ISSUE 10.1
Brisbane 2012 Back from the brink
Johnson Winter & Slattery The next merger target?
Workplace relations Fair Work Act under fire
King & Wood Mallesons: Masterstroke or master blunder?
Market-leading analysis Comprehensive deals coverage debt & Equity market intelligence
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Senior Roles from Senior Recruiters
At Burgess Paluch our recruiters are some of the most senior in the market. To speak to a recruiter who understands senior lawyers, call Burgess Paluch. Melbourne
Sydney
Family - Special Counsel/Partner
Banking & Finance - Partner
Up-market family team seeks a special
Lead a team of top notch lawyers in
counsel or current/future partner for its
this profitable and growing national
growing and busy practice. Work with
firm. Deal with leading lenders,
a mix of high net worth clients on both
financial institutions, underwriters
disputes and mediated matters. Taking
and owner/developers on a wide
a lead role in the business and assisting
variety of domestic and cross-border
with the practice and development of
projects. Working with impressive
juniors, this is a rare offering with a
peers, enjoy a generous package and
defined career path.
strategic input into group decisions.
IR/ER - Partner
Commercial Litigation 8+ PAE
Challenging and interesting work
Expanding premier firm seeks partner
assisting employers including some
for rare role in this high profile
executive level matters. Blue chip
practice. Enjoy high level general
issues with corporate and significant
corporate and commercial litigation,
government clients. Some level of
setting the goals and spearheading
transportable clients needed, though
the direction of the group. Have an
the scope to build internal referrals is
impact at the firm and broaden your
immense.
horizons.
Commercial/Property - Partner
Corporate - Partner
The partners in this highly respected
National firm seeks dynamic partner
national mid-tier firm see opportunities
to expand its already significant
going begging in the commercial and
corporate reach. Work in a diverse and
property spaces. There is great support
successful corporate team and use
in this growth focussed role and the
your commercial skills to full effect.
firm can consider a team if you are
Key role in a relaxed group. Open path
looking to relocate your entire practice.
to equity for the right partner.
Perth Corporate/M&A – Senior Assoc
This leading, busy corporate team boasts some of the best corporate and resources work going in Perth. Work directly under a highly respected partner on corporate / commercial matters including joint-ventures, takeovers, and some international work including off-shore capital raisings.
Commercial Lit - Senior Assoc
Interesting range of high profile, high calibre general commercial litigation, insolvency, and insurance work on offer (depending on experience). The firm has one of the leading commercial litigation and dispute resolution practices in Australia and the Asian region. Enjoy significant career prospects.
Abu Dhabi Construction 5-8 PAE
This superlative team enjoys projects across the global stage. The Abu Dhabi office is currently enjoying major projects flowing out of the region’s buoyant energy sector. The UAE is an ideal location for an international career with Europe at your doorstep.
New Zealand Banking & Finance 5-8 PAE
Top tier firms seeks returnees looking to move to Auckland or Australians looking for a move abroad. Join one of the leading NZ finance practices and enjoy a quality of work envied in the local market. Mix of corporate and banking clients and a dynamic approach.
London Commercial Litigation
This premier City/international law firm is looking to recruit an additional associate to join their top flight litigation team in London. The successful candidate should have general commercial litigation experience. Interviews via video conference.
Hong Kong Insolvency 5+
Attractive senior role in this switched on insolvency team. With recent experience conducting one of the largest corporate insolvencies in the Asia Pacific region this strong team, led by an Australian partner, is ready to hire. Work on challenging cross border disputes with a close Australian connection.
BPL2356
www.bplr.com.au Paul Burgess 0414 687 629 Doron Paluch 0438 004 445 Paul Garth 0434 113 355 Jackie Gillies 0422 288 685 paul@bplr.com.au
ONE 185C
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1
ISSUE 10.1
Brisbane 2012 Back from the brink
Johnson Winter & Slattery The next merger target?
Workplace relations Fair Work Act under fire
King & Wood Mallesons: Masterstroke or master blunder?
A New Year, a new ALB
A
LB is ushering in the New Year with a redesigned and repurposed magazine and Website. The refined new look compliments the reliable, accurate and insightful news, analysis and commentary delivered by a new team of professional legal journalists backed by the same Reuters News that powers global business. In short, we’re launching the ALB that you would expect from Thomson Reuters. We have sharpened our focus on patterns and implications, critical insight and analysis, shifting away from synopsis of industry events. No more laundry lists of deals and news events that you already know about; we’ll pick the few that mean something and add value. No more summaries of people on the move – but a look at trends in movement and their significance. Our extensive market research guided our approach to transforming ALB into a trustworthy and reliable resource to aid your decision making.
In 2012, ALB is positioned to take full advantage of being a part of the world’s leading source of intelligent information for businesses and professionals. Join us and stay connected as we deliver authoritative and reliable value to meet your professional needs.
Market-leading analysis CoMprehensive deals Coverage debt & equity Market intelligenCe
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IN THE FIRST PERSON “When you’re selling intellectual prowess, a big shop is not the only place to find it. Buyers are not necessarily walking into department stores.” Peter Slattery, Johnson Winter & Slattery (p46)
“There are a lot of them who are going to be caught napping and with the penalties going up significantly, that’s of great concern.” Michael Harmer, Harmers Workplace Lawyers (p50)
“In developing a law that fits New Zealand’s needs, we should not follow the lead of a wild west mentality and throw more people in prison more often just because our trading partners do so.” John Blair, Air New Zealand (p14)
Andrew Goldner Managing Director Asian Legal Business Thomson Reuters
2
Asian Legal Business ISSUE 10.6
News | deals contents >> >>
contents
ALB issue 10.1 46
14
36
COVER STORY 10 King & Wood Mallesons All pain and no gain?
ANALYSIS
PROFILES
COLUMNS
14 Criminal cartels Americans send people caught price fixing to gaol – but does that mean Australia and NZ should follow suit?
32 In-house profile – Srechko Kontelj, Specsavers This corporate lawyer has spent more than his fair share of time in the Federal Court – but he wears it as a badge of honour
56 In-house Q&A
FEATURES 26 ALB Predictions 2012 Industry leaders share their views on how the profession will fare this year 36 ALB Special Report: Brisbane 2012 Brisbane spent 2011 mopping up after floods and cyclones – but the city is still looking forward to a robust 2012 50 Workplace relations Corporate Australia has been at war with the Gillard government over the Fair Work Act – and now the bungled OH&S harmonisation looks to be adding fuel to the fire
46 Managing partner profile – Peter Slattery, Johnson Winter & Slattery Inside the walls of one of the market’s most enigmatic corporate firms
REGULARS 6 DEALS 18 Appointments 20 NEWS
Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Australasian Legal Business can accept no responsibility for loss.
4
Australasian legal business ISSUE 10.1
! Ne w
NEWS | deals >>
deals in brief
By Kalianna Dean
Firm: Freehills Lead Lawyers: Rebecca MaslenStannage, Peter Stawell, Evelyn Halls, Richard Giannone, Irene Zeitler and Alan Mitchell Client: Centro Properties Group Firm: Johnson Winter & Slattery Lead Lawyers: Shelley Hemming, Jim Hunwick, David Proudman, Kate Fitzgerald, John Keeves Client: Centro Australia Wholesale Fund (CAWF), Centro Direct Property Fund (DPF) and Centro Direct Property Fund Holding Trust (DHT) Firm: Maddocks Lead Lawyer: Ron Smooker Client: Centro Retail Limited and Centro Retail Trust (CER) • Restructure involved establishment of a new REIT with an underlying equity value of circa A$3 billion and enterprise value of around A$4.5 billion and commenced deferred settlement trading on ASX from December 2011 • Clayton Utz and Maddocks were co-legal advisors to Centro Retail Limited and Centro Retail Trust (CER) • Lazard was financial adviser to CAWF and DPF/DHT
| M&A/RESOUrces | ►► Gloucester Coal – Yanzhou merger – A$8 billion Firm: Clayton Utz Lead Lawyer: Rory Moriarty Client: Noble Group Firm: Freehills Lead Lawyers: Philippa Stone, Jai-Shi Liew, Jay Leary, Roxann Halliday Client: Yanzhou Coal Mining Company (Yanzhou) Firm: Minter Ellison Lead Lawyers: John Steven, Bart OudeVrielink, Alberto Colla, Sam Lawson Client: Gloucester Coal Ltd (Gloucester) • Gloucester has entered into a merger proposal deed with Yanzhou and its wholly owned subsidiary Yancoal Australia Limited • Freehills has worked on various transactions with Yancoal Australia, but this is the first time the firm has advised the Chinese parent
6
company, Yanzhou • In 2011 Minter Ellison advised Gloucester on its acquisition of 100 percent interest in Donaldson Coal Holdings Limited and Ellemby Holdings Pty Limited as well as a A$285 million capital raising • In 2010 Minter Ellison advised Gloucester on its response to a takeover offer from Macarthur Coal and Noble Group, and acquisition of nearly 49 percent interest in the Middlemount Coal Joint Venture and A$570 million capital raising
| insolvency & restructuring |
| M&A/RESOUrces | ►► Whitehaven Coal and Aston Resources merger – A$5.1 billion Firm: Corrs Chambers Westgarth Lead Lawyers: Andrew Lumsden, Shaun McGushin, David Sim, James Shirbin, Nicholas McBride, Jennifer Leung and Jin Ooi Client: Whitehaven Coal Firm: Gilbert + Tobin Lead Lawyer: Gary Lawler Client: Boardwalk Resources
►► Centro restructure
Firm: McCullough Robertson Lead lawyers: Damien Clarke, Janelle Moody and Emma Jenkins Client: Whitehaven Coal
Firm: Clayton Utz Lead Lawyers: Brendan Groves, John Moutsopoulos, Fred Pickett Client: Centro Retail Limited and Centro Retail Trust (CER)
Firm: Freehills Lead Lawyers: Matthew FitzGerald, Philippa Stone and Phil McMahon Client: Aston Resources
– A$7 billion
• Whitehaven Coal and Aston
Resources have announced a merger-of-equals to create the largest ASX-listed independent coal company, with a pro forma market capitalisation of approximately A$5.1 billion • Whitehaven has also agreed, conditional on the Aston merger proceeding, to acquire 100% of unlisted coal explorer Boardwalk Resources • Freehills advised Aston Resources on its initial public offering (IPO) and listing on the Australian Securities Exchange in 2010. It also advised the Brisbane-based company on the sale of 15 percent of its Maules Creek project in New South Wales’ Gunnedah Basin to a subsidiary of Japan’s fourth largest resources and trading company, Itochu Corp for A$345 million.
| PPP | ►► Victorian Comprehensive Cancer Centre Project (VCCC) PPP – A$1 billion Firm: Allens Arthur Robinson Lead Lawyer: Anthony Arrow Client: Honeywell Firm: Clayton Utz Lead Lawyer: Marcus Davenport Client: Plenary Group Firm: Freehills Lead Lawyers: Joanne Crew, Joel Rennie Client: Financiers, Plenary Health Consortium Firm: Norton Rose Lead Lawyer: Grant Ahearn Client: Grocon Constructions/PCL Constructions joint venture • The Plenary Health Consortium has been announced as the winning bidder for this project to provide 160 overnight in-patient beds, a 42 bed intensive care unit, 110 same-day treatment places and eight therapy radiation bunkers and research space for 1,200 medical researchers • Clayton Utz also advised on the A$630 million Bendigo hospital project (advising the Victorian government), the Royal Adelaide Australasian Legal Business ISSUE 10.1
NEWS | deals >>
Hospital project (jointly advising the South Australian government, the Sunshine Coast Hospital in Queensland (advising a short-listed consortium) and the Melbourne Royal Children’s Hospital project, which became operational in November • Freehills also recently advised the SA Health Partnership consortium on South Australia’s Royal Adelaide Hospital PPP, the Sentinel Joint Venture on the Darwin Correctional Facility Precinct in the Northern Territory and the financiers to the Plenary sponsored Single LEAP 2 Commonwealth PPP Project • Norton Rose has also advised participants in PPPs including the New Royal Adelaide Hospital (Hansen Yuncken and Leighton), the Ararat Prison (St Hilliers and New Zealand based Hawkins), Biosciences Research Centre (Grocon Constructors), Victorian Desalination Project (ITOCHU) and QEII Medical Centre Car Park (Probuild)
►► Your month at a glance Firm
Jurisdiction
Deal name
Value ($Am)
Practice
Allen & Overy
Australia
MSREI acquisition of OCI Limited/ facility
186
M&A
Allens Arthur Robinson
Australia
Victorian Comprehensive Cancer Centre Project (VCCC) PPP
1,000
PPP
Baker & McKenzie
Australia
Ironbridge/Archer Capital sale of iNova Pharmaceuticals
625
M&A
Australia
Clough sale of offshore marine construction division to SapuraCrest
127
M&A
Australia
MUTB stake acquisition in AMP Capital Holdings
425
M&A
Australia
Clough sale of offshore marine construction division to SapuraCrest
127
M&A
Australia/China
Gloucester Coal merger with Yanzhou
8,000
M&A/Resources
Australia
Centro Restructure
7,000
Insolvency & Restructuring
Australia
Victorian Comprehensive Cancer Centre Project (VCCC) PPP
1,000
PPP
Australia
Ironbridge/Archer Capital sale of iNova Pharmaceuticals
625
M&A
Australia
Wah Nam International on takeover bid for Brockman Resources
456
M&A
Australia
Independence Group NL equity raising and share purchase plan
148
Equity
Australia
State of Tasmania sale of TOTE Tasmania to Tattsbet
118
M&A
Corrs Chambers Westgarth
Australia
Whitehaven Coal and Aston Resources merger
5,100
M&A/Resources
DLA Piper
Australia
MSREI acquisition of OCI Limited/ facility
186
M&A
Australia/South Africa
South Africa’s Renewable Energy IPP Procurement Programme
Undisclosed
PPP
Australia/China
Gloucester Coal merger with Yanzhou
8,000
M&A/Resources
Australia
Centro Restructure
7,000
Insolvency & Restructuring
Australia
Whitehaven Coal and Aston Resources merger
5,100
M&A/Resources
Australia
Victorian Comprehensive Cancer Centre Project (VCCC) PPP
1,000
PPP
Australia
Wah Nam International on takeover bid for Brockman Resources
456
M&A
Australia
CBA acquisition of Count Financial approval
373
M&A
Blake Dawson
Clayton Utz
Freehills
| M&A | ►► Ironbridge/Archer Capital sale of iNova Pharmaceuticals – A$625 million Firm: Baker & McKenzie Lead Lawyer: David Egan Client: Valeant Pharmaceuticals Firm: Clayton Utz Lead Lawyer: David Stammers Client: Ironbridge Capital and Archer Capital • This deal saw NYSE-listed Valeant Pharmaceuticals acquire iNova Pharmaceuticals from Ironbridge Capital and Archer Capital • Baker & McKenzie has been advising Valeant Pharmaceuticals on the overall divestiture of its Asia-Pacific pharmaceuticals business • Clayton Utz also advised on the original investment in iNova in 2006 by Ironbridge and Archer and has a long-standing relationship with this client
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Gilbert + Tobin
Australia
HQ North Tower acquisition
186
Real Estate
Australia
Independence Group NL equity raising and share purchase plan
148
Equity
Australia
Merlin Entertainment Group bid for Living and Leisure Australia Group (LLA)
140
M&A Real Estate
Australia
Real I.S acquisition of 661 Bourke Street, Melbourne
100
Australia
Icon Ipswich sale
93
Real Estate
Australia
Securus shariah-compliant acquisition of Gore Hill data centre facility
60
Real Estate
Australia
I-Med Group restructuring
Undisclosed
Debt
Australia
Whitehaven Coal and Aston Resources merger
5,100
M&A/Resources
Australia
GE financing of Accolade Wines
Undisclosed
Debt
Henry Davis York
Australia
I-Med Group restructuring
Undisclosed
Debt
Holman Webb
Australia
HQ North Tower acquisition
186
Real Estate
Australia
Icon Ipswich sale
93
Real Estate
HopgoodGanim
Australia
Sucrogen acquisition of PCSMA assets
120
M&A
Johnson Winter & Slattery
Australia
Centro Restructure
7,000
Insolvency & Restructuring
Latham & Watkins
Australia
Pola Orbis acquisition of Jurlique
335
M&A
Lincolns Lawyers & Consultants
Australia
Magna Prima Berhad acquisition of 218-236 A'Beckett Street, Melbourne
200
Real Estate
Maddocks
Australia
Centro Restructure
7,000
Insolvency & Restructuring
Australia
Magna Prima Berhad acquisition of 218-236 A'Beckett Street, Melbourne
200
Real Estate
7
NEWS | deals >>
Mallesons Stephen Jaques
Australia
MUTB stake acquisition in AMP Capital Holdings
425
M&A
Australia
Pola Orbis acquisition of Jurlique
335
M&A
Australia
Merlin Entertainment Group bid for Living and Leisure Australia Group (LLA)
140
M&A
Australia
Clough sale of offshore marine construction division to SapuraCrest
127
M&A
Australia
Securus shariah-compliant acquisition of Gore Hill data centre facility
60
Real Estate
Australia
GE financing of Accolade Wines
Undisclosed
Debt
McCullough Robertson
Australia
Whitehaven Coal and Aston Resources merger
5,100
M&A/Resources
Minter Ellison
Australia/China
Gloucester Coal merger with Yanzhou
8,000
M&A/Resources
Australia
CBA acquisition of Count Financial approval
373
M&A
Australia
Pola Orbis acquisition of Jurlique
335
M&A
Australia
Sucrogen acquisition of PCSMA assets
120
M&A
Australia
Real I.S acquisition of 661 Bourke Street, Melbourne
100
Real Estate
Australia
Victorian Comprehensive Cancer Centre Project (VCCC) PPP
1,000
PPP
Australia/South Africa
South Africa’s Renewable Energy IPP Procurement Programme
Undisclosed
PPP
Simpson Thacher & Bartlett
Australia
Pola Orbis acquisition of Jurlique
335
M&A
TressCox
Australia
Securus shariah-compliant acquisition of Gore Hill data centre facility
60
Real Estate
White & Case
Australia
GE financing of Accolade Wines
Undisclosed
Debt
Wragge & Co
Australia
GE financing of Accolade Wines
Undisclosed
Debt
Norton Rose
Does your firm’s deal information appear in this table? Please contact
| M&A | ►► Wah Nam International bid for Brockman Resources – A$456 million Firm: Clayton Utz Lead Lawyers: Mark Paganin, Glenda Currie and Stephen Neale Client: Wah Nam International Firm: Freehills Lead Lawyer: David Gray Client: Brockman Resources • ASX/HKEx-listed Wah Nam International Holdings through its subsidiary, Wah Nam International Australia, has launched an offmarket bid for the remaining shares in ASX-listed Brockman Resources. The company already owns 55.33 percent of Brockman shares • Wah Nam is offering Brockman shareholders A$1.50 in cash and 18 Wah Nam shares for each Brockman share held. The deal has an implied offer price of A$3.03 per share, which values the company at approximately A$456 million • Clayton Utz advised Wah Nam
8
alb@thomsonreuters.com
| m&a | ►► MUTB stake acquisition in AMP Capital Holdings – A$425 million Firm: Blake Dawson Lead Lawyers: Ian Williams, Natsuko Ogawa Client: Mitsubishi UFJ Trust and Banking Corporation (MUTB) Firm: Mallesons Stephen Jaques Lead Lawyers: Evie Bruce, David Eliakim, Susan Hilliard, Ken Astridge Client: AMP Capital Holdings (AMPCH) • MUTB will acquire a 15 percent interest in AMPCH, the parent company of the AMP Capital group of companies, for A$425 million and will be offered one seat on the
• Acquisition received approval from the Supreme Court of NSW on November 28 • Under the terms of the scheme, Count shareholders have the choice of receiving A$1.40 per Count share or A$1.40 in CBA shares. Count’s financial advisor was Goldman Sachs • Freehills partner Damian has previously advised the Commonwealth Bank on various M&A deals, including its A$2.1 billion acquisition of BankWest and its A$10.1 billion acquisition of Colonial Limited • Count is a relationship client of Minter Ellison
| m&a | ►► Pola Orbis acquisition of Jurlique
61 2 8587 7484
International on its first bid for complete co-ownership of Brockman Resources in 2010. It also advised the company on its initial public offering (IPO) and listing on the Australian Stock Exchange (ASX) in the same year
Firm: Minter Ellison Lead Lawyers: James Philips, Michael Barr-David, Nathan Cahill Client: Count Financial
AMPCH Board
– A$335 million
• Under the alliance arrangements, MUTB will distribute AMP Capital’s products to Japanese institutional investors. AMP Capital retail products will also be distributed in a non-exclusive arrangement through the broader Mitsubishi UJ Financial Group’s network of third party banking and securities distributors
Firm: Mallesons Stephen Jaques Lead Lawyers: Jim Boynton, David Friedlander Client: Pola Orbis Holdings
• Blake Dawson has represented the Mitsubishi UFJ Financial Group in Australia for over 10 years, including in the merger which formed Bank of Tokyo Mitsubishi UFJ
Firm: Simpson Thacher & Bartlett Client: Pola Orbis
• AMP is one of Mallesons Stephen Jaques’ longest standing clients
| M&A | ►► CBA acquisition of Count Financial approval – A$373 million Firm: Freehills Lead Lawyer: Tony Damian Client: Commonwealth Bank of Australia (CBA)
Firm: Minter Ellison Lead Lawyer: Callen O’Brien Client: Jurlique
Firm: Latham & Watkins Client: Jurlique • Pola Orbis, a listed Japan-based cosmetics/pharmaceuticals company, has acquired Australian skin care and cosmetics group Jurlique International Pty Ltd • Mallesons Stephen Jaques has not previously advised Pola Orbis • Minter Ellison has acted for Jurlique for a number of years prior to this transaction, including on the initial investment in the company by CPH and its more recent expansion into Hong Kong and China
Australasian Legal Business ISSUE 10.1
Firm Profile |
NEWS deals >>
NZ Commentary
ENVIRONMENTAL REFORMS GATHER PACE As the National-led Government settles into a second term in office following the 26 November 2011 election, New Zealanders can expect a programme of wide-ranging environmental law reforms and policy development. Having introduced “simplifying and streamlining” amendments to the Resource Management Act 1991 (RMA) in its previous term, the National-led Government will now look to implement “Phase Two” of its RMA reforms. Phase Two includes: • A full revision (for the first time since the RMA was enacted in 1991) of sections 6 (matters of national importance) and 7 (other matters) of the RMA. These are two key sections within Part 2 (the purpose and principles) of the RMA. The Government has established a technical advisory group to review these sections and report back with recommendations by the end of February 2012. The Government has indicated its intention to revise these sections with the aim of better addressing natural hazard risks (following the devastating Canterbury earthquakes) and better managing the growth of urban environments. • T he introduction of a six-month statutory time limit for council decisions on the consenting of medium-sized projects. The intention is to provide greater certainty and to save costs for applicants. However, this time limit does not affect the appeals process, which can considerably delay such projects. • C hanges to plan-making under the RMA. Preelection, National announced its intention to improve the integration of local government plan-making processes. Under the confidence and supply agreement between National and ACT they will work to “reduce the clutter of planning documents and increase the efficiency of the planning process”. National and ACT have also agreed to legislate to ensure that there is only “one plan for each district”, though it is presently unclear how that will be delivered. • A range of further proposals to address resource management and infrastructure issues, which are to be identified by Minister for the Environment, Nick Smith, when he reports back to Cabinet by March 2012. These proposals are likely to include: - a range of possible amendments the Public Works Act and the RMA designation provisions - t he alignment of the consenting processes under the RMA and the Conservation Act
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ptions for increased Māori participation in - o resource management processes - o ptions for better approaches to urban planning. Our commentary in the July issue of the ALB addressed freshwater management reform. This will be a very busy and contentious year for freshwater reform with the Land and Water Forum due to report to the Government on methods and processes for setting limits for fresh water quality and quantity in May 2012, and on allocation methods in November 2012. Other legislative reforms to be progressed include: • P assing the Exclusive Economic Zone and Continental Shelf (Environmental Effects) Bill, which contains a marine consenting process not dissimilar to that for resource consents. While the process will be similar, the purpose of the Bill is not “sustainable management” as in the RMA, but rather it “seeks to achieve a balance between the protection of the environment and economic development”. The Environmental Protection Authority (EPA) (established during the last Parliamentary term) will be responsible for the marine consent approval process and enforcing and monitoring compliance with the legislation. In applying this balancing test the Bill proposes that the EPA may grant an application “if the activity’s contribution to New Zealand’s economic development outweighs the activity’s adverse effects on the environment”. • P assing the Heritage New Zealand Pouhere Taonga Bill which is intended to “re-balance” heritage values against values associated with private ownership, achieve efficiency gains and improve alignment with the RMA.
• A review of the Crown Minerals Act 1991, with legislation to make “significant changes” to the current regime set for 2013. The Government’s intent is to “get the best out of natural resources” while remaining “very conscious of our environmental obligations.” The RMA is largely implemented by local authorities. It is notable that in the new cabinet, Minister for the Environment, Nick Smith, has added local government to his ministerial portfolio. In its last term, the Government reformed the governance of Auckland, creating the new “Super City” Auckland Council and the new Minister has already commented that the local government sector is “ripe for reform”. Overall, we can expect the National-led Government to push through some significant environmental and natural resources law reform on a number of critical, but contentious, issues in its second term. This is reflective of the increased awareness of environmental issues and the desire of the present Government for efficiency and to strike a balance between economic and environmental outcomes.
This article was written by David Allen, a special counsel in the Wellington office of Buddle Findlay, one of New Zealand’s leading law firms. David specialises in resource management and environmental law, Public Works Act, local government law and Māori law. He advises a range of clients, including developers, requiring authorities, local and central government. David can be reached on +64 4 462 0423 or email david.allen@buddlefindlay.com
• I ntroducing and passing new marine reserves legislation. The Government has described the approval process under the current Marine Reserves Act 1971 as “controversial and fractured”. Again, the Government sees the EPA, with its Board of Inquiry model, as the appropriate agency for this process. • I ntroducing and passing an Environmental Reporting Bill. This will require the Parliamentary Commissioner for the Environment to report independently, every five years, on water and air quality, coastal and ocean management, waste management, and native plants and animals.
David Allen
Buddle Findlay
9
Analysis | Mallesons King & Wood >>
Analysis >>
The King’s Ransom Mallesons is set for a merger with prize partner King & Wood – but ALB’s Renu Prasad asks at what cost?
“W
ord on the street in China is that King & Wood have acquired Mallesons.” This mischievous comment first appeared anonymously on the online forum of The Lawyer and sums up the difficulties faced by Mallesons in selling the K&W merger. A great result for King & Wood – but what’s in it for Mallesons? The timing of the announcement – in the final month of Robert Milliner’s term as Mallesons CEP – invites the inference that the merger is Milliner’s legacy to the firm. There is a symmetry here: just as Milliner’s predecessor, Tony D’Aloisio, is often credited with making Mallesons what it is today, posterity may well credit Milliner for this important first step towards what the firm will become tomorrow. The drivers behind the move are
10
well known – the shift of the balance of economic power from west to east and the desire to create a new Asiaoriented firm. King & Wood Mallesons represents the first such alliance between a Chinese firm and a Western law firm and the combined entity will be the largest in Asia. Mallesons is certainly entitled to credit for pursuing such an innovative arrangement contrary to the widely held expectation that a U.S. or UKcentred merger was on the cards. However, this move may also be an instance of putting all of one’s eggs in one basket; clearly the Mallesons partnership have made a calculated gamble that the additional work flowing from the K&W merger will more than off-set the potential loss of referral work from other Chinese firms. With about 1,000 lawyers, K&W is
the third largest domestic Chinese firm. While the first and second largest firms each have considerably more lawyers, they generally do not enjoy the same reputation as K&W in high end practice areas. Competition at this level is more likely to come from smaller players such as Zhong Lun (600 lawyers) and Jun He (400 lawyers) and other firms of considerably smaller size. There may be some basis, therefore, to the proposition that the K&W basket is the safest place for the Mallesons eggs. However, the Asian century does not necessarily mean just the Chinese century. Mallesons has long been perceived as a firm that has concentrated on North Asia at the expense of other Asian jurisidictions and this bias is entrenched by a merger with K&W, which is similarly limited geographically. More Australasian Legal Business ISSUE 10.1
Analysis | Mallesons King & Wood >>
mergers, association agreements and lateral hires will be needed to fulfil the ambition of creating a true Asia powerhouse – and all this at a time when the firm already faces a mammoth integration task in bringing the K&W and Mallesons operations together. Some South Asian markets such as India are clearly still in a state of flux – witness the termination of the Clifford Chance – AZB & Partners referral relationship last year and the glacial progress towards liberalisation of the local market – so K&W Mallesons cannot be said to have missed the boat on this crucial jurisdiction. Milliner has already hinted that the more immediate priority will be Singapore, which will be no easy feat in that highly competitive market. The key point is that even if the K&W Mallesons merger is a success, there is still much more work to be done both in Asia and the so-called “old worlds” of U.S. and Europe to provide coverage of areas currently outside the ambit of the two firms. This is only the first stage of a much longer journey. The final verdict on Milliner’s legacy may be some years or even decades in the making.
What’s in a name?
This merger sees the relegation of the 150 year old Mallesons brand to third place on the shingle, a move which has inevitably been interpreted as an indicator of who will be wearing the pants in this relationship. This is not a view held by global managing partner Stuart Fuller. “We took the view that the combination of the brands made each brand stronger,” Fuller told ALB. “We need to consider where the brands are going, not where they have been.” Perhaps history may provide some guidance on where the Mallesons brand is heading: readers may recall the fate of Allen & Hemsley, Hollingdale & Page and Dawson Waldron. These are all names which occupied second place on the letterhead of top Australian firms in the 1990s and have since disappeared into the slipstream of history. Brevity and sonority habitually have the final say on these kinds of branding questions. This is more than a question of history or sentiment. The Mallesons name needs no introduction in boardrooms across Australia and with www.legalbusinessonline.com
the in-house profession – the firm has consistently been acknowledged as one of the top three in Australia. It is less clear how the King & Wood name will be received. There is an argument that clients will be undeterred by the name change because relationships with individual partners are more important. This view is not universal and there is anecdotal evidence that a premium brand carries surprising weight: stories circulate of partners who have left top tier firms and struggled to re-establish their practice elsewhere. Conversely, some Australian partners at Allen & Overy and Clifford Chance are said to have been surprised by the doors which opened to them following their ascent to the Magic Circle. Losing a premium brand like Mallesons may prove to be a miscalculation; however, Fuller is confident that the firm has done its market research thoroughly. “We spoke to close to 30 of our major clients in the lead up to this merger, and King & Wood spoke to its clients as well and the discussions were overwhelmingly positive,” he said. “If you take the noise out of the discussion and talk to the people who buy the services, they are saying that they understand our strategy. They think it’s a game changing strategy, and they think it adds to our capability.” This client endorsement is particularly important given concerns over the firm’s independence from Chinese government influence. Fuller says there is “very little difference”
between the ethical standards required at both firms. “King & Wood is a private law firm, and because its client base is at least 50 percent western, it operates like all good firms to the same standards that clients require,” he said. “King & Wood lawyers have to meet the same ethical standards as Australian lawyers.”
Hooking up
With Blake Dawson and Mallesons off the market for merger partners, commentators have been working overtime with the dating metaphors. Freehills is said to be desperately seeking a partner and AAR and Clayton Utz are said to be happily single and looking to position themselves as the true independents of the market. The rumour mill has proven to be embarrassingly wrong in recent years and we can offer no confirmation of these reports. What is now starting to emerge is a fuzzy outline of the future shape of the Australian legal services market: independent national firms, U.S. and UK-based firms and Asia-based firms all competing alongside each other for premium work. Which strategy will ultimately be vindicated remains to be seen, but at least uncertainty can now be banished at one level. After years of speculation, we finally have some solid information on how the key players see the future. That beats the rumour mill any day.
King & Wood Mallesons – quick facts Effective start date
1 March 2012
Partners
380
Lawyers
1,800
Structure
Verein alliance
Partnerships
Three (ex-Mallesons, Hong Kong combined, exK&W including current Mallesons PRC)
Chairman
Wang Junfeng
Global Managing Partner
Stuart Fuller
Offices
21 (11 mainland China, 5 Australia, HK, London, New York, San Francisco, Tokyo) 11
news | M&A >>
M&A: The road ahead M
&A activity in Australia increased significantly in 2011, up 12.5 percent to $184.4 billion according to the Thomson Reuters 2011 M&A Legal Advisors Review. Lawyers in the field are cautiously optimistic that this year will again prove to be an improvement or at least as good as the previous year for M&A transactions. “We saw the Australian market perform extremely well in the first half of the year. In fact, M&A activity rose to almost on par with pre GFC levels before concerns about European debt reined the market in again,” said Freehills partner Rebecca Maslen-Stannage. Cross border activity was a significant contributor to the M&A activity in Australia, up nine percent to $86.5 billion. “A lot of the M&A here was driven by the resources sector and interest from foreign investors,” said Allens Arthur Robinson M&A partner Guy Alexander. “In terms of the year coming forward, I think we will continue to see strong interest in resources continue.” However, while foreign investors are ready to snap up Australian and New Zealand assets Australian corporates have been quiet in the past year, according to Alexander. But he is optimistic they and private equity will be tempted back into the market this year. “There are quite a few funds out there with dollars that need to be invested,” he said. Freehills topped the league table for deals announced, closely followed by Allens and Blake Dawson. It also topped the deals completed league table, followed by Clayton Utz and Allens. Freehills has advised a number of M&A deals during the past year including Aston Resources merger
12
with Whitehaven Coal, Yanzhou Coal’s merger with Gloucester Coal, Centro’s restructure, Peabody Energy’s joint bid with ArcelorMittal for Macarthur Coal and Seven Group’s sale of Seven Media Group. However, one of the biggest surprises on the league table was Allen & Overy which jumped from 36th place last year for deals completed to ninth this year. Allen & Overy partner Australia Michael Parshall said the $12 billion SABMiller/Foster’s deal was a testament to the confidence the market has in A&O in Australia. “18 months ago A&O didn’t have an Australian office ... There are some players in the rankings who have played active roles in some of those deals, but at A&O we would have 10 to 15 percent of the partners those firms have,” he said. A&O advised SABmiller on the deal while Allens advised Foster’s Group. Allens’ Alexander dismisses the threat posed by new players such as A&O and Clifford Chance. “We have not seen too much of them yet. While I suppose maybe they are getting market share from other firms, I don’t feel that they have taken any off us,” he said. As with previous years energy and resources remained the dominant industry for M&A. “Energy and resources have driven a lot of activity for us and everyone else. There has been a lot of significant work in the field as well as in the services sector,” said Parshall. Yet while much of that work has been focused on the west coast Alexander is optimistic that more work will arise on the east coast this year. “Perth will continue to be a strong market for us, but last year we also had lots of activity in Queensland and this year I expect to see activity in New South Wales as a result of the privatisation of state-
Rebecca Maslen-Stannage
owned assets such as the desalination plant, power generators and Port Botany,” he said. Parshall agrees that privatisation in NSW is likely to generate work for lawyers in the M&A space, although it may take time. “One would expect that there would be further levels of privatisation in NSW, but it will be less advanced than in Queensland,” he said. “However, those processes towards privatisation will involve significant amounts of work for sponsors and financiers. We have already been seeking, pitching and obtaining mandates on those processes.” Maslen-Stannage added that she expected the market will continue to fare well despite the possibility of challenging economic times ahead. “Our strong economy and booming resources sector remains an attractive investment destination for global companies. We expect that in 2012 Australian M&A activity will still be largely driven by resources, but also financial services, agriculture and property,” she said. Australasian Legal Business ISSUE 10.1
Rank Value per Advisor (US$m) Market Rank Value Market 2011 2010 Rank Rank US$m Sh (%) Share Ch. 1 2 52,425.3 28.4 -1.2 ▼ 2 3 48,103.4 26.1 2.0 ▲ 3 5 47,964.1 26.0 4.6 ▲ 4 4 39,575.8 -1.7 ▼ 21.5 1 5 38,656.0 21.0 -9.0 ▼ 6 17.5 17.3 ▲ 60 32,311.3 7 16.5 8.9 ▲ 12 30,493.2 8 7 29,513.2 16.0 2.0 ▲ 9 22 29,411.4 16.0 12.8 ▲ 10 62 28,391.0 15.4 15.2 ▲ 11 8 25,473.8 13.8 -0.1 ▼ 12 27 23,566.3 12.8 10.7 ▲ 13 26 22,900.4 12.4 10.0 ▲ 73 20,329.4 11.0 10.9 ▲ 14 15 18,426.1 10.0 10.0 ▲ 16 13 17,984.0 9.8 3.5 ▲ 17 16 15,166.5 8.2 3.4 ▲ 18 29 13,770.4 7.5 5.5 ▲ 19 120* 13,037.7 7.1 7.1 ▲ 20 6 5.7 -8.5 ▼ 10,513.7 5.1 21* 9,400.0 5.1 ▲ 9,400.0 5.1 5.1 ▲ 21* 8,444.4 3.8 ▲ 23 38 4.6 0.3 ▲ 24 18 7,527.8 4.1 25 47 5,858.7 3.2 2.6 ▲ 184,386.1 100.0
Legal Advisor Freehills Allens Arthur Robinson Blake Dawson Clayton Utz Mallesons Stephen Jaques Simpson Thacher & Bartlett Corrs Chambers Westgarth Minter Ellison Allen & Overy Latham & Watkins Gilbert + Tobin Sullivan & Cromwell Johnson Winter & Slattery Morgan Lewis & Bockius Cravath, Swaine & Moore Baker & McKenzie Skadden Hogan Lovells Cleary Gottlieb Steen & Hamilton Norton Rose Cadwalader, Wickersham & Taft Bracewell & Giuliani Osler Hoskin & Harcourt LLP Freshfields Bruckhaus Deringer Jones Day Industry Total
Industry % Change from Same Period Last Year Industry % Change from Last Quarter * tie
12.5% ▲ -54.5% ▼
Jan 1 – Dec 30 # of Deals per Advisor # of Market Deals Rank Sh (%) 100 1 5.3 68 6 3.6 76 5 4.0 78 4 4.1 82 3 4.4 9 0.5 20* 37 8* 2.0 97 2 5.1 37 8* 2.0 4 32* 0.2 27 12* 1.4 4 32* 0.2 16 17* 0.9 3 38* 0.2 5 27* 0.3 46 7 2.4 8 22* 0.4 4 0.2 32* 58* 0.1 2 35 10 1.9 1 79* 0.1 79* 0.1 1 4 32* 0.2 0.4 8 22* 17 15* 0.9 1,887
Change in # of Deals -6 ▼ 3 ▲ 1 ▲ 4 ▲ -2 ▼ 6 ▲ 2 ▲ -3 ▼ 27 ▲ 2 ▲ -8 ▼ -4 ▼ 1 ▲ 1 ▲ 5 ▲ -12 ▼ 4 ▲ 1 ▲ 1 ▲ -4 ▼ 1 ▲ 1 ▲ -6 ▼ 0 4 ▲
Legal Advisor Freehills Clayton Utz Allens Arthur R Blake Dawson Mallesons Ste Simpson Thac Minter Ellison Latham & Wa Allen & Overy Corrs Chambe Johnson Winte Norton Rose Gilbert + Tobin Sullivan & Cro Baker & McKe Morgan Lewis Skadden Hogan Lovells Chapman Trip Cravath, Swai Cleary Gottlieb Clifford Chanc Cadwalader, W Bracewell & G Osler Hoskin & Industry Tota
Industry % Ch Industry % Ch
Australia & New Zealand Rankings ▼
-18.5%
Jan 1 – Dec 30
Top M&A firms – Completed deals, full year 2011 $40
# of Deals per Advisor Market # of Rank Sh (%) Deals 2 6.2 90 68 6 4.7 5.2 3* 75 73 5 5.0 3* 5.2 75 7 23* 0.5 96 1 6.6 4 31* 0.3 28 11* 1.9 33 9 2.3 18 17* 1.2 38 8 2.6 10 2.1 30 3 40* 0.2 51 7 3.5 2 56* 0.1 9 20* 0.6 4 31* 0.3 28 11* 1.9 40* 0.2 3 2 56* 0.1 15* 1.4 20 1 83* 0.1 0.1 83* 1 6 25* 0.4 1,453
Rank Value per Advisor (US$m) Rank Market Market 2011 2010 Rank Rank Value US$m Sh (%) Share Ch. 1 1 63,553.3 7.1 ▲ 32.4 2 11 57,248.7 29.2 21.3 ▲ 3 2 50,991.5 26.0 1.1 ▲ 25.2 3.1 ▲ 4 3 49,363.0 4 46,617.0 5 23.8 1.9 ▲ 6 116* 31,925.0 16.3 16.3 ▲ 7 6 28,773.5 14.7 -2.1 ▼ 8 64 28,391.0 14.5 14.2 ▲ 9 36 27,658.8 14.1 12.8 ▲ 10 13.7 9.3 ▲ 23 26,965.6 38 25,660.8 13.1 12.0 ▲ 11 12 10 24,770.6 12.6 3.7 ▲ 13 8 23,231.2 11.8 2.7 ▲ 23,016.3 14 20 11.7 6.7 ▲ 11.4 7.0 ▲ 22 22,448.8 15 73 20,306.5 16 10.4 10.2 ▲ 17 14 16,701.3 8.5 2.0 ▲ 18 8.4 8.1 ▲ 60 16,382.8 19 41 15,581.2 7.9 7.1 ▲ 20 14,351.8 7.3 7.3 ▲ 21 116* 13,037.7 6.6 6.6 ▲ 22 42 4.7 ▲ 5.4 10,580.7 23* 9,400.0 4.8 4.8 ▲ 23* 4.8 4.8 ▲ 9,400.0 25 4.8 4.4 ▲ 57 9,376.4 196,268.7 100.0
Legal Advisor Freehills Clayton Utz Allens Arthur Robinson Blake Daw son $30 Mallesons Stephen Jaques Simpson Thacher & Bartlett Minter Ellison Latham & Watkins Allen & Overy Corrs Chambers Westgarth Johnson Winter & Slattery $20 Norton Rose Gilbert + Tobin Sullivan & Cromwell Baker & McKenzie Morgan Lewis & Bockius Skadden Hogan Lovells Chapman Tripp $10 Cravath, Swaine & Moore Cleary Gottlieb Steen & Hamilton Clifford Chance Cadwalader, Wickersham & Taft Bracewell & Giuliani Osler Hoskin & Harcourt LLP Industry Total
Any Aus
Full Year 2011 |-25.7% Mergers▼& Acquisitions | Legal Advisors
Australian Cross Border Announced M&A Any Australia or New Zealand Involvement Completed (AG28)
Ou
Change in # of Deals 3 ▲ 10 ▲ 19 ▲ 15 ▲ 2 ▲ 5 ▲ 16 ▲ 2 ▲ 22 ▲ 7 ▲ 8 ▲ 3 ▲ 8 ▲ -5 ▼ 3 ▲ 0 6 ▲ 2 ▲ 14 ▲ 3 ▲ 1 ▲ -7 ▼ 1 ▲ 1 ▲ -1 ▼
3Q09
2Q09
1Q09
▼ ▼
4Q08
-20.5% -21.7%
3Q08
2Q08
1Q08
90.1% ▲ 8.5% ▲
4Q07
2Q07
3Q07
$0 Industry % Change from Same Period Last Year Industry % Change from Last Quarter
1Q07
Change in # of Deals -6 ▼ 3 ▲ 1 ▲ 4 ▲ -2 ▼ 6 ▲ 2 ▲ -3 ▼ 27 ▲ 2 ▲ -8 ▼ -4 ▼ 1 ▲ 1 ▲ 5 ▲ -12 ▼ 4 ▲ 1 ▲ 1 ▲ -4 ▼ 1 ▲ 1 ▲ -6 ▼ 0 4 ▲
Any Australia or New Zealand Involvement Announced (AE27) Top M&A firms – Announced deals, full year 2011
Rank Value (US$b)
– Dec 30
news | M&A >>
13
www.legalbusinessonline.com
15 100%
Analysis | Criminal Cartels >>
Analysis >>
Criminal Cartel Policies Play Follow The Leader The New Zealand parliament is pondering the criminalisation of cartels, to the dismay of Air New Zealand General Counsel John Blair. Here he argues that the main outcome of criminalisation is to induce a chilling effect on global business – and any reduction in cartel activity is questionable.*
“W
e put Americans in jail for price fixing so it’s only fair that we put other nationalities in jail too.” This stunning logic from a very senior prosecutor in the Department of Justice left me wondering if I was in Wonderland with Alice. Nobody told Americans they should imprison people for the heinous crime of price fixing – they made it up all on their own. In a room accompanied by freshfaced, eager and visibly “tooled-up” FBI agents, I decided that pointing out the flawed logic was not in my or my client’s best interests. Tragically this same flawed logic is now entrenched in English and Australian law and New Zealand is set to follow the blind stupidity. Why? Americans consider cartels to be criminal matters, we want to trade with Uncle Sam so we should
14
pay homage to his philosophies on commerce. Whichever shallow politicians are framing these policies, they have yet to wake up to the fact that China has limited competition law – and economically seems to be doing rather well. We are likely to trade more with China than the U.S. in coming decades. And by the way, if we want to level the playing field with the U.S. when will Australia and New Zealand adopt the protectionist, anticompetitive regime of Chapter 11 which shelters U.S. companies from exposure to the realities of insolvency faced by Australasian businesses? This article is not a defence of price fixing. Economically, price fixing promotes inefficiency and the unfair distribution of wealth. It should be illegal – but not criminal. Let’s go back to logic for a moment. The ultimate cartel becomes in substance a monopoly. A monopoly
CONTEXT The debate over the criminalisation of cartels will resume in New Zealand in early 2012 when the New Zealand Parliament considers the Commerce (Cartels and Other Matters) Amendment Bill 2011. Proponents point to U.S., UK and Australia as having followed this path and argue that New Zealand should follow the lead of these key trading partners. Against this background, this article argues that the limited experience of criminal prosecution in the UK has been a disaster, the Australian legislation is an untested maze that many Australian lawyers are cautious about and the U.S. hard line has obvious flaws. New Zealand should reject the proposed “me too” policy and focus on promotion of competition instead of a penalty regime that will damage New Zealand’s economy. Australasian Legal Business ISSUE 10.1
Analysis | Criminal Cartels >>
earning unjustified profits runs the risk of regulatory intervention, potentially including price control. Airport managers for example, must have feverish nightmares about price control. Monopoly businesses that have extracted many millions of dollars of overcharges from consumers seem to continue to escape the rigorous examination that those in truly competitive businesses incur. By contrast, a businessman agreeing prices with a competitor risks not price control, but imprisonment. Why the difference in severity? Have the politicians assumed that cartels inevitably involve South American drug barons? Maybe we really are in Wonderland?
www.legalbusinessonline.com
Criminalisation and Imprisonment is Not the Right Answer
The New Zealand Commerce (Cartels and Other Matters) Amendment Bill 2011 is proposed ostensibly for the purpose of testing “whether it is possible to define with sufficient clarity the prohibition and exemptions, such that any downsides of criminalisation are remedied or at least mitigated”. This is a good question, but nowhere in the papers accompanying the Bill are there any adequate answers to that question. Criminalisation and imprisonment are undoubtedly a strong deterrent. Deterrents do not work for the “determined criminal” who will knowingly take the risk of detection and punishment, assessed against the
potential rewards of the conduct. The criminalisation proposition proceeds on the unsupportable assumption that employees of businesses are prepared to risk substantial personal regulatory penalties in the interests of improving their employer’s profitability, but will not risk imprisonment. There is no evidence for this and less logic. Most participants in cartels are employees who derive little if any direct personal gain. Rather, cartels tend to evolve from historic business practices and relationships which become “too close”, not through deliberate intent. Neither does a deterrent work where the accused was genuinely unaware of the illegal nature and the consequences of the conduct. This is rarely relevant in offences such as assault, theft and 15
Analysis | Criminal Cartels >>
arson carrying the same seven year potential sentence, but highly relevant when considering an area of law with such complexity and uncertainty as competition law. This uncertainty linked to an extreme deterrent will result in honest business people giving legitimate business opportunities an unnecessarily wide berth creating the so-called “chilling effect” on commerce. Proponents of criminalisation point to one cartel which it is claimed did not operate in the U.S. because of the criminal regime there. No mention is made of how many legitimate business initiatives have not been pursued in the U.S. because of undue caution about the same risk. Proponents of imprisonment for cartel conduct point to increasing numbers of prison sentences in the U.S. for “anti trust” conduct as evidence that criminalisation works. In my view the statistic proves the opposite; if more people are being imprisoned the deterrent isn’t working. Since the days of the wild-west, the U.S. has had a deep commitment to putting people in jail, but crime continues to increase. The “jail” response is now at a level where in the U.S., 1,000 individuals are imprisoned per 100,000 of population. In New Zealand the ratio is 199 and in Norway, 66. In the interests of avoiding clichés I will make no reference to levels of criminality in Australia. It can be argued that there are more cartelists being uncovered – but how many are cartelists and how many are prisoners of circumstance? Bruce 16
McCaffrey, a Qantas cargo manager in the U.S. claims publicly that he opted for a guilty plea and imprisonment in the face of not having the resources to attempt to prove his innocence. Having some insight into just how extensive those resources must be, I believe him. How many more of the apparent 400 individuals imprisoned in the U.S. for cartel offences have had the same Hobson’s choice? The debate should not be just about imprisonment and fines without considering the entire costs – financial and emotional – of the criminal process for prosecutors and accused. Competition law regulators recognise that very many prima facie anticompetitive business arrangements can produce net economic benefits. That is precisely why exemptions, clearances and approvals are provided for. I can think of no other crime capable of receiving prior exoneration from a regulator.
Jurisdiction and International Commerce
International commerce and national sovereignty bring further complications and risks when considering criminalising cartel conduct. There is an obvious lack of fairness in prosecuting in one jurisdiction, conduct that occurred in another jurisdiction where it is legal, or is even required by regulators in that other jurisdiction. The consequences are substantial when possible criminal penalties are involved and are compounded by the alarming prospect of consecutive sentences in multiple jurisdictions for the same conduct. Domestically the “double jeopardy” is protected but there is no such international protection with each regulator potentially wanting its “pound of flesh” as has already occurred between the UK and the U.S. If New Zealand criminalises cartels, its citizens are susceptible to extradition to territories where the consequences may be more severe than New Zealand Courts would contemplate. The New Zealand Commerce Commission’s long running air cargo case (it will be over seven years from the start of the investigation when a trial starts in 2013) is prosecuting conduct alleged in overseas markets with an as yet unknown effect on any
relevant market in New Zealand, if there is one. The High Court recently decided that air cargo services contracted for in Asia are part of a “market in New Zealand” because of derived demand in other, downstream markets and that airlines somehow “compete” in New Zealand despite the absence of the context of any relevant market. The latter conclusion is based on there being two newly defined (by the Commission) meanings of “competition” in the Commerce Act, linked to the ability of a hypothetical observer to watch competitor aircraft being unloaded in New Zealand. The Court of Appeal has been asked to consider that proposition. This is an outcome of a regulator attempting to extend its jurisdiction through a new, creative interpretation of the law (albeit one the High Court accepted) and interfere with overseas markets, regulators and sovereignty – something that even the globally expansive U.S. has progressively resiled from over the years. This legal uncertainty is unpalatable in the context of potential regulatory financial penalties – it is unacceptable for criminal conviction and imprisonment of individuals. It is estimated that cartel activity in New Zealand domestic and trans Tasman cases amounts to a total of NZ$2.85m of illegal overcharges per year. That level of economic detriment pales into insignificance against the multi-million dollar costs of a single indepth investigation and prosecution. In developing a law that fits New Zealand’s needs, we should not follow the lead of a wild-west mentality and throw more people in prison more often just because our trading partners do so. Laws and other state resources that control competitive behaviour need to be re-focused on maintaining and promoting the importance of competition in promoting economic efficiency – not chasing extended jurisdiction and harsher penalties that frighten people away from legitimate commercial opportunity. Or am I still in Wonderland? * The views expressed in this article are the personal views of the author and do not necessarily reflect the views of Air New Zealand. Australasian Legal Business ISSUE 10.1
Analysis | Criminal Cartels >>
Protect your interests. www.legalbusinessonline.com
17
NEWS >>
appointments Baker & McKenzie
►► lateral partner hires Name
Practice area
Organisation coming from Organisation going to
Simonetta Astolfi
Government
Blake Dawson
Maddocks
Simon Bellas
Construction
Baker & McKenzie
Norton Rose Australia
Garth Gallaway
Insurance
Duncan Cotterill
Chapman Tripp
Chris Flynn
Corporate/ E&R
Kulczyk Oil Ventures
Gilbert + Tobin
Tim Hemingway
Corporate
Clayton Utz
Swaab Attorneys
Annette Hughes
Litigation
Allens Arthur Robinson
Corrs Chambers Westgarth
Michael Mammen
Property
Macpherson + Kelley
HWL Ebsworth
Alex Roth
Banking & finance
Herbert Geer
Middletons
Paul O’Donnell
Energy & resources
Novatec Biosol
HWL Ebsworth
John Samaha
Litigation & dispute resolution
Samaha & Associates
Allen & Overy
Tim Hemingway
Corporate
Clayton Utz
Swabb Attorneys
Jason Salman
Restructuring & insolvency
Greenberg Traurig Maher LLP
Corrs Chambers Westgarth
►► partner promotions Firm
Name
Freehills
Gilbert + Tobin Gilchrist Connell
Practice Area
Caroline Cox
Litigation
Sydney
Ben Dudley
Employee relations
Sydney
Martin MacDonald
Banking & projects
Melbourne
Juan-Jose Zentner
Banking & projects
Melbourne
David Clee
Mergers and acquisitions
Sydney
Paula Gilardoni
Competition law
Sydney
Alex Haslam
Insurance
Sydney
Gavin Beardsell
Insurance
Sydney
Jackson McDonald
Helen Weatherley
E&R
Perth
Kemp Strang
Sarina Roppolo
Dispute resolution/ insolvency
Sydney
mdp McDonald Partners
Sarah Verstak
IP
Melborune
Minter Ellison
Benjamin Smith
Mergers and acquisitions
Sydney
Piper Alderman
Megan Calder
Construction
Melbourne
Clayton Utz
Swabb Attoneys
Swaab Attorneys recruits new partner from Clutz Tim Hemingway has joined Swaab Attorneys as a partner from Clayton Utz. Hemingway has acted for the government and a number of medium to large corporates in the banking, manufacturing, media, telecommunications and retail sector. His practice focuses on IT and intellectual property, logistics and transport, corporate advisory and mergers and acquisitions. He has had both private practice and in-house experience having undertaken secondments in his previous firm.
18
Office
Macpherson + Kelley
Norton Rose
Norton Rose recruits Bakers talent for partnership Baker & McKenzie senior associate Simon Bellas will join Norton Rose Australia as a partner in March. A construction and engineering lawyer, Bellas has most recently been based in Almaty, Simon Ballas Kazakhstan and in that time has had an increased exposure to significant mining projects and clients.
Herbert Geer
Middletons
Middletons’ gain is Herbert Geer’s Roth Middletons banking and financial services group has added a new partner to the team. Alex Roth has joined the Sydney office of the firm from Herbert Geer, where he was a partner since 2006. Roth has more than 10 years’ experience in advising large banking and finance clients including Westpac, St. George, Credit-Suisse, ANZ, Suncorp, Centuria, Capital One, Wingate and Partnership Finance Group.
Allens Arthur Robinson
Corrs Chambers Westgarth
Allens’ litigation expert joins Corrs Corrs Chambers Westgarth has added to its dispute resolution and risk advisory capability with the appointment of Annette Hughes as partner in its Melbourne litigation group. Hughes joins Corrs from Allens Annette Hughes Arthur Robinson where she led the product liability team and coled the corporate responsibility group. She currently sits on the committee of the National Product Liability Association having previously been president.
HWL Ebsworth
M+K senior associate takes partnership at HWL Ebsworth HWL Ebsworth has recruited Macpherson + Kelley senior associate Michael Mammen as a partner in the property team. Mammen has expertise in residential, commercial and mixed use developments such as ownership and development structuring and leasing. He acts for all parties involved in the property industry, including developers (listed and private), vendors, purchasers, landlords, tenants, managers, consultants and advisors. Mammen will remain based in Melbourne.
Mouldens
Tindall Gask Bentley
Tindall Gask Bentley raids Mouldens South Australian law firm Tindall Gask Bentley has bolstered its wills and estates department with the addition of Mouldens trio Rod Behenna, Michael Arras and Sarah Behenna. Rod Behenna is a former managing partner at Mouldens and has nearly 42 years of legal experience.
Australasian Legal Business ISSUE 10.1
NEWS >>
Chapman Tripp
Duncan Cotterill
Chapman Tripp adds litigation partner in Christchurch Long term Duncan Cotterill partner Garth Gallaway has joined Chapman Tripp as a partner in the firm’s Christchurch office. Gallaway has extensive experience in insurance related litigation and has worked for numerous insurance companies and underwriters, particularly in relation to professional indemnity, statutory liability and public liability insurance complements and extends Chapman Tripp’s existing South Island practice. In addition to his litigation experience, Gallaway has extensive experience in alternative dispute resolution, especially mediation. Duncan Cotterill recently added three new partners to its Christchurch-based litigation team.
corporate practice group leader. Humphrey’s is a private equity and mergers and acquisitions lawyer and has acted on a considerable number of private equity transactions, including leveraged buyouts, management buyouts and buy-ins and expansion capital investments, he has also advised some of Australia’s leading private equity investors. He is a member of the Financial Services Institute of Australia (FINSIA), the American Bar Association (committee on private equity), the Australian Institute of Company Directors and the Australian Venture Capital Association. He is also a member of the Corporate Finance Advisory Panel for FINSIA. Greenberg
restructuring practice in London, specialising in major cross-border restructurings. Prior to this he was a partner at Kirkland & Ellis International LLP in the financial restructuring group. special counsel to principal
Gilchrist Connell promotes from within Specialist insurance firm Gilchrist Connell has made four senior promotions to start the new year. Alex Haslam and Gavin Beardsell, both formerly special counsels in the firm’s Sydney office have each been appointed principal (partner equivalent), taking Gilchrist Connell’s senior leadership team to nine across its three offices. Justine Siavelis, who began as senior associate in the recently launched Gilchrist Connell Perth office is moving into the position of special counsel, and Verginia Serdev, also in Perth, has been appointed senior associate. “These senior appointments are another step in the firm’s ongoing evolution since opening in July 2008. These appointments are in response to our clients’ demand for our services in those markets,” said managing principal Richard PM Wood.
Corrs
Corrs attracts UK partner to restructuring team Corrs Chambers Westgarth has added to its restructuring and insolvency capability with the Sparkes Norton Rose appointment of Jason Salman as a partner in its Sydney office. Sparkes acquires senior Norton Rose partner Salman brings to Corrs more than a decade of Former Norton Rose Australia partner and national international financial restructuring experience and head of private equity Nick Humphrey has joined firm Greenberg Traurig C oHelmore n A_ A u s LasBthe _ 0firm’s 1 0 national 2 1 2 . p d f joins P afrom g eU.S. 1 2 7 / 0 1 / 1 Maher 2 , LLP 5 : 3 3 Sparke Lawyers where he led the business reorganisation and financial
Matching the Australian legal experts
,
with
,
the global legal experts
On 1 March Blake Dawson will become Ashurst, Australia’s new global law firm.
Blake Dawson and Ashurst – more than a match. ConA_AusLB_010212
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NEWS >>
industry >>
South America next frontier for Aussie firms A
number of Australian law firms are seeing increased activity related to South America as miners look for fresh pastures. Norton Rose managing partner Wayne Spanner told ALB activity in the South American market by both Canadian and Australian mining and resource companies was a clear business case for the recent merger between Norton Rose and Canadian firm Macleod Dixon, which has offices in Caracas (Venezuela) and Bogotá (Colombia). “Energy and resource companies operate around the world and they go to where the resources are, which is why it’s important to have people on the ground in South America, which is a growth area for commodities,” said Spanner. Norton Rose isn’t the only firm seeing movement in Latin America. Mallesons Stephen Jaques was the lead advisor on the $3.5 billion takeover of Andean Resources by Gold Corp in late 2010. The former was an Australianbased junior miner responsible for the Cerro Negro gold project in Argentina, while Gold Corp is a Canadian miner with extensive operations in the South Americas. “We are seeing a lot of the Perth-based junior miners and explorers becoming very active in South America. It has really come onto the scene in the last five years,” said Mallesons partner Nigel Hunt. South America is touted to have huge deposits of untouched minerals, and while gold in particular is hot amongst Australian junior miners, other minerals such as copper and nickel are also growing in prominence as new regions open up. “There is a strong Canadian community already in South America and a very similar mining community in Australia is looking in that direction,” added Hunt. In recent times Middletons has also been involved in a number of deals in the region. Special counsel Clive Cachia acted for an Australian investment house acquiring three mining projects in Argentina last year and is currently working on a deal involving a copper and gold producer in Chile which is set to be listed on the ASX. “Over the last year we are seeing an increasing role in Australian companies doing business in places like Argentina and Chile and we are helping them to complete transactions related to those markets,” he said. ALB
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industry >>
Slater & Gordon to enter UK market P
laintiff law firm Slater & Gordon has announced its first foray overseas through the acquisition of UK-based law firm Russell Jones & Walker (RJW). The Australian Stock Exchange listed-firm, the first of its kind, will pay £53.8 million (A$80 million) for RJW including £36.4 million in cash and £17.4 million worth of Slater & Gordon shares. The cash component will be funded by the Slater & Gordon debt facility, which has been increased to A$160 million to cover the transaction and continued growth of the Australian business. It is the law firm’s largest acquisition to date. Slater & Gordon managing director Andrew Grech said RJW, which has approximately 425 staff, across 10 locations in the UK, was the ideal partner for Slater & Gordon in the UK. “We have researched the UK market for the past three years and studied more than 30 law firms in the UK,” Grech said. “RJW has a history and values that are very similar to Slater & Gordon and the firm has a management team that can see the opportunities that lie ahead in the UK market.” The deal is subject to regulatory approval and should be completed by April. “We will be among the first to take advantage of a number of significant changes which are occurring in the legal profession in the UK,” Grech said. “Our experience as a listed public company gives us a head start on other law firms in the UK.” The firm will be known as Russell Jones & Walker part of Slater & Gordon Lawyers on completion. Approximately 60 percent of RJW’s revenue is from personal injury litigation; similarly both firms have a strong presence in employment law and family law. The acquisition also includes RJW’s Claims Direct brand, one of the UK’s most recognised claims management brands. For financial year 2013, the first full year as part of the Slater & Gordon Group, the combined RJW and Claims Direct revenue is forecast to be £53 million including earnings before interest, tax depreciation and amortisation of £10.9 million. “The UK market is inherently attractive to us because of its size and its jurisdictional similarities to Australia which the recent changes bring even closer,” Grech added. The UK is the second jurisdiction, following Australia, to allow Alternative Business Structures, including stock exchange-listed firms. ALB Australasian Legal Business ISSUE 10.1
NEWS >>
industry >>
Lawyers eye potential private equity surge E
arly private equity activity in 2012 has lawyers already predicting that private equity will play an important role in overall M&A activity for the year. U.S.-based private equity firm Kohlberg Kravis Roberts (KKR) has made an unsolicited approach for clothing retailer and manufacturer Pacific Brands which could value Pacific Brands at A$600 million if it goes ahead. Australasian-based Pacific Equity Partners’ (PEP) potential buyout of Spotless was also again in the headlines while PaperlinX announced it has been approached by a potential private equity buyer. Mallesons Stephen Jaques partner Michael Barker says the situation will be harder for corporations than private equity. “I think this year, with share prices being low, it could be quite hard for Australian listed corporates to go and buy things. Private equity funds can readily deploy their money,” he told ALB. Overall he predicted that, outside of resources, private equity deals will make up at least a quarter of all M&A activity in 2012. Baker & McKenzie partner Brendan Wykes agreed private equity will be tempted back into the market in 2012, adding that cashed up private equity firms will have a greater incentive to do deals. “I think you’ll find that, after a relatively quiet six months, there will be more incentives for private equity firms to close deals; more willingness to do so. I am optimistic that it will be a stronger six months for private equity if debt continues to be available on similar terms,” he said. One reason for the added incentive on private equity offered by Barker was the fact there are currently a number of Australian companies in a similar position to Pacific Brands, whose valuations fall into a ‘sweet spot’ for both domestic and foreign private equity houses in terms of deal size which can be funded in the current market environment. “The deal size is several hundred million to one to two billion, that’s a sweet spot of Australian companies. The Australian stock market is suffering like the others, and there comes a point when the price is low and a deal may be done,” he added. In addition, Wykes said it appears other sectors could open up for private equity buyers, encouraging further activity. “Essentially it could be that sectors that have recently been out of favour, such as retail and manufacturing, will become more attractive again to private equity firms,” he commented. Some of those ‘out of favour’ sectors can also have the potential for private equity houses to provide operational and managerial improvements, according to Barker. “I think the ‘old fashioned businesses’ – nonfinancial services, non-retail, manufacturing, processing style businesses – people have forgotten about them. I also think those are the types of businesses where operational managerial improvement can have results,” he added. Minter Ellison partners John Steven, Bart Oude-Vrielink, and Joseph Pace are advising Pacific Brands on the KKR deal. ALB
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In-house Q&A ►► Australia Law firms in Singapore Firm Advent Lawyers Allens Arthur Robinson
Model
Amanda Egan
Foreign law practice Joint Law Venture General Counsel with TSMP Hairhouse Warehouse Pty Ltd Blake Dawson Foreign law practice Freehills Foreign law practice In your opinion, why have in-house lawyers become an increasingly Kanji Group Foreign law practice indispensable part of an organisation? Webb Henderson Foreign law practice The popularity of having an in-house lawyer has not changed significantly since Wojtowicz Kelly Legal Representative office
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I started practice some 10 years ago, although smaller companies appear to be Attorney-General’s moving Source: further Singapore towards hiring lawyers in anChambers initial measure to save on external legal fee bills. As a first year solicitor, many clients, particularly those based in the U.S., retained their own General Counsel or legal team for transactional work and briefed out projects or more onerous, technical matters. From my own experiences and from what I see through colleagues, the indispensability of in-house lawyers stems from the fact that in-house legal assistance can not only save the organisation a significant amount of money (in savings from not briefing all work out to external lawyers and paying (more often than not) high law firm fees) but enables management to have a person or people that are available on a 24 hour 7 day a week basis for advice or to have work completed. A well respected, hard working in-house lawyer becomes a trusted part of the organisation where their views and opinions are sought and they have input into the strategic direction the organisation is taking. In-house lawyers tend to have a genuine interest in seeing the organisation they are an integral part of succeed and grow. External lawyers, although valuable for their specialist knowledge or experience do not tend to have the same level of care or interest in what occurs to the organisation after their bill is paid (given they are an external consultant engaged to provide specific advice/undertake certain work only). In-house lawyers are accountable and responsible for the work they undertake and advice they provide and the consequential effects of that advice or work.
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In recent times, the role of the General Counsel has diversified into a multi-faceted role, (where the General Counsel can wear the ‘hat’ of Lawyer, Legal Manager, Compliance Manager, and Company Secretary). In your opinion, do you believe this has increased your risk profile?
The various hats I wear as General Counsel most certainly increase my risk profile. The advice I provide or work I undertake can, if incorrect, expose the company to unnecessary liability, potentially excessive costs or damage to reputation. However, if you are competent and can recognise your strengths and weaknesses (seeking specialist advice where necessary) then this does not become a practical issue of concern each day. Taking on the role of General Counsel is very rewarding and a challenging role but does involve an enormous amount of responsibility (not unlike many roles in other fields) and is not suited to those who prefer not to deal with pressure, colourful personalities or stringent time frames.
3
In your opinion, what do you consider to be the main challenges you and your team will face in the coming 12 months?
My employer’s business interests are retail and consumer based. As most are aware, there are many areas of retail suffering the effect of low sales and high debt. We see retailers collapsing around us and although our business is strong and in a exciting phase of growth we are conscious of not becoming overzealous with expenditure but conversely, plan for periods of low customer counts in shopping centres. As a management team we plan in advance to counter possible effects of the Global Financial Crisis worsening and look to strategies to assist our core business partners (our franchisees) cut their overheads, by, amongst other things, buying in product at a lower cost base. Internally, we are cautious and need to rely more on the skills we have in our employees and management staff, rather than look outside to consultants. The saying that you should work smarter not harder is not necessarily true for us, we need to work both smarter and harder. In an environment where our employers are two of the most generous people in business, it is not a chore for staff, it is enjoyable to be part of the growth and success of the business.
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INDUSTRY >>
Maddocks to open in Canberra M
David Rennick
addocks has announced that it will be opening an office in Canberra, to service the firm’s growing list of Commonwealth clients. The government practice contributes close to half the firm’s overall revenue and the Canberra office will be the firm’s third after Sydney and Melbourne. The Canberra office is expected to open in February of next year and will be headed by a new addition from Blake Dawson, Simonetta Astolfi. Astolfi’s team will advise on regulatory issues, commercial matters and dispute resolution. Mark Henry, head of the firm’s government and administrative law practice, said the firm had been planning a move to the nation’s capital for some time. “Maddocks has grown considerably in recent years, particularly since the opening of our Sydney office,” he said. Maddocks CEO David Rennick said the firm is well placed to take advantage of the Government’s plan to expand the range of firms with whom it works. “The Commonwealth’s desire to expand the range of firms from which it sources legal services provides an opportunity for Maddocks to establish a local presence in Canberra,” he said. In the past year Maddocks has secured top-tier hires from both Freehills and Blake Dawson. In March two property partners, Lisa Chung and Bronwyn Badcock, moved across from Blake Dawson, while former Freehills dispute resolution special counsel Timothy Atkin also joined in June. ALB
JUDICIARY >>
Former HDY partner appointed to Supreme Court F
ormer Henry Davis York partner and member of the Bar, James Stevenson SC, has been appointed as a judge to the Supreme Court of NSW, Equity Division. Stevenson is the first HDY partner to be appointed as a judge at the Supreme Court level. He was a partner at HDY until the end of 1988, when he left to join the Bar. A HDY spokesperson said it was “wonderful news” for Stevenson and the firm which has worked with him on numerous occasions during his career at the Bar.
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His appointment is the fourth judicial appointment to the Supreme Court this year. In June former Mallesons Stephen Jaques partner Ashley Black was appointed as a judge, while high profile barrister Anthony Meagher SC was appointed in August. Christine Adamson, the former counsel assisting the Special Commission of Inquiry into the NSW Electricity Transactions, joined the court in October. ALB
Australasian Legal Business ISSUE 10.1
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in-house >>
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Confirmed: Mallesons, King & Wood to link in March A
ustralian law firm Mallesons Stephen Jaques and Chinese firm King & Wood will become King & Wood Mallesons on 1 March 2012, the firms have officially announced. The agreement will see the firms rebrand but retain separate partnerships. The only exception to this arrangement will be in Hong Kong, where the two partnerships will be completely integrated. Beijing and Shanghai-based Mallesons partners will join the King & Wood partnership. Stuart Fuller, Mallesons chief executive partner elect, who will relocate to Hong Kong next year, said that the move was a response to the rise of Asia. “It will be a firm for the Asian century,” said Fuller. “[This will be] the only firm that brings together the combination of Chinese local law, English law, Hong Kong law and Australian law capabilities.” Fuller will become the global managing partner and Hong Kong managing partner of the new firm. Current King & Wood chairman Wang Junfeng will be the chairman of the combined firm while Tony O’Malley will become the Australian managing partner. King & Wood Mallesons will be the largest law firm in Asia and the largest firm headquartered outside of the U.S. or UK, with more than 380 partners and 1,800 lawyers. Mallesons has made it no secret that a global presence was always on the agenda and almost joined forces with Clifford Chance before the financial crisis in 2008. Fuller said the decision to join with King & Wood was one based on a combined desire to create a leading global law firm based in the Asia region. “What the King & Wood alliance does is allow the firm to create and shape its own destiny. It differentiates the firm from its competitors and is very much focused on the new world, not the old world,” he said. He added that in the post financial crisis world clients were increasingly demanding a “one-stop-shop” for legal services while at the same time economic power has shifted as a result of a change in capital flows. “By combining with King & Wood, becoming a new global legal brand, a very differentiated global legal brand, we are creating a genuinely new choice for clients in the international legal services market,” he said. Fuller said there was no plan to have a fully combined partnership in the future and touted the success of other firms in the market with the verein structure as justification for the decision. “The Swiss verein structure allows you to act very quickly to add capability in different markets… that is an important feature for us as the aspiration is to become a global law firm,” he said. He added that as a result of discussions held with clients in the lead up to the merger, the two firms were already working on six deals together involving Chinese and international clients. ALB 24
Damian Paul
M+K Lawyers makes further acquisition in Sydney M
+K Lawyers (Macpherson + Kelley) has merged with Sydney property and commercial firm Lane & Lane, taking on a small team headed by Anthony Roberts, who will become the principal of the combined firm’s property services group. The combination of the two firms follows a period of rapid growth for M+K Lawyers and is aimed at building on M+K’s established practice in the areas of commercial and property law. Roberts is accompanied by lawyers Bruce Yahl and James Linton, one paralegal and two secretaries. Yahl and Linton both join the new firm as special counsel. The addition of the Lane & Lane lawyers takes the total number of principals at M+K nationally to 55 and the total number of lawyers to 135. Roberts said he is pleased that his team will now be able to offer a broader range of services, at the same time as maintaining relationships; “By merging with M+K we are able to deliver to our existing clients a much broader range of legal services while maintaining the close relationships that our clients value,” he said, adding that his existing clients would also benefit from the national reach of M+K. ALB Australasian Legal Business ISSUE 10.1
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industry >>
Direct action, profit guidance and ‘low-doc’ capital raisings on ASIC agenda C
orporations and their lawyers can expect to see increased direct action from regulators, according to Jane Eccleston, senior manager, corporations, for the Australian Securities and Investment Commission (ASIC). Eccleston made the comment during the opening remarks of the Chartered Secretaries Association (CSA) conference in Sydney last month. “It’s likely that we’re going to continue to send some direct messages to the market where we continue to see some more risky or complex products specifically targeted at retail investors,” she added. One area in particular where Eccleston said she expected ASIC will be involved over the next year is with socalled ‘low-doc’ capital raisings, where companies look to recapitalise themselves based on ‘low-doc’ means. “You’re likely to see more of ASIC in this space,” she warned. “One of the issues we’re concerned about is ‘do all investors have the same information, or do some investors have more than others?’ ‘Are investors being misled?’”
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Years of Tax experience at Simpson Grierson.
Domestic and cross border tax advice in banking, finance, investment and governance.
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In terms of the immediate future, Eccleston said ASIC is preparing to issue guidance notes on underlying profits, assisting issuers on how to avoid misleading investors and will also continue to outline what it expects of directors in light of the Centro case and other significant cases. “We’re also concerned to ensure that companies adopt proper processes, particularly with respect to new remuneration laws, which is an area those cases have really focused attention on at this time” she added, mentioning that voting exclusions are another area ASIC is currently concentrating on. “It’s going to be a mixture of addressing fundamental issues, but also trying to ensure that there’s incremental improvements in Australia’s regulatory system. The GFC demonstrated that we have a world class regulatory system here in Australia, but this is not the time to be complacent with that,” she concluded.
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feature | 2012 preview >>
ALB 2012 preview What does 2012 hold for Australia’s law firms and corporate lawyers? We asked some industry leaders for their prognostications on the year ahead.
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Australasian Legal Business ISSUE 10.1
feature | 2012 preview >>
G+T’s previous alliance with King & Wood was regarded as groundbreaking at the time – and now the firm enters 2012 in the unusual position of being a spectator to an attempt at an even more ambitious alliance by Mallesons.
Danny Gilbert Gilbert + Tobin
ALB: What is your reaction to the Mallesons-King & Wood merger? Do you still have any formal relationship with K&W? DG: We’re still good friends but there is no longer a formal relationship. They are both two terrific firms and we wish them well. I imagine there will be times when there will be conflicts and they may consider sending us work and we hope that will be the case. ALB: What do you see as the impact of the Eurozone crisis on the market? Have we already seen the full brunt, or is there a “lag effect”? DG: The Eurozone is one input into what is an already volatile market situation. The amount of M&A activity and corporate activity over the last nine months has been low and resources projects in Perth appear to
be also starting to slow down. This year will be quite bearish, I think. I think the lag effect, if there is one, has already gone – we’re already well and truly into it. There didn’t seem to be such a lag this time. It means we haven’t recruited like we would have done in an expanding market – we’re not recruiting much and watching costs. ALB: What do you see as the key areas where clients are likely to seek advice? DG: I think access to funding is going to be an issue for corporates – hence you’ve got the government trying to create necessary conditions to build a proper bond market in the country. That’s something to watch. The regulatory environment continues to grow that’s an ongoing source of work for lawyers, particular in-house.
If Australia came back to earth with a thud in 2011, New Zealanders have always had more modest expectations about their immediate economic prosperity. In a flat environment, there’s good reason to believe that the only way is up.
Gary McDiarmid Russell McVeagh ALB: How do you see the market in 2012? GM: We anticipate that the NZ economy is more likely to be “steady as she goes” rather than [suffering] a major impact from the Eurozone. From what we can see, 2012 should be an improvement on 2011: for our firm 2011 was a good year, up on last year. There are a number of positive factors www.legalbusinessonline.com
at play: agricultural commodity prices remain at record high levels even with the consistently high exchange rate. There is the Christchurch rebuild, with insurance payout stimulus and rebuilding activity and spinoffs, the continuing government commitment to infrastructure spending; the Reserve Bank has room to move with interest rates and capital markets are showing more signs of activity. ALB: What do you see as the key areas where clients are likely to seek advice? GM: We think as well as potential issues as advisors, we are there to assist with the identification of potential opportunities. There are a number of pieces of new legislation afoot: The Financial Markets Conduct Bill places requirements for issuers around disclosure statements and also makes wide ranging changes to the governance of financial products and services. As well as general registration requirements for ‘managed investment
schemes’, the Bill sets out requirements for specific types of managed investment schemes, including KiwiSaver and superannuation schemes. The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 will impose anti-money laundering obligations on ‘reporting entities’, who will need to identify, manage and mitigate their money laundering risks according to the size, nature and complexity of their business. Considerable work needs to be undertaken to ensure they have considerable systems processes in place before implementation deadlines in 2013. Government has signaled that they will be fronting up to critical water issues (ownership, pricing, quality, access), ongoing Resource Management Act reform and there will be ongoing public sector reform .There will be the introduction of competition in the Accident Compensation scheme with major opportunities for insurers and impacts on employers and employees. 27
feature | 2012 preview >>
Freehills had a strong FY2011 with 7 percent revenue growth and the Brisbane and Perth offices in particular were riding high. Resources, banking, private equity and employment relations were the busier areas for the firm and CEO Gavin Bell says that there is cause for continued optimism in 2012.
Gavin Bell Freehills
ALB: How do you see the market in 2012? GB: It is very difficult to predict how the world economy will play out over 2012, but I am generally optimistic that Australia and the Asia-Pacific are better positioned than anywhere else for growth. As long as Europe takes positive steps or, at least, does not collapse completely, than I think that this part of the world will be reasonably protected. This year is likely to continue to be unsettled until the problems in Europe are resolved. However, a lot will still be happening in our market. For example, we will start to see an increase in investment in public infrastructure and state government asset sales will continue, such as the New South Wales electricity assets. There is also a lot of debt that needs to be refinanced during 2012. The debt and equity markets are in a very different shape to when that debt was first put in place which will mean that quite different debt structures are likely to be used. In addition, Australia will continue to be one of the better
investment destinations around the world, which will continue to generate a level of M&A activity. We will be continuing our graduate recruitment levels, which we maintained right across the Global Financial Crisis. ALB: What do you see as the key areas where clients are likely to seek advice? GB: There are some obvious areas where clients will need assistance. The implementation of the carbon tax and the MRRT are good examples. Even if the general structure of the legislation is known, how it will be implemented and the impact on particular companies is not yet fully understood. The ATO also seems to be taking a retrospective approach in some of its recent actions, such as in relation to private equity transactions and acquisitions. This will continue to generate uncertainty and disputes. The approach that the ACCC will be taking to various areas under the new Commissioner also looks like it will also require attention during the year.
Clifford Chance partners Mark Pistilli (Sydney) and Michael Lishman (Perth) provide their perspectives on the market.
Mark Pistilli Clifford Chance
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ALB: What do you see as the impact of the Eurozone crisis on the market? Have we already seen the full brunt, or is there a “lag effect”? MP: The impacts of the Eurozone crisis have already been felt in Australia. There is clear cautionary behaviour of Australian consumers and investors which is in large part driven by the Eurozone crisis. That has been evident since the middle of 2011. Whether we have seen the full impact of it will depend on how the crisis develops. It is not clear if the position will stabilise or worsen. Obviously there is contagion risk and a threat that the crisis will impact China and broader Asia. If a slowdown occurs in Asia, then we suspect the impact on the legal industry as a whole will be
more significant. Some major projects may be shelved or delayed. Of course there will be buoyant areas because of the crisis (litigation, restructuring and insolvency to name a few), but there is a threat to Australia’s energy and resources sector which has been resilient to date. ALB: What have been the specific impacts on the firm? ML: For the firm, we have noticed some difference in our domestic practice. Traditional corporate transactional and ECM work has been slow domestically since mid 2011, except in the energy and resources sector. Much of the firm’s corporate teams have been involved in project development over the year Australasian Legal Business ISSUE 10.1
feature | 2012 preview >>
(Diamantina power station, the Roy Hill Iron Ore project and the port expansions at Newcastle and Wiggins Island) and with corporate restructures (such as the Centro aggregation, Babcock and Brown asset sales and group restructures and Allco). Our litigation practices remain busy across both offices, and our Perth office, along with the whole of the Western Australian economy, has been especially busy across the board.
Michael Lishman Clifford Chance
ALB: What do you see as the key areas where clients are likely to seek advice? MP: There will be a number of “hot issues” for 2012. Some of them are not new. On some of the long standing ones, we expect the Carbon Tax, the new OH&S laws and the personal property securities legislation (not only in financial services but across all areas including energy and resources) to have a significant and broad impact. An understanding of changing Australian foreign investment policy
will also be important. ML: Offshore developments are impacting on business in Australia. Some of the key ones are the extraterritorial operation of UK and U.S. anti-corruption and anti-bribery legislation and the extending reach of foreign anti-money laundering and terrorism legislation. Funding is now more accessible from “shadow” banks and not the traditional banking system, with European, especially French banks, disposing of portfolios. Global capital adequacy requirements are tightening, which will see new products being developed to meet such requirements (such as covered bonds) and a general tightening of credit to marginal borrowers. Worldwide regulators are also working more closely together than ever to crack down on improper activity of a cross-border nature, and corporate non-compliance is taking on criminal penalties in many areas.
These are not exactly clement economic conditions for launching one of the global legal industry’s great cross-border experiments, but perhaps the King & Wood-Mallesons merger is an example of a great idea born of necessity. In the meantime, incoming CEP Stuart Fuller says that the global economic uncertainty is more of an opportunity than an obstacle.
Stuart Fuller Mallesons
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ALB: What have been the specific impacts of the Eurozone crisis on the firm? SF: In terms of the firm – there has been no impact on hiring or revenue. We have seen the impact more on our clients and their ability to raise funds. What we are seeing at the moment are requests from clients for advice on the impact of the Eurozone. I think it creates some opportunities, because of the strength of the firm in that fundraising space. We saw this in 2008, when there were challenges in finding funding and the firm worked with the market to develop new products and covered bonds is an example of that: the breadth of fundraising capability that we bring across the capital market products becomes an advantage at those points in time.
ALB: What are the other areas where clients are likely to seek advice? SF: Across the corporate and banking client base there is a regulatory challenge: the implementation of regulation from the new global capital and liquidity standards, which will impact on Australian banks; the consumer credit regulation and the impact that has on the cost of business for our clients; the new freedom of financial advice provisions and the new “three strikes” rules for directors. Our major concern is still around the weight of additional regulation and how that impacts on clients. There is a general lack of confidence when it comes to government legislative programs: timetables to bring through legislation and the infrastructure rollout in Australia – there’s the uncertainty of government in approving those projects, the uncertainty of government around policy making and this has significant [impacts] for us and our clients. 29
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Long serving Deacons stalwart Don Boyd has now vacated the managing partner role at Norton Rose Australia, leaving his replacement Wayne Spanner to ponder the 2012 market. Norton Rose has been at the vanguard of the globalisation of the industry with forays in several new markets in 2011 including Casablanca and several American markets.
Wayne Spanner Norton Rose
ALB: How will the Eurozone crisis affect the firm? WS: The financial situation in Europe is affecting the availability of credit and finance worldwide, which will in turn impact the legal services industry in Australia. Certain industries will continue to generate work globally, like mining, infrastructure and energy. These are sectors that law firms need to be placed in and they are three of our key strength areas at Norton Rose. We are well positioned to deal with the cyclical nature of business. We’re seeing growth in disputes, employment, insolvency, restructuring, infrastructure and energy. ALB: What are the other areas where clients are likely to seek advice? WS: Some of the hot issues will continue to include the carbon legislation, mining tax and greater
financial rigour and regulation including the impact of changes that will occur at the European level. It will be important to keep abreast of emissions trading rules in existing and emerging markets both here and overseas. These trends will provide key insights into the future of regulation and could lead to a more effective management of emissions costs. The combination of market volatility and the repercussions of Basel III will continue to have global impact. Clients doing cross-border business need to be especially alive to the extra-territorial reach of anti-corruption measures such as the UK Bribery Act and FATCA in the U.S. Clients will also be focused on the harmonisation of Work Health and Safety laws as they start coming into effect.
Corrs boss John Denton has always been well known for his particular interest in the Asia-Pacific – but what is his take on the Eurozone?
John Denton Corrs Chambers Westgarth
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ALB: How do you see the Eurozone crisis affecting the market? JD: Australia’s direct economic and trade exposure to Europe is limited, however we are likely to experience some spillover effects particularly if the Eurozone crisis triggers a slowdown in China and India. The crisis has added to the nervousness of business, which has played out in fewer M&A deals and reduced new financing activity. Despite this, we are seeing evidence of a pick up in M&A activity. In 2012, energy and resources and property activity will remain resilient and we expect further growth in disputes and restructuring. Clients are seeking strategic advice, particularly around identifying and managing risks. Many companies are already preparing for a prolonged Eurozone crisis that could see the unlikely, but possible, departure of some countries from the Euro.
ALB: What are the other areas where clients are likely to seek advice? JD: Eurozone turbulence will continue to affect global credit markets and we anticipate more capital markets activity in 2012/13. Engagement in Asia is a critical issue for Australia. Many of our clients have identified opportunities in Asia and are working hard to build their regional business links and relationships. In 2012 global markets will continue to be influenced by the Eurozone crisis until a sustainable resolution is found. In Australia, our clients will be preparing for the harmonisation of occupational health and safety laws; implementation of the carbon pricing scheme and the minerals resources rent tax if it passes through the Senate.
Australasian Legal Business ISSUE 10.1
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AUSTRALASIAN 2012
24 may 2012, Sydney’s prestigious Town Hall
celebrate the achievements of
the legal industry’s finest Now in its ninth successful year, the ALB Australasian Law Awards 2012 is the highlight of the legal industry calendar and ensures your team a spectacular evening of recognition and celebration with over 500 of your peers.
visit www.albawards.com for more info
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Feature | interview >>
In-house perspective
Sight set on success From small town beginnings to a global organisation Dr Stretch Kontelj is a general counsel with an eye for business, writes Olivia Collings
I
t takes a brave general counsel to admit to a room full of lawyers that his client has been involved in almost half of all marketing cases heard in the Federal Court in the past year, but Dr Srechko “Stretch" Kontelj did just that. The confession was made during his acceptance speech on receiving the 2011 Australian Corporate Lawyers Association Corporate Lawyer of the Year Award in Melbourne last November and Kontelj wears it as a badge of honour. A lawyer with more than 20 years of legal experience he has held countless senior business roles such as chief operating officer and general manager, was Mayor of Geelong for a year and has an Order of Australia Medal (OAM). In his current role of Asia Pacific legal director at Specsavers Kontelj has relied on all these experiences to guide him through the dramatic rise of Specsavers while also dealing with a surge in litigation. Since launching in
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Australia in 2008 the optical group has been to the Federal Court 10 times on matters such as copyright, consumer protection and costs. “The Australian market was a very mature market, with a clear market leading brand and quite a cosy coexistence between the independents and the major brands,” states Kontelj. “Specsavers came in and disrupted that with a very aggressive marketing-led strategy, so that’s made the last two years particularly exciting from an advertising/marketing perspective.” Indeed since launching here Specsavers has snatched 18 percent of the market according to an IBIS World report and in the previous financial year achieved a 53 percent increase in gross profit, and is on target to hit A$350 million this year. “It’s been a phenomenal growth and success story in a very difficult financial climate,” says Kontelj.
20/20 vision of business
The son of Slovenian immigrants who came to Australia to work on the Snowy Hydro Scheme, Kontelj was “born and bred” in Geelong and started his legal career in the same Victorian town. “My intention was always to return to Geelong to practice, which I did,” says Kontelj who studied law at Monash. After practicing as a partner at Geelong-based Burke & Fazio for more than 10 years Kontelj decided it was time to move in-house and try something new. He joined Colour Vision Systems in 2002 as a legal advisor before moving to a similar role at national business Sportsco in 2004. “I always enjoyed private practice,” says Kontelj. “I enjoyed the interaction with clients but I always felt that I have more of an entrepreneurial bent in my personality and interests – I wanted to be able to be part of business decision making and not just be an advisor to business.” Australasian Legal Business ISSUE 10.1
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After two years as an in-house counsel he moved into an operational role at Sportsco before becoming chief operations officer and then general manager. Kontelj says this move was again evidence of his desire to be part of a management team that drives the business. As Asia Pacific legal director Kontelj is responsible for handling all legal matters that arise in the region, while also sitting on the management team. “To be part of that management team has been a dream come true and a fulfilment of the ambition and the goal that I had when I left private practice,” says Kontelj. “The skills and experience I have picked up in the last year three years is more than what one would probably pick up in a lifetime, given the rapid growth of Specsavers in such a short time has been revolutionary – nothing short of it – there’s no other way to describe it.” Launching a new brand and business model in the market was always going to be difficult, but the speed by which Specsavers has grown contributed to Kontelj’s workload. “The legal challenge was to help manage the myriad of legal issues required to accommodate 34
the Specsavers business model, which is steeped in UK law, into the highly regulated Australian and New Zealand franchise environment,” he says. In addition there have been the cases in the Federal Court, two of which are still ongoing. “It’s not cheap, but much has been at stake,” says Kontelj. For this work Kontelj relies on Minter Ellison, a firm chosen for its strong national coverage and presence in New Zealand.
A business frame of mind
As a global business headquartered in the UK, many adaptations were required for the franchise model, product registration, employment contracts, manufacturing implementation, business development and marketing in order for Specsavers to work in Australia and New Zealand. At Specsavers franchises aren't franchisees at all – they are joint venture partners. Each store is jointly-owned by the company and the independent owner; meaning that for every store there is a separate company established. “We hold over 300 leases in our own name so there’s a very active property law portfolio.
We also have interests in over 300 companies so a very active company secretarial function that we perform as an organisation,” explains Kontelj. To accommodate this one of the four lawyers on Kontelj’s team is dedicated to franchising and another is dedicated to property. Kontelj says that regardless of what he or his team are doing they must always seek to find a commercial solution, not only legal roadblocks. “The philosophy that I adopt is that the function of the legal team is to oil the wheels of commerce. Whilst we must point out the legal environment of each issue, such advice must be provided with commercial options for achieving a desired outcome,” he says. “People aren’t interested in being told they can’t do something. They want to know legally how we can actually achieve an outcome. [The people] I’ve recruited have to be people who are lateral thinkers, people who are commercial in that they can help find commercial outcomes and solutions to problems.” Having overseen the growth of a business from a handful of head office staff and two stores to a 400 plus head office and more than 250 stores Kontelj says the next focus for him is on putting in place the processes and procedures expected of a company of Specsavers’ size. “Ensuring that we have world’s best practice as far as policies and procedures are concerned will be a focus of mine for the next six to 12 months,” he states. Centralising and consolidating will also be a priority in the coming months. “With the rapid growth it was all about getting the stores open and getting the job done but now we need to centralise.” ALB Australasian Legal Business ISSUE 10.1
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feature | Brisbane Report 2012 >>
Brisbane Bounces Back Brisbane spent 2011 mopping up after floods and cyclones – but as ALB’s Kathryn Crossley discovers, the city is still looking forward to a robust 2012. 36
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risbane’s lawyers can only describe 2011 as a mixed year. The first weeks saw much of the state flooded, and then the north was buffeted by Cyclone Yasi shortly after. “It has been one of those years that has absolutely flown by,” says Dr Peter Ellender, CEO of Carter Newell. “The severe weather right through Queensland, and particularly in Brisbane … seems to have squashed the year into about two thirds of an actual year.” These natural disasters were a huge blow to business confidence and caused many projects to be put on hold. As the disaster recovery process progressed, lawyers turned a watchful eye to the ongoing economic woes of Europe and America, with many clients nervous about the deepening difficulties facing the global economy. Locally, it’s a mixed picture for business confidence: Queensland’s mining sector has generally survived the setbacks of early 2011 unscathed and has continued to drive a boom in infrastructure and building and construction work in certain regional centres. But in contrast, cities such as the Gold Coast have endured tourism slumps and very quiet building and construction scenes, and corporate work remains slow across the state. Given the hurdles to be overcome by Brisbane’s firms in 2011, the revenue growth reported by the firms ALB spoke with was impressive, with double-digit revenue growth on the previous financial year the norm and many expecting to match or exceed this rate in financial year 2011/12.
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Market
Competition for legal work has grown considerably in Brisbane with several new players arriving in Brisbane in the past 18 months. These include Thomsons Lawyers – following the well publicised defection of nine partners from DLA Phillips Fox - Henry Davis York and Macpherson+Kelley, which entered the market through a merger with BCI Lawyers. More recently, Slater & Gordon announced in November that it would acquire Queensland-based Conveyancing Works for approximately A$5 million. The expectation is that the newcomers will have to become profitable by growing market share, rather than relying on overall market growth. “The legal market in Australia is largely mature. The pie is not growing, so therefore if you want another slice, you have got to take it off someone else,” says Cooper Grace Ward managing partner Chris Ward. Movement at national firms has also served to promote some client movement to Brisbane firms: “We win new clients every day who are looking to forge a real relationship with their lawyers. The more consolidation that happens at the top-tier and international level, the more work comes our way. In that respect, the reach of the mid-tier firm is greater than it has ever been,” says HopwoodGanim managing partner Bruce Humphrys. Many lawyers expect the market to remain fluid in 2012. McCullough Robertson chairman Brett Heading believes Queensland’s capital will
“The attraction of Brisbane is the sheer volume of capital committed for long term investment in resources and related infrastructure … I anticipate more global firms will be in our market in the next twelve months.” Brett Heading
McCullough Robertson
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►► Middletons set to join Brisbane market Middletons have become the latest firm to announce a foray into Brisbane and have negotiated a merger with local partnership Flower and Hart. From March 1 the Flower & Hart office will be rebranded Middletons in a move designed to capitalise on client demand north of the border. “This is a key plank in our strategy to be truly national. With a significant presence now in Brisbane, Sydney, Melbourne and Perth I think that goes a long way to being national and represents our commitment to being available to support our clients in all major markets,” Middletons national managing partner Nick Nichola told ALB. “We had been exporting a significant amount of work north of the border to a variety of firms – it made logical sense for us to open a Middletons office in Brisbane.” In less than five years Middletons has doubled its geographic footprint from Melbourne to Sydney and lastly Perth. Nichola is confident that in Flower and Hart, the key attributes for a successful merger have all been satisfied . “For us the key factor was cultural compatibility. This is based on experiences in the past: when we get the people right, everything else follows,” he said. Flower and Hart managing partner Robert Cunningham added that the merger is one based on “mutually agreed” goals and objectives. “Flower and Hart shares the same service philosophy as Middletons…the Middletons network strengthens the scope of our service offering and provides our clients with national reach,” he said. Flower and Hart have six partners and more than 15 legal staff. Nichola said he would be looking “reasonably quickly” to bolster the energy and resources practice and workplace relations and safety practices of the Brisbane office. Both firms received unanimous support from their partnerships on the merger.
soon begin to attract the attention of international players: “the attraction of Brisbane is the sheer volume of capital committed for long term investment in resources and related infrastructure … I anticipate more global firms will be in our market in the next twelve months. This is hardly surprising in view of the economic horsepower of the Asia Pacific region and the problems in Europe,” he says.
Disasters and Disruptions
Natural disasters have clearly taken their toll on Brisbane’s legal fraternity in 2011; business disruptions caused a slow start to the year and damaged business confidence. “Business ground to a halt. People got into that recovery process … and just postponed any of the normal expansionary programs that they may have, or takeovers, mergers – all of that was put on hold,” says Les Hancock, managing director for Queensland at Macpherson+Kelley Lawyers. Flooding of the Brisbane CBD meant a number of law firms were forced to close their offices, with some closures lasting a week or more. Those firms that were fortunate enough to avoid 38
flood disruptions in the CBD were still faced with delays emanating from clients’ and opposing parties’ office closures. As recovery activity got underway, firms fielded enquiries from clients. For some, the natural disasters have brought considerable work. Cooper Grace Ward has been advising a major insurer on issues arising from the disaster. “The huge claims handling processes alone were just phenomenal. In a month they were getting the number of claims they might get in two years,” says Ward. “In the first three to four months a lot of it was just working with our client through that whole process and then the Queensland Floods Commission of Inquiry was announced in February ... a lot of work has gone into the preparations for the hearings, and then subsequent to the hearings there will be a lot of work in terms of the report itself.” For HopgoodGanim, the work has come from the other angle: “We’ve seen an increase in work related to the repair of both State infrastructure, and retail, commercial and residential premises on a smaller scale,” says Humphrys.
Despite some strong activity in this area, many firms told ALB that far less work was coming through from the recovery than originally expected. “Generally, flood recovery work has been a bit of a mixed bag for local law firms, we have seen legal work coming through from affected body corporates and businesses, but there has not been the volume of work that may have been initially anticipated,” says McCullough Robertson’s Heading.
Resources and Mining
Unsurprisingly, resources and mining work has continued to bolster Queensland’s legal practices over the past 12 months, led by the state’s flagship LNG projects at Gladstone. According to the Minerals Council of Australia, construction work on new resources projects in Australia rose by 31 percent over the 2011 calendar year and investment in machinery and equipment rose 20 percent over the year. This gives some insight into why Brisbane firms are continuing to grow despite a patchy local economy. It is clear that the resources sector has remained strong despite project delays caused by wild weather in January and February. “Because there’s demand in mining and infrastructure, other industries such as consultants, the property industry and services are going gangbusters. That’s creating a whole influx of additional work in different sectors, based on the activity in the mining sector. That’s all over the state, and includes the areas such as Gladstone, Mackay and Mount Isa,” says Andrew Johnson, partner at Mills Oakley. Although all areas of resources work were strong, coal seam gas has garnered the greatest attention and landholder rights have become the issue du jour. “The number of properties affected by wells has substantially increased, and the big players have substantially increased their activity in the last 12 to 18 months,” says Hancock. He adds that advice sought by landholders in this area primarily centres on “how to manage the coexistence on the properties, the disruption to business and fair compensation.” The sector has also seen growth in regulation. “There is of course some strong public debate in [the coal seam Australasian Legal Business ISSUE 10.1
feature | Brisbane Report 2012 >>
Carter Newell Lawyers‌ a specialist law firm.
Insurance constructIon & engIneerIng resources corporate commercIal property lItIgatIon & DIspute resolutIon www.legalbusinessonline.com
avIatIon
CN
L A W Y E R S cn/180-alB
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“It has been one of those years that has absolutely flown by. The severe weather right through Queensland, and particularly in Brisbane … seems to have squashed the year into about two thirds of an actual year.” Dr Peter Ellender
Carter Newell
gas] area, and government looking to respond to that public debate,” says Ellender. “We’ve got quite a bit of change in Queensland with the government active in areas such as strategic cropping land and urban restricted areas which are coming into play and affecting the way in which those industries are being run. Then at the federal level we’ve got the impact coming through of the resources tax and the carbon tax also affecting some key clients in Queensland.” Many lawyers expect these legislative changes will keep them busy in 2012. “As the regulation governing Australia’s and specifically Queensland’s resources industries continues to increase in both number and complexity, the work for our resources and energy practice in 2012 and beyond is likely to include a significant component relating to regulatory compliance,” says Martin Klapper, partner and head of resources and energy at HopgoodGanim.
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Infrastructure
In recent years Brisbane has been home to numerous major infrastructure projects. “It’s clear that what used to be regarded as a major project is now the industry standard,” says Heading. Infrastructure work across the state remains strong, with the size and number of projects meaning that numerous Brisbane firms have been busy advising head contractors, subcontractors and other project parties. Current projects under construction include Brisbane’s A$4.8 billion Airport Link and the A$1.5 billion Legacy Way project. Further south, the A$1 billion Gold Coast Rapid Transit project that was announced in June 2011, is set to become Australia’s first wholly internationally funded PPP. However, after the unexpected expenditure on post-flood and cyclone repairs to state infrastructure, government spending on major infrastructure projects may remain limited for some time, and the emphasis on infrastructure work is expected to shift further to the private
“The more consolidation that happens at the top-tier and international level, the more work comes our way. In that respect, the reach of the mid-tier firm is greater than it has ever been.” Bruce Humphrys
HopgoodGanim
Committed to Queensland “Cooper Grace Ward opened its doors for business on 22 December 1980. During the following 31 years Cooper Grace Ward has committed itself to the Queensland and Australian market place, and continues to do so. Cooper Grace Ward works throughout all of Australia and has a dedicated regional focus.” Chris Ward, Managing Partner Corporate and Commercial Employment and Workplace Relations Health and Medical Litigation T 61 7 3231 2444 www.legalbusinessonline.com
Corporate Governance and Compliance
Energy and Resources
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Insolvency
Estate Planning
Insurance
Tax and Superannuation
Dispute Resolution and Litigation Family Law
Intellectual Property Transport Law
Financial Services
Franchising
Property, Planning and Environment www.cgw.com.au
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feature | Brisbane Report 2012 >>
“As the regulation governing Australia’s and specifically Queensland’s resources industries continues to increase in both number and complexity, the work for our resources and energy practice in 2012 and beyond is likely to include a significant component relating to regulatory compliance.” Martin Klapper
HopgoodGanim
sector. “The government doesn’t have a lot of money to use at the moment for launching new projects; they’re trying to get the budget back into surplus, but they’ve pre-committed to a phenomenal amount of projects in the last few years so there’s a huge amount of ongoing activity,” says Johnson. The impending Queensland state election will also keep government infrastructure work quiet for a few months. “It may be mid year, or even later before there’s some clarity and direction around government developments,” predicts Heading. In the private sector, infrastructure to support resources projects remains of critical importance. “Rail and port infrastructure are the obvious examples but the impact of many new developments proposed for Queensland, principally but not solely in coal and CSG, will require significant investment in electricity generation and transmission, transport and water supply,” says Klapper. Heading agrees: “this will be necessary to enable the pipeline of coal mining projects planned to come into production over the next few years. The range of legal work will encompass everything from land acquisition, project approvals, construction and financing.” It seems Brisbane’s infrastructure lawyers can expect to be busy well into 2012.
Building and Construction
Brisbane’s building and construction lawyers reported some pick up in the sector during the second half of 2011, but say that work has been patchy throughout the year. “The building sector associated with the resources industry is still strong, but in terms of pure commercial building and construction there is not so much activity, and restricted finance is a major factor here,” says Ellender. For many lawyers this has meant periods of considerable activity followed by quiet. “The intensity of the work is something that you have to cope with,” says Ward. “It normally starts off very quickly and there is an intensity of work that goes around the whole tender process and then you come to a halt whilst the tender process is resolved … In some respects, 42
it is probably not unlike the M&A space where it is all systems go and then when it finishes, certainly there is then a hiatus period, while you wait for the next transaction.” Although work remains stop-start, it is an improvement on previous years. “In 2006/2007 there were 15 cranes in the CBD building high-rise towers and residential towers,” says Johnson. “During the GFC for two years there were none. We’ve got four or five in Brisbane at the moment and on the outskirts of Brisbane there’s activity in the infill residential market. There’s demand for investor stock; there’s a terrible housing and affordability crisis in Queensland in terms of stock but our clients seem to be finding the price point and going to the market and getting good pre-sales.” However, as with other areas of Brisbane legal practice, resources projects are a key driver of the building and construction sector. “There is a strong demand for building to support resources and infrastructure-focused regions throughout the State,” says Tony Baldwin, partner and head of HopgoodGanim’s commercial property practice. He adds that several largescale accommodation projects for mine workers in regional Queensland are now underway to address the severe lack of available housing in those areas. “In regional areas like Gladstone and Mackay, the property market is booming. Gladstone is off the Richter scale and people are trying to catch up with that demand,” says Johnson.
Insolvency
Insolvency work remained strong in 2011 with large corporate insolvencies, receiverships and administrations. Lawyers reported growing levels of mortgage stress in both commercial and residential spaces: “there are still people whose businesses are stressed, and I don’t think there’s any change to that. It’s not likely for another year or so, particularly when refinance is almost impossible for anyone that’s in a stress mode,” says Hancock In addition the last months of 2011 saw increased mortgage debt recovery work. In particular, receiver and manager sales remain high, and Australasian Legal Business ISSUE 10.1
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“The government doesn’t have a lot of money to use at the moment for launching new projects; they’re trying to get the budget back into surplus, but they’ve pre-committed to a phenomenal amount of projects in the last few years so there’s a huge amount of ongoing activity.” Andrew Johnson
Mills Oakley
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accounted for approximately one third of all commercial sales in Queensland. Despite the activity, much of this work has not reached law firms. “In a large number of cases,” says Ward, “clever lenders and mortgagees are working with their borrowers. I think there is a lot happening behind the scenes that we will never see.” Darrell Jardine, partner and head of HopgoodGanim’s litigation and dispute resolution practice, agrees. “There have perhaps not been as many appointments as expected in areas such as receiverships. It seems that some banks were performing an informal receivership under their supervision, rather than appointing an insolvency practitioner, to minimise costs. In this respect, the insolvency figures out there at the moment might be inaccurate, as they will overlook companies and people that ordinarily would have been factored in but haven’t been because their banks dealt with them informally.” Despite this trend, ongoing difficulties in the tourism and retail sectors, and global economic uncertainty mean that
insolvency lawyers can still expect strong workflows from 2012.
What Next?
While Brisbane’s firms are in many ways at the mercy of global economic conditions, the state’s booming resources sector is expected to continue to provide some insulation. For most firms, the strategy for 2012 is to focus on their strengths and to consolidate their positions. While most of the firms ALB spoke with are looking to grow staff numbers, any changes will be made with a close eye on the markets. “Obviously, you need to keep an eye on the outside world but at the end of the day it is your ability to get your internal workings in proper shape that will drive your ability to capture work … I think surviving and growing will be looked at in retrospect as a huge measure of success in the next couple of years,” predicts Ward. “We hope it will be quite a reasonable year but I do not think we will be setting records in terms of growth or profitability.”
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profile | managing partner >>
ALB 2012 MANAGING PARTNER SERIES
Peter Slattery, Johnson Winter & Slattery
Winter blossom Johnson Winter & Slattery has always been known for its unique style. Managing partner Peter Slattery explains the firm’s perspective on leverage and the crucial question of market globalisation.
“Frequently lawyers experience some level of frustration because their work style and the demands of their clients do not sit easily with the pressure to operate within a higher leverage environment”
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J
ohnson Winter & Slattery is one name which you will not find on the various media surveys of Australia’s largest law firms. That’s a choice, not an oversight – JWS has a policy of not participating in industry surveys. “We’re not trying to be difficult,” says managing partner Peter Slattery. “But we see ourselves in many respects as not being comparable to many firms with whom we compete – firms that are much larger. No one has convinced me there’s any benefit to the firm in participating in public surveys. What we see as important is the quality of the work we undertake and the quality of the lawyers – these attributes aren’t measured in surveys.” At 120 lawyers, JWS initially appears to lend itself to the “mid tier” categorisation. However, the firm believes that the top tier designation is more appropriate. “We say we are tier one because of our clients – the same clients as conventional tier one
firms – and the nature of our work,” says Slattery. “Our lawyers have either been recruited laterally from one of those [top tier] firms or they have been developed internally by partners who have themselves been brought over from one of those firms.” Like Gilbert + Tobin and the old Chang, Pistilli & Simmons, JWS is generally recognised as one of the few firms outside the “six” to break into the premium space – something which is particularly notable given the firm’s Adelaide origins. According to Slattery, the firm has always targeted the premium market even in the early days as a one-city South Australian operator. “We always started from a base of quality,” he says. ”From the start we were active in the upper end of the market, representing major corporates within [the SA] market. And so slowly this builds the reputation for quality and the ability to handle complex work, which in turn leads to the Australasian Legal Business ISSUE 10.1
Photography by Thilo Pulch
profile | managing partner >>
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profile | managing partner >>
he says. “Frequently lawyers experience some level of frustration because their work style and the demands of their clients do not sit easily with the pressure to operate within a higher leverage environment. Senior lawyers were being asked to market themselves and win work, but then delegate it away. Here we ask them to win work and to do it.” The other aspect of JWS which is attractive to recruits is the collaborative structure of the firm, where there is an emphasis on collective achievement. “We don’t allocate individual fee budgets to lawyers; we don’t allocate fee budgets to teams of lawyers or individual offices,” says Slattery. “So, the behavioural driver within the firm is the focus on client relationships.” Remuneration is determined with an emphasis on overall firm performance rather than individual performance. ability to recruit like-minded lawyers with comparable capabilities in other States. So it wasn’t a case of us growing nationally with Adelaide clients – it was rather a case of developing a strategy to expand through the recruitment of senior lawyers from other firms who had the capacity to introduce us to new clients and in turn develop those relationships.”
Attracting talent
One of the key attractions of JWS for new recruits is the firm’s unique approach to leverage – it is common for transactional or project teams to be assembled on a 1:1 ratio, a figure which generally reflects the senior lawyer:associate ratio across the firm. This approach is believed to be unique in Australia, although it is a feature of some overseas firms such as US-based Wachtell, Lipton, Rosen & Katz. The rationale is that a lower leverage will result in a more efficient resolution of matters because of the higher level of senior involvement. This is an approach which Slattery says has proved to be popular not only with clients, but with lateral partner recruits. “Our service delivery model has been a major component of the interest in our firm,” 48
Globalisation
Smaller Australian firms have proven to be attractive merger targets for international firms and JWS has had its share of suitors. JWS has kept an open mind, holding a series of informal discussions with a number of firms. “These are really for the purpose of gaining an understanding of what other firms see in these market developments,” explains Slattery. “Personally I am maintaining an open mind to what might be required to keep capturing the quality of work we want to capture. But we certainly do not feel that we need to take any immediate action.” Given the number of major industry mergers afoot, there is – at least in some quarters – a sense that one needs to be part of the momentum or risk being left behind. Slattery believes this viewpoint somewhat overstates the situation. “I don’t think it’s as simplistic as that,” he says. “I’m not convinced there’s only one way to capture high quality lawyers and legal work. Being part of a global firm is one way, but is it the only way? I don’t think so.” It is a lesson which Slattery says is evident when one looks at how other professional service industries
have evolved worldwide. “When you’re selling intellectual prowess, a big shop is not the only place to find it,” he says. “Buyers are not necessarily walking into department stores.” Despite mergers progressing at an unprecedented pace, Slattery says the true state of play will take some time to emerge. “Combinations of law firms might emerge reasonably quickly, but I don’t know that buyer behaviours will change all that quickly,” he says. “Work that has a cross border component may more naturally sit with firms with a global network, but absent cross border requirements will the international firms eat into the market share of domestic firms? I think that’s the more interesting question and that will take some time to play out. Our strategy is to keep doing what we’re doing and to keep working on the depth of our expertise in our core practice areas.” One of the factors which led Chang, Pistilli & Simmons into a merger with Clifford Chance was the concern that the increase in the number of international operators in Australia would cause a drop in the level of the inter-firm referral of premium work. Slattery says this is not a major concern at JWS. “Referrals are not central to our model,” he says. “We receive referrals from other firms because of conflicts, but I have no reason to believe we receive proportionately more than other commercial firms. Referrals tend to be individual relationship-based and less influenced by the firm brand.”
JWS Consulting
An interesting offering from JWS is a specialised board services division which is marketed under the JWS Consulting brand. This service is not limited to legal advice and offers a full suite of board related services ranging from governance, the review of board effectiveness, non-executive director search and executive remuneration. Clients are typically in the ASX100 space. “This is a suite of services under a single brand and it is now developing some critical mass – we’re expecting it to continue to grow,” says Slattery. ALB
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FEATURE | Workplace relations boom continues >>
Workplace relations boom continues Landmark cases, new legislation and a pending review of the Fair Work Act are just some of the issues keeping workplace and OH&S lawyers on their toes. Olivia Collings reports
F
or lawyers in the industrial relations and OH&S space, 2011 was the year that didn’t slow down and 2012 is looking set to be even bigger. From new regulation to front page arbitration it’s been an exciting and sometimes hectic year for anyone working in the field. “There is no question that our workplace group is a lot busier than it was 12 months ago,” says Middletons partner Alice DeBoos. Workplace relations lawyers offered a variety of reasons for the continuing strength of workflows in this practice area: wage negotiations across a number of key industries, the higher profile of bullying and harassment
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cases and in particular the challenging economic environment. “As the economy weakens there will be increased changes in workplaces, which produce a lot of work,” says Harmers Workplace Lawyers chairman Michael Harmer. “We have already seen a wave of redundancies. We have strong counter cyclical work practice – the only difference will be the composition of the work.” This is a view shared by Joydeep Hor, founder of People & Culture Strategies. “I think there is a reality that as economic pressures augment, there is a greater likelihood that people will make complaints of bullying and harassment,” he says.
The high profile Qantas dispute must have been a boon for Qantas advisor Freehills, where practice group head Graeme Smith unsurprisingly described his team as “very busy” across most sectors. It is a similar story at Blake Dawson, where partner Stephen Woodbury notes that 2011 delivered an unusually consistent level of workflow. “It is different to other years where you have peaks and troughs,” he explains. He says one reason is the legislative reform, both current and prospective, such as the national OH&S reform process. “Change in legislation is always a driver of work,” he observed. Australasian Legal Business ISSUE 10.1
FEATURE | Workplace relations boom continues >>
Fair Work Act
There has been an increase in the level of scrutiny on the Fair Work Act. Introduced in 2009, the Act was the Labor Government’s reform of the employer-friendly Work Choices legislation introduced by former Prime Minister John Howard. “In terms of legislation, the Fair Work Act represents a significant swing in favour or workers and unions,” notes Harmer. The business community has been vocal in its criticism of the Act. Lawyers say the main complaints relate to the rules around enterprise bargaining and adverse actions. “The system of putting in place enterprise agreements is overly complicated and legalistic,” says DeBoos. “It makes it virtually impossible for an employer to put an agreement in place without seeking legal advice.” Harmer adds that the enterprise bargaining system favoured by the Act does not in effect produce favourable outcomes for all workers across all sectors. “The difficulty with enterprise bargaining is that it’s fairly patchy in its application across the economy. Bargaining strength varies across the economy; if you are in a sector where union strength is strong then this Act gives you a lot of assistance, but only then,” he says. “I’m an advocate for more productivity based arbitration. Far fairer outcomes can be achieved for employers and employees by moving away from the current model.” Woodbury says the adverse action provisions within the Act have provided employees with a new avenue to make claims against employers and, unlike unfair dismissals, there is no cap for payouts made to employees who bring a case against an employer based on adverse action. “We are seeing a number of those claims put forward, simply because they are fairly easy to launch,” he says. Smith adds that he has also seen an upward trend of individual grievances being pursued under the general provisions of the Fair Work Act. “The unions and employees are getting more familiar with the Fair Work Act and the new tools available to gain leverage in the workplace,” he says. However, all is not lost. The Act is set for a review on January 1 under the guidance of Reserve Bank board www.legalbusinessonline.com
member John Edwards, former judge Michael Moore and workplace academic Ron McCallum. “I’m hopeful that the review will genuinely address these problems,” says Harmer, who adds that no real solutions will occur while industrial relations is used as a political point scorer. “Depoliticisation of the system, getting stability in it and fairness in it would be of great benefit to all sides of the fence and the economy,” he states. The review panel is set to report back to the government by 31 May. However, Harmer concedes that in the year leading up to a federal election it is unlikely there will be significant changes.
Occupation health and safety
For years state and federal governments have been discussing the introduction of harmonised or
uniform OH&S laws across Australia. What started off in 2008 as a powerful movement has now run into difficulty: while Queensland, New South Wales, Northern Territory and the Australian Capital Territory have signed up to introduce the laws on January 1 of this year, the remaining states have not. A possible start date of January 1, 2013 has been reported for the remaining states, but there have also been reports that some states such as WA are questioning some aspects of the legislation. The Queensland opposition has also said that it will repeal the Queensland laws if it wins government later this year. It is a frustrating position for corporations who had been promised legislative certainty by January 2012. “For our clients that is disappointing, especially clients that operate national
Graeme Smith
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FEATURE | Workplace relations boom continues >>
Michael Harmer
businesses,” says DeBoos. “Because of political differences, half the country will not have those harmonised laws in place for at least another 12 months.” Woodbury agrees the situation is a challenge for clients. “A lot of clients are working through the changes; unfortunately, this has not been helped by the fact that it’s happening in a staggered manner,” he says, adding that some employers held off taking any action because of the state of indecision. “For those who did that, they are now in a rush to ensure they are ready [in the applicable states],” says Woodbury. Middletons has also been busy in recent months assisting clients who have waited to the final hour. “We are very busy at the moment assisting those clients, to make sure they are compliant with the new laws,” DeBoos says. Smith adds that he is expecting the introduction of the new Codes of Practice developed by Safe Work Australia to provide further clarification on a number of priority areas within the reforms to produce additional activity in the field for at least the next 12-18 months. However, while there will be changes in every state that adopts the harmonised laws, some of the concepts in the new laws should be familiar, making it less burdensome according to DeBoos. “All of the laws are in place already somewhere in the country, but some of them will be new to some jurisdictions,” she explains. At People & Culture Strategies the increased work around OH&S, which
accounts for a significant percentage of work at the firm, is not completely related to the new laws according to Hor. “The harmonised framework does not necessitate a radical level of increased attention,” says Hor. “It’s the broadened and varied places people undertake work that presents an OH&S challenge.” As more and more employers introduce flexible work practices such as working from home, at client sites and even during travel, rules around OH&S and employer’s obligations are being tested says Hor, which leads to more work. Added to this are increasingly large fines and/or criminal prosecutions that, according to Hor produce a “heightened level of personal interest” by managers and boards alike. While many large national companies will have already begun getting their houses in order with regards to the new laws, Harmer says many of the small to medium sized enterprises will not be as on the ball in the lead up to January 1. “There are a lot of them who are going to be caught napping,” says Harmer. “And with the penalties going up significantly, that’s of great concern.” A key reason for this, he believes, is that small to medium enterprises won’t have the funds or the organisational structures in place to deal with the changes. “Clients are very wary about costs at the moment, especially with what’s happening with the economy,” he adds.
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FEATURE | Workplace relations boom continues >>
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FEATURE | Workplace relations boom continues >>
Implications of Qantas
The most high profile workplace relations incident of 2011 must have surely been the dramatic decision by Qantas to shut down its operations in order to bring union disputes to a head. While Qantas’ actions were certainly ground breaking, lawyers in the field are unconvinced it could have implications for other employers in the market. “I think the situation Qantas and the unions were facing was highly unusual,” says Woodbury. “We have had a lot of inquiries from clients about the
circumstances and how it might apply to them, but they are [in] very different circumstances.” Indeed, all lawyers ALB spoke to say the Qantas situation has led to inquiries from clients, but none are in a position to act on the example set by the flying kangaroo. If anything, clients have become more careful about entering enterprise bargaining as a result of the situation, which is still not wholly solved. “In terms of what the dispute has done, it has sobered up a number of employers heading into
enterprise bargaining,” says Harmer. For some industries, the outcomes of the disputes will be of greater interest because of the reasons for the dispute, which are not wholly connected to wages. “The disputes are about contract clauses that the unions want to put in the agreements inhibiting Qantas’ ability to flexibly manage its business, and to outsource work,” says DeBoos. “That’s an issue which is facing many industries in the country and those types of clauses are showing up in every enterprise agreement.”
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We neverLegal forget what you want Australasian Business ISSUE 10.1 8/06/11 10:47 AM
FEATURE | Competitive edge: the ‘eBook advantage’ >>
Competitive edge: the ‘eBook advantage’ Rick Ness, Chief Technology Officer from publisher, Thomson Reuters, examines exactly what lawyers need to know when it comes to the ‘eBook revolution’ sweeping the legal industry and how best to maximise this opportunity.
A
dvances in legal technology have been making a dramatic impact on the profession for years. While we’ve already seen e-billing, electronic case management and cloud-based services, the last 12 months have brought the beginnings of an ‘information revolution’, as lawyers move from ‘legacy’ print-based knowledge resources, towards electronic information such as eBooks. Not only does this shift impact on one of the most iconic symbols of law – the legal library – but if managed correctly, brings numerous benefits to the lawyer. Perhaps the biggest and most obvious advantages of eBooks are in their portability; the ability to transport potentially thousands of books around from meeting to meeting. While remote working has been a buzz word in other industries for years, in law it’s only now truly becoming a reality, due in part to the invent of ‘professional grade’ eReader apps, designed with the specific needs of the legal practitioner in mind, rather than offering a ‘consumer’ experience. The impact of this can’t be underestimated. Journeys to and from meetings or travel time to work can now be utilized as an opportunity for a lawyer to broaden their knowledge and read around a subject in depth – a process previously confined to working hours and the office. Client meetings also become enhanced, with lawyers able to give clients immediate
www.legalbusinessonline.com
responses, rather than having to go back to the office to find out specific legislation or information. The services lawyers are able to offer clients also become much more rounded, with instant access to diverse legal research and information. This starts to deliver real, tangible benefits, for example those sole practitioners who operate on a highly transactional working model can service more clients in a quicker time. eBooks also bring changing working practices and demands for new skills when it comes to the legal research process, not only for lawyers, but for knowledge managers. For end-users, the research process can become a much more collaborative process. While the ‘old model’ involved visits to a legal library with endless annotations and sticky tabs, eBooks and eReaders have the ability for users to share and synchronise notes with other professionals, resulting in a much more rounded, broad knowledge base, and ultimately more efficient working practices. The lawyer can also start to by-pass the knowledge manager, who previously took on the role of intermediary between library and lawyer. The knowledge manager’s role in turn then evolves, into a much more holistic, IT-focused role. Another key challenge faced by law professionals when it comes to traditional research is ‘information fog’. The emergence of eBooks – with sophisticated referencing, searching
and note taking abilities – can help the legal practitioner overcome this issue, and a major benefit of this technology is in the ability to quickly access information, and cross reference multiple publications simultaneously. But that’s not to say there isn’t still a place for internet or traditional librarybased research with each method carrying its own distinct advantages, and eBooks should simply be treated as another tool at the deposal of a practicing lawyer – albeit a powerful one. When it comes to adopting any new technology that can impact on working practices, taking a strategic view to information consumption to ensure its successful delivery is so important. For example, it’s surprising to see the number of large law firms that simply don’t have a strategy in place for eBooks; some make knee-jerk decisions to bin an entire legal library in favour of electronic versions, while others remain in the more conservative camp with lawyers using tablets on an ad-hoc basis. What’s key is to recognise just how you, or a firm, uses information – do you need immediate research on the move away from your office, are you looking at driving work flow efficiencies, do you need to project an image of a forward thinking and tech savvy nature? If the answer is “yes” or “maybe” to any of these questions then digital information and eBooks could be part of the answer.
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Q A FEATURE | Q&A >>
&
This month’s question: Do you expect government regulation to account for a greater percentage of your legal department’s work in the coming 12 months? Why or why not?
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Brian Salter general counsel and company secretary, AMP We anticipate that the implementation of the Federal Government’s proposed new laws for the financial services industry will account for a greater percentage of our legal work in 2012. In recent years there have been a number of significant inquiries and reviews into various aspects of the financial services industry and 2012 is scheduled to be a year in which the Government seeks to implement many of the accepted recommendations arising from these reviews and inquiries. Taking policy intentions and turning them into legislation is a complex and difficult task. We see an important role for AMP, and the rest of the financial services industry, to participate in the process to achieve good legislative outcomes within a framework of reasonable business obligations and cost. The emphasis must be on getting the regulation right, so that it is not just effective but also efficient, not only for business but also for society. The coming year has the potential to bring many opportunities for our industry and for our customers if we succeed in getting the implementation right. Brian has 30 years experience in the legal profession advising many of Australia’s leading financial and wealth management companies. Before joining AMP he was a partner at Clayton Utz and a member of its executive team for a number of years. Brian is a member of the legal committee of the Corporations and Markets Advisory Committee (CAMAC) and the Australian Institute of Company Directors and the Corporations Committee of the Business Law Section of the Law Council of Australia.
Mathew Kaley general counsel, Allianz Australia 2011 was a big year for regulatory reform in relation to insurance and I expect that will continue in 2012, likely at about the same rate. In 2011, we saw regulatory activity in a number of areas. In relation to our customers, the future of financial advice review looked at the duties owed by insurers and insurance intermediaries to insureds. That also looked into the remuneration arrangements between insurers and their intermediaries. A range of regulatory matters arose in relation to insurance documentation, many resulting from the floods in late 2010 and early 2011. There was the introduction of a standard definition of flood and a proposal to introduce a new single page “Key Facts Statement” to Australasian Legal Business ISSUE 9.12
FEATURE | Q&A >>
inform insureds of the key features in their policy. There was also the proposal to apply the unfair contract term provisions of the Australia Consumer Law to insurance contracts. On the prudential side, APRA is in the process of concluding significant changes to the capital requirements for insurers and has also conducted a wholesale review of its prudential standards, making a range of minor changes to those. There was also a whole new prudential and financial services regime to grapple with in New Zealand. Outside of these insurance specific regulatory matters, there were also a number of general changes of relevance to insurers, such as the introduction of the personal property securities regime and the proposal to revise the privacy legislation. All of these matters have required significant work by the legal and compliance departments, and affected business units, within insurers to assess the changes being proposed, make submissions where appropriate and then take steps in order to comply. The work is not complete though; many of these initiatives will be continuing on into 2012. And no doubt there will be some more. Mathew Kaley joined Allianz Australia as general counsel in 2001 after a private practice career at Clayton Utz, which also included a stint in London at Clifford Chance. Since joining the insurance company he has grown the legal team from two and a half lawyers to eight.
Francesca Lee general counsel and company secretary, OZ Minerals Government regulation (both in Australia and offshore) will definitely account for a greater percentage of the legal department’s work in many areas of the law. To name a few: 1. The Personal Property Securities legislation which is now expected to come into operation at the end of this month will mean that we will need to step up our preparation in this area and identify all securities that need to be registered, put processes in place to ensure that none are missed and ensure our contracts adequately deal with the changes. 2. Changes to the corporations’ legislation. This year’s Annual General Meeting (AGM) will be the first time that OZ Minerals will need to deal with the new restrictions on key management personnel from voting on the Remuneration Report and dealing with undirected proxies in this area; we are lucky that we will have the benefit of precedents from companies that have already had to deal with the issue. 3. The new model safety legislation which has come into operation in some states and not others – causing even more confusion and uncertainty. 4. Keeping abreast of developments in changes to the mining legislation in South Australia and other jurisdictions. 5. Keeping abreast of proposed changes to the Fair Work Act – although OZ Minerals was one of the first mining companies to enter into a collective agreement under the new regime there is still a lot of work to do in ensuring that the company complies with the requirements of the Act in relation to Modern Awards, etc. 6. Dealing with Australian Securities Investment Commission’s new guidance on disclosing non-IFRS financial information. Francesca Lee was formerly a group counsel at BHP Billiton and has also held a number of senior positions at Rio Tinto Limited including general manager internal audit and corporate counsel, and was vice president of structured finance at Citibank Limited. Lee is a board member of the Metropolitan Waste Management Group, a Victorian statutory authority and a member of the Federal Government’s Takeovers Panel. She was appointed to the position of general counsel and company secretary of Zinifex in March 2004 and OZ Minerals in July 2008. www.legalbusinessonline.com
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FEATURE | Facing up to demands for facilitation payments >>
Facing up to demands for facilitation payments: law, policy and practical dilemmas for Australian business
John Bray, Director (Analysis) at Control Risks argues that companies have a social and legal responsibility to reduce their exposure to bribery demands.
“Corruption is a shared problem that demands collective solutions from companies, industry associations, civil society and governments. Recent international legal developments have contributed to an existing momentum for change. It is up to all these actors to sustain and increase this momentum.” John Bray
Control Risks
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O
n 15 November 2011 Minister for Justice Brendan O’Connor launched a consultation paper proposing the removal of the facilitation payment defence from Australia’s laws against foreign bribery. Under the current Criminal Code, an Australian company or individual is guilty of an offence if they bribe a foreign official in order to “obtain or retain business”, regardless of whether the payment takes place in Australia or abroad. However, the Code offers a defence regarding facilitation payments, which are defined as payments “of a minor nature” for the purpose of “expediting or securing the performance of a routine government action”. Classic examples include speeding up the processing of an application for a work permit or scheduling government inspections. The main argument in favour of removing the defence is that it would end a legal and practical anomaly: it is often hard to distinguish between a ‘facilitation payment,’ which is
considered acceptable, and a ‘bribe’ which is not. The counterargument is that the defence is necessary in order to avoid putting Australian companies at a disadvantage when competing in developing countries where demands for such payments are everyday practice. The consultation paper, which was issued under the auspices of the Attorney-General’s Department, reflects a much wider international debate. Many Australian companies already fall within the jurisdiction of the new UK Bribery Act, which covers companies and individuals with a “close connection” to the UK and offers no defence for facilitation payments. This article analyses the international policy issues and the implications for Australian companies. It argues that, in the current climate, all international companies need a strategy for dealing with facilitation payments, especially if they operate in developing countries with poor governance records. Australasian Legal Business ISSUE 10.1
1. Introducing the issues
In many developing and transition economies, government officials routinely demand additional payments for day-to-day transactions, such as processing customs applications. Few would condone this practice but, at a practical level, ordinary business people and citizens find it hard to challenge what often amounts to a form of extortion. The cost of resistance may include loss of time and business, and, in some cases, physical violence. Even if it is commonplace, the practice of giving and receiving facilitation payments has a corrosive impact on society, governance and business: • Facilitation payments do not speed up government processes: they slow things down by giving officials an incentive to create delays in order to be paid for removing them. Companies that make small payments are more likely to face demands for larger bribes. • Companies pay bribes to avoid tax payments or customs duties, they deprive governments of much needed revenue. Such payments serve to entrench corrupt practices, making life harder for everyone. Wellendowed international companies may be able to afford the extra costs of paying off officials. Ordinary citizens, struggling to make ends meet, all too often cannot. Therefore, there are sound pragmatic and social reasons for resisting demands for small bribes, but it is only recently that they have reached the international legal agenda. www.legalbusinessonline.com
2. U.S. and OECD anti-corruption initiatives
The 1977 U.S. Foreign Corrupt Practices Act (FCPA) was the first extraterritorial law to cover the bribery of foreign officials, and has helped set the agenda for subsequent international legal initiatives to combat corruption. When the FCPA was first enacted, it prompted protests from U.S. companies who – like some of their Australian counterparts today – argued that tough legislation would put them at a competitive disadvantage. In 1988, Congress made a partial concession by amending the FCPA to exclude ‘facilitating’ or ‘facilitation’ payments to “expedite or secure a routine governmental transaction” from its definition of the criminal offence of foreign bribery. This approach may be regarded as an imperfect interim solution to a difficult problem. It does not mean that facilitation payments are ‘legal’ in the U.S. or anywhere else: it merely means that they are not covered by these particular extraterritorial provisions of U.S. law. They are in any case illegal under almost every country’s domestic laws. Furthermore, under the FCPA’s ‘books and records’ provision, companies are still required to keep accurate accounts, including of facilitation payments. For two decades the U.S. was the only country to adopt extraterritorial anti-corruption laws. However, in 1997 all the OECD member states – including Australia – signed the OECD Anti-Bribery Convention whereby they 59
FEATURE | Facing up to demands for facilitation payments >>
undertook to introduce laws that, like the FCPA, criminalise the bribery of foreign officials. To date, 38 countries have ratified the Convention. Following the U.S. model, the main focus of the Convention is on bribes to “obtain or retain business or other improper advantage in the conduct of international business”, but it does not address facilitation payments. The commentary to the Convention refers to facilitation payments, noting that they constitute a “corrosive phenomenon”, and are illegal in most countries. However, it argued that “criminalisation by other countries does not seem a practical or effective complementary action”. In other words, facilitation payments were a problem, but extraterritorial legislation was not the answer, at least not yet. However, there is now an emerging consensus among international opinion formers that facilitation payments are simply another form of bribery. In December 2009 the OECD issued a Recommendation of the Council for Further Combating Bribery of Foreign Public Officials, which again noted the “corrosive effect of small facilitation payments” and called on member states to “prohibit or discourage” them. The OECD has not yet gone so far as to propose an amendment to the Convention, but the trend is clear.
3. Australian law and policy on facilitation payments
Australia ratified the OECD AntiBribery Convention on the basis of an amendment to Division 70 of the Criminal Code Act 1995, and this came into force in 1999. The amendment met the minimum requirements of the convention by establishing an extraterritorial offence of bribery of foreign officials in order to obtain or retain business. However, it also 60
included a facilitation payments defence, which is loosely modelled on the FCPA. The Criminal Code states that in such cases the payment must be of a “minor nature”, though it offers no further definition of the word “minor”. In a similar vein it states that the payment must be for the “sole or dominant purpose of expediting or securing the performance of a routine government action” that is likewise of “a minor nature”. It gives a list of seven illustrative examples, ranging from applying for a licence to do business, to the loading and unloading of goods and the protection of perishable goods from deterioration. The Code also includes a requirement that the person making the payment keeps a record of the date on which it was made, the identity of the foreign official who received it, particulars of the “routine government action” and the recipient’s “signature or some other means of verifying the person’s identity”. It is hard to envisage circumstances in which an official would offer a signature in return for accepting a benefit, which under his or her own national law would constitute a bribe. Australia’s ratification of the AntiBribery Convention was only the first stage of a continuing process of engagement with the OECD. The OECD operates a system of ‘peer review’ whereby its own officials working with representatives of two member states examine each country’s application of its foreign bribery laws. Australia will submit to the third in a series of such reviews in the course of 2012. In the first stage of the review the Australian Government will submit answers to a standard questionnaire which – in the light of the OECD’s 2009 Recommendation – includes a request
to describe “steps taken to encourage companies to prohibit or discourage the use of small facilitation payments”. Brendan O’Connor may be hoping that the response to the November consultation paper will help him formulate a response.
4. The U.S. tightens the noose
Meanwhile, U.S. authorities have been taking a more aggressive approach. The FCPA’s exclusion applies to payments made to secure services to which companies are entitled. It does not apply to payments that – however routine they may be – are designed to secure a reduction in customs duties or to gain exemption from tax payments. In early November 2010, the U.S. Department of Justice and the Securities Exchange Commission concluded a long-running investigation into the activities of Swiss-based logistics company Panalpina. The company admitted that between 2002 and 2007 it paid thousands of bribes to officials in Africa and Central Asia. Individual payments typically amounted to hundreds or low thousands of dollars but the total came to at least USD 27 million. In return, Panalpina and its clients received benefits such as exemption from customs inspections to which they clearly were not entitled. Under the terms of a deferred prosecution agreement, Panalpina was required to pay a USD 70.56 million criminal penalty. Together with earlier, similar enforcement actions, the Panalpina case makes very clear that U.S. authorities are prepared to pursue companies that pay bribes in connection with routine logistical operations. The FCPA exclusion clause for facilitation payments is interpreted narrowly rather than broadly. Australasian Legal Business ISSUE 10.1
FEATURE | Facing up to demands for facilitation payments >>
5. UK Bribery Act: no exemption for facilitation payments
Unlike the FCPA, the UK Bribery Act has no exclusion clause for facilitation payments. In fact, it does not refer to them at all, meaning that they are included in its definition of bribery. This is not new; UK law has never exempted facilitation payments either for bribes paid in the UK or abroad. What is new is that the Act provides a much clearer definition of bribery (based on the concept of “improper performance”) and there is greater political will to enforce it. Before the Act was passed, parliament debated whether a facilitation payments exception should be introduced for the first time. However, the UK Government explicitly rejected the idea, arguing that an exception would create more problems than it solves. The Ministry of Justice’s official guidance document on the Act, which was published in late March 2011, argues that: “Exemptions in this context create artificial distinctions that are difficult to enforce, undermine corporate anti-bribery procedures, confuse antibribery communication with employees and other associated persons, perpetuate an existing ‘culture’ of bribery and have the potential to be abused.” On a practical level, one may judge that investigators are unlikely to devote expensive resources to the examination of small one-off payments, and they make take a sympathetic view of companies and individuals operating under physical duress. However, they will make no guarantees. They are likely to take a particularly severe view of companies that make a practice of paying even small bribes as a normal part of doing business. Recent UK policy developments www.legalbusinessonline.com
therefore send a clear warning to Australian companies that already fall within the remit of the Bribery Act. They could well be a harbinger of further legal reforms in Australia.
6. A strategy to resist demands
While there is an emerging international consensus on the need to ban facilitation payments, no one should underestimate the difficulties of avoiding them in cases where small bribes are in effect part of the host country’s informal system. As all authorities agree, the first requirement is a formal company policy statement – for example, a Code of Business Principles – forbidding both larger and smaller bribes. Since the term ‘facilitation payments’ is so widely used and misused, the Code should address them specifically. It should also make clear that employees will not be penalised, for example, for delays arising from refusal to make payments. Policy statements are not sufficient, of course. Compliance officers will need to ensure that in-house training covers demands for small bribes as well as bribes to secure contracts. Training should place particular emphasis on employees who are most at risk, for example, sales teams dealing with government officials in high-risk countries. Company employees are better able to resist demands if they know the rules, and training could include a briefing on the details of local regulations and how to resist the most likely kinds of demand. On a similar proactive note, companies would do well to undertake a detailed risk assessment of the regions and transactions where their employees are most exposed to demands for ‘operational bribes’ in connection with customs, visas and logistics. It is important to plan ahead and
to look out for stages in the business cycle when a company may be particularly vulnerable to demands for bribes (for example, when applying for planning permission or importing vital equipment). Once the risks are identified, it should be possible to develop counter strategies. Success requires forward planning: a ‘just-in-time’ approach to supplies will not work if officials are accustomed to seeking extra payments for avoiding delays. Where companies find themselves facing systemic bribery, they need to establish how the system actually works and whether there are any pressure points – for example, approaches to specific senior officials – that might work in their favour. If it turns out that local employees have been making payments in the past, it may be worthwhile to send a senior executive to explain to officials why they cannot do so in the future. In the case of companies that fall within the jurisdiction of the UK Bribery Act, the new law gives them a readily understandable alibi for doing so. Arguably, the position of Australian companies will be strengthened if the Australian Criminal Code takes a similar stance.
7. Long-term strategic dilemmas and the need for collective action Applying a combination of these different measures to resist bribery demands requires energy and strategic direction. The good news is that facing up to demands often turns out to be easier than is often supposed. Demands for small bribes may well be opportunistic. Companies and individuals that enter high-risk jurisdictions expecting to pay at every turn are liable to be exploited for their naivety. By contrast, experienced business people, who are confident of
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their own knowledge of the rules, are often able to deflect demands with a polite refusal. The less good news is that certain patterns of bribery remain entrenched in many emerging and transition economies. Common examples include demands for bribes at customs and security checkpoints backed by the threat of delays, and in some cases of physical violence. The defence of duress is more readily applicable to isolated extortion cases. It is harder to apply in cases where payments – even in response to a form of extortion – are accepted as a normal part of the ‘system’. Recent U.S. enforcement actions and the public discussions surrounding the Bribery Act have played a constructive policy role in highlighting these problems, and in changing the terms of debate: it is no longer feasible simply to wish them into oblivion, and in that respect the Australian consultation paper is timely. Equally, it has to be recognised that long-term solutions need to come from the combined efforts of a range of different actors, and not just from legislators. These include: • Industry associations and chambers of commerce can use their combined energies to promote high standards and, where appropriate, lobby governments for administrative and regulatory reforms. • The OECD Anti-bribery Convention remains one of the most important international initiatives to address the ‘supply side’ of international bribery. However, with the notable exceptions of the U.S. and a handful of other countries, signatories have yet to demonstrate a sustained will to enforce their extraterritorial anti-bribery laws. Australia has an important contribution to make first in refining and, above all, implementing the Criminal Code’s provisions on foreign bribery. To the extent that it does so, it will be more effective in working with other OECD governments to promote active enforcement of their own extraterritorial laws. 62
• Most important of all, ‘host’ governments will need to take responsibility for governance reforms that reduce opportunities for official extortion. The task of holding these governments to account falls primarily to their own citizens. However, international companies, business associations, aid agencies and international organisations all exercise a degree of influence, and should apply it to support governance reforms that reduce opportunities for graft and are therefore of common benefit. In summary, this article has argued that small bribes – even if characterised as ‘facilitation payments’ – are a corrosive phenomenon, and that companies should not pay them. With
skill and determination, companies can reduce their exposure to bribery demands, and they have a social as well as a legal responsibility to do so. However, they should not be expected to act on their own. Corruption is a shared problem that demands collective solutions from companies, industry associations, civil society and governments. Recent international legal developments have contributed to an existing momentum for change. It is up to all these actors to sustain and increase this momentum. The Australian Government and Australian companies will be able to make a more effective contribution to the extent that they take a clear stand against smaller as well as larger bribes.
John Bray
Australasian Legal Business ISSUE 10.1
FEATURE | Facing up to demands for facilitation payments >>
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