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gbm June 2012
global business magazine
A Drachma out of a Crisis: will Greece Leave the Euro?
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INSIDE this Month:
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Business Talk as Greece goes to the polls this month to decide on the euro, we look at the economic crisis in detail and what impact their decision will have on the rest of europe. While on the subject of making big decisions, we give you the most popular industries chosen by people wanting to change career. it’s not only jobs that are no longer for life – customer loyalty is also a thing of the past. our telecom focus examines the challenge network operators face, how the Brazilian telecommunications industry handles alternative dispute resolutions and the growing need to develop a pan-european cross-border telecommunications market. We throw the spotlight on united arab emirates – from its role as an international ‘green zone’ for investments – the it infrastructure – to the difﬁculties that arise in cloud-computing service agreements. With a speciﬁc focus on small but powerful ﬁnancial centres, we examine why international trade remains a driving force in Guernsey’s economy and how Mauritius is tapping into the growing ﬁnancial opportunities in africa. looking at latin america, we ﬁnd out about the increasing pressures on the Brazilian judicial system and the world of Mexican trademark legislation. emerging Markets considers the effect of the new mining regime in turkey and the latest public procurement efforts in ukraine. We also question whether the spanish economy really is in danger of becoming another ‘Greece’. our ship & aircraft Registration focus highlights the role of the european Business aviation association, the shipping register in Guernsey and how the convention on international interests has changed the aircraft equipment rules. in Banking & financial law, we uncover how trade ﬁnance facilitates economic development in the usa. our family Business service Report 2012 looks at the importance of the family Business sector and the role of support networks in the uk and usa. We also ﬁnd out about the pressures family businesses face in Mexico and look-through companies in new Zealand. the best hotels, exceptional restaurants – and a renowned spa thrown in for good measure – our luxury Brand series goes around the world in search of memorable experiences. it’s ofﬁcial – summer has arrived.
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banking and finance sector
June 2012 • Global Business Magazine • 3
a drachma out of a crisis - wiLL greece LeaVe the euro
A Drachma out of a Crisis: will Greece leave the euro? Uncertainty in the eurozone is damaging confidence in currencies, countries and markets. With Greek voters rejecting the conditions of the bailout in last month’s elections, the country is faced with a choice between austerity and exit. What would be the ramifications to the eurozone and to economies worldwide in the case of a “Grexit”, and is there another option?
THE STATE WE'RE IN Greece has been one of the sick men of Europe for some time now. Unemployment rates breached the 20% level in November last year and are forecast to stay above 21% well into 2013. Only Spain has higher unemployment (23%) with Portugal and Ireland suffering relatively modest unemployment rates of around 14%. So far the eurozone has injected 38.4 billion euros into the Greek economy and has lent a further 34.5 billion euros to underwrite a debt restructuring that knocked 75% off the value of private investments in Greece. These funds were provided with the caveat that Greece would implement strict austerity measures which include the lowering of minimum wages by 22% (plus an extra 10% cut for young employees), lowering overtime payments, and making it easier to lay off employees. The austerity-led approach has done little to calm the markets. Greek investors are scrambling to offshore their assets: Greek banks have seen 72 billion euros (about 30% of their holdings) shift abroad since the start of 2010 according to data compiled
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by Thomson Reuters. The flight from the Greek banking sector is accelerating, with reductions in deposits running at a rate of 700 million euros per day at one point in May. German Bund futures - seen as a safe haven by many eurozone investors - rose to an historic high of 144.28 a little over a week ago in response. The contagion is spreading beyond Greece and the drag on growth is no longer isolated to the traditionally weaker economies. The latest figures from the Purchasing Managers Indices (PMIs) show that economic activity in the eurozone as a whole has declined faster than was forecast throughout May. Even the previously robust German factory sector (see ‘The German Economy: a Race Engine in a Rusty Car’ for more details) is experiencing a contraction due to a drop-off in export orders and new business, according to the same figures. The Munich-based IFO think-tank reported that German business sentiment fell for the first time in seven months, underperforming even the most conservative projections. Although the euro has steadily fallen over the month, the shocks in Greece have stood out clearly against this background trend. When
the general elections on May the 6th failed to produce a clear winner, the markets lurched, fearing uncertainty as much as the apparent popularity of the anti-austerity parties. The euro opened low against the dollar on the 7th and plummeted again on the 15th as talks failed to yield a workable government. Although opinion polls still show support for the euro at 75% inside Greece, the Greek elections demonstrated that the so-called "anti-bailout" parties were more popular than the parties that formed the pro-austerity government. The radical leftist SyRIZA party, which has promised to defy the austerity measures in the bailout agreement, convincingly led the polls for some time after the elections. However, a poll on the 17th of May suggested that the New Democracy party would now win 26.1 percent of the vote compared to 23.7 percent going to SyRIZA. New Democracy could win enough seats to form a pro-austerity government if it could enter into an alliance with the Socialist PASOK party after the elections on the 17th of June. "It seems people vented their anger in the election and then they got scared,” said political analyst John Loulis. “They disliked that there was no government and they got worried about a possible exit from the euro. Still, voters are far from enthusiastic with New Democracy. Things are still volatile. The outcome of the elections will depend on who will make the fewest mistakes."
MIXED MESSAGES May saw the markets responding negatively to the levels of uncertainty surrounding the future of Greece in the euro, which continued to hover just above a 22 month low, at around $1.28 for most of the month (compared to $1.43 in May 2011). According to analysts at Barclays Capital, "Rising economic uncertainty in Europe and the lack of a policy response are proving too much for the market to handle." In the middle of May, Karel de Gucht, EU trade commissioner, appeared to confirm that European institutions, including the ECB, had begun to draw up plans for an orderly transition, should Greece exit the euro. "A year and a half ago there was maybe some risk of a domino effect," he told Belgian newspaper De Standaard on the 18th of May. "But today there are in the European Central Bank, as well as in the Commission, services working on emergency scenarios if Greece shouldn't make it. A Greek exit does not mean the end of the euro."
Dimitris Tsiodras said that German Chancellor, Angela Merkel, raised the prospect of Greece holding a referendum on its euro zone membership alongside this month's national elections, during discussions with the Greek president. This is something that a German government spokesman later angrily denied. The closest thing to a solid prediction has come from Citigroup, which published a note to its clients on the 23rd of May which estimated that the likelihood of Greece leaving the euro stands at 50-75%, and predicting that Greece would likely leave the eurozone on the 1st of January 2013. This would send severe but manageable shocks across the zone, according to Citigroup's analysts. The likelihood of the departure scenario rises if the next set of national elections in Greece fails to produce a viable government that will adhere to the austerity measures that form part of the bailout deal. "Greece is threatening not to implement the reform and consolidation measures that were agreed in return for the large-scale aid programmes," a spokesperson for the Bundesbank said. "This jeopardises the continued provision of assistance. Greece would have to bear the consequences of such a scenario." The rumours have had some unusual effects on share prices. UK-based specialist printing company, De La Rue saw their shares rise 11% from April on speculation that they might be called upon to supplement the Greek state printworks if the drachma is to be revived. "lf [Greece] decide to pull out of the euro the first thing is it won't be an overnight job, partly because of the implications of what they are trying to do but secondly because of the sheer number of banknotes that are needed to replace a currency," Panmure analyst Paul Jones told Reuters on the 18th May. "It will be a huge job which the state printing works will do, but they will probably pull in some additional volume from outside and De La Rue will be in with a chance."
Greek government spokesman
June 2012 • Global Business Magazine • 5
a drachma out of a crisis - wiLL greece LeaVe the euro
But not everyone in the eurozone is planning to say αντίο to Greece and γειά σου to the euro.
But not everyone in the eurozone is planning to say αντίο to Greece and γειά σου to the euro. Newlyappointed French Prime Minister, Jean-Marc Ayrault called for new measures to revive the Greek economy and to avoid a "catastrophic" exit from the eurozone. The socialist head of government warned that a Greek exit would have a negative impact on the rest of the bloc and suggested an alternative scenario. "There is a possibility, for example, of offering structural funds in a targeted way to help restart the [Greek] economy." European Central Bank Vice President Vitor Constancio told a panel at the Institute of Regulation and Risk, North Asia, in Hong Kong, "I don't think the worst is going to happen in Europe. I don't anticipate Greece will exit." The European Commission's top economics official, Olli Rehn, also dismissed the trade commissioner's remarks about preparing for a Greek exit. "Karl De Gucht is responsible for trade. I am responsible for financial and economic affairs and relations with the European Central Bank." Rehn said. "We are not working on the scenario of a Greek exit. We are working on the basis of a scenario of Greece staying in." A spokesman for the Commission, Oliver Bailly, added "[The] European Commission denies firmly [that it] is working on an exit scenario for Greece."
“GREXIT” - WHAT HAPPENS NEXT? Some commentators are bullish about the prospect of the Greek departure from the euro. "I'm one who thinks that Greece could exit,” James Bullard, one of the leading US Federal Reserve officials, told Reuters on the 23rd May. “It could be handled in an appropriate way that doesn't cause too much damage, either in Europe or the US," Some prognosticators are already naming the date for the decree absolute: “We assume [the Greek Exit] occurs on Jan. 1 2013 with Greece staying in the European Union and
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receiving external loan support [to mitigate risks of social unrest and collapse of civil society],” said Citigroup economist Michael Saunders in response to the note that the bank sent to its customers in May. The Citygroup note warned that "‘Grexit’, if it happens, will not end the EMU crisis.” Saunders elaborated: “We expect that Grexit will be followed by a series of policy responses aiming to prevent a domino-style collapse of the banking system and escalating economic disruption,” adding that the exit would encourage the ECB and the European Stability Mechanism to produce additional packages for Portugal, Ireland, Spain, and to prop up Spanish and Italian government bonds. Any exit would require a period of transition, and some experts are predicting the emergence of a “parallel currency”. According to Mike Dolan of Reuters, "Many are looking at the possibility that Athens issues IOUs to meet salaries and key service bills for a fixed period, much in the way California did during its budget crunch in 2009 when it issued 'registered warrants' with a coupon in place of dollar salaries and which banks then accepted for cash." If the ECB allows the Greek central bank to accept these coupons - and that's a big if - then strategists are suggesting that they would act as a "proxy drachma." Exchange values for these coupons would likely plummet against the euro - Citigroup predict a likely fall of 60% against the euro as soon as the currency is launched. There will be a final rush to move investments outside the country before any possible introduction of capital controls. Mike Dolan says that this would "[offer] Greeks a glimpse of the shock of devaluation in a euro-ized economy with euro-denominated debts." In the event of another inconclusive election on the 17th of June, the "proxy drachma" could start being traded as early as next month, RBS analysts warned. "Whether [the temporary measure] is something that lasts six to 12 months or something that lasts longer term depends on how many IOUs they have to put out," said Erik Neilsen, global chief economist at Unicredit. "And that will be a function of how deeply the economy collapses."
What of the rest of the eurozone? John Greenwood, chief economist at Invesco Perpetual predicts that the Greek exit would have knock-on effects on the Spanish and Italian economies. The ECB would need to lend several trillion euros to prevent a run on these countries banks and, he says, the EFSF and ESM bailout mechanisms aren’t big enough to mop up the damage.
Who will blink first? The austerity hawks or the Greek electorate?
"[W]atering down commitments on either side would send a dangerous signal to other member states," he said. "Financial markets would quickly lose confidence, outflows of funds from Greece and other peripheral economies would accelerate, yields on financial instruments would rise even further, and the euro could unravel very quickly."
AN ALTERNATIVE SCENARIO THE NEW NEW DEAL The May G8 Summit raised the possibility of an alternative solution to the "austerity or exit" scenario that has been placed before Greece and the other weak eurozone economies. Significantly, May also saw the inauguration of new, leftist French President Francois Hollande and at his first G8 summit he joined with Italian premier Mario Monti to press for increased spending on measures that will boost growth. The rocky European economy is causing domestic economic problems for President Barack Obama, who has now thrown his weight behind the call for stimulus spending. With the exit of Sarkozy from the world stage, Chancellor Merkel is looking increasingly isolated in her push for austerity. SyRIZA leader Alexis Tsipras is still certain that his party will win this month's election and he reiterated his commitment to ending austerity policies that he said were bankrupting the nation. "We will never participate in a government to rescue the bailout," he said. "The Greek people voted for an end to the bailout and barbaric austerity. They ignored the threats and the cheap propaganda. And we are certain they will do the same now." He told Channel 4’s Jonathan Rugman that the standoff with the eurozone is a “game of blackmail” and that the austerity measures are unenforceable. He believes that Angela Merkel and the Bundesbank will back down if his party wins the June 17th elections. Who will blink first? The austerity hawks or the Greek electorate? David Shairp, global strategist at JPMorgan Asset Management, said the situation was incredibly fluid. "Increasingly we're dealing in the realms of political economy rather than pure economy and that makes things so much more difficult for multi-asset investors."
June 2012 • Global Business Magazine • 7
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family business serVices For more information about the Family Business Network, visit: www.fbn-i.org.
The Importance of the Family Business Sector & the Role of the Family Business Network Family businesses are the backbone and engine of the economy, making up at least 60% of all businesses. The most common form of business structure, they represent a powerful sector – alongside widely held companies (in the UK known as Quoted Public Limited Companies or PLCs) and the private equity sector.
of the firm, or in the possession of their spouses, parents, child or children’s direct heirs; secondly, the majority of votes may be indirect or direct; thirdly, at least one representative of the family or kin is involved in the management or administration of the firm; fourthly, if the person who established or acquired the firm (share capital) or their families or descendants possess 25 per cent of the right to vote mandated by their capital share.
Nowadays, the family business sector faces issues, namely effective governance; succession planning and transmission of businesses through the generations; and dealing with inheritance and gift taxes. The Family Business Network (FBN or ‘the Network’) works to support business families in tackling these sector-specific issues by not only providing practical support and advocating for the family business sector, but aiding understanding through undertaking research.
The 2007 Pilot Family Business Network International Monitor* provides comparable data on the number, structure, performance and operational context of family businesses. The results have concluded that family businesses account for between 31% (in the UK and Netherlands) and 61% (in Sweden) of total employment. In most of the countries where the survey was conducted, at least 40% of the family businesses are spread across just three sectors – ‘Manufacturing’, ‘Construction’ and ‘Wholesale and Retail Trade’. However, a fourth sector – ‘Real Estate, Renting and Business Activities’ – accounts for about 20% of family businesses in Sweden, Finland and the UK. (*FBN-I/ Gallup Europe)
What is a Family Business? A firm may be described as a family enterprise if it meets the following criteria: Firstly, the majority of votes is in possession of the natural person(s) who established the firm, in possession of the natural person(s) who has/have acquired the share capital
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Family Businesses: Some Facts and Figures
Family businesses usually keep ownership and management in the hands of the family.
It is rare for families who fully own their business to bring in non-family managers to run it for them. In France, for example, 44% of the family businesses are fully family owned and nearly the same percentage (42%) are family-managed. While the UK is the country where non-family managers are most likely to be brought into family businesses, 51% of UK family businesses are fully familyowned and 45% are family-managed. Most of the family businesses are still in the hands of the first generation. If the business has already been transferred within the family, it is most often the second generation that is currently owning and/or running the business. In some of the countries, the clear intention is for family businesses to be passed down to the next generation of the family. In the next five years, one in nine of the family businesses are supposed to be transferred. However, there seems to be a lack of potential successors within families: Where family businesses are intended to be sold or transferred in the future, the majority will be transferred to other family members in only three of the eight countries. Key Issues for the Family Business Sector Governments can support family businesses by simplifying and reducing tax on inheritance and gifts of business assets.
Sweden led the way in 2005 by abolishing inheritance and gift taxes, but in general, there is still much that tax systems could do to help family businesses.
to the communities where you operate; your family recognises that the Network’s activities are for direct members of your family.
national borders. It makes it easy to keep up-to-date on coming events, to contact other members, to listen to the views of peers and to access useful knowledge from past events.
There is also a need to raise the profile of the family business sector. Governments are just beginning to pay more specific attention to family businesses as a separate entity (different from SME's or privately owned businesses) and to their positive contribution to economy and society. Although family businesses are supported by active advocacy groups in all of the countries, with regards to the representation of family business in the media, there is considerable potential for development.
Connecting Across National Borders
Our research includes surveys of the next generation’s hopes, dreams and ambitions. These help draw out useful recommendations and also provide inspiring stories of how other families succeed in the face of common difficulties.
Given the need to know more about family businesses, the Pilot Family Business Monitor answers some of the questions but it also raises new ones. Fruitful areas for further research include: contrasting European and non-European family businesses; investigating the impact of legal and fiscal frameworks; and comparing corporate social responsibility agendas. The Family Business Network (FBN) The Family Business Network is the world’s leading network of business owning families, promoting the success and sustainability of family business. The role of the FBN is to articulate the positive role of family business and its contribution to the economy and society. The FBN works to create opportunities for sharing best practice through national, regional and international programmes and events. The Network also seeks to provide a thorough understanding of the micro and macroeconomic framework of family business and to promote the longevity of family business worldwide. Its strap-line is “By families, for families…for successful enterprises”. Founded in 1990 as a federation of family business associations, the FBN has grown to 26member assocaitions. The Network is composed of 5,200 family business members (owners, leaders and next generation successors). Our members come from medium-to large size companies in 45 countries across five continents. Every year we provide more than 100 programmes, educational opportunities and events. Supporting Family Businesses Worldwide The Family Business Network is for business-owning families who share all the following characteristics: As a family, you own, manage or are involved in a business that you plan to keep within the family; your family has a controlling ownership interest in the business; your business provides products and services that are distinctive and respected in their industry; your family and the business are committed to good corporate citizenship and making a strong contribution
At the Family Business Network International we make it easier for business-owning families from many different countries to share knowledge, experiences and best practice. Our annual International Summit is an outstanding opportunity for businessowning families coming from all over the world to learn from world-class speakers and from each other. As a premier event it explores issues such as succession, governance, philanthropy, family offices and how to develop both the family and the business. We also organise other events focused on particular regions, issues or groups. Our online knowledge-sharing platform combines a social networking feature with useful information for business-owning families. The information includes peer-topeer lessons gathered from national events, academic papers, research from universities and experts, and international surveys. Members of all our national chapters have privileged access to this facility. Our publications include printed research summaries, as well as a regular ‘E-news’ that covers topics such as dealing with conflict, enforced retirement, developing financial responsibility in the next generation, encouraging a sense of stewardship and pruning the family tree. Proving Support for the Next Generation The next generation of business-owning families are aged between 18 and 40 years of age. At the younger end, they may still be in education or at an early stage of a career outside the family business. At the older end they may have started working for the family business or even be in the advanced stages of the succession process. Relatively few people really know what it’s like to work closely with family members, or act as responsible owners, or inherit a sizeable business. By bringing together people from many different countries, our network makes it possible to gain valuable insights and enjoy interacting with people who are living through very similar situations. Our international networking events explore issues such as: how can we develop as an owner and/or as a manager? How can we contribute to a smooth transition between generations? How can we leave a mark on the business? How do we manage clashes between family expectations and our own desires?
Our Family Business Young Entrepreneurs Honours promotes family business values by sowing the seeds of entrepreneurship, and by cultivating young, visionary innovators who are reinventing their family businesses. Our International Internship Programme The Family Business International Internship Programme is open to members of any of the national chapters in our network. As an owner you could host an intern and see your business from the fresh perspective of a next generation member. We are very grateful to members of our national chapters who host trainees. As a ‘next generationer’ you could be an intern in a family business in a foreign country for between one and twelve months. Taking part in the internship programme is a great way to learn before you take up a position in your own family business. The programme will give you a unique international experience and a fulfilling family business education outside your own company. Our Vision for the Future “Without a sustainable approach our future is at risk – not just the future of our businesses but the lives and livelihoods of generations yet to come”. That is why the International Board of the Family Business Network (the ‘Board’) has reaffirmed its promise to promote a business model that will sustain future generations. FBN members are invited to join the Board in their pledge to do all that they can to: create and nurture workplaces and working cultures where our people flourish; be responsible global citizens who make a positive contribution to the communities that we work and live in; constantly search for ways to reduce the ecological impact that we create and safeguard the environment that we all share; and lastly, to pass on our values and long term aspirations to future generations.
Our social networking uses the latest technology to connect young owners across
June 2012 • Global Business Magazine • 9
famiLy business serVices
Family Firm Institute, Inc. www.ffi.org www.ffigen.org General information email address: firstname.lastname@example.org 200 Lincoln Street, #201, Boston, MA 02111. Telephone: 617.482.3045 Fax: 617.482.3049.
The Family Firm Institute: Education, Research & Awareness Lawyers have Bar Associations: Doctors have Medical Associations: Thespians have the ‘Screen Actors Guild’ … and in the United States, even dog enthusiasts have the ‘American Kennel Club’. But the phenomenon of like-minded individuals bonding over common interests isn’t always a domestic event. ‘The International Trade Union Confederation’, for example, represents 175 million workers in 153 countries. There’s even the ‘International Association of Amusement Parks & Attractions’, which is headquartered in Chicago with branches in Brussels, Mexico and Hong Kong.
However, prior to 1986, no such global learning organisation existed for the worldwide family enterprise set and the army of practitioners who support them—a perplexing void, given that the family business structure is as old as humanity itself. Thankfully, that year, a collective of 22 individuals – lawyers, educators, psychologists, consultants and family enterprise owners – joined forces to create the Family Firm Institute (‘FFI’). More than two decades later, FFI boasts more than 1,500 individuals and organisations in its membership, hailing from more than 70 countries spanning every corner of the globe. FFI is an interdisciplinary association of advisors and consultants, academics and researchers who advise and study family enterprise. The Boston-headquartered organisation provides a global education network, which includes granting professional certificates in the areas of family business advising and family wealth advising. “From professionals to academics to members of family enterprise, if you are in the family enterprise field, you belong in FFI,” says president Judy Green, a driving force behind the Institute since 1992. “Our mission is to be the trusted resource, advancing the field of family enterprise.” Chief among FFI’s mission is promoting awareness of the field through its website and other social media efforts. As part of this initiative, FFI runs an online journal and a blog entitled ‘The Practitioner,’ where each week its thought-provoking blog entry thematically ties in with a compelling companion article penned by a leading guest professional in the field. Whether contributed by a lawyer, an accountant, an educator or a consultant, these informative articles contain actionable advice and intelligence that others may apply to their own practices. From delving into the importance of crafting iron-clad shareholder agreements that prevent closely-held family-owned businesses from slipping into wrong hands – to expounding on the critical importance of procuring second legal opinions when making key business decisions –‘The Practitioner’ aims to raise awareness of issues of profound import to the family business community. “We are pleased that these blogs and articles are widely
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available to a broader audience,” notes Green, “because promoting awareness is essential to our mission.” Eye on Research FFI is the owner of the esteemed research publication Family Business Review (‘FBR’). Currently published by SAGE, FBR was recently ranked in the top 20 business journals in Thomson Reuters’ ‘Journal Citation Reports’. And given that FBR is the oldest scholarly journal in the field, others also clearly hold the publication in high regard – no doubt in large part due to the broad spectrum of topics explored under the FBR banner. Over the years, FBR has been watched over by an all-star rotation of editors, including Ivan Lansberg, Kelin Gersick, Max Wortman, Joseph Astrachan and current editor Pramodita Sharma—all of whom have, in turn, led the journal to its current high quality standards. Meeting of the Minds FFI hosts pre-eminent family enterprise global conferences on an annual basis. Its marquis event – the ‘2012 Annual Conference: The Field. The Families. The Future’, is being held at the Radisson Blu Royal Hotel, in Brussels, from 17th to 20th October. Affording attendees the opportunity to network with premier global professionals in the field, this event has chartered the following umbrella themes: – The Field: Moving beyond the ‘buckets’ of law, finance, management and behavioural science that defined the field in the beginning, the conference programming includes approaches, research and case studies, that are unique to the profession of family enterprise advising today. – The Families: The nuclear family appears to be in decline, and thus the extended family has taken on new meaning as cross-cultural research has created new family models. Entrepreneurial drive now goes far beyond the domain of the founder to include the family across generations. Any implications of the changing family structure is examined. – The Future: An exploration of the social, business and interpersonal aspects of family enterprise and enterprising families from a futurist perspective.
Gala dinners, breakout discussion groups and interactive workshops promise to foster a robust sense of communal discourse. A full list of presenters and lecture topics can be found on the FFI website. Visit www.ffi.org and click on Conferences. Eye on Education In addition to its lively conferences and its robust idea-generating research function, FFI also boasts a vigorous educational programme. Launched in 2011, the FFI Global Educational Network (GEN) offers cuttingedge multi-disciplinary courses for family enterprise advisors, consultants, academics and other professionals. These students benefit from the collective wisdom of a stable of seasoned mentors, whose expertise spans a myriad of family enterprise disciplines willing to lend their intellectual capital to FFI’s educational cause. Participants can access these and other mentors through online interactions, face-to-face meetings or a hybrid of the two. Courses entitled ‘Families of Wealth: a Multidisciplinary Approach; Family Governance in the Family Enterprise’ and ‘Family Enterprise Advising and Consulting’, represent just a sampling of FFI’s course curricula aimed at helping professionals navigate the often choppy family enterprise waters.
honours the memory of Jeff Rothstein – a long-time FFI member and former board member. It goes without saying that FFI gives out prestigious experienced-based awards. The ‘Interdisciplinary Achievement Award’ recognises outstanding achievement in the advancement of interdisciplinary services: The ‘International Award’ recognises individuals for outstanding achievement in furthering the understanding of family business issues occurring between two or more countries: The ‘Richard Beckhard Award’ recognises outstanding achievement in professional practice: And lastly…the ‘Barbara Hollander Award’ honours the late founder and first president of FFI, celebrating her interest in family business and her love for education and learning.
Conclusion As the world becomes increasingly interdependent, family enterprises and those who study and work with them must develop new forms of collaboration to keep up with a changing landscape. In service to this mission, FFI will continue expanding its global view, through the creation of new partnerships, publications, informationsharing programmes and networking tools. “FFI has always focused on interdisciplinary issues, topics and collaborations, both on the practitioner and the academic side,” says Green. “It’s about finance; it’s about behavioural issues; it’s about research. It’s about collaboration on a high professional level—not simply exchanging business cards: It’s about exchanging ideas, serving clients, developing professional collaborations – and of course, promoting the family enterprise field.”
And the Award Goes To… FFI knows that a little healthy competition goes a long way in bringing out the finest work from people. That’s why it sponsors an award programme inviting ambitious academics to submit their research offerings across a slate of different categories. For example: ‘The Best Doctoral Dissertation Award’, honours outstanding academic achievement in the field of family business study and is eligible to dissertations written as part graduate school courses that were defended during the last calendar year. ‘The Best Unpublished Research Paper Award,’ annually awards papers demonstrating acute understanding of family firms and/or family firm advisors that not have not yet been accepted for publication elsewhere. And ‘The Jeffrey Rothstein Award,’ co-sponsored by FFI and Hubler Family Business Consultants,
June 2012 • Global Business Magazine • 11
famiLy business serVices
BRITISH VIRGIN ISLANDS
Zac Lucas Partner Ogier E: email@example.com D: +1 284 852 7366 | T: +1 284 852 7300
Business Succession Planning Managing succession to businesses continues to be an important and urgent topic both for advisors and clients.
available governance options. In broad terms succession may be either absolute or controlled.
During the next decade, many businesses will transition control and ownership for the first time, while a smaller but not insignificant number will pass from second to third generation having successfully achieved a transfer from the founding generation.
An example of absolute succession is where the founder generation transfers their shares in the business to the succeeding generation, either in equal shares or subject to differentiating factors such as involvement in the business or gender.
However, many businesses will not survive the process. Many reasons will account for this, including the benign solvency requirements of the retiring generation. There will however be a number of businesses that will fail or be broken up due to unrestrained inter and/or intra generational conflict.
An example of controlled succession is where the founder generation establishes a business succession trust to hold the shares in the family business.
Succession failure due to generational conflict can be attributed to a number of reasons all of which tie very closely to family dynamics and the personal style of the head of the family and business. The question for advisors and their business owning clients is whether formal governance structures, both at the family and business level, would help not only initial succession to the business but also future generational transfers? It is of course acknowledged that formal governance structures may not be appropriate in all cases, this may be because the personal style of the head of the family and business may not permit formal rules, or sadly in extreme cases the family may be so emotionally fractured that formal governance rules would likely not be adhered to or respected. However, there may be situations where elements of the family business are sufficiently inter-dependant, and family goodwill is such, that formal governance rules would add immediate value and facilitate effective succession to the business across generations. Effective governance rules in essence facilitate information sharing, accountability, joint and informed decision-making and provide a mechanism to address and resolve conflict. Succession necessarily implies a transfer of ownership. Different ownership configurations will in turn necessarily affect
12 • Global Business Magazine • June 2012
Whether absolute or controlled succession is more appropriate can be a difficult question for most business owning families, and much will depend on whether the senior generation view succeeding generations as owners or stewards of the business: in crude terms would the senior generation accept an immediate sale of the business by the junior generation? If the answer is no, then perhaps controlled succession would be more appropriate. Controlled succession permits uniform and pervasive governance rules to apply across generations, whereas the effectiveness and longevity of governance rules created by absolute owners will very much depend on individual intentions and circumstances and may not survive into future generations.
contain provisions establishing a family council to facilitate joint family decisions on matters such as distributions of trust funds to family beneficiaries, but would also likely contain detailed office of director rules to permit the family council to make direct decisions on who may be appointed a director of the family business from time to time as well as detailed permitted grounds governing, for example, the circumstances in which family members may be employed by the business and the terms on which they may advance their careers. Where the family does not wish to involve a licensed corporate service provider to act as trustee of their business succession trust, then a PTC is usually the preferred option. The business succession trust would contain the usual family council provisions to permit joint decision-making regarding both the family business and practical administration of the trust, and would also play a role in governance of the PTC. Effectively structuring ownership and control of the PTC is essential. It is imperative that the shares of the PTC are themselves held in a separate special purpose trust, as absolute vesting of shares in family members would risk diluting the control and governance mechanisms that are required to complement the provisions contained in the business succession trust.
A business succession trust created in the British Virgin Islands (BVI) will typically either be a trust governed by the provisions of the Virgin Islands Special Trusts Act, 2003 (Vista) or involve use of a BVI private trust company (PTC).
Therefore, it is typical for the shares of the PTC to be held by a purpose Vista trust. The purpose Vista would contain detailed office of director rules, which would confer on the family council ultimate control on who may be the directors of the PTC from time to time. A purpose Vista, like a PTC can last in perpetuity, and therefore the related governance rules would also last across future generations.
Broadly, Vista permits a trust of BVI company shares to be established under which corporate governance rules may be created to deal with succession to the office of director of the company held in trust (termed “office of director rules”) and to regulate the business activities of the company (termed “permitted grounds”). A corporate trustee licensed in the BVI is required to be trustee of a Vista trust.
In summary, demographic pressures will continue to focus attention on effective business succession processes and structures, appropriate governance rules will in most cases enhance the survivability of businesses across generations, and therefore clients and their advisors will necessarily need to consider whether business succession trusts provide the ideal solution.
For the purposes of this article we will explore controlled succession to the business in the form of a typical business succession trust.
A typical business succession Vista would
Peter Englisch, Global Leader of the Family Business Center of Excellence, Ernst & Young Tel:. +49 (160) 939 21800 firstname.lastname@example.org
Francesca Ambrosini, EMEIA Associate Director, Family Business Center of Excellence, Ernst & Young Tel: +44 (0) 20 7951 4267 email@example.com
About the Ernst & Young Family Business Center of Excellence Running a family business successfully is a balancing act between the strategic issues related to your family and those connected with your business; it also means steering the company successfully between the forces at work in the marketplace and within the family.As an organization focused on entrepreneurship, with a dynastic will to build a stronger business generation after generation, Ernst & Young relates to and understands the issues faced by family businesses.
working with private companies and family businesses. The Center also coordinates research investments, sharing leading practice insights with our clients. Ernst & young is proud to be one of just three Global Alliance Sponsors of the Family Business Network International (FBN-I).
We have recently established a global Family Business Center of Excellence, the first of its kind, designed to support family businesses and their owners wherever they operate in the world. The Center brings together advisors from across the Ernst & Young global network to share knowledge and insights that will address family business challenges and provide seamless service for internationally based family-led companies.
We know that each family business is unique, yet successful family businesses have much in common; understanding these success factors and taking advantage of that knowledge underpins what we call the “growth DNA of family business.” Our bespoke family business services, based on this growth DNA model, support both the personal and company performance agenda of family business leaders, and aim to help you succeed for generations.
About the Ernst & Young Family Business Center of Excellence For more information, please visit www.ey.com/familybusiness
The Ernst & Young Family Business Center of Excellence builds on our history of
Running a family business successfully is a between the strategic issues related to you connected with your business; it also mean successfully between the forces at work in within the family.
Future management structure
Effective tax management
Next generation planning
Business Balancing risk
Culture and responsibility
Managing and retaining talent
Sustaining growth and proﬁtability
As an organization focused on entreprene will to build a stronger business generation Ernst & Young relates to and understands family businesses.
We have recently established a global Fam of Excellence, the first of its kind, designed businesses and their owners wherever the The Center brings together advisors from global network to share knowledge and ins family business challenges and provide sea internationally based family-led companies
The Ernst & Young Family Business Center on our history of working with private com businesses. The Center also coordinates re sharing leading practice insights with our c proud to be one of just three Global Allianc Business Network International (FBN-I).
We know that each family business is uniqu businesses have much in common; unders June 2012 • Global Business Magazine • 13 factors and taking advantage of that know
famiLy business serVices
Michael Reason & Partners LLP Hamilton House, 1 Temple Avenue, London EC4y 0HA Tel: +44 (0) 20 7489-2048 | Fax: +44 (0) 20 7353-5715
New Zealand Look-Through Companies Look-Through Companies (‘LTCs’) are fiscally transparent New Zealand registered companies useful for holding non-New Zealand assets of families’ resident outside New Zealand. While a standard New Zealand resident company may elect to be treated as an LTC, the shareholders must be individuals, trusts or other LTCs. An LTC must also have five or fewer ‘look-through counted owners’. New Zealand trustees of New Zealand foreign trusts of the shares of LTCs need to ensure that LTC assets are invested rather than traded as a business and that foreign-sourced income does not acquire some ‘taint’ of New Zealand source. The source rules can cause the activities of the LTC to be imputed to the owners of the LTC, for example, if investment decisions are being made from New Zealand, or if the level of investment activity is such that the LTC could be construed as an investment business performed or conducted by the New Zealand trustee. If this occurs ‘passive’ income such as dividends, interest and royalties derived by a non-NZ resident beneficiary, could be subject to New Zealand non-resident withholding tax and other income could be subject to tax on business income. Where a trust owns its shares, look-through counted owners are treated as the individuals who either receive beneficial income, or own shares in a company that receives beneficial income from the trust in the current or one of the three preceding income years. This consists of, or includes, income the trust derives from the LTC, or the trust if some or all of the income it derives from the LTC in the current income year, or in the preceding income years, was taxed as trustee income. Look-through counted owners who are relatives – individuals who are connected within the second degree of relationship – are treated as one person for the purposes of this requirement. The LTC must complete an income tax return that includes the total amount of income or deductions for the year, the amount of income for each owner and a summary of the deductions for each owner. The company isn’t taxed but each owner must make a separate income return, taking into account the amounts shown on the company’s income return. An LTC can function effectively as a tax neutral/fiscally transparent underlying asset holding company wholly owned via a New Zealand foreign trust. If the LTC earns foreign sourced income, this will pass through the LTC and the trust with no New Zealand tax liability, as long as none of New Zealand’s source of income rules are infringed. Any income or loss from the business activity of an LTC will be treated as if it were self-employed business income or loss for the lookthrough counted owner; in our case the non-NZ resident beneficiary of the NZ foreign trust.
14 • Global Business Magazine • June 2012
C.P.A. Juan C. Simon | Business Advisory Partner firstname.lastname@example.org PwC Mexico | Family Business Services Leader
Ensuring the Future of Family Businesses in Mexico In Mexico, 90% of the companies are family businesses and generate over 70% of total formal employment in the economy. Despite its importance in the value of production volume, family businesses face a difficult macroeconomic and political environment due to weak laws and heavy taxes. In addition to this, family businesses face internal problems that affect their operation, such as lack of professionalism in their business, emotional conflicts, little succession planning and ineffective communication between members. As a result, family business in Mexico going from one generation to another has a success rate of only 35%. The survival of family business generally depends on executing effective and efficient actions as part of an overall strategic plan. My experience in advising family businesses in Mexico is that working with a multidisciplinary team of tax, legal, financial and strategy specialists is crucial to ensure a seamless succession process. Maintaining the economic power together is fundamental to the long life of the family business: Separating the company to avoid problems and discussions within the family, not only contributes to weakening the corporate structure but duplicates costs and expenses, ultimately increasing the chance of the business failing significantly. The key to achieving a successful process is to establish clear rules at the outset for all the family members. Such rules must consider fundamental aspects in key areas of the company, such as the stockholders relationship, cash distribution, corporate governance and executive decisions. Amongst other things the plan should also cover, succession, compensation schemes, legal structures, adopted protocol, organisational design, business plans and strategic plans. This implementation of well-communicated rules must be reviewed periodically and systematically, in order to ensure that the family and the company are seamlessly working together on relevant aspects of the business. This will ensure the proper operation of corporate governance with well defined responsibilities and activities; a suitable internal communication structure; the effective transmission of family values in the company; the definition of a strategic business plan; the development for business administration team; the preparation of career plans for family members consistent with individual expectations; and acknowledgement of the new generation’s strengths and weaknesses. In a survey conducted by PwC and the Centre for Family Business Research at the Universidad de las Americas de Puebla last year, one of the most significant findings was that over 88% of the companies not have a succession plan, and 75% have not even thought about the person who will run the company. This relevant indicator shows that family businesses in Mexico have a long way to go, to find permanence for generations to come.
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São Paulo • Belo Horizonte • Fortaleza • Manaus • Porto Alegre • Recife • Rio de Janeiro • Vitória
June 2012 • Global Business Magazine • 15
spotLight on the uae
spotlight on the uae the dizzying heights of dubai Dubai, the jewel in the UAE’s business crown is persevering in its quest to become a global business hub across all sectors of industry including banking, tourism, aviation, hospitality, finance and shopping. Economic indicators over the past year for Dubai have been on an upward trend as the emirate has witnessed a strong recovery in all fields of its economy. A number of studies conducted over the past year by the world’s leading economic and financial institutes have seen Dubai ranked among the world’s top destinations for economic potential, friendliness, growth, security, infrastructure development and ease of doing business. Dubai, top in the ‘Middle East Cities of the Future’ A recent study by fDi magazine who crowned Dubai as the “Middle
16 • Global Business Magazine • June 2012
East city of the Future 2010/11,” highlights the emirate’s premier status as a preferred foreign investment destination. The emirate ranked highly across all categories achieving top position in Economic Potential, Infrastructure and Business Friendliness categories – all vital areas within business. In total, Dubai received an impressive total score of 52.05 among 25 Middle East cities, compared with other Middle Eastern cities. The report also highlights Dubai’s position as a preferred foreign investment destination as referenced by the 201 AT Kearney FDI Confidence Index Report, which ranked Dubai as the “preferred destination of choice for future Foreign Direct Investments (FDI)”. Direct foreign investment in Dubai has recorded an impressive growth of 4.5 per cent in 2011 and is poised to grow 30 per cent next year. Dubai in top 10 global business destinations The ease of working and attractive incentives in place for businesses in Dubai has led to CB Richard Ellis (CBRE), the real estate services company, placing Dubai amongst the top 10 most popular business locations in the world, with almost 56 per cent of the world’s largest companies operating in the emirate.
Of the companies profiled, over half (56 per cent) have an office presence in Dubai (ranking it ninth overall), while the UAE as a whole was ranked 15th in the country rankings with 171 companies present (61 per cent). This has been bolstered by the industrial goods and services sector as Dubai was ranked seventh globally with 23 of the companies surveyed present. This represents 70 per cent of the total amount, with Dubai emerging as a “gateway” city between Europe and the Far East, and as a convenient base for conducting business in places such as Saudi Arabia and Pakistan. The report also observed that Dubai scored highest in the region in terms of the number of FDI projects from 2003 to June 2010, establishing the city’s leading role as a preferred destination. The city scored a perfect 100 in terms of economic potential, evaluated on the basis of population, total
number of patents, GDP, total number of FDI projects, number of companies in R&D, number of FDI mega-projects, global competitiveness and other key parameters. The emirate also clinched the perfect 100 score in infrastructure, measured by the number of international destinations served, airlines served, upload and download speeds, port size, time to export and import, internet users, logistics performance index and e-government web measure index, among others. The ‘business friendliness’ of Dubai, in which again the city led the region, was measured against the number of jobs created by FDI, the growth of hi-tech manufacturing firms and the growth of knowledge based firms, the number of days taken to start a business, economic freedom and innovation, amongst other parameters. The FDI department of the Government of Dubai is also focusing on supporting and developing SMEs (small and medium sized enterprises) which will further enable the economy to move from a capital and labour intensive economy to an economy driven by innovation and technology. The impact of the ongoing ‘Arab Spring’ has helped make the emirate an attractive and safe haven for businesses looking to trade in the local regions resulting in growing confidence among international investors and multinational companies. Currently more than 98 per cent of Dubai’s economy is non-oil based and the emirate is already the world’s third largest re-export centre after Hong Kong and Singapore. Trade accounts for nearly 40 per cent of Dubai’s GDP, while services such as hospitality, law and financial make up more than 25 per cent of the economy. Furthermore, Dubai's non-oil trade which includes direct trade, free zone trade and customs warehouse trade exceeded AED 814bn at the end of third quarter in 2011, an increase by 23% compared to the same period of 2010 which reached AED 661bn. The Xinhua-Dow Jones International Financial Centres Development Index 2011 rated Dubai eighth globally in terms of growth and development and has maintained its status as the leading financial centre between Singapore and Europe. Dubai also topped the financial centres in the Middle East in the latest edition of the Global Financial Centres Index. Around 64 companies joined DIFC in the first six months
of 2011, bringing the net total of active registered companies operating in the Centre up to 813; 44 per cent of new regulated companies in H1 2011 came from the Middle East and Asia, 50 per cent from Europe and North America, and 6 per cent from the rest of the world, according to DIFC Authority. In addition, a global property index placed Dubai above major competitors such as Geneva, Kuala Lumpur, Paris, Shanghai and Singapore which can mainly be attributed because of the amount of investors pouring in to the state. Average global prices rose 3 per cent in 2011, according to the latest Prime Global Cities Index by Londonbased real estate consultancy firm Knight Frank, ranking Dubai as the 15th most attractive investment location in the world, much higher than the majority of its Asian competitors and high profile European cities. Sultan bin Saeed Al Mansouri, Minister of Economy said today that the UAE sought to raise the contribution of the Industrial Sector in the gross domestic product (GDP) from the country to 25 per cent in 15 years, compared with its current 14 per cent. After inaugurating a new coating line for Emirates Glass (EG) in Dubai, he said: "The strategy developed by the state aims at strengthening the industry, based on improving the industrial environment and engaging on projects in specific industrial fields, such as petrochemical, food and valueadded industries." At the end of 2011 the government's investment arm, Investment Corporation of Dubai (ICD) announced a $1 billion (Dh3.67) investment fund for development activities, while Dubai Real Estate Corporation (DREC) announced it is to start a series of tourism projects whilst port operator DP World has plans to expand the Dubai Cruise Terminal. With an unrivalled combination of incentives, facilities and services, Dubai offers access to a market of outstanding potential for overseas companies in a wide range of sectors. Dubai’s over 30 free zones have made a significant contribution to the successful growth and diversification of the emirate’s economy in recent years. Establishing a business entity in one of the emirate’s innovative free zones can be an attractive option for foreign investors due to a number of commercial incentives. Dubai Airport Free Zone ranks first The benefits for foreign investors were highlighted by The Financial Times Magazine
2011 survey which ranked Dubai Airport Free Zone first in the Middle East and North Africa. The survey found that as the result of continuous efforts to provide quality services and infrastructure to its partners, Dubai Airport Free Zone attracted foreign investment and confirmed the strength of Dubai’s economy. The free zone is located in close proximity to Dubai International Airport and the survey found it to be a world class business destination, both regionally and globally While free zones are designed to complement and contribute to Dubai’s growth and development, their legal status is quite distinct. Companies operating there are treated as being offshore or outside the UAE for legal purposes. The option of setting up in the free zones is therefore most suitable for companies intending to use Dubai as a regional manufacturing or distribution base and where most or all of their turnover is going to be outside the UAE. Dubai’s Department of Tourism and Commerce Marketing in the UK (DTCM) spearheads the global promotion of Dubai’s commerce and tourism interests. Ian Scott, director UK and Ireland for the DTCM commented: “Dubai is continuing to go from strength to strength in its economic outlook which has been bolstered through increased consumer and trade confidence. Over the past year, numerous global reports have recorded the continued and sustained growth throughout the emirate that can be attributed to Dubai being the archetype of a world-class business destination. The government of Dubai is committed to ensuring this upward trend is maintained and the city continues to prosper. This is demonstrated through ambitious growth plans and a diversification strategy, making it a highly attractive option for both regional and international investors.” Apart from economic advantages, the city offers a superior quality lifestyle with luxury residential accommodation and office space combined with excellent educational, health and shopping facilities. Dubai also offers a wide range of dining and entertainment choices for a range of holidaymakers and businessmen form fine dining through to local experiences in the spice souks. The Dubai government has been working tirelessly to support the travel industry through various marketing activities and by consistently enhancing the facilities and services that Dubai has to offer to visitors.
For more information about setting up in Dubai and to subscribe to the e-newsletter, please visit www. definitelydubai.co.uk, or alternatively get in touch with: E: email@example.com T: 020 7321 6110
June 2012 • Global Business Magazine • 17
spotLight on the uae
uae – the ideal gateway to the middle east market A couple of years ago, one of the issues that we discussed in our regular RSM Middle East meetings of partners and directors was the venue of the next meeting. Unfortunately, because of the current political turmoil in the region, these discussions no longer happen and the UAE has become the venue by default. I believe the same has happened with a lot of business decisions as well – the UAE becoming by default, the Green Zone for investments in the Middle East. However, not all of the UAE’s success can be attributed to accident. The fo undations for making the UAE, international hub and the gateway to the Middle East were by definite design. Given the progressive government, the young multicultural population and the world-class infrastructure, the UAE has been successfully promoted as a major venue for industrial exhibitions, international conferences, art forums and musical concerts. As a result, it has gone on to become a leading regional host of corporate headquarters, as well as a distribution and logistics centre. The UAE enjoys a number of competitive advantages over other countries in the region. The strategic location makes it the time zone bridge between the Far East, Europe and America on the east-west axis – the CIS and Africa on the north-south axis. Gateway to 1.5 billion consumers in the surrounding countries, the country is well connected to the world, with more than a 100 shipping lines and more than 120 airlines connecting it to every destination. Furthermore, government control and regulation of private sector activities have been kept to a minimum, with no direct taxes and custom duties as low as 5%, with total exemptions on re-export. Furthermore, full repatriation of profits is allowed and there are no foreign exchange controls, trade quotas or barriers. While the exchange rate is pegged to the US Dollar to provide stability, liberal visa policies permit an easy importation of skilled workforce from around the world. In order to reduce the dependence on an oil-based economy, the UAE has invested its petrodollars in its own infrastructure. Such a heavy investment has created excellent transport, energy and telecommunications facilities. Complementing the world-class
RSM Dahman Rakesh Pardasani Director Tel: +971 4 227 1112 firstname.lastname@example.org www.rsmdahman.com
18 • Global Business Magazine • June 2012
infrastructure is a sophisticated service sector that features leading regional and international freight forwarders, shipping companies and insurers, as well as major international hotels, banks and financial service firms. In the 2010 biennial Logistics Performance Index (LPI), the World Bank ranked the UAE as the top logistics hub in the Middle East. All these conditions make the UAE an ideal entry point for global businesses wanting to reach out to consumers in the Middle East. As soon as the conditions stabilise in the region, it is predicted there will be a great deal of demand for goods and services. With the understanding that businesses closer to the consumer will benefit from this demand, over the years the UAE has created an environment conducive to business. The UAE has, in all, more than 15 Free Zones and Special Activity Zones, where businesses can consider incorporating an entity. Furthermore, most of these Free Zones have no restrictions on foreign ownership or profit repatriation. They also enjoy a 50-year tax holiday, which protects them from possible changes in tax laws in the future. Companies in the Free Zones can also save on custom duties, if the goods are not sold in UAE but are re-exported. Foreign businesses can choose to go down two routes when doing business in the UAE. The first route is to get into partnership with a local business group and incorporate a limited liability company; the second route, to incorporate a wholly owned company in one of the Free Zones in UAE. However, the decision of the route to adopt for foreign businesses is often complicated, as it depends on a number of factors such as; the product / service being sold, the target market, the long term plans of the company in the Middle East, the availability of a suitable partner and the cost considerations. At RSM Dahman we put such questions to foreign businesses and then come up with the best possible route of entry into the UAE or the Middle East. We understand that, given the complications involved in winding up an entity in the UAE, it makes sense to have all such issues clarified in advance. There are no direct taxes in the UAE, which makes regulatory compliance a lot easier. However, as there are other countries in the Middle
East who tax foreign companies, we have experts within our Middle East ‘centre of excellence’ who can devise the best and most tax efficient strategy for doing business. RSM Dahman assists companies / businesses in not only deciding on the best route to enter the UAE, but advising on the legal requirements and formalities throughout the entire setting up process. Our business advisory teams ensure that all requirements and costs are known upfront in order to pre-empt possible surprises or unnecessary delays in setting up the local entity. Once the entity is incorporated, we then assist businesses in keeping abreast with all local law changes / regulations and the requirements involved with annual license renewals. Our comprehensive service includes recruitment, payroll processing, book-keeping and statutory auditing of the financial statements – everything that companies need to do business in the UAE. About RSM Dahman Established in 1996, RSM Dahman, is the independent UAE member firm of RSM International. This international affiliation combined with the local experience of our partners and staff members enables us to provide clients with excellent service and global reach. RSM Dahman, along with its sister firm Crescent Management Consultancy offers a full range of audit, assurance, accounting and consulting services supported by in-depth local knowledge, industry expertise and international experience. About RSM International RSM International (www.rsmi.com) is the 6th largest global accounting network of independent firms, represented by over 30,000 people working in over 700 offices across more than 85 countries worldwide. RSM International and its member firms are separate and independent legal entities. RSM International does not itself provide accounting or consultancy services. All such services are provided by affiliate members practising on their own account. RSM International is a member of the Forum of Firms. The objective of the Forum of Firms is to promote consistent and high quality standards of financial and auditing practices worldwide.
right questions about the service provider’s practices and make your own determination about whether your use of their services is a breach of your own policies. Consider the quality of the service. your cloud-based services will probably be socalled ‘mission critical’ services for your organisation, so you will want to take comfort from the fact that the provider is going to be up and running virtually all the time. After all, less (or no) downtime is theoretically one of the benefits of outsourcing IT infrastructure. Look for a strong service level agreement (SLA), which promises both power and bandwidth uptime of at least 99.999 percent and has meaningful remedies if that threshold is not met (usually all or part of the monthly fees for that service). SLAs are notoriously riddled with exclusions and limitations. Building appropriate protections, standards and service levels into your contract is all very well, but you must also ensure you have the right to audit the service provider’s performance. Service providers will quite legitimately resist overly intrusive audit rights, and will likely ensure that any such rights are subject to close supervision. your right to audit the provider’s compliance with its contractual obligations must be balanced against the provider’s need to keep its facilities protected from third parties, for both security and business reasons. Remember, these will be shared facilities, and if they give you that right, they give everyone that right.
Afridi & Angell P.O. Box 3961 Al Ghaith Tower - Level 8, Suite 806, Hamdan Street, Abu Dhabi, U.A.E. Tel: (971-2) 627-5134 Fax: (971-2) 627-2905 email@example.com P.O. Box 9371 Emirates Towers - Level 35, Sheikh Zayed Road, Dubai, U.A.E. Tel: (971-4) 330-3900 Fax: (971-4) 330-3800 firstname.lastname@example.org P.O. Box 5925 Al Safa Building - 2nd Floor, Al Boorj Avenue, Sharjah, U.A.E. Tel: (971-6) 568-1062 Fax: (971-6) 568-2336 email@example.com
Limits of liability are key, and are almost always a focal point of negotiations. The contractual commitments of data protection, privacy, quality, reliability and standards become much less meaningful if the provider is not liable for anything more than, say, six months of service fees. How much help will that be when you are facing a disastrous and public privacy breach? At the same time, a provider cannot possibly accept unlimited liability for whatever loss your business suffers due to data loss or business interruption because of downtime. It is common to have a general limit of liability (something high enough to be a serious disincentive to the provider), with much higher limits for things like privacy or security breaches or for the provider’s gross negligence. Don’t think of your service provider as an insurance company but do hold them to account for what they control. While these are only a few of the key issues to bear in mind when negotiating a service contract for cloud-based infrastructure services, I hope the theme is becoming clear: cloud computing has its risks, but there are appropriate ways to manage those risks that are fair to both parties. The technology is sound – all you need is a sound contract. Author - James Bowden, Associate June 2012 • Global Business Magazine • 19
spotLight on the uae
uae’s investment environment enhanced by information revolution The legal practice in the UAE has been positively affected by both the investment environment and revolution of information technology that has emerged over the last few years. As one of the leading business nations, the UAE’s unique advantage lies in its well-known flexibility in terms of starting a business, as well as the diverse forms and types of investment entities made available to investors. This flexible nature of business registration and other day-to-day investment activities in the UAE is actually considered a major trend that characterises all other official transactions in the Emirate of Dubai. Since the creation of Dubai e-government in the year 2000, Information and Communication Technology (ICT) has used multiple channels to provide information and channels of transactions of government services to citizens, residents, visitors and businesses. In achieving its objectives to make it easier for people and businesses to interact with the government, Dubai has reached a revolutionary state of economic growth within a short space of time. Furthermore, the introduction of massive telecommunication technology in Dubai in the last few years has made it much easier for people to deal with government services on all matters, including judicial and litigation services. By way of example, the UAE's credit information system was introduced with a new law that allowed the establishment of a Federal Credit Bureau. This was considered by many to be a significant step in fostering an environment conducive to prudent lending and decision-making across industry sectors in the UAE. It is now expected that this will also strengthen the credit information legal infrastructure of the UAE, by requiring banks and other financial institutions to provide their credit information in the UAE. The UAE Ministry of Finance states that the Federal Credit Bureau’s most important tasks include: collecting and documenting data from different financial institutions and individuals in the UAE; conducting studies and analysis; and lastly, presenting comprehensive reports specifying
20 • Global Business Magazine • JuneJune 20122012
debt levels and financial commitments. Such reports will not only allow banks and financial institutions to better determine debt ceilings, but to enable them to decide on monthly payments in a more efficient manner. It is also relevant to mention the introduction of an information system by Dubai Customs known as Mirsal II, which became effective in 2011. This system enables the implementation of new business processes, information technology and information management techniques. It also supports the vision of Dubai Customs and of Dubai of becoming an international centre for trade, tourism and finance – allowing businesses to exchange declarations and information to customs instantly and at all times, thereby having a direct impact on easing trade across borders. The Doing Business Project is an annual report prepared by the World Bank and the International Financial Corporation. It provides objective measures of business regulations and their enforcement across 183 economies and selected cities at a national and regional level. According to the 2012 Doing Business Project the tax-free UAE ranks 7th worldwide in terms of ease of paying taxes with 0% profits tax. It also ranks 5th when it comes to ease of trading across borders, 12th in dealing with construction permits and 6th in registering properties. Data collected by Doing Business has also found that starting a business requires seven procedures, takes 13 days, costs 5.6% of income per capita and requires paid-in minimum capital of 0.0% of income per capita. Such figures are continually being improved on due to the modifications in laws and regulations, introduced annually to improve investment in the United Arab Emirates. In 2010, some of the administrational reforms in the UAE could be seen in business startups: Registration documents were simplified, minimum capital requirement was abolished and there was no longer the requirement that proof of deposit of capital be shown for
registration. However, starting a business in 2012 has become even easier now the requirements to file documents with the Department for Economic Development have been merged with obtaining a trade license and registering with the Dubai Chamber of Commerce and Industry. This merger serves to strengthen the concept of the one-stopshop. Bin Suwaidan Advocates & Legal Consultants is a general practice law firm, providing legal services on the level of the United Arab Emirates. With offices in Dubai and Abu Dhabi, the firm works with an international team of highly experienced lawyers and legal experts who are well acquainted with various legal systems. The practice covers all fields of legal services, but particularly on court and arbitrational litigation in civil, commercial and criminal matters. The firm provides procedural and consultancy services in investment and business registration, as well as banking, securities, real estate, insurance, maritime and intellectual property. They have the right of audience before all courts of the UAE and those of the Dubai International Financial Centre (DIFC) courts.
Bin Suwaidan Advocates & Legal Consultants Abdul Moneim Bin Suwaidan Managing Director Tel: +971-4-3258888 firstname.lastname@example.org www.binsuwaidan.com Bin Suwaidan Advocates & Legal Consultants Elmugtaba Bannaga Legal Counsel Tel: +971-4-3258888 email@example.com www.binsuwaidan.com
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TORONTO WASHINGTON, D.C. WILMINGTON
523 avenue Louise, Box 30 | 1050 Brussels, Belgium | T: 322 639 0300
Skadden’s Brussels office handles merger control, cartel, abuse of dominant position and state aid issues. We advise clients on investigations before various agencies and in litigation, including enforcement proceedings, before European courts. Our lawyers assist businesses and governments on regulatory and liberalization issues, and we work closely with clients to design, implement and monitor worldwide antitrust compliance programmes. Our focus is on EU competition issues raised by mergers, acquisitions and joint ventures, and we are highly experienced in dealing with EU institutions and member state authorities.
Skadden’s Brussels office was recognized as one of the top firms in the area of European Union and International Competition by Chambers Europe 2011 and The Legal 500 2011. ‘This US M&A powerhouse has a highly respected competition and antitrust practice operating on both sides of the Atlantic.’ Chambers Global 2011 ‘An extremely strong player in the US and worldwide.’ Chambers Europe 2011 ‘Delivers an excellent service.’ The Legal 500 EMEA 2011
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Guernsey Internat ional Finance Cent re WHy GUERNSEy REMAINS A STRONG FINANCE FAVOURITE
As a leading international finance centre, Guernsey has continued to demonstrate its resilience in the face of the worldwide economic downturn. While many jurisdictions struggle to react to the changing global economic landscape, the key indicators suggest that Guernsey remains a popular location for doing business and continues to outperform many of our closest competitors. For example, the results of an independent survey published earlier this year by ‘Fund Domiciles.com’ found Guernsey to be the most popular fund domicile among a sample of UK-based alternative investment fund managers. That report followed a report in September 2011 by ‘The Banker’ magazine, which ranked us the number one specialist finance centre in Europe and second in the world. One area this island demonstrates this specialist expertise is international insurance. The latest research – based on figures to the end of 2011 – shows that we have strengthened our position as the largest captive insurance domicile in Europe, while also remaining the fourth biggest globally. New insurance business has also come on board in the first two months of this year,
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with the island’s regulator, the Guernsey Financial Services Commission (GFSC), reporting that the number of international insurance entities licensed in the island has risen from 687 at the end of December 2011 to 695 at the end of February. Other positive news for our insurance market includes JLT Insurance Management
(Guernsey) Limited establishing a Protected Cell Company (PCC) that will provide insurance to lenders under the UK government-backed NewBuy scheme, which is offering prospective owners newly built homes with 95% mortgages underwritten by house builders and the government. Guernsey is proving resilient to the global economic downturn but equally neither is the island completely immune. For example, the sovereign debt crisis and continued low interest rates provide a challenging environment for our banking sector, with the value of deposits held by banks in Guernsey falling during the final two quarters of 2011 to stand at £107.5 billion at the end of 2011, representing a fall of £3.4 billion over the course of the last year. The nervousness in the global markets has also impacted the value of investment funds under management and administration in Guernsey, with contraction in the second half of last year in the face of continued fears about the Eurozone. However, overall there has been growth from £200.4 billion at the end of 2008 to £261.1 billion at the end of 2011, including an increase over the past 12 months of £4 billion (1.6%). In particular, the island continues to grow its reputation for excellence in alternative and niche funds, especially private equity. This has been reaffirmed by a Private Equity News / State Street survey where 61% of Chief Financial Officers (CFOs) responded, saying that Guernsey was their preferred destination for private equity outsourcing. One of the island’s great strengths is the ability for Guernsey vehicles to list on the local Channel Islands Stock Exchange (CISX), which now lists more than 4,300 securities, including amongst others, the London
Stock Exchange (LSE). Data direct from the LSE to the end of December 2011, shows that there are more Guernsey-incorporated companies and securities listed on its markets than there are entities from any other competitor jurisdiction. In addition, in May 2011, Guernsey received approval for its companies to list on the Hong Kong Stock Exchange (HKEx). Diversiﬁcation – Products & Markets Guernsey has developed a reputation for its ability to adapt and be fleet of foot. Not only are we looking to maximise these characteristics to unlock the potential from other niche areas such as providing the financial infrastructure around films and cleantech, we have also taken steps to put the necessary legislation in place which will enable Guernsey practitioners to offer clients an even greater choice of services. Our fiduciary sector for example boasts more than 150 licensed providers, ranging from large multinational organisations to locally owned boutiques, who together hold more than £350bn worth of assets in trust and company structures.Guernsey’s government has agreed to establish a registry for aircraft belonging to local residents and those held through fiduciary structures on behalf of clients. This comes at a time when Guernsey is to become the first jurisdiction in the world to recognise image rights in law and provide them with a register. This will be managed by the island’s Intellectual Property Office – part of the Guernsey Registry – and adds a further dimension to our cutting edge IP offering. The Guernsey government has approved the preparation of foundations legislation and we’re hopeful that clients can be offered a local foundation
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structure later this year. We expect the foundation will be especially attractive to clients based in civil law jurisdictions in Europe and also in ‘emerging’ markets such as China, Russia and Latin America where the trust concept is less familiar than in common law countries. Our practitioners are already increasingly attracting clients from further afield, with the traditional sources of the UK and Europe being supplemented by new business from India, Russia, the Middle East and the Far East. Towards the end of 2010 we held our first official delegation to India and since then have returned on several occasions. Guernsey has grown a reputation as the domicile of choice for Indian-related entities listing on the LSE’s Alternative Investment Market (AIM) and this is a position we reinforced during our latest visit to Mumbai in December 2011 – the same month the Guernsey government signed a Tax Information Exchange Agreement (TIEA) with India. The island has also seen increased business from Russia in the last few years, especially within the private wealth and investment sectors. We held our first official delegation to Moscow in May 2011 and have already visited again this year, meeting officials and attending the Russian Funds Forum in February. It is now over four years since we established our representative office in Shanghai and during that time we have built some very strong relationships. This is highlighted by the fact that towards the end of 2010, the Guernsey Government signed a Memorandum of Understanding (MoU) for exchange and cooperation with the Shanghai Municipal Financial Services Office and a TIEA with the Chinese central government tax authorities. In addition, the GFSC has now signed a statement of cooperation with the Chinese central banking regulator, the China Banking Regulatory Commission (CBRC). Awareness of the Guernsey brand is also being enhanced by the fact that a number of locally-based service providers are establishing operations in Asia. These developments have no doubt been given impetus by the approval for Guernsey companies to list on HKEx. Now we are in discussions with the equivalents in Singapore, Shenzhen and Shanghai, to see if we can develop relationships that will help facilitate the listing of Guernsey companies on those exchanges in the future. Enhanced Reputation One of the key messages to our audiences in the emerging markets is that Guernsey is a well-regulated and transparent leading international finance centre – a reputation that has been further enhanced since the beginning of last year. In January 2011, the IMF
published six evaluation reports that commended Guernsey’s high standards of financial regulation, supervision and stability along with our robust criminal justice framework. Later that same month, the OECD’s Global Forum built on the fact that we were among the first wave jurisdictions placed on its ‘white list’ (at the G20 summit in London, April 2009) by endorsing our continued commitment to tax transparency and exchange of information. In addition to this, an FSB report prepared for the G20 meeting in Cannes last November recognised Guernsey as being within the top tier of jurisdictions adopting international standards and thereby demonstrating strong commitment to financial stability. Indeed, Guernsey has now signed TIEAs with 35 jurisdictions globally and we are also extending our network of Double Taxation Arrangements (DTAs). Guernsey signed a DTA with Malta in March, which is our third comprehensive arrangement – the other two being with the UK and Jersey. It is our 13th overall and several others are now in the pipeline. The ‘Zero-10’ corporate tax systems of the Crown Dependencies have come under European scrutiny. In April this year, the EU Code of Conduct Group in Brussels deemed Guernsey’s zero-10 tax regime to be harmful. It is expected that we will be able to finalise our position later this year. However, the island has been clear from the outset that we will ensure our regime is both compliant and also competitive, i.e. continued tax neutrality of financial services products. Indeed, the fund industry’s exempt regime for collective investment schemes is not under threat and is even in the process of being extended. The waters ahead are unlikely to make for plain sailing, but we will take the necessary steps to ensure that the conditions remain in place for Guernsey to continue as a leading international finance centre well into the future. By Fiona Le Poidevin, Deputy Chief Executive of Guernsey Finance – the promotional agency for the island’s finance industry. Fiona Le Poidevin is Deputy Chief Executive and Technical Director of Guernsey Finance, the promotional agency for Guernsey’s finance industry internationally. Her role includes assisting with business development in existing and emerging markets, providing technical support to industry and liaising with industry associations. Previously a senior tax manager, she has over 13 years’ experience in financial services in both the UK and Guernsey. Miss Le Poidevin is a Chartered Accountant and a member of the Institute of Directors.
Address: PO Box 655, North Plantation, St Peter Port, Guernsey, Gy1 3PN Phone: +44 (0) 1481 720071 Fax: +44 (0) 1481 720091 firstname.lastname@example.org www.guernseyfinance.com
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If you want an innovative financial solution there’s one place you should look.
where? Guernsey combines 50 years’ financial heritage with a modern, well regulated infrastructure. The result is an international financial centre with the pedigree, experience and expertise to meet even the most exacting of needs, be they across banking, fiduciary services, investment funds, insurance, asset management or overseas pensions. Add to this our reputation for innovation and a broad range of service providers, including a full set of support services and you can see why Guernsey offers an ideal location for your business. Make Guernsey your first port of call. Telephone: +44 (0) 1481 720071 Email: email@example.com
BANKING • FIDUCIARY • FUNDS • INSURANCE • ASSET MANAGEMENT
Bedell Crist in Mark Helyar (01481) 812857 Mark.firstname.lastname@example.org Bedell Cristin La Pladerie House, La Pladerie St Peter Port, Guernsey, Gy1 1WG
What is ILS Investment? Insurance companies and reinsurers need substantial capital to underwrite risk, especially for catastrophic events. This is particularly true of losses caused by earthquakes, hurricanes, tornadoes and flooding, but can also be much more sophisticated or indeed macabre – such as extreme mortality or insuring against failed satellite launches. An insurance linked security or ‘ILS’ is simply a capital markets instrument (like a preference share or loan note) whose performance is directly linked to an underlying insurance risk – it is a species of derivative instrument. It enables a targeted investment in specific risk(s) over a limited period, rather than simply buying listed shares in an insurer and trusting it will make profits out of a spread of risk. It also allows for natural hedging as well as investment in risk, which is not correlated to economic growth or financial markets. Insurance linked securities (‘ILS’) are growing in popularity for investors with higher risk appetites because of the current prolonged low returns and volatility in capital market investments, and the desire to diversify away from markets directly correlated to economic growth or the success or failure of the financial markets. Typically, large hedge funds have provided significant amounts of capital for the catastrophe reinsurance markets but this is changing and smaller, niche investors are expressing the desire to be more adventurous in this area, provided that the structures they are considering are suitably safe and transparent. A Typical ILS Transaction Potential gains and premiums (known as the ‘rate on line’) can vary quite substantially from year-to-year but can provide good investment returns in a relatively short period when compared to traditional markets. For example, a reinsurer of windstorm loss in the Gulf of Mexico may have US$500m of risk on its books and offers to retrocede some of that risk. A suitable transformer receives
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a premium in order to re-reinsure a slice of that risk. If we assume an attachment point of $5bn and a rate on-line of 20%, this means the transformer structure will receive $20m dollars of premium for its provision of say $100m of capital to the reinsurer (who will generally require that capital to be secured or guaranteed in some way, for example by a letter of credit). The transformer structure will only be called on to pay if the total underlying insured losses (or events) in the season exceed $5bn. The insurance linked security in this case would be an investment of $100m (whether by way of shares in a cell of a PCC or similar) in return for a payment of $20m. If a claim is made, then the structure will lose the $100m. If no claim is made, the return, usually after nine months or less, is therefore 20% of invested capital. The types of structure, which can, and are, being used can be considerably more complicated and converted into a number of derivative instruments. In one case for example, we have used an investment bank to issue listed bonds as the ‘transformer’ end of the instrument. The benefit of this type of instrument is that it can be purchased by a wider range of investors, and traded over an exchange for a profit immediately that a hurricane season has finished, rather than waiting for the underlying policy period to finish and the bond to mature. However, ILS transactions have two crucial elements – they require some form of licensed and regulated insurance vehicle to assume risk and they require significant reinsurance and capital market professional expertise. Why Guernsey for ILS? Guernsey is well known as Europe’s leading captive insurance domicile but its significant activities in reinsurance and ILS transactions are less frequently reported (with the exception of the specialist media). Insurance is actually Guernsey’s oldest financial services industry and has been active since the early 19th century. The same elements
which make Guernsey successful as a captive domicile make it an ideal jurisdiction of choice for ILS structures: There is a mature, well-respected and stable jurisdiction, which currently has the highest global IMF approval rating for financial services regulation and countering financial crime: There is flexible company law – Guernsey was the first jurisdiction to incept protected cell company legislation in 1996: There is a zero corporate tax rate: There is flexible, proven and leading insurance regulation - Guernsey’s regulator is a leading member of the International Association of Insurance Supervisors (IAIS): There is a long-established insurance jurisdiction with a proven track record for ILS transactions: There are reasonable and flexible capital requirements and also the existence of a number of cost efficient ‘rental’ PCC and ICC structures for transformer transactions: There is a substantial wealth of experience and contacts in the reinsurance and insurance / broking sectors represented both by the presence of subsidiaries of the world’s largest brokers and leading independent insurance company managers: Lastly, the professional support disciplines in insurance management, law and accounting have reached a critical mass. Author Mark Helyar is an advocate and partner of Bedell Cristin with a substantial practice in the insurance and reinsurance market, including the use of segregated cell companies for ILS and reinsurance transactions. His series of 2011 deals for Solidum Re ICC in Guernsey were described as ‘groundbreaking’ by Trading Risk magazine and shortlisted for the award of Derivative Initiative of the year.
Alter Domus Alter Domus Mark Vidamour Director Tel: + 44 1481 742253 email@example.com www.alterdomus.com
A Historic Port Offers Navigation for 21st Century Investment Managers Guernsey has a long history in international trade. For centuries, ships docked in and around the island’s picturesque main town of St. Peter Port, carrying goods destined for major northern European cities. Today, international trade remains a driving force in Guernsey’s economy. In the 21st century version, ships filled with silks and spices have been replaced by a world-renowned financial services sector that caters to the global investment management industry. As a consequence of the global financial crisis and its aftermath, investment managers – much like the traders of past generations – are seeking new investment opportunities on global scale. To capitalise on these opportunities, investment managers require corporate, administrative and regulatory knowledge and experience in the markets in which they operate and in the jurisdictions through which they invest. As of the end of 2011, 854 funds, valued at £261 billion, are operated from Guernsey. A large proportion of these funds are involved in alternative investments and typically make their investments via complex special purpose vehicles and operating companies
that are established in many jurisdictions. For such funds, Alter Domus offers a high quality ‘one stop shop’ solution, enabling clients to streamline administration tasks so they can better focus on meeting their global strategic objectives. Alter Domus, which has its origins in a Big Four accountancy practice, is a leading independent provider of professional administration services for alternative investment funds and multinational corporations. Founded in 2003 in Luxembourg, Alter Domus has grown to 15 offices and desks across four continents and continues to enhance its service offerings in response to evolving client needs. Alter Domus currently has over $20 billion of assets under administration for fund administration clients and administers about 4,000 special purpose vehicles worldwide. It is one of the very few third party outsourcing service firms that can provide high quality ‘one stop shop’ services. The firm’s professional staff of approximately 550 people has proven expertise in corporate
management services, fund administration and financial reporting services. Alter Domus supports the accounting, tax, regulatory and compliance requirements of legal structures established by its clients in each of the jurisdictions in which it operates. Key factors in the firm’s ability to provide exceptional client service include, its client relationship management structure which designates a single client contact to address needs across all relevant jurisdictions, experienced local operational teams and a globally integrated IT system. Alter Domus’ Guernsey office is licensed by the Guernsey Financial Services Commission to provide both Fund Administration and Fiduciary Services. For further details on how Alter Domus can assist you with navigating today’s global opportunities, please contact Mark Vidamour, Director, at mark. firstname.lastname@example.org or James Brasher, Managing Director, at email@example.com.
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A General Overview to the Mining Sector in Turkey Turkey, with its unique landform, has an important place in world’s mine demand amongst the world’s biggest producers –USA, China, South Africa, Canada, Australia, Russia and Chile. According to the Mining Sector Report of State Planning Organisation of Turkey, fifty-three different mines and minerals are being produced by both governmental and private entities in Turkey. Turkey mostly produces chrome, manganese, copper and iron ores: It also directly sells the produced ores as raw materials. In line with increasing world demand and the existing potential, reputable international companies have started to invest in Turkey. The Effect of the New Mining Regime to the Turkish Mining Sector With amendments to the Mining Law (‘Law’) numbered 3213 (amended with the Law No 5995) in June 2010, Turkey has integrated its mining regulations in line with international standards: All mining activities in Turkey are regulated by the Ministry of Energy and Natural Resources, and the General Directorate of Mining Affairs of the Ministry of Energy and Natural Resources. The main aim of the amendments to the Law is to set international production and operation standards. The conditions for the attainment of permissions for mining activities are determined by Article 7, which introduces a general frame to the mining activities by accepting international standards (see Mining Law at www.gurlaw.com). In accordance with Article 6 of the Law, the mining rights can only be granted to Turkish citizens or Turkish companies. This effectively means that any foreign investor can establish a Turkish company in Turkey and can obtain mining rights (N.B. A company established under Turkish laws in Turkey is assumed as a ‘Turkish company’). There is no restriction for a foreign investor to be a partial or whole owner of a Turkish company to perform mining activities in Turkey. As an emerging market, Turkey wants to adopt modern production techniques and attract investment from international mining companies, so it not only produces the raw materials but the ‘final product’. Authors: İbrahim Kursat Dogan – Nazli Dervisoglu
New Regulations On Suretyship Under the New Turkish Code Of Obligations The new Turkish Code of Obligations numbered 6098 (the ‘New TCO’) – published in the Official Gazette numbered 27836 on 4th February 2011 will come into force as of 1st July 2012. This will replace the Code of Obligations numbered 818 (the ‘Current TCO’) – published in the Official Gazette numbered 359 on 29th April 1926, which is still in use. The major differences between the New TCO and the Current TCO are mentioned below, with specific reference to the suretyship institution.
Conditions Articles 582, 583 and 584 of the New TCO set forth the conditions of the suretyship. According to the Current TCO the suretyship contract (the “Contract”) should be executed in writing, with the maximum amount of responsibility written in the Contract. However, pursuant to Article 583 of the New TCO, the maximum amount of responsibility of the surety, the date of contract; and the expression of whether the suretyship is joint or several must be written in the Contract by the surety’s handwriting. In accordance with Article 584 of the New TCO and Article 194 of the Turkish Civil Code, the husband or wife cannot terminate the lease contract or sell the house of family or grant any encumbrances on it, if his/her spouse does not provide consent for the relevant transaction. Therefore, if married, the written consent of the surety’s spouse is mandatory for the valid execution of a Contract. Such consent should be given prior the execution of the Contract or at the same time of the execution; in writing; and for any amendment that expands the responsibility of the surety. Content Contrary to the relevant provisions of Current TCO, Article 591 of the New TCO states that the surety cannot waive his/her/it rights of defence (def’i). Due to this, any prior waiver of right of refusal (def’i) of the surety will not be enforceable and the surety will still be entitled to exercise his/her rights of defence (def’i). Termination: Pursuant to Article 598 of the New TCO, if the suretyship is granted by a real person, the suretyship itself will terminate at the end of ten years following the execution of the Contract. Upon the consent of the surety, the suretyship may be extended for a new period of maximum ten years. Such extention should be done earliest, one year prior to the termination of the Contract. Article 599 of the New TCO sets forth the termination right of the surety. In case of a suretyship for future debts, if the debtor’s prior financial condition is either disrupted following the execution of the Contract, or the debtor’s financial condition is worse than the surety supposes; the surety may terminate the Contract at any time prior to the occurance of debt, provided that he will be liable to compensate the damages of the debtor. Scope of Application: Pursuant to Article 603 of the New TCO, the relevant provisions of the New TCO regarding suretyship are applicable to any contract, executed under any name with regards to granting personal security (e.g. guarantee). Authors: Sena Apak – Ece Ozelgin
Main Oﬃce Sümbül Sok. No:61 34330 Levent/Istanbul-TURKEy Phone: +90-212-325 90 20 Fax: +90-212-325 90 23 firstname.lastname@example.org www.gurlaw.com | www.gurip.com Moscow Oﬃce Nizhnyaya Krasnoselskaya Street 40/12, Bld.20 Nov Business Centre 105066 Moscow-Russian Federation Phone/Fax: +7 (499) 346 39 47 email@example.com Contacts Tevfik Gür (Founding Partner) Email: firstname.lastname@example.org Serkan yildirim (Partner, Head of Litigation Department) Email: email@example.com Burcu Boso (Partner, Banking & Finance Department) Email: firstname.lastname@example.org İbrahim Kursat Dogan (Mining&Natural Resources Department) email@example.com Nazlı Dervişoğlu (Mining&Natural Resources Department) firstname.lastname@example.org Sena Apak (Banking & Finance Department) email@example.com Ece Ozelgin (Banking & Finance Department) firstname.lastname@example.org
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In Challenging Times Lie Spanish Opportunities According to available data, the Spanish deficit for 2011 was 8.5% of GDP. Furthermore, this will still represent 6.4% of GDP in 2012 and is set to be 6% of GDP in 2013. GDP growth for 2011 was 0.7% and predictions for 2012 and 2013 show almost no improvement – 1.8% and 0.1%, respectively. Credit is trickling into our enterprises with difficulty – the financing available for 2011 was 76% lower than in 2010 and the reduction of the amount of credit to finance production activities amounted to €73 billion between December 2008 and December 2011. Unemployment statistics are not very encouraging either, with figures ranging between a 24.3% rate for 2012 and a 23.4% rate for 2014. However, it is not all doom and gloom as the Spanish economy is also showing other signs: a focused government adopting all necessary measures to correct the deficit situation; a restructuring of our banking entities in the process of being completed in the coming months with a view to pouring liquidity back into the economy; and a new labour framework aimed at creating employment in the short term. Besides, incumbents in our market, despite being affected by the crisis, are already global – 60% of the aggregate turnover of the companies on the selective IBEX-35 stockexchange index comes from abroad. They are competitive enough to pull our country in the right direction to get back up to speed quickly, inter alia, two Spanish banks who are among the 30 largest banks in the world by market capitalisation value – Santander 14th and BBVA 30th (as of 20th January, 2012); Telefónica who is currently the fourth telecommunications company in the world by total revenue; Repsol YPF and Endesa who were among the top 20 global energy companies by size at the end of 2011; five Spanish companies who were ranked among the 50 biggest construction companies in the world in 2011 – ACS 9th and FCC 14th; Inditex who was number one company in the world by turnover amongst the fashion operators; and Spanish company El Corte Inglés who is the fourth largest multi-product distributor in the world. At the end of the day, we are still the
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number 12 economy on the planet in terms of 2012 GDP – a predicament many other countries would love to find themselves in. In this context, our market offers significant investment opportunities: Firstly, a wave of privatisations is foreseen to assist state, regional and local governments to reduce deficit – particularly in the transport, healthcare and energy, and natural resources distribution sectors. This is of interest as there is a safe and tested regulatory regime for concessions that has always been considered attractive by foreign infrastructure operators. Secondly, the restructuring of the Spanish banking system will provide investment opportunities in terms of acquiring either controlling or financial investment positions in the resulting entities. Thirdly, Spanish corporations are focusing on their core business and deleveraging as a way to improve results and remunerate shareholders. This is fuelling divestments that will represent purchase opportunities. The divestment trend will be general but it is likely to be more acute in the construction, TMT and energy sectors. Fourthly, there will be a huge portfolio of distressed assets available for sale. It will mainly include underperforming debt and real estate property but will also extend to companies with financial difficulties. Finally, the current trend by US and European investors is to pay attention to high-growth regions such as China, Southeast Asia, India and Latin America. Spanish companies are an ideal platform to access
SPAIN South America. It is worth noting that in 2011, Foreign Direct Investment (FDI) in Latin America was 31% higher than in 2010 and 12% higher than the historical maximum set in 2008. Moreover, 14% of the total FDI in the region came from Spain – the third country after The Netherlands (a traditional jurisdiction for channeling investments coming from other states) and the USA – two nations that accounted for 21% and 18%, respectively, of total FDI. Reaching this market indirectly through long-standing businesses already established by Spanish players, will make it easier to circumvent the usual fears about emerging markets such as cultural gaps and political or regulatory threats against foreign investors. These opportunities are coupled with a stable and tested legal framework where international investors have long been and continue to be welcome. Moreover, Spain has absolutely no intention of following the recent trend towards protectionism exhibited in some jurisdictions regarding investments from abroad, and with very few exceptions in some residual sectors of activity, foreigners may take control of almost any Spanish asset.
Javier Amantegui Partner Clifford Chance Paseo de la Castellana, 110 28046 Madrid Spain Javier.Amantegui@CliffordChance.com Tel: +34.91.590.75.00
The volatility of economies both in and outside Spain and the profile of potential transactions show a market with an opportunistic ethos and selective character. There will be transactions, although of a number that will make them selective and rather competitive. Until full recovery of Spanish credit entities, investments funded with equity will be predominant, all of which implies intensive due diligences, complex negotiations and long processes. The total outcome: Sophisticated investors not afraid of a certain degree of risk but looking for a higher and longer-term reward. In summary, the Spanish situation requires reading between the lines, thorough preparation and an element of resolve. However, it does indeed offer interesting opportunities, some of which are already crystallising.
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USA David B. Abel Partner DLA Piper LLP (US) 2000 Avenue of the Stars, Suite 400 North Tower Los Angeles, California 90067-4704
T: 310.595.3062 F: 310.595.3362 M: 310.850.4599 email@example.com www.dlapiper.com
Protecting Intellectual Property Rights to Promote Sustainable Economic Growth Emerging markets may be defined as countries or regions in the process of rapid growth and industrialization. That definition can be applied to the eight largest emerging and developing economies – China, Brazil, Russia, India, Mexico, South Korea, Indonesia and Turkey. Seven of those countries were identified in the 2012 version of the ‘SPECIAL 301’ annual review of the state of intellectual property rights protection and enforcement, issued by the Office of the United States Trade Representative (USTR). With China, India, Indonesia and Russia listed on the ‘priority watch list’, only South Korea escaped scrutiny in the USTR report. While virtually all of the foregoing countries identified in the USTR report had perceived deficiencies in the areas of unauthorized copying and piracy of products, as well as software and entertainment media, only a few were mentioned in connection with patent protection and enforcement issues. The most commonly mentioned patent issue centered on protections of pharmaceuticals – a concern which the USTR report recognizes is at the intersection of IP protection, health policy and affordable healthcare. Of the emerging market countries identified in the USTR report, the country that drew the greatest attention and commentary was China. Almost at the same time as the USTR report, the Chinese Supreme People's Court released its annual report/whitepaper on intellectual property cases for the 2011 calendar year. In 2011, the Supreme People's Court report indicated that the number of first instance civil intellectual property cases resolved by local courts grew by almost 40% to 58,201 cases. Among the cases accepted, 7,819 were patent cases – an increase of 35% over 2010; 12,991 were trademark cases – a 53% increase; and 35,185 were copyright cases – up 42%. Notably, the same report for the previous calendar year had indicated a nearly 37% increase in the number of IP cases resolved, including an over 30% increase in the number of patent cases. The substantial increase in the number of IP cases filed and resolved in China is clearly a result of the ‘National Intellectual Property Strategy’ discussed in the most recent Supreme People's Court report. As the report states: ‘enhanced judicial protection of intellectual property contributed to the steady and rapid economic growth during the 12th five-year plan period’. That national 32 • Global Business Magazine • June 2012
strategy is also reflected in the substantial increase in the number of patent applications being filed in China. The Chinese patent authority received a total of 1,633,000 patent applications in 2011 – an increase of over 33% from the prior year, of which 526,000 were applications for inventions as opposed to utility model and design applications. This increasing importance of patents within China is apparent to companies outside of China, as reflected in the number of Chinese national applications that have resulted from international applications between 2010 and 2011, growing by almost 36%. The fact that China’s government and judiciary are acknowledging and taking steps to promote the protection of intellectual property rights as a strategic national interest should be significant to the other seven large emerging market countries. It is important for every economy that is premised on development and innovation, to implement an effective intellectual property protection system, and in particular, a patent registration and enforcement process. It is also important for promoting foreign investment, technology transfer and joint development opportunities with companies from both established and emerging markets. Indeed, in a recent survey of 150 U.S. companies and universities conducted and published by ‘inovia’, 21% of the respondents indicated that they filed international applications in new countries in 2011 – up from 17% in the previous survey. Not surprisingly, China, India, Brazil, Russia and Korea were all identified as countries added in 2011. Even if an effective patent system is not perceived to presently exist within each of the largest emerging markets, for innovating companies and their IP rights managers, the prospective and long-term nature of patent protection requires consideration of a patent filing strategy for the emerging countries. However, because of the substantial increase in the number of patent applications being filed and the concurrent economic situation straining government budgets – including the budgets of national patent offices – the time from patent application filing to issuance is increasing. For many technologies, the pendency of applications may be three to six years in the United States and up to ten years in Japan or European countries – the traditional patent application venues.
Accordingly, patent applications filed up to one year ago in the United States, or being contemplated for filing in absolute novelty countries, may need to be filed in each of the large emerging market countries if the products, processes or services are expected to have a ten to twenty year life cycle, even if it is anticipated that it will take ten years to obtain the patent. Given that lead-time, it may be a reasonable economic risk (ten to twenty thousand dollars per country per patent) to anticipate that the large emerging market countries will follow China’s example – that being, to recognise that judicial protection of intellectual property rights promotes sustainable economic growth.
UKRAINE Kateryna Tkachenko Antonina yaholnyk Senior Associate Partner Tel: +380 44 590 0101 Tel: +380 44 590 0101 Fax: +380 44 590 0110 Fax: +380 44 590 0110 Antonina.Yaholnyk@bakermckenzie.com Kateryna.Tkachenko@bakermckenzie.com
Public Procurement in Ukraine With a population of almost 50 million people, Ukraine is a great market for many industries, many of which traditionally operate through government procurements. Among these are socially sensitive markets such as food services, pharmacy, medical equipment and energy. With both foreign and Ukrainian domestic industries competing in such sectors, to make the markets competitive and transparent, Ukraine has initiated a raw of incentives and adopted specific legislation. While the law is rather new and has limited practice, we would like to provide a short overview. Following the 2010 adoption of the new Law of Ukraine ‘On Public Procurement’ (‘the Law’) Ukraine has managed to replace old, ineffective tender mechanisms that were open to abuse, with a comprehensive, up-to-date regulation of state procurement procedures. In doing this they have taken an important step towards harmonising the domestic law with the World Trade Organisation (‘WTO’) and European Union (‘EU’) requirements in this area. The new law of 2010 applies to all purchases made fully or partially at the expense of the state by specified undertakings, defined as customers for the purposes of the Law. Such purchases must meet certain financial
thresholds. The 2010 law covers purchases or goods equal to or exceeding UAH 100 thousand (UAH 300 thousand for construction industry) and covers UAH 1 million for the purchase of works. One of the core principles established by the new Law is the principle of nondiscrimination of the participants to state procurement procedures, regardless of their nationality. The non-discrimination principle replaced old provisions whereby Ukrainian individuals and undertakings were granted certain preferences to participate in tenders. In general, the Law has introduced a range of positive changes to the state procurement procedures and has been welcomed by market players and experts. It has expanded the scope of application of state procurement rules through, (i) the amended definition of the state funds; (ii) the enlarged list of undertakings which make purchases at the expense of the state funds and are as such defined as customers for the purposes of the Law (the main novelty in this regard is that the new Law also now covers municipal undertakings and associations of customers); (iii) the reduction of industries not covered by the new state procurement rules; and (iv) the definition of industries (construction, energy, oil and gas etc) having special regulation in state procurement procedures. Although the public tender remains the most common procedure in state procurement, in certain cases customers have been granted the possibility to choose a specific procedure to meet their particular needs. Another important novelty of the Law is the distinction of the control and regulative functions in the state procurement procedures. The Law has defined a separate state authority and established a transparent administrative procedure under which public procurement matters can be challenged. Therefore, it has empowered the Antimonopoly Committee of Ukraine (the AMC) to be a responsible state authority and to exercise control over the abidance with the state procurement regulations. The Law does not preclude market players to challenge tender related matters to a customer or directly to a court. However, the AMC as the state authority with the special status and far reaching competences, has quickly proved to be an effective remedy to protect the rights and interests of parties in state procurement cases. It is also true that the number of the AMC’s contested decisions has been traditionally low: Court practice also shows a
small number of revoked decisions made by the AMC in state procurement cases. The AMC considers claims of tender participants and makes a decision on whether a respective purchase must be suspended and/or withdrawn. As a matter of practice, tenders challenged on the procedural grounds have more of a chance to be suspended/withdrawn by the AMC, while the success of cases challenged on the substantive grounds (i.e. interpretation of law) is not so evident. So far the AMC has been careful to interpret the Law and certain principle questions still remain open. In this context, court proceedings may be more effective to challenge state procurement matters on substantive grounds upfront. However, things may change with time and the development of practice in the field. It is worth noting that in pursuance with the Law, a tender is not automatically suspended if it is challenged to the AMC, although it may be suspended by its separate decision. This rule allows for avoiding situations of artificial suspension of a tender through a claim filed to the AMC. As mentioned above, while market players and experts have welcomed the Law, its implementation has revealed certain ‘grey’ areas that require further clarifications/ amendments. Such critical comments mainly surround the Law’s provisions regarding the application of specific purchase procedures. There are also a number of draft laws whereby significant changes may be introduced, however these predominantly suggest limiting the scope of the Law by not only removing certain industries currently covered, but changing the thresholds applicable to certain purchases. Market players and experts consider such changes to be a step back in state procurement regulation. They believe that any changes made should take into account the achievements of the Law and the obligations taken by Ukraine as WTO members, as well as its European prospective. The market players expect that the role of the AMC will continue to ensure that the markets for public procurement in Ukraine remain competitive and that the best offer wins the competition. Antonina Yaholnyk, Partner, Baker & McKenzie – CIS, Limited Kateryna Tkachenko, Senior Associate, Baker & McKenzie – CIS, Limited
June 2012 • Global Business Magazine • 33
Leading Lawyers of Latin america
of america 34 â€˘ Global Business Magazine â€˘ June 2012
cHile importation of used or refurbisHed parts into cHile Over the past decade, Chile has adopted a more liberal trade policy and opened its markets to international trade, entering into a number of free trade agreements (FTAs) with almost every one of its commercial partners around the world, including the US, the EU, all Latin American countries, Canada, China, Japan, as well as most of Asia Pacific. This recent trade liberalisation has not only brought substantial increases in import and export activity in Chile, but has also brought about major changes and an added complexity to Chile’s foreign trade and customs laws. New areas, such as rules of origin, tariff classification, customs valuation, customs compliance and internal auditing and strategic planning, have become increasingly important and complex. One aspect that has suffered many changes over the past few years refers to the importation of used, remanufactured, reassembled or refurbished products, of particular importance for multinational companies that wish to honour their product warranties. Chilean customs legislation does not contain clear rules regarding the definition of ‘used’ or ‘refurbished’ products (except regarding automobiles and motor vehicles). The general understanding states that used goods are those that have evident signs of prior use that may be detected in a physical inspection and/or that have been declared as such by the manufacturer or importer in the import documents. However, the ambiguity of Chilean applicable rules allow the Chilean customs authorities broad discretion to characterise a given component that has formed part of another product imported into Chile and furnished to a client in the past, as ‘used’. As a general rule, there is no prohibition to import used or refurbished assets into Chile. Only certain assets (eg, used vehicles and tires) must be necessarily new. Further, there are no special customs
provisions requiring to label or mark in any special way used or reassembled/refurbished products. Importers must inform Chilean customs in their import declarations that the product is used. Under Regla General Complementaria N°3 of the Arancel Aduanero (Chilean Customs Tariff Act) the import of used assets is subject to the applicable tariff for the corresponding new asset, plus a 50% surcharge. In other words, as the general tariff currently in force in Chile is 6%, the import of used assets is subject to a 9% duty. However, such 50% surcharge does not apply in the following cases: capital assets qualified as such by the Ministry of Economy; assets contained in section 0 of the Arancel Aduanero that import complies with the conditions and the requirements set forth in each applicable customs position of such section 0; and, assets imported under operations with no commercial purpose, with a cap of CIF US$100. Also, under article 3.4: Used Goods, of the US-Chile FTA, Chile shall cease to apply the 50 % surcharge with respect to originating used goods from the US that benefit with the preferential tariff treatment of such FTA. Additionally, under article C-07 in connection with annex C-07 of the Canada-Chile FTA (most favoured nation (MFN) treatment), certain assets, regardless of their country of origin, are exempt of Chilean tariff payment in their import into Chile. Under Customs Classification Chile-Canada for automatic data processing equipment, most headings under HS 8471 are expressly contemplated under the MFN rule exemption. However, recent reinterpretations of this provision by the Chilean Customs has created significant legal uncertainty, as the authority has rejected numerous classifications declared by importers over technological products and their corresponding spare parts that were formerly classified under HS 8471 and are now being unilaterally reclassified under non exempt headings by customs, thus increasing the cost of importation of such products and exposing importers to litigation with Chilean customs and, eventually, to fines and other penalties.
acquire, utilise or enjoy assets or services as final users or consumers under any type of agreement in exchange for a price. Therefore, the provisions of the CPL do not apply to resellers who will not be the final or end user or consumer of such asset. Regarding the formal process to allow a specific national or nationalised good to exit the country for repair or refurbishment, such goods may be authorised to exit the country for a limited period of time, which shall be determined by the NATO Codification System (NCS) and that may not exceed two years, without having to pay import duties and taxes upon their re-entry into Chile. The temporary exit may be converted into a regular export by formalising the corresponding export documentation and waiving the duty-free re-entry benefits granted by the NCS authorisation. A special temporary exit regime is also contemplated for ‘passive perfectioning’ (salida temporal para perfeccionamiento pasivo). This type of special programme is provided for the temporary exit of goods that need to be repaired or processed abroad. Said goods shall be subject, upon their re-entry into the country, to the payment of import duties and taxes only on the parts, pieces, spares or materials of any kind that have been added to the good during its temporary exit. Repair and processing services may also be considered by the NCS as part of the added value subject to import duties and taxes.
Baker & Mckenzie - Santiago Ignacio Garcia Partner Tel: + 56 2 367 7042 firstname.lastname@example.org www.bakermckenzie.com
Also important to keep in mind, section 14 of the Chilean Consumer Protection Law (CPL) provides that when used or refurbished products are delivered or when products are offered that were made or elaborated with used parts or pieces, such circumstances shall be expressly noticed to the consumer. Under article 1 of the CPL, consumers are defined as individuals or juridical entities that, June 2012 • Global Business Magazine • 35
Leading lawyers of latin america
Honduras A basic approach to Honduran insurance law and regulations Insurance and underwriting activities that take place or have legal effects within the national territory of Honduras (currently, there are ten national insurance companies and two foreign insurance companies legally authorised to operate in Honduras) are regulated by the following laws: the Commercial Code (1950), the National Banking and Insurance Commission Law (1995) and the Insurance and Underwriters Institutions Law (2001), respectively. In order to understand the legal standing, as well as the scope of application of each of the legal bodies mentioned above, following are some general remarks and also, a brief description of some of the most important legal mandates contained in each one. Commercial Code The Honduras Commercial Code (Code) sets forth rules that apply to commercial matters in general. Therefore, it is clearly stated that the provisions of the Code and all other commercial laws apply to merchants (individuals and corporations), commercial acts and commercial matters. In the absence of specific provisions contained therein, commercial ways and customs will be applicable and if there are none, the corresponding provisions contained in the Civil Code (1906) will prevail. The Code contains provisions that specifically regulate the insurance contract; the provisions can be found in Book IV, Title II, chapter X (articles 1105 – 1264). In this regard, insurance contracts are deemed to be always of a commercial nature. The Code ordains that only dully authorised national and foreign insurance companies or their agents (brokers), as well as insurance brokerage firms, can offer and manage insurance contracts within the Honduran market. The Code presents general and specific provisions regarding insurance policies, risks, premiums, coverage, information and obligations of the parties to an insurance contract. The Code also includes regulations regarding insurance against damages, fire, for crops and livestock, transport, responsibility, credit, cars, and personal insurance. Lastly, some provisions regarding underwriting are also included.
National Banking and Insurance Commission Law This law creates the National Banking and Insurance Commission (Commission), as the regulating authority for the banking, financial and insurance sector. The Commission is part of the Presidency of the Republic and is legally attached to the Honduran Central Bank; notwithstanding, the Commission operates as an independent governmental agency. The Commission is headed by three commissioners that approve all internal decisions needed to properly manage the entity. With the technical support provided by the Superintendence (divided in threes separate internal departments: banking, finance and savings and loan; insurance and pensions; and, securities and other institutions), the commissioners are also responsible for the approval of all regulatory actions applied to the institutions under the jurisdiction of the Commission (supervised institutions). The Superintendence practices periodical audits based on the mandate derived from the law, which also authorises the use of recommendations derived from international practices. The Commission can order the amendment of certain actions or proceedings, as it also has sufficient authority to impose fines, as well as other type of sanctions against supervised institutions. Here are some of the topics related to insurance and underwriting that have been regulated by the Commission: registration and contracting of external auditors; accounting manuals for insurance companies and for independent agents and insurance brokerage firms; registration of independent insurance agents (brokers), national and foreign insurances brokerage firms and underwriters; unlawful use of insurance services for money laundering purposes; and, insurance consumer protection. Insurance and Underwriters Institutions Law The law regulates all matters related to the creation, organisation, operation, merger, transformation, separation and liquidation of insurance and underwriting companies (the current law repeals the Insurance Institutions Law (1963). All national and foreign persons and companies domiciled in Honduras, dedicated to the trade of insurance and bonds, are subject to the provisions of this law, as well as to the regulations approved by the National Banking and Insurance Commission (Commission) and the Honduran Central Bank. Insurance companies are classified into three
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groups: personal insurance; insurance against damages and bonds; and, those engaged in both. The law mandates that only fixed capital corporations can operate national insurance companies. The authorisation to operate an insurance or underwriter company is granted by the Honduran Central Bank, provided the Commission has previously dully documented its opinion. The same process must be followed by all foreign insurance and underwriter companies that wish to establish a branch office in Honduras. Under this law, the Commission is granted with complete authority to supervise the appointment of the members of the board, as well as senior officials of insurance operators. The Commission is also authorised to monitor the financial solvency of all insurance operators. In this regard, the Commission can order whatever actions are necessary, including the creation of financial reserves in order to avoid capital loss. The assignment of credits between insurance operators must be authorised by the Commission. The law includes a list of activities that are limited and even prohibited to such operators, including the endorsement of third party credits. With respect to underwriting, the law mandates that all underwriting contracts and amendments thereof, as well as all underwriting agents (brokers) must be registered in a special registry managed by the Commission. By Ricardo Montes Belot
Arias & Muñoz Ricardo Montes Associate Tel: (504) 2221-4505 email@example.com www.ariaslaw.com
Mexico and its Trademarks
Brazil: A Strong Economy with an Increasing Need for Efficient Arbitration
Goodrich, Riquelme y Asociados is a full service law firm based in Mexico. With over 75 years of experience in the field, Goodrich has a longstanding tradition of excellence in both the legal service on offer and the customer satisfaction provided. With regards to the latter, the Intellectual and Industrial Property Department has led the way, attracting its clients with timely responses, quality care, expertise, effective results and great attention to detail. Goodrich´s IP department mainly works with foreign clients who have sought their services to protect their IP assets in Mexico and other Latin-American countries. As a result, Goodrich has made it a priority to understand the key differences between Mexican legislation and that of neighbouring jurisdictions. Some of these are around the fact that Mexico is a registration-oriented country, with no common law rights protection. This means the only way to secure the right over the exclusive use of a trademark is through its registration before the Mexican Patent and Trademark Office. Also, there is no opposition system, which means that only registrations are published, thereby making it difficult to detect a possible conflicting trademark or slogan before it is granted. Once granted there are several grounds in which the trademark may be cancelled,
but they all involve a full administrative procedure. Furthermore, trade dress protection does not exist in Mexico (except for franchises), so in order to protect the ‘trade dress characteristics’ it is necessary to file individual applications protecting the separate elements. With regards to multiple class applications, as these are not possible in Mexico, it is necessary to file independent applications for each class intended to be protected. As most of these differences are unknown to foreign companies, careful explanation of both the alternative routes and possible risks to come about is essential. Enrique A. Diaz, Senior Partner and Head of the IP Department, is known for securing his clients. He ensures that before any steps towards registering a trademark or patent are taken, his clients fully understand what to expect. He appreciates the value of his clients’ assets and personally looks after each case, providing cost effective solutions to satisfy every need.
Goodrich, Riquelme y Asociados Enrique A. Diaz, Esq. Senior Partner Tel: 5255 5525 1422 firstname.lastname@example.org http://goodrichriquelme.com
With an economy that has consistently been growing over the past few years, Brazil is seen as a secure choice for foreign investments. However, with a strengthening economy comes an increasing demand for legal assistance in diverse areas –from commercial to fiscal law. The Brazilian judicial system is all too aware that with such a likely significant increase in future litigation, parties will seek to have their problems solved quickly. Due to the overall efficiency of the procedures involved in its development, arbitration has emerged as an efficient method for future conflict resolution. This is because there are several advantages in the use of arbitration. As well as being rapid, sensitive and judicial economically, parties are allowed a greater freedom and flexibility in setting the rules that govern the process. They also have the choice of arbitrators for the case. As arbitration provides such benefits, Basilo Advogados has a team who specialise in this very subject, in order to be able to meet the expectations of our customers. Bachelor of Law from Universidade, Ana Tereza Basilio has accumulated experience in great law offices of Brazil, among them, Sergio Bermudes’ firm, where she worked for eleven years. From July 2002 to December 2005, Ana was also a partner of Trench, Rossi e Watanabe Firm (associated with Baker & McKenzie), responsible for the civil and commercial litigation area in Brazil. A postgraduate in North American Law from Wisconsin University, she is a specialist in civil and commercial litigation as well as in arbitration. From 1993 to 2001, she taught Civil Law in the Post Graduation Course of the
Escola Superior de Advocacia (Lawyer’s Superior School). She is also the author of several books about corporate law. From 2004 to 2006, she was the President of the Mediation and Arbitration Chamber of the Brazilian Bar Association, in which she also acted as President of the Lawyer's Association Committee. She has also been Vice-President of the Arbitration Committee; Chief Counsellor of the Brazilian Bar Association; and a member of the Committee to Fight Piracy and Unfair Competition of the Federal Committee of the Brazilian Bar Association. She is still a member of the Special Committee to Fight Piracy and Unfair Competition of the Federal Committee of the Brazilian Lawyers Association; the Editorial Committee of the Arbitration and Mediation Magazine; and the Corporate law Committee from the Escola da Magistratura (Judge’s School) of the High Court of the State of Rio de Janeiro. Ana Tereza Basilio is a professor in Fundação Getúlio Vargas, in the Arbitration post graduation course. In December 2010, she was elected a member of the Tribunal Regional Eleitoral (TRE).
Ana Tereza Basilio Tel 55 (21) 2277 4200 Fax: 55 (21) 2210 6316 email@example.com www.basilioadvogados.com.br
June 2012 • Global Business Magazine • 37
World’s best destinations With ancient monuments, breath-taking landscapes, tranquil beaches and more, these destinations are the world’s best according to TripAdvisor’s over 50 million users, who have visited and explored destinations in every corner of the world. “These are the best destinations the world has to oﬀer according to those that really matter – travellers themselves,” commented Emma Shaw, TripAdvisor spokesperson. “Travellers seeking a break to indulge in relaxation, nightlife, architecture, gastronomy and more will be pleased with any of these destinations.”
world’s best destinations: 1. London, United Kingdom
England’s capital city, London is a vibrant metropolitan city featuring four World Heritage sites and stunning architecture. The city is wellknown for its landmarks, nightlife, shopping and as the host of the 2012 Olympic Games this summer. As one TripAdvisor traveller said, “London is very special! All the wonderful museums, the beautiful parks, the history, the architecture, the theatre, the pubs, even the tube. I love it all.”
2. New York City, New York, United States Featuring some of the world’s most distinctive architecture, including the Empire State and Chrysler Buildings, New york City’s skyline is like no other. This is the ideal city for travellers looking for seemingly endless choices, from the park, sports stadiums, restaurants and eclectic mix of shops. As one TripAdvisor traveller said, “There is absolutely no place like New York City. It is so captivating and has the ability to grab your heart – it is a great city.”
6. Marrakech, Morocco Comprised of an old fortified city (the medina) and modern neighbourhoods, Marrakech is a bustling destination filled with wonderful sights and smells. Featuring a large traditional souk (market), travellers can dine at open-air restaurants, watch musicians and choose from a wide selection of food and product stalls. As one TripAdvisor traveller said, “I love Marrakech as it is warm, exotic and has the sense of stepping back in time when you’re wandering along the alleyways in the Medina.”
7. Istanbul, Turkey A European Capital of Culture in 2010, Istanbul’s landscape is highlighted by artistic Byzantine and Ottoman architecture. The Grand Bazaar is particularly interesting as it is one of the world’s oldest and largest covered markets, offering a plethora of trinkets and delights. As one TripAdvisor traveller said, “Istanbul is the most beautiful place I’ve been - from the ambience, the bazaar and the food.”
3. Rome, Italy
8. Barcelona, Spain
Steeped in history spanning thousands of years, Rome offers culture and natural beauty to be envied. Enjoy the breath-taking sights of the Colosseum and St. Peter’s Basilica, and sample traditional cuisine such as spaghetti alla carbonara.
As the capital city of Catalonia, Barcelona has an abundance of things to do and see. With picturesque scenery, beautiful beaches, vibrant nightlife and the world-famous football stadium Camp Nou, travellers will be kept well entertained.
As one TripAdvisor traveller said, “I love Rome because it’s ancient and modern, and utterly beautiful. It’s a place where you just sit and let the culture seep into your heart.”
As one TripAdvisor traveller said, “Am just back after a really excellent time in Barcelona and we were amazed by how much there is to see and do. All in all it is a brilliant buzzing city that we can’t wait to go back to.”
4. Paris, France
9. Siem Reap, Cambodia
Situated on the river Seine, Paris is France’s largest city. Well-known for its gastronomy and tourism, travellers can indulge at Michelinstarred restaurants and marvel at highly esteemed attractions including the Notre Dame Cathedral and the Eiffel Tower.
Offering serene beauty in the form Angkor Wat and the majestic hills, the magnificent sights in Siem Reap are ones to behold. Take a trip to the Old and Central Market where glorious antiques, clothes, food and jewellery are waiting to be bought.
As one TripAdvisor traveller said, “I have just returned from this lovely city, and I simply could not stop myself from falling in love with it. It has beautiful architecture, attractions and wonderful wines.”
As one TripAdvisor traveller said, “Siem Reap is fascinating, the people are wonderful, the town is so lively and interesting, and the temples are amazing.”
5. San Francisco, California, United States
10. Berlin, Germany
Marking the 75th anniversary of the Golden Gate Bridge in May, San Francisco boasts rich history, unique festivals and amazing sights – it is a city not to be missed.
Located in North-eastern Germany, Berlin is home to renowned orchestras, festivals and architecture. Featuring around 180 museums, the gallery scene is particularly inspiring and an exciting draw for lovers of art.
As one TripAdvisor traveller said, “The whole buzz of San Francisco is so totally infectious, the diﬀerent cultures, architecture, views, food and the people.”
As one TripAdvisor traveller said, “Berlin is wonderful city - very cosmopolitan with plenty of museums and attractions to keep you occupied.
For more information on the world’s best destinations, visit www.tripadvisor.co.uk/TravelersChoice-Destinations-cTop-g1 38 • Global Business Magazine • June 2012
LuXury brand series – traVeL awards 2012
Travel Awards 2012
luXuRY BRanD seRies
40 • Global Business Magazine • June 2012
best business hoteL Storchen Zurich Zurich, Switzerland Storchen Zürich – history of hospitality The hospitality at the Storchen Zürich has been famed for more than 650 years. The origins of this historic building date back to 1357. In 1938 the hotel was completely rebuilt and has since then been continually adapted to the requirements of the most discerning clientele. Alongside the traditional atmosphere of well-being, the Storchen Zürich offers its guests the newest in technology, first class service and incomparably breath-taking views of the River Limmat and the heart of the old town. The Storchen Zürich is the only building with its own landing stage for the Limmat boat. From April through October the Storchen guests can be transported directly from Zürich’s main train station to the hotel or be taken to the Opera House or other places of interest by the Limmat boat or a special water taxi. The open and friendly Storchen hotel in the midst of the old city offers a total of 67 rooms, among them one Storchen Suite and five brand new junior suites. All rooms are comfortably furnished and fitted with the latest technology. The junior suites all have floor to ceiling French windows for maximum light and unforgettable views. The Storchen Suite has a living room and separate bedroom with private marble bathroom
as well as a guest bathroom. Both rooms have access to the private terrace with its unique view of the River Limmat, lake Zürich and the Swiss Alps. The dining experience at the Hotel Storchen is a reason in itself to visit the hotel. In summer the exclusive Storchen Terrace, also known as Zurich's most beautiful terrace, adds a delightful dimension to the Restaurant Rôtisserie, offering superb views of the River Limmat, the Grossmünster Church, Lake Zürich and the Alps beyond. The Storchen Bar is a popular meeting place for local people as well as for international guests – relax with a cocktail and a light snack to the charming music played by the hotel pianist. The Barchetta (little boat) is the hotel’s small café, which directly leads out to the river. Hotel guests and locals alike enjoy the views over a cup of coffee, a morning snack or a special Barchetta-Cocktail. In summer the Boulevard Café on Weinplatz is also a favorite place to enjoy a refreshing ice cream or a delicious cappuccino. For further information please visit: www.storchen.ch Storchen Zürich, Weinplatz 2 8001 Zürich, Switzerland T +41 44 227 27 27 F +41 44 227 27 00 www.storchen.ch firstname.lastname@example.org
June 2012 • Global Business Magazine • 41
LuXury brand series – traVeL awards 2012
best romantic resort
Baros Maldives North Male’ Atoll, Maldives
Water villas have individual sun decks and stunning views of the sea with steps down to the lagoon for leisurely swimming.
Baros Maldives- The Essence of Maldives
All have bathrooms en-suite, some open to the sky, while others feature indoor and outdoor rainfall showers in a walled garden.
When you’re in love, there’s no better place to be than Baros, Maldives. Baros Maldives is a small coral island in the Indian Ocean, just 20 minutes by speed boat from the Maldives International Airport. Set in a translucent lagoon surrounded by a sundrenched, golden sand beach, ringed with a colourful living coral reef, Baros Maldives is the perfect retreat for a romantic holiday to remember forever. Its 75 private villas seem designed for romance, whether poised over the tranquil waters of the lagoon or set in verdant, tropical gardens where exotic flowers bloom beside sandy trails shaded by swaying palms. The resort’s Deluxe Villas, Baros Villas, Water Villas, Baros Pool Villas and Baros Premium Pool Villas are all equally desirable for a vacation of love and luxury. They each have a kingsize bed, a daybed to relax, veranda, satellite television, air-conditioning, mini-safe and mini-bar, Lavazza expresso machines and a personal wine chiller with sommelier selected bottles. Each villa is stylishly created with sandstone and timber, with fine furnishings and large windows to let in natural light and contemporary linen blinds for privacy.
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A member of the Small Luxury Hotels of the World, the award-winning Baros Maldives excels in caring personal attention to meet every guest’s desires. For couples who crave complete seclusion with in-villa dining and picnics on an isolated sandbank, or pleasure and indulgence in one of three gourmet-class restaurants and bars, Baros Maldives is the answer. Baros Maldives is dedicated to lovers, whether on a secret interlude together, a honeymoon in the sun, a special anniversary, or for those who just want to enjoy each other’s company away from stress and hassle. No children or groups are there to disturb the serenity of this tropical idyll, and staff members are discreet and understanding.
The Spa features treatments designed especially for couples together and there are exclusive yoga sessions. Guests can enjoy a sunset cruise for two on the resort’s traditional sailboat, complete with airconditioned bedroom. A luxury yacht with a double bedroom can be chartered to visit neighbouring islands, or couples can take a boat to view leaping dolphins. For relaxation, there are comfortable loungers and hammocks in the Palm Grove, a library of films and books, and culture aplenty in the Maldivian Lounge with its antique maps and artefacts. Guests return again and again to Baros Maldives charmed by the warm hospitality and memorable moments that are the essence of this truly romantic resort. Be special. Be destined for Baros. Baros Maldives, PO Box 2015, Male’ 20-02, Republic of Maldives Tel: +960 664 26 72, Fax: +960 664 34 97 email@example.com, www.baros.com
best LuXury hoteL Hotel de Crillon Paris A brief history of a legendary palace… In 1758, King Louis XV commissioned the greatest architect of his day, Jacques-Ange Gabriel, to build twin structures fronting the Place de la Concorde in Paris. The result was a masterpiece of 18th century architecture. Behind one of these majestic facades rose a sumptuous private residence decorated by the era’s finest artists and craftsmen. Such are the origins of the Hôtel de Crillon, created to welcome the world’s greatest Ambassadors. Long owned by the illustrious family of the Counts of Crillon, this private mansion was transformed into a luxury hotel in 1909. Since then it has welcomed travelers from around the world in search of comfort and service in the incomparable luxury of this former private Parisian palace. Reza Shah Pahlavi of Iran, Emperor Hirohito of Japan, King George V of England, their Majesties King Juan Carlos and the Queen of Spain, U.S. presidents Herbert Hoover, Theodore Roosevelt, Richard Nixon and countless other statesmen, celebrities, and artists are among those who have signed their names to the Crillon’s guest book. The Crillon is the only French luxury hotel to have one of its rooms, the “Duc de Crillon Suite”, exhibited—complete with its period woodwork—at the Metropolitan Museum of Art in New york City. Its historic salons have often served as a backdrop for international diplomacy, and notably hosted the signing of the treaty to form the League of Nations in 1919. Flagship of the Concorde Hotels & Resorts Group, the Hôtel de Crillon is a member of Leading Hotels of the World. Situated in the heart of the City of Light on
the world-famous Place de la Concorde, Hôtel de Crillon is steps away from the luxurious boutiques of the Faubourg St.Honoré, and is within walking distance of the Champs Elysées, the Avenue Montaigne, the Louvre, the Tuileries Gardens and many more of this famous city’s most acclaimed attractions. The 103 guest rooms and 44 suites or “Grand Apartments” (including 5 overlooking the Place de la Concorde) have been restored in Louis XV style under the auspices of the French National Historic Landmark Commission and joint efforts of Sybille de Margerie. In April 2010, Christopher Hache and his new team reopened Les Ambassadeurs restaurant. Just one short year later, it is with great joy and pride that Hôtel de Crillon announces its first Michelin star. Thanks to its history, its charm, its outstanding service and its unique location that the Hôtel de Crillon has been granted the Best City Hotel in The World Award 2011 by UltraTravel.
Tel. 33 (0) 1 44 71 15 01 Fax 33 (0) 1 44 71 15 03 Email: firstname.lastname@example.org www.crillon.com
Copyright : Eric Cuvillier June 2012 • Global Business Magazine • 43
LuXury brand series – traVeL awards 2012
best serVice Greece Domes of Elounda Domes reinvents Elounda, restoring its lost principal of exclusivity. The essence of the Mediterranean, the culture, the cuisine, the temperament, the architecture, are holistically captured in the form of a luxury resort consisting for the first time of only suites & villas that provide a small number of exclusive guests with all the amenities of a resort, while offering an abundance of living space, privacy and extraordinary service. Minimally interfering with the natural habitat and harmonically blended with their surroundings, domed structures with breathtaking ocean views emerge from the ground. Respecting its natural contours and creating a Mediterranean settlement on a hillside of flower gardens, stone pathways, and olive
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groves just a stone’s throw away from the Venetian castle on the island of Spinalonga, the setting for Victoria Hislop’s bestselling novel “The Island”... It is all is part of our new design inviting the senses to feast on sights, scents and tastes from the rich outdoors through large windows, and spacious verandas that capture sea breezes and provide the perfect setting for the ultimate fantasy getaway. We invite you to experience... Domes of Elounda. Honeymoon In this special time of your life, let us make your honeymoon in Greece a time to remember. Domes of Elounda honeymoon resort specializes in creating the honeymoon of your dreams. Located in Elounda, Crete, one of the most exclusive romantic destinations of the world, let us cater to your needs while you immerse yourself in luxury and celebrate your love.
Whether you plan on relaxing in your honeymoon suite by your personal pool, soaking in the sun on our sandy beach by the crystal blue waters of the Mediterranean, or self-indulging at the Domes spa we have ensured that your honeymoon in Greece will be more than you ever imagined! Thomas Kostopoulos Reservations Manger +30 2310 810624 +30 2310 810634 email@example.com www.domesofelounda.com
best spa hoteL Coworth Park, Ascot The Spa at Coworth Park Revel in the pastoral tranquillity of a unique hotel – a refined retreat with more than a few surprises… Set in 240 acres of picturesque parkland on the borders of Windsor Great Park, Coworth Park blends the warmth and comfort of a traditional country house hotel with an eccentric spirit that is undeniably English and irrefutably modern. Designed to complement and preserve the natural beauty of its surroundings, our groundbreaking eco-luxury spa is an architectural wonder. Partially submerged in the landscape, it enjoys breathtaking views, with floor-to-ceiling windows in the pool making for a uniquely sublime swim. Built over two floors the spa has eight treatment rooms (including two doubles), a manicure/ pedicure suite and relaxation rooms, while the roof is adorned with a garden of thyme, lavender, chamomile and other fragrant herbs. Guests can enjoy a range of luxury branded treatments including Carol Joy London, Kerstin Florian, Aromatherapy Associates, and a 100% organic treatment by Dr. Alkaitis. Swimmers can enjoy underwater music and atmospheric lighting. Filled with natural daylight, the glass side of the swimming pool hall opens out onto a sun terrace sheltered by the spa hillside. Along the length of the swimming pool are 15 unique amethyst geodes which stand on stone plinths. Sourced from St Andrews, Scotland, these sculptures range in size, have had the backs silver leafed and are uplit. The depth of the pool is 1.2 metres deep hence there is no lifeguard on duty. If you feel peckish after a dip in the pool, you can enjoy light meals or even a glass of chilled champagne in The Spatisserie. Boasting solid eco-credentials The Spa at Coworth Park is built predominantly out of timber structures. Emerging from the hillside it has a Living Roof with plants and herbs such as St. John’s Wort, Thyme, Chamomile and Lavender which are used by the spa therapists.
The Spa at Coworth Park Spa.CPA@dorchestercollection.com +44 (0)1344 756 756
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LuXury brand series – traVeL awards 2012
The Red House Seafood Restaurant Singapore Established since 1976, Red House is one of the pioneer restaurants at the East Coast Seafood Centre. Well-known for our dedication to serving the best quality seafood in town, our timeless favourites include the Steamed Scottish Razor Clams and Sri Lankan King Crabs in Chef's Special Blend of Spicy Black Pepper. Located at the East Coast Seafood Centre where the cool ocean breeze makes dining a wonderful experience, Red House Seafood Restaurant is nestled amidst lush greenery and just a stone’s throw away from the lovely seaside. It is the perfect place to wine, dine and simply enjoy the scenic beauty of Singapore’s east coast. In December 2007, we also opened our doors at The Quayside, incorporating a fresh restaurant bar concept that offers customers the luxury of having drinks pre and post meal. The atmosphere is homely and convivial, yet elegant and makes a great venue for corporate functions and product launches. Located in a quaint corner of the city centre, Red House at The Quayside is Robertson Quay’s prime dining spot. Tucked snugly along the riverfront, diners can enjoy a lovely view whilst feasting on delicious seafood. The cosmopolitan feel of Red House at The Quayside is the result of a unique restaurant bar concept where you can enjoy drinks “By The House” before and after a scrumptious meal. Enjoy our Bar Bites which include the Trio Combination of Squid & Wasabi Mayo Prawns. Cooked favourites include Creamy Custard Prawns, Scottish Bamboo Clams steamed with Minced Garlic, Crispy Roast Chicken and Crayfish baked with Fresh Herbs & Fragrant Butter. We have a range of red, white and sparkling wines specially selected to pair perfectly with our menu offerings, and we also carry the irresistible yamazaki Whisky. Our private rooms hold up to 60 people and make great spaces for corporate functions & product launches. The bar area can also be booked for private events as it can be
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separated from the main restaurant area. Dress casually and relax in the homely atmosphere at Red House. The mouthwatering smells of succulent seafood simmering in a myriad of delicious sauces constantly fill the air as you let our warm and friendly staff take care of all your dining needs. Do contact us today for menus and budgets customized to your requests. Red House Seafood Restaurant Blk 1204, #01-05 East Coast Parkway Seafood Centre Singapore 449882 Tel: +65 6442 3112 Operating Hours: 5pm – 11.30pm (Mon – Fri), 11.30am – 11.30pm (Fri, Sat, Public Holidays) Red House at The Quayside #01-13/ 14 The Quayside, 60 Robertson Quay Singapore 238252 Tel: +65 6735 7666 Operating Hours: 11.30am – 11.30pm (Mon – Fri), 10am – 11.30pm (Fri, Sat, Public Holidays) firstname.lastname@example.org Group Restaurant Manager: Sunny Goh email@example.com Business Operations Manager: Jocelyn Ng firstname.lastname@example.org Corporate Communications & Creative Developments: Yee Ling Chang email@example.com
51 Buckingham Gate, Taj Suites and Residences 51 Buckingham Gate, Taj Suites and Residences is a luxury five star hotel located minutes from Buckingham Palace.
best city hoteL
Part of Taj Hotels Resorts and Palaces, the property boasts many signatures of excellence including butler service, a Michelin star restaurant, an award-winning courtyard, grand banqueting facilities and exclusive Spa. Combining all facilities of a luxury hotel with the space and convenience of a private home, 51 Buckingham Gate consists of three individually designed buildings: Kings, Falconers and Ministers. The buildings have been beautifully restored, offering 86 elegant suites from one to nine bedrooms, including a Presidential floor and the World’s first Jaguar Suite. Each suite feature separate living room, fully-equipped kitchens and luxurious bathrooms. The world’s first Jaguar Suite, launched in October 2011, is a result of the exciting collaboration between two TATA-owned companies, Taj Hotels Resorts and Palaces and Jaguar. The sleek design of the 1,832 square foot, two-bedroom abode alludes to classic and contemporary Jaguar models, from the legendary 1960’s E-type to the stateof-the art C-X75. Overseen by Jaguar's in-house Design Director Ian Callum, the suite boasts specially-commissioned artwork and intriguing design features such as a minimalistic clean-fuel fireplace referencing the shape of the brand's hallmark back window, the finest Italian leather that lines the cars, ebony veneer doors and custommade Jaguar wallpaper. The Michelin star Quilon restaurant, part of the Taj group, specialises in cuisine from the Indian states of Kerala, Goa and Karnataka with seafood being a particular speciality. Among a new generation of Indian restaurants specialising in lighter sauces and more progressive offerings, it is the sister restaurant of the highly acclaimed Bombay Brasserie. The Spa at 51 brings a touch of Paris to London, offering both guests in residence and day visitors luxurious Anne Sémonin pampering in an exclusive setting. The Spa faces onto 51 Buckingham Gate’s historic and award-winning Courtyard Garden - a quiet and relaxing enclave whose centrepiece is an elegant fountain surrounded by manicured flowerbeds.; With a bespoke treatment range designed by Anne Sémonin, The Spa at 51 is centred around an ‘a la carte’ concept, tailored to guests’ requirements. Each treatment begins with a full consultation, where an Anne Sémonin trained therapist consults the guest on his or her specific skin needs. The treatments are then adapted and ‘made to measure’ in the famous Anne Sémonin tradition.
is in exclusive partnerships with London’s finest stores, Harrods and Hamleys. The chic shopping packages entitle guests to a number of exclusive extras, such as store hampers, bespoke store tours, in-store discounts and personal shopping experiences.
Phone (0)20 7769 7766 firstname.lastname@example.org www.51-buckinghamgate.co.uk
Boasting a synonymous reputation for flawless service with a quintessentially London experience, 51 Buckingham Gate June 2012 • Global Business Magazine • 47
LuXury brand series – traVeL awards 2012
best boutiQue hoteL Hotel LKF by Rhombus Central, Hong Kong With its dramatic décor and luxury design, Hotel LKF by Rhombus is a deluxe boutique hotel TRULy located in the heart of Lan Kwai Fong, Central, one of Hong Kong’s trendiest, hip and vibrant neighbourhoods. This world renowned district is abuzz with bistros, al fresco bars, restaurants, pubs, shopping areas and art galleries. Its prime location allows you to access all parts of Hong Kong via Mass Transit Railway (MTR), Airport Express, Buses, Taxis, Tram and Ferries. The hotel’s distinctive rooms and suites are generously proportioned from 500-950 square feet, designed with liberal space for relaxing, and appropriately proportioned to create the comfort of home, enriched with warm fabrics - leathers and suede, in soothing shades of ivory, camel and wood. Cherish the precious moment and luxuriate in tailored bed sheets and goose down pillows, admire the deluxe Molten Brown amenities, wind down under the warm background lighting and be pampered by its 24-hour “� Care” one-stop service. On the 29th and 30th floors of the hotel, with a sweeping view of the vibrant city skyline is Azure Restaurant Slash Bar, acclaimed as one of the ‘Best Restaurants in HK’ by Asia Tatler 2008-2011 and ranked No. 7 in ‘The World’s 20 Best Sky Bars 2008’ by The Sunday Times, UK. Transformed at the hand of award-winning interior designer Andre Fu, Azure is a sophisticated venue perfect for gastronomic pleasure, lively conversation and people-watching. For an aura of romance and intimacy, sample the creative cocktails during Happy Hour on the 29th floor and tantalise your taste buds with Chef Joe’s culinary delight on the 30th floor in a private and secluded VIP area with breathtaking views of Hong Kong’s vibrant skyline and 48 • Global Business Magazine • June 2012
dynamic scenery…an experience one will not soon forget. Enjoy Hotel LKF by Rhombus’ special Honeymoon Package: “Happily Ever After Starts at Hotel LKF by Rhombus”. Stay in a G950 LKF Suite at HK$6,938 and receive the below exclusive privileges: • Complimentary round trip airport transfer • Welcome seasonal fruits and tea upon check-in • Exclusive champagne toast at Azure Restaurant Slash Bar • Complimentary in-room romantic breakfast • Complimentary daily mini-bar • Special romantic turndown • Complimentary 3-course Set Dinner for two persons at Azure Restaurant Slash Bar • Personalised “his and her” bathrobes • Complimentary in-room foot massage or Swedish massage for two persons • Complimentary use of Fitness Centre • Complimentary one pay movie per night • Complimentary late check-out until 4:00pm *Terms and Conditions apply I Rate is subject to 10% service charge per room per night I Valid until August 31, 2012
Hotel LKF by Rhombus 33 Wyndham Street, Lan Kwai Fong, Central, Hong Kong T: (852) 3518 9333 F: (852) 3518 9338 reservations@hotel-LKF.com.hk www.hotel-LKF.com.hk / www.azure.hk
Matterhorn Focus Zermatt, Switzerland
The resort is full of top class accommodation too, so to stand-out is a challenge, and the answer from the Matterhorn Focus was to design the hotel like a work of art. The 4-star Superior “Design and Lifestyle” Hotel Garni Matterhorn Focus was created by Heinz Julen, world famous for his eye-catching creations. With its distinct lines, the architectural style is elegant, without being obtrusive, blending perfectly into the mountain environment. The combination of modern architecture, genial comfort, attentive service and fascinating countryside create a very special ambience. The splendid location with an unbeatable view of the Matterhorn emphasizes the high standards that the hosts set for the hotel. Most of the 30 spacious rooms and suites offer a view of the famous “Matterhorn”, some even from the free-standing bath tubs. While from the other rooms there is a view of the buzz of activity in the charming Valais village of Zermatt. The spacious and exclusive wellness area invites guests to relax in luxury, where all their needs will be catered for. It is very important to the hosts, that the guests are able to enjoy to the fullest their welldeserved and always too short holiday. To this end, a splendid indoor pool, an outdoor whirlpool, a saline bath, a caldarium and a Finnish sauna are waiting for the guests. A rest room with heated couches provide relaxation. Massages and beauty treatments, well-fit courses and various leisure activities ensure complete well-being. Zermatt is, amongst many other things, a perfect setting for seminars and conferences, away from “every-day-life”, promoting mental freedom. The light and spacious meeting room of the Hotel Garni Matterhorn Focus is fitted with all the technical features necessary for a successful event. Flexibility is one of the big advantages and ensures success oriented and focused activities. But the key element of the success of the Matterhorn Focus, behind the great design and the excellent facilities, is the discreet but attentive service to the high standard required by the owners, Chris & Sonja Noti and their team. Phone +41 (0)27 966 24 Fax +41 (0)27 966 24 25 email@example.com www.matterhorn-focus.ch
best ski resort
Zermatt is a very special resort, Europe’s highest lifts, one of the world’s biggest lift-served verticals and the iconic backdrop of the Matterhorn make it hard to beat.
ship and aircraft registration
ship and aircraft registration The Role of the European Business Aviation Association The recent State of the Industry Report published by the European Business Aviation Association (EBAA) presents the current and projected future state of business aviation. It highlights a range of costs faced by operators, all on the rise, describes how the industry is addressing problematic issues such as taxes and limited access to infrastructure, and outlines four key EBAA initiatives designed to enable the industry to self-regulate. EBAA Members currently operate 1,219 business aircraft, almost 1/3 of the total European business aviation (BusAv) fleet. As a whole the sector represents 7.2% of all European aircraft movements, making it a significant part of the European air traffic system. BusAv traffic between Europe’s major financial sectors remains relatively stable, with areas in central, eastern and southern Europe developing steadily. Nonetheless, the traffic peaks of 2006 and 2007 (i.e. 750,000 IFR movements to, from and within Europe) will not be reached again before 2016-2017. In short, the crisis and its necessary corrections
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have set European business aviation back about a decade. Overall, operating costs within business aviation are increasing. Despite Single European Sky (SESII), air traffic control (ATC) costs in Europe remain between 2 and 3 times more expensive than in the U.S. Environmental costs are increasing as well as for the first time, aviation must pay for CO2 allowances. Business aviation is no exception. Despite the historically low price of the allowances (at around € 8 per tonne), it still adds up to several dozens of millions Euros per annum for business aviation despite its environmental enviable record (less than 1% of air transport emissions). This is mostly due to a discrimination in the methodology used to calculate historic emissions. Meanwhile, fuel prices are also surging rapidly, with the price of the gallon now 300% higher than in 2003. Pundits expect such prices to remain structurally high in the future. At the same time, many EU States are financing austerity measures through the imposition of national taxes on aviation. This
manna brings European governments more than € 5bn annually, of which € 3bn only in the UK through its infamous Passenger tax. In the midst of these rising costs, EBAA is working with national and EU legislators to achieve more sustainable solutions. In 2011 EBAA worked with Eurocontrol to improve the accuracy of the EU ETS reporting for small emitters. EBAA also provides ongoing support for its members’ internal ETS procedures, and works hard to improve business aviation’s imbalanced treatment in the scheme through participation in various initiatives: on global level, through ICAO, and with the Commission, who will be reassessing current ETS rules by 2014. Furthermore, having obtained a simplified reporting for small emitters in 2011, and a new threshold for smaller emitters (from the initial 10,000 tonnes to 25,000 tonnes, effective in 2013), EBAA is now working to obtain single point verification. In response to the initial inclusion of business aviation in the UK Air Passenger Duty, EBAA, along with the British Business and
General Aviation Association (BBGA) and the British Helicopter Association (BHA), launched a comprehensive campaign to reduce the negative impact of the original UK Treasury proposal and persuaded authorities to treat business aviation with the same principles as airlines. Specifically, the three Associations recommended to fix duties in accordance with the size of the aircraft and to eliminate the automatic maximum rate for business aviation that was initially proposed. Helicopters were also excluded from the scheme all together. The UK Treasury has also agreed to a transition period, which will allow operators to accommodate these changes. EBAA also responded swiftly to the “Italian Luxury Tax” by taking political action at both a European and national level, to reduce its most toxic impact. In 2011, EBAA, the Italian Business Aviation Association (IBAA) and the European Helicopter Association (EHA) lobbied to change the conditions under which the tax becomes applicable, with partial success as the Italian Government reviewed the conditions for taxation by March 2012. The Association has also been working on securing a fair and viable solution for the capacity crunch. In 2011, the Association developed a counter-study that disputed the conclusions of the Commission’s own Steer Davies Gleave (SDG) report; it remains in discussion today with the Parliament and Council, as well as National Authorities, to grant BusAv operators historic rights. EBAA is a strong proponent of having a tailored approach to aviation safety. Because of the Association’s efforts, the European Aviation Safety Agency (EASA) has agreed
to develop specific business aviation rules for flight time limits (FTL) and has created a dedicated rule-making group, of which EBAA is an active part. Lastly, EBAA has been working to ensure that Air Traffic Management is comprehensive, inclusive, achievable and affordable. Specifically, last year the Association implemented a strategy to develop the right avionic mandates for business aircraft in order to reduce costs. It also participated in proposals aiming at reducing ATM charges and fees throughout Europe. EBAA continues to push for a less fragmented ATM system in Europe through participating in the new Network Manager Board. In view of supporting activities that enable the industry to proactively self-regulate (and thereby avoid injudicious government regulation), EBAA has developed four key initiatives. The first programme’s goal is to decrease multiple, non-standardized audits for fixed-base operators (FBOs) and operators. To do this, the Association is creating a more meaningful standard for FBOs and groundhandlers, enhancing monitoring capabilities, the implementation of a standardized auditing procedure (similar to that of the IS-BAO), and a proposed new list of ‘approved agents.’ The second programme aims at curtailing illegal flights. EBAA plans to do this by capitalising on its initial illegal flights campaign of 2010 to raise awareness among stakeholders about what constitutes an illegal flight. Moreover, EBAA is making clear to Member States that it is in their interests to combat illegal flights for both political and
legal reasons. Illegal flights are estimated to comprise between 5 and 8% of all movements in Europe, impacting both the profitability and the credibility of the sector. EBAA recently flagged the issue with Member States during a presentation to SAFA inspectors. Going forward, the Association envisions having the support of airports and brokers in the continued dissemination of information. The third initiative focuses on Safety. EBAA has made a variety of tools available to operators to include a Safety Management System (SMS), the International Standard for Business Aircraft Operations (IS-BAO) and an Emergency Response Planning (ERP) Toolkit. And finally, the Association has introduced Focus Groups for its Associate Members Advisory Council (AMAC). These Groups employ their functional expertise to work on behalf of EBAA Operator Members and help them overcome key operational challenges in the areas of Finance and Leasing, Aviation Insurance and Tax, VAT & Registration. In summary, 2012 was labelled as being a pivotal year for business aviation by the Association. With a slower than hoped for recovery and a strong aero-political agenda, EBAA’s sleeves are rolled up in preparation for the work that needs to be done in order to protect the interests of the sector. With more than 4,000 aircraft, 650,000 movements a year and 100,000 city-pairs, business aviation cannot be dismissed. The sooner it is understood by the decision-makers, the better for the ensemble of the aviation community, and of course for Europe plc.
EBAA (European Business Aviation Association) Avenue de Tervuren 13 a / Box 5, BE- 1040 Brussels, Belgium Phone: +32 2 766 00 70 Fax: +32 2 768 13 25 Send an e-mail to the EBAA www.ebaa.org
June 2012 • Global Business Magazine • 51
ship and aircraft registration
india Aircraft Financing An airline’s decision to acquire an aircraft is invariably accompanied by the question whether the aircraft should be leased or purchased. The answer depends on a number of things, namely the airline’s requirements, cost, availability of capital/ financing, tax and other issues. Leasing – both operating and finance – offers flexibility and does not require capital or a loan, even though effectively finance lease is a kind of a loan in itself. In contrast to buying an aircraft, leasing also gives airlines the opportunity to adapt fleet size according to business growth, market changes and demand. The more common mechanism for acquisition of aircraft by Indian Operators (the ‘Operator’) is finance and operating leases – in fact there have been many sale and leaseback arrangements made. Export credits guarantees and facilities, such as those offered by US Export Impact Bank (‘Ex-Im’), European Export Credit Agencies (‘ECAs’) and Export Development Canada (‘EDC’) are available and are competitive. Operating Leases Operating leases are usually short term, and (in most cases) for three to five years. A wet lease – also called ACMI (Aircraft, Crew, Maintenance and Insurance) – is a type of operating lease in which the aircraft
is leased together with its crew. While such leases are generally not permitted in India, they are still used to tide over certain situations such as the termination of the lease leading to the depletion of the operator’s deployment capacity; delays in the execution of a new lease or purchase of an aircraft; and emergencies (natural disasters, industrial unrest ‘et al’). In recent months, there has been a flurry of activity on sale and leaseback, where the Operator has been able to sell its owned aircraft for cash, to then lease the same back from the purchaser, not only freeing up capital, but reducing the risk of variation in the aircraft’s future value. Finance Leases Finance leases are long-term arrangements, in which the Operator has the option to purchase the aircraft at the end of the lease term at a pre-determined value. As these
are regarded as loan transactions, prior permission from the Reserve Bank of India is required. However, such an arrangement is beneficial to the airlines, as showing the aircraft on their balance sheets enables them to claim depreciation. The Importance of IR Registrations and the Risks of Failing to Register India ratified the Cape Town Convention on International Interest in Mobile Equipment and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (the ‘Convention’) on 31st March, 2008. Since it came into force, international interests in aircraft objects and engines have to be registered with the International Registry (‘IR’), established under the Convention. These filings are done electronically and, once registered, the interest becomes searchable and invariably has priority over the unregistered, as per the Convention.
Ravi NATH Rajinder Narain & Co. Solicitors & Advocates Maulseri House, 7, Kapashera Estate New Delhi - 110 037, India Tel:+91.11.4122.5000 Fax:+91.11.4122.5001 firstname.lastname@example.org www.rnclegal.com
usa The New World of Legal Priorities for Creditors and Lessors: The Cape Town Convention for Aircraft In 2006, a seminal event occurred that changed the rules for perfecting priorities and legal rights in aircraft equipment – the Convention on International Interests in Mobile Equipment and Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (the CTC). The CTC is currently in force in 51 countries around the world (a sampling includes Brazil, Colombia, Indonesia, Ireland, Russia, Saudi Arabia, South Africa, United States of America). Its purpose is to provide a stable international legal regime for the protection of creditors, conditional sellers and lessors. The CTC governs the priorities of ‘International Interests’ in aircraft objects, which are legal interests created by transaction documents relative to an aircraft transaction and are autonomous from national law: An International Interest is created and derived from the CTC itself.
or the debtor, lessee or seller is situated in a contracting state. The definition of ‘situated’ is quite broad and can encompass companies that are headquartered outside of their incorporating jurisdiction.
The CTC applies to a transaction when the following connecting factors are met: Firstly, the aircraft, helicopter or engine (an aircraft object) must meet certain size requirements (eight seats or more for aircraft – five seats or more for helicopters – 550 horsepower or 1750 lbs. of thrust for engines); and secondly, the aircraft/helicopter is registered for nationality purposes in a contracting state,
McAfee & Taft Erin M. Van Laanen Attorney Tel: (405) 552-2208 email@example.com www.mcafeetaft.com
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For states that are parties to the CTC, it creates autonomous rules regarding the priority of legal interests, defaults, remedies and insolvency protection. A critical element to the CTC’s effectiveness is its creation of an electronic International Registry (IR) – a webbased system with offices in Ireland – where International Interests are registered between transacting parties. An International Interest is ineffective against third parties until registered with the IR. The CTC’s priority rule is simple – the first to register takes free of a subsequent registration and from a legal interest that is not registered. Therefore, compliance with national law alone is not enough to protect the legal rights and
priorities of financing parties: Registration of legal interests with the IR is now an additional and critical step to protection. Because of the critical importance of the registered International Interest, a primarily goal of the IR is inviolate security of the registration system. Thus, transaction parties must apply for and establish accounts with the IR before registering legal interests – a challenging process given that it is a secured site. As a result of our continuing involvement with the CTC and IR, before adoption and with new developments, updates and interpretation, McAfee & Taft serve as administrator of IR accounts for hundreds of worldwide companies, advising parties on the registrations necessary to protect their legal interests in aircraft objects. Erin Van Laanen is a shareholder with the law firm of McAfee & Taft, Oklahoma City, USA.
Turkey Significant Amendments in Turkish Shipping and Maritime Law Firstly, we would like to give a brief introduction about the Gur Law Firm (the ‘Firm’) based in Turkey. Established by Tevfik Gur in 1984, the Firm provides legal services in six major fields: Maritime and Shipping; Corporate; Banking and Finance; Litigation and Dispute Resolution; Debt Recovery; and Intellectual Property. Our legal team consists of 70 highly skilled advocates and other specialists who correspond in English, German, French, Russian, Italian and Arabic. Since 2007, we have also run a successful office in Moscow, collaborating with other worldwide law firms, in order to meet the legal needs arising from clients’ global business transactions. Gur Law Firm is recognised as one of the most competent and leading firms in contentious and non-contentious, wet or dry, hull or cargo and other shipping issues. We provide a comprehensive legal shipping service for clients, including ship owners, charterers and cargo interests. Gur Law Firm handles all types of maritime proceedings and litigation, including ship arrest, cargo claims, salvage, groundings, collisions, pollution, sinkings, wreck removals and general average. In Turkey
and further afield, we also handle death and personal injury actions – a successful part of the Firm’s practice. We represent shipowners, cargo interests, insurance (hull and cargo), P&I Clubs, shipbuilders, financiers, international agencies, governments, port authorities, brokers and traders. In response to the significant new amendments to the Turkish maritime and shipping law, it is worth noting the new regulation on Insurance Coverage and Inspection of the Vessels for the Maritime Claims. This was prepared by the Undersecretariat of Maritime Affairs of the Turkish Republic, in accordance with the directive numbered 2009/20EC dated 23rd April, 2009. This regulation came into force on 1st July 2011, setting forth the necessity of ships – regardless of country – to hold an original and valid P&I insurance policy. This
is in order to cover maritime claims – subject to the limitation within the Convention on Limitation of Liability for Maritime Claims, 1976 and the Protocol of 1996 to amend the 1976 Convention. The other important legal development in Turkish legislation is that as of 1st July 2012, the current Turkish Commercial Code No. 6762 (dating back to 1957) will be replaced by the new Turkish Commercial Code No. 6102. This law brings with it material changes regarding the provisions of maritime law, and has a combined system that reflects the provisions of international regulations and conventions. It is expected that this new amendment to the Turkish maritime and shipping law will bring stability and predictability for businesses in the maritime and shipping area.
GUR LAW FIRM Ms. Selin Koparal Partner Tel: +90 212 325 90 20 firstname.lastname@example.org http://gurlaw.com/
Guernsey (Channel Islands), GREAT BRITAIN Registry of British Ships, Guernsey: Adding Value not Bureaucracy Guernsey is one of the twelve British territories that constitute the Red Ensign Group and operates a ‘Category 2’ shipping register (the ‘Register’). Though this limits the Register in terms of the maximum size of vessel that can be registered (150 Gross Tonnage), it has a well-established and enviable reputation for providing a highly professional, personal and friendly service. It also provides early advice on whether the Register is the best fit for an applicant’s vessel. Where a vessel will exceed the Register’s limitations, the Registry will always try to assist an applicant in identifying another suitable register either from within the Red Ensign Group or beyond. With more than 11 years experience in this field, Guernsey’s Assistant Registrar, Joshua
Registry of British Ships, Guernsey Joshua Paine Assistant Registrar of British Ships
Paine, attempts to anticipate problems by ensuring that applicants, or their agents, are provided with all the information they require. “When an initial approach is made to the Registry, it sometimes becomes evident that applicants are trying out the registration process for themselves for the first time, rather than using an intermediary. We provide a level of assistance, advice and personal service that has often been remarked upon by vessel owners, as both unexpected and refreshing. We try to ensure that the registration process is as hassle-free as possible, whilst achieving the desired outcome of a globally recognised vessel registration. “Frequently, owners or their agents have not dealt with a British Registry before. We want to therefore ensure their first encounter
with a member of the Red Ensign Group will encourage them to use other members of the Group for the registration of larger vessels. Being one of the ‘restricted’ British Registers does not limit our approach to providing a high quality of service. Traditional values of trust and respect are an inherent part of that service.” “We also recognise that the registration process can be perceived as ‘dead time’ by an owner being unable to use their vessel until completion. We seek to minimise the time the process takes – after all, registration needs to be recognised as adding value, not bureaucracy. We also appreciate that owners are very discerning and will want the best service from their chosen flag administration”.
Tel: +44 (0) 1481 705822 / +44 (0) 1481 720229 Fax: +44 (0) 1481 705824 / +44 (0) 1481 714177 email@example.com www.shipsregistry.gov.gg or via www.redensigngroup.org
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A Further Step towards a Single Pan-European Market for Digital Communications One of the key goals of the European Union (‘the EU’) should be the promotion of ubiquitous access-to-access infrastructures, which recognise and anticipate the different and changing needs of business users, network architecture, the Information and Communication Technology (ICT) sector and the wider economy. This would support the development of an innovative cross-border market in telecommunications services and applications. The Case of Cross-Border Electronic Communication Services for Businesses Much attention has been given to fostering competition and broadband take-up for residential consumers, for example, the European Digital Agenda setting targets for all households by 2020 to have access to 30Mbit/s and for half to use 100Mbit/s. However, less focus has been given to promoting the development of business communications, despite the significant impact that it has on productivity and economic growth. Increasingly, PanEuropean business service users such as banks, multinational corporations and national or supranational organisations – or any
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sort of users with business branches or offices in different EU countries – are highlighting their frustrations at the failure of the existing regulatory system to meet their needs. In the era of digital communications, these entities often compete on a global level and require quality cross-border services in all the places where they operate their business. This frustration is also shared by many of the international or global telecom business service providers, who offer tailored crossborder services to high-level clients that need fixed or mobile, seamless communications all over the EU and beyond. Cross-border telecom business service suppliers need to acquire links between their points of presence and customer sites. These links can take the form of Ethernet over copper, Ethernet over fibre, leased line terminating segments, end-to-end private circuits (leased lines), xDSL service, wholesale line rentals and, sometimes, unbundled local loops. The availability of these different products depends on how effectively regulators in each of the 27 EU member states have mandated access from national incumbents. However, despite progress in the achievement of the single market, there is no consistency in the provision of these wholesale inputs across different EU member states – particularly in the types offered and the pricing. There is also little consistency in provision for business grade performance and in the interpretation of the concept of non-discriminatory supply. According to an economic analysis carried out for the European Commission (‘the Commission’) in 2011 (Ecorys/TU Delft/ TNO Study for EC on e-Communications Internal Market: ‘Steps towards a truly Internal Market for e-communications’), the economic potential of realising an internal market is €27bn-€55bn or 0.22 – 0.44% GDP.
This analysis specifically mentions that business services are one area where different approaches in various countries have held back growth in Europe, forcing multi-country operators to duplicate costs, and limiting their ability to compete effectively with incumbents across the single market. EU Telecom Framework and the Single Market The EU legal framework for electronic communications has created almost uniform rules for the provision of electronic communication services in all the 27 member states of the Union, through requiring all of them to adopt a common regulatory framework. The framework also provides a large degree of flexibility to national regulatory authorities, over how to implement regulatory requirements in their jurisdiction. However, this can cause problems in ensuring the consistent provision of essential inputs, which are needed to provide services that are inherently multinational. In theory, there are provisions in the EU regulatory framework that require a coordinated analysis by natural regulators for the Pan-European markets (Article 16.5 of the Framework Directive). However, these have never been used (Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 – the ‘Framework Directive’). Effects of Fragmentation The effects of competition regulation fragmentation in the provision of business services were revealed by a project carried out by the European Regulators Group (‘ERG) in 2009. ERG published a survey revealing that business users (70% multinational) show dissatisfaction with the competitiveness of underlying broadband access provision. Less than half of them reported that they had more than two credible suppliers of fit-for-purpose services, while over a half relied on incumbents for the majority of the services. According to ERG, “the results give rise to concern…this market segment should be fiercely fought over… yet the results suggest that the intensity of competition is by no means vigorous” (ERG (09) 51: ‘Report on the regulation of access products necessary to deliver business connectivity services’: BEREC BoR (10) 11: ‘Report on the Regulation of Access Products Necessary to Deliver Business Connectivity Services’). In particular, the lack of harmonised wholesale reference offers that are appropriate for business needs to enable (at least) replicability of incumbent offers, means
that “when a Pan-European tender has a big footprint in a specific country (e.g. Germany, France) the incumbent supplier can – in the absence of standardised wholesale broadband access offers – easily fence off other pan-European service providers who depend on bitstream access” (Ecorys/TU Delft study for European Commission). These concerns of dominance by incumbent operators active in the provision of business services in several EU member States, highlight the consequences of missing an opportunity to have significant regulations that address the problem. In Spain, the National Regulatory Authority (NRA) CMT found Telefonica’s market share in the enterprise segment was 60-75%, compared with 52% in the residential segment. In the Netherlands, in its October 2011 analysis, the telecoms regulator OPTA found that the main operator KPN would have 75-80% share of the corporate market in the absence of regulation. The Way Forward Evidence from the ERG survey, the cost of non-Europe study and NRAs such as CMT all support the need for greater attention to be paid to business services, both at a political and technical level. Unfortunately, despite the clear signals that the market is not functioning effectively, no action has yet been taken at any level, to help solve the problem of business connectivity users and their suppliers. However, there is now an opportunity to create a positive precedent for the treatment of business services in Europe, through two initiatives that the Commission is planning to adopt in the coming months. The Commission is reviewing the targets set out in the Digital Agenda for Europe and is beginning a review of its Recommendation on Relevant Markets – an important instrument that signals to national regulators which markets are most susceptible to economic regulation. This would then regulate the supply of bottleneck assets and promote competition. To this end, it would be vital to see a new target set in the Digital Agenda that calls for the completion of a single market for business communications by 2015, with recognition in the market analysis process that retail business services are often multisite and multinational. Going forward, this would have a positive impact on the way in which regulators regulate bottleneck inputs. The revised recommendation should be concluded by late 2013. If, after proper market analysis results in, as ECTA believes
For more information on ECTA, please visit www.ectaportal.com/en/: For the latest updates, follow @twECTA on twitter.
it will, the identification of cross-border business service markets, NRAs will, after assessing the national market conditions, have the task to adopt remedies able to inject competition in the market. In a period of economic gloom, it is more important than ever to identify untapped potential growth and to enable it. The European Competitive Telecommunications Association was founded in 1998, and supports the regulatory and commercial interests of new entrant telecoms operators, ISPs and suppliers of products and services to the communications industry. ECTA represents more than 100 of the leading telecoms challengers across Europe, delivering broadband, mobile and business services in Europe. ECTA works for a fair regulatory environment, which allows all electronic communications providers to compete on level terms in order to multiply investment and innovation throughout an effective European internal market. The association represents the telecommunications industry to key government and regulatory bodies. It also maintains a forum for networking and business development. All ECTA members believe that consumers are best protected by competition and that service development is driven by consumer choice. Regulation should create confidence and avoid picking winners or losers among market players and technologies. ECTA strongly supports the role of European institutions, as Pan-European solutions are needed for Pan-European problems. The main objectives of the association are to assist and encourage market liberalisation and competition, through representation of the telecommunications industry to key government and regulatory bodies – in particular at European level.
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EUROPEAN UNION/GLOBAL Telecoms Regulation: the Flip Side of Net Neutrality Whilst emerging relatively unscathed from the global economic downturn, network operators face their own challenges in overcoming the assault on the value created by their traditional core services. With data services exponentially overtaking voice call usage and with consumers focussing on application and device providers rather than on the underlying network quality and operator brand, it is becoming increasingly difficult to maintain the old-school business models. To avoid being pushed into the relatively low margin business of simple conveyance services, operators must seek to re-establish customer loyalty and reposition themselves in the communications value chain. The Centre of the Communications Universe Increasing data bundle charges only goes so far in mitigating revenue loss from declining voice call and SMS volumes. It would in any event appear a short-lived remedy, with continued fibre-optic rollout and the emergence of 4G technology allowing for significantly increasing bandwidth. Recognising that the smartphone and tablet are fast becoming every consumer's centre of the communications universe, sound business strategies then appear to call for strengthening collaboration with content and device suppliers, investing in network
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intelligence, and aiming to custom-serve the demand for ubiquitous and fast mobile access to content and messaging services. Net Neutrality Restrictions In the regulatory arena, a considerable obstacle for network operators in realising such a strategy may be posed by net neutrality requirements. In the European Union, the Framework Directive and Universal Service Directive oblige Member States to ensure transparency as to how public communication providers handle traffic depending on sender or destination. These Directives also allow for the imposition of minimum quality of service requirements, in order to prevent degradation of service and (selective) hindrance or slowing down of traffic over networks. Similar transparency and (in effect) non-discrimination rules in respect of operators' treatment of communications traffic are in place or being enacted by regulators throughout the world, restricting user- or content-based (and ultimately profit-driven) differential treatment of one type of communication above the other. Undeniably, operators may have a commercial interest to limit or deny access to services that undermine their own revenues, as occurred in The Netherlands, where operators such as KPN and Vodafone blocked or contemplated additionally charging their mobile subscribers' access to instant messaging and VoIP services.
Striking a Balance
About Clifford Chance
The general policy aim underlying the net neutrality requirements is to ensure a level playing field between content and service providers and equal access to required bandwidth and connectivity. This is in itself, of course, a commendable objective and touches upon fundamental privacy rights. At the same time, stringent net neutrality enforcement may undermine service innovation and viable business models to sustain the actual and prospective user demand. Arguably, market forces will take care of fulfilling market demand for access to particular applications or services or any lack of desirable service quality. From that perspective, regulators should exercise restraint in curbing operators' business strategy choices and focus on ensuring open access for new entrants and enforcing minimum (universal) service requirements to bridge any gaps in meeting consumer requirements. Experience in the heavily regulated telecoms markets shows that legal instruments are not always ideally suited to catch and shape market dynamics and technological developments. Net neutrality regulation should not overshoot its aim and leave us with impoverished operators, who lack the funds to invest in the high bandwidth pipelines required to meet the needs of our information society. At the end of the day, the Internet does have to be financed by somebody.
Net neutrality and other regulatory matters – such as ensuring data protection and privacy compliance in an increasingly internationally distributed and virtualised network environment, to mention but one – are tackled by the lawyers of Clifford Chance worldwide every day. With 34 offices in 24 countries, Clifford Chance is a fully integrated law firm that literally spans the globe. The Technology, Media and Telecoms (TMT) Group of Clifford Chance is a multi-disciplinary, sector-focussed group of lawyers across our network of offices who service a wide range of the leading companies in the TMT markets. With a detailed understanding of the industry and an unparalleled expertise in regulatory and transactional matters, the TMT Group is uniquely positioned to assist clients on the most complex and demanding legal issues.
Joachim Fleury Global Head of TMT Clifford Chance LLP Joachim Fleury Partner Tel: +31 (0) 20 711 9670 firstname.lastname@example.org www.cliffordchance.com
We invite you to further discover Clifford Chance at our website at cliffordchance.com and welcome you to contact us at any of our offices, to discuss how we can assist you in addressing your legal challenges locally or across borders.
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BELGIUM Implementation of the EU Telecom Package in Belgium On 25 November 2009, the European Union adopted a revised regulatory framework for the European telecommunication sector, consisting of one Regulation and two Directives (Regulation (EC) No 1211/2009, Directive 2009/136/EC and Directive 2009/140/EC, O.J. L-337, 18 December 2009, p. 1-69, together the ‘EU Framework’). These Directives were due to be implemented in the EU Member States before 25 May 2011. Almost a year after the deadline, the Belgian government recently submitted a bill to the Belgian Parliament, aimed at implementing the EU framework in Belgian law (Draft bill of 5 April 2012 containing various provisions regarding electronic communications, the ‘Bill’). The Bill proposes numerous changes. We look at how the government proposes to implement two key provisions of the EU Framework under Belgian law, namely the data breach notification and the so-called EU cookie rule. Personal Data Breach Notiﬁcation Directive 2002/58/CE already provided for an obligation on providers of electronic communication services, to implement appropriate technical and organisational protection measures to safeguard the security of its services (Article 4(1) of Directive 2002/58/EC of 12 July 2002, concerning the processing of personal data and the protection of privacy in the electronic communications sector, O.J. L 201, 31 July 2002, p. 37-47). The EU Framework went a step further (Article 4(3) of Directive 2002/58/EC, inserted by Directive 2009/136/EC). It included a definition of ‘personal data breach’ and an obligation to notify such breach, both to the competent national authority and to the individuals concerned by the breach. While notification to the regulator is required in all situations of breach, notification to individuals is required only when the breach is likely to adversely affect their personal data or privacy, but not when the regulator is satisfied that appropriate technological protection measures were implemented. The Bill implements the notification regime by inserting a new Article 114/1 par. 3 in the law on electronic communications (Law of 13 June 2005 regarding electronic communications, Belgian State Gazette 20 June 2005, the ‘e-Communications Law’). Under the new rule, the notification must be made to the Belgian Institute for Postal Services and Telecommunications (the ‘BIPT’), the supervisory body of the electronic communications sector. Although the Bill 58 • Global Business Magazine • June 2012
Linklaters LLP Tanguy Van Overstraeten Partner, Technology, Media & Telecommunications, Brussels Tel: (32-2) 501 94 05 email@example.com www.linklaters.com Guillaume Couneson Associate, Technology, Media & Telecommunications, Brussels Tel: (32-2) 501 93 05 firstname.lastname@example.org www.linklaters.com
be obtained. This means it should be up to the regulators to issue relevant guidance. A first indication of the Belgian position is that during its review of the Bill, the regulator in charge of data protection indicated that consent may not be obtained through current browser settings (Privacy Commission Opinion 10/2012 of 21 March 2012 regarding the Bill). Conclusion The Bill shows that, as in other Member States, the EU Framework’s provisions may still be adapted upon implementation in local law and result in diverging interpretations of the same EU provision. Although the Bill does not specify how consent should be obtained with respect to cookies, Belgium seems inclined to follow the hard line and refuse current browser settings as a proper expression of consent. This is likely to negatively impact electronic business unless a more pragmatic approach is developed by the operators and accepted by the regulator.
BRAZIL Why Alternative Dispute Resolutions Are Not Yet Fully Adopted by the Telecommunications Industry in Brazil Nowadays, choosing to settle disputes amicably is part of the business culture in Brazil. This means that once the arbitration or mediation procedure, is chosen by the parties as the alternative means to solve the disputes, the claims are not submitted to the Judicial Courts. The arbitration offers several advantages to the parties involved, namely the opportunity to appoint a professional arbitrator with expertise in their field of industry, who is able to work very fast and preserve the parties’ privacy in view of the confidentially commitment required. However, several regulatory provisions of telecommunications industry discipline the option to select alternative dispute resolution. The recommendation for inclusion of a clause referring to the amicable dispute resolution is expressed on the terms of the telecommunications concession contracts. Currently, there are very few who enquire as to the validity of the decisions granted by Arbitration Courts, arising out of administrative or public contracts. The majority of queries have already been answered by Brazilian Judicial Courts, confirming that public service providers are permitted to choose extrajudicial means of solution of disputes, as long as the arbitrators do not affront the rule of law and public interest.
arbitration proceedings, adequate enough to solve claims arising of deadlock in negotiation of interconnection agreements, or disputes arising out of the share of network, unbundling or share of infrastructure. In addition, the recent draft of ‘PGMC’ – General Plan of Targets for Competition Regulations, and the rules disciplining SeAC – the Service of Conditional Access (replacing the former Pay TV Services) – make references to the enforcement of the provisions of Law 9.307/2006, known as Brazilian Arbitration Law. The express reference to the Brazilian arbitration laws dully authorises the telecom sector to choose the arbitration tribunals for the settlement of disputes. In light of the above, it is within the duties of telecom legal experts to follow up the telecom associations’ activities, providing assistance in order to arrange for an arbitration convention to be executed by Arbitration Courts. It is also important to submit to Anatel the document with the terms and conditions of the arbitration convention, in order to grant the approval. Finally, it is worth noting that the arbitration tribunals will need to invite telecom industry experts among the reputable names, to join their body of arbitrators who are in charge of issuing decisions solving the telecom service provider’s disputes.
Furthermore, telecommunication regulatory authorities have issued rules disciplining
Regina Ribeiro do Valle Telecommunications -Corporate and Regulatory Matters Legal Consulting at Mitico & Sigliano Advogados Associados
Al. Santos 700, 2ºfloor, suite 22, Cerqueira Cesar CEP 01418002 São Paulo, Brazil Phone 5511-8111.5467 www.miticosigliano.com.br
June 2012 • Global Business Magazine • 59
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focus on mauritius
The Mauritian Economy in 2012
62 â€˘ Global Business Magazine â€˘ June 2012
Over the last few years, achieving high levels of growth worldwide has proved to be a tricky task, with major economies failing to increase their output at reasonable rates. This situation is particularly worrisome for countries like Mauritius, which is heavily dependent on external trade and foreign direct investment â€“ even more so with the rise of competition from emerging economies in Africa, Asia and South America. Since the beginning of the crisis back in 2008, domestic companies have been battered but have been bravely facing the adverse conditions to survive, with the anticipation that respite would not be far. Four years later, these companies are now finding it increasingly difficult to withstand the adverse conditions prevailing in their markets, especially in the absence of additional support from local authorities to boost investment and increase competitiveness.
The Mauritian tourism sector is highly likely to be next in line, with latest figures released signalling difficult times ahead. Investment in hotels and restaurants has already fallen massively over the one-year period. In 2007, investment grew at the rate of 37.7 % but in 2011 it fell by 31.5 %. A fall in investment harbingers only one thing â€“ worsening prospects for the operators of this sector. This has been confirmed by the latest figures in tourist arrivals and revenue, prompting speculation that growth figures for the sector will have to be revised downwards in the coming months.
engineering of activities, the sector was able to rebound in 2011 and even register a 7.8% growth rate. However, the unsustainable policy of maintaining an appreciating Rupee is thwarting the potential of Mauritius to achieve even higher levels of GDP growth. Due to a rising wage bill and the upward trend in the prices of raw materials, increasing costs of production will have a definite impact on future growth rates. This is coupled with a decrease in profitability of local manufacturers, due to lower receipts in Rupees and the reluctance to commit further investment without any visibility.
There are already signs that activity in the external sector is slowing down, with the level of employment in export-oriented enterprises on a downward trend and a decline in the number of enterprises. While investment is also down, thanks to significant investment prior to the global crisis and a re-
Fortunately for Mauritius, despite reigning global uncertainties and the advance impact on some sectors, the economy has been performing rather well. This is due to a good performance of other sectors, namely the booming ICT sector and financial intermediation, which resulted in a 4.2 %
growth rate in 2010 and an estimated 4.1% in 2011. Overall, the IMF, in September, expected growth in Mauritius for 2011 to amount to 4.2 % and 4.1 % in 2012. Within the context of the Article IV consultations, in January, the IMF revised their figures for the Mauritian economy to stand at 3.7 %. That same month the World Bank put forward a growth rate of 4.1 % for 2011. However, while 2011 started rather promisingly, the economic situation deteriorated in the second half of the year with the escalating Euro crisis and its ensuing austerity measures. This put pressure on external demand, which was further exacerbated by a notable appreciation of the Rupee relative to major currencies. As a result, the loss of competitiveness has been expected to have an impact on the performance of the 2012 economy. Added to which, business confidence amongst local
June 2012 â€˘ Global Business Magazine â€˘ 63
focus on mauritius producers worsened at the end of 2011, resulting in a fall in private investment. Taking into consideration the expected deterioration of several economic indicators and a situation of sustained global disarray, the MCCI expected in November 2011 to have a growth rate of 3.8 % for 2012, while Statistics Mauritius forecasted growth at 4.0 %. Earlier this year, the forecast for 2012 was revised downwards to 3.6%. The continued uncertainty over the Euro Zone debt crisis, the dwindling purchasing power in our major markets and low consumer demand, have been slowing the growth of the Mauritian economy. An overvalued currency is further eroding the ability of our entrepreneurs to face competition. In addition to this, private investment continues to fall, both in absolute terms and relative to total investment. The increase in current account deficit is also an issue that needs to be addressed. Some sectors of the economy such as hospitality and manufacturing are already starting to feel the strain. Given international trends and the local situation, it is unlikely that last yearâ€™s growth performance will be matched in 2012. Nevertheless, amelioration in the situation in other countries and the fact that the crisis has been milder than was actually expected, has prompted dynamism and increasingly palpable optimism in 2012. This renewed hope has translated into improved growth estimation on the part of the MCCI. As a result of a lowering of the Repo rate by 50 basis point, a growth estimation in May forecasted a rate of 3.9%, regaining the confidence of entrepreneurs and presenting a relatively better economic situation in our major markets. Until now, the local economy has remained fairly resilient to external shocks, mainly due to coordinated macroeconomic policies and institutional stability. However, as risks on our external markets are increasing, there is the need for more action on the part of policy makers, not to just wade through the turmoil but to embark on an even higher path of post-crisis sustainable development.
The Mauritius Chamber of Commerce & Industry (MCCI) 3, Royal Street, Port-Louis, Mauritius www.mcci.org email@example.com Tel: (230) 208 3301 Fax: (230) 208 0076
64 â€˘ Global Business Magazine â€˘ June 2012
Mauritius – an Efficient Gateway: IFS – a Reliable Partner for Investment in Africa Africa is a land of many opportunities in a huge number of sectors – from natural resources to mining – manufacturing to agriculture – infrastructure to utilities – consumer-facing goods to financial services. The strategy of many global companies is how to reap the benefits from these opportunities, all the while managing and mitigating the associated risks.
Mauritius is positioning itself to tap into the growing trade, investment and capital flows in Africa. It is emerging as the premier financial centre for conducting business by many global fund managers, private equities and multi-national companies. Its ease of doing business; its convenient time zone; its sophisticated business; its banking, financial and technological infrastructure; it’s well trained, competitive and bilingual labour force; its good network of double taxation treaties, and investment promotion and protection agreements; its strong cultural ties – all of these have produced an excellent enabling framework for global businesses to invest in Africa. Added to which, the rule of law, political stability, economic predictability, attractive tax incentives and its membership of key regional economic groupings such as COMESA and SADC, all combine to sharpen its competitiveness and attractiveness. These have lured international law firms, corporate service providers, trust companies, fund managers and global investment banks to its shores. Global companies are setting up structures in Mauritius both for tax and non-tax benefits. Therefore, the existence of a good network of double taxation treaties, and investment promotion and protection agreements, allows for the mitigation of risks in Africa while guaranteeing the security of investments. In addition to offering fiscal neutrality to investors, the country also provides other incentives such as low corporate tax, no capital gains tax, no taxes on dividends and interest as well as no inheritance tax. There are also no exchange controls.
Mauritius. Having started its activities in the early 90s, it has many years of on-theground experience and knowledge of various jurisdictions – with a particular focus on Asia and Africa. IFS has emerged as a recognised leader in providing international tax, corporate, legal, administration and business advisory services to its valued global clientele. IFS has also acquired considerable experience of advising global companies and private equity funds on how best to structure and to administer their cross border investment – again, with particular focus on Asia and Africa. While the nature and scope of the global business industry has evolved over time, IFS has proudly maintained its key objective of delivering a quality and efficient one-stop service. By matching the expectations of our global clients, we help them capitalise on the vast opportunities arising in the African and Asian continents, with a strong emphasis on local presence and substance.
International Financial Services Limited Dr Rama Sithanen Chairman and Director Tel: (230) 467-3000 firstname.lastname@example.org www.ifsmauritius.com
International Financial Services (IFS) is a pioneer in the global business industry of
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banking & finance sector
Trade Finance - Not Just an Investment; an Investment in Jobs Trade finance facilitates economic development, which drives job growth. It funds nearly $18 trillion of global commerce and provides critical liquidity to small-and medium sized enterprises (SMEs) – the main engine for economic growth in most countries. However, financial institution balance sheet deleveraging and regulatory concerns have limited the flow of trade finance available. Such limited liquidity increases the cost to companies that use trade finance, which in turn lowers import and export growth. Now is the time for stakeholders in the industry to move towards collaboration to provide some solutions. The BAFT-IFSA Global Trade Industry Council (GTIC) consists of the global heads of trade finance of the largest trade finance banks in the world. It has been actively engaged to contribute ideas and solutions for some of the industry challenges. “Our industry has historically been very fragmented. We currently lack comprehensive statistics, uniform reporting and product definitions. GTIC members share a commitment to trade finance and aim to coordinate industry efforts to establish more uniformity in its activities,” says Daniel Cotti, J.P. Morgan Global Trade Executive and Chair of the GTIC. “As a leading body driving change and developing cohesion, the GTIC is working in close partnership with the International Chamber of Commerce and BAFT-IFSA, to replace the fragmentation that exists with broadly accepted standards and data. The council membership currently numbers 18 banks, and we are open to participation from financial institutions that would add to the balance of ideas.”
While economies in Europe are still fragile, recovery in the U.S. is trying to gain momentum; Japan recorded a record trade deficit in 2011; and China’s growth slowed to its lowest level in the last three years. Expectations are that developing economies will also feel the slowdown in the form of lower exports. The World Trade Organisation (WTO) has reported 5% trade growth in 2011 – a sharp decline from the 13.8% recovery made in 2010. Forecasts for 2012 are pointing to even slower trade growth (3.7%). Tighter regulatory measures such as Basel III and capital constraints have caused some banks to greatly reduce the amount of trade finance they provide and other banks to exit the trade finance market. Faced with shrinking the balance sheet, it is less difficult for banks to not renew short-term trade facilities as they are due, than it is to unwind longer-term commitments. This void in the market creates opportunity for banks with balance sheet appetite, but at some point there needs to be a new source of liquidity – new investors. Trade finance assets are relatively low risk; the ICC Trade Register study conducted across 18 banks demonstrated less than 3,000 defaults in 11.4 million transactions (< 0.03%). By comparison, US consumer default rates fell to post-recession lows in March 2012 and were 1.88% for first mortgages, 1.11% for auto loans and 4.47% for credit cards. Non-performing commercial and industrial loans were 1.3% at the end of 2011. These rates beg the obvious question – why not do more trade finance lending? The answer is much more complex and involves risk/return appetite, balance sheet constraints, portfolio preference and business mix. Yet the sustainable solution to funding global economic trade growth may lie in bringing in new investors to increase the pool of liquidity available for trade finance. Trade finance assets as an investment option is a topic of growing interest in the global trade community. Banks have long maintained an informal secondary market amongst themselves. Banks with excess capital but relatively small client demand are often active buyers of trade assets from institutions that lack capacity to meet client demand. However, by broadening the potential pool of investors, the increased supply and lower cost of capital would certainly help global trade growth. “This is not an easy task,” says John Ahearn Global Head of Trade at Citi and past GTIC Co-Chair. “While the asset is well known in the banking industry, many alternative investors are not familiar with its characteristics and low default rates. Also, trade finance paper
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today does not trade like a security.” One of the other challenges banks have faced is the increased capital requirement driven by the move to Basel III. Unlike credit cards and mortgages that have their own asset valuation curves, trade assets are co-mingled with other corporate products. However, the lower risk profile, short-term nature and direct linkage to real-economy financing, warrants consideration for differentiating trade assets from more complex instruments. BAFTIFSA and the GTIC has been actively involved in conversations with the regulatory, policy making and business community, to help bring to light some of those differences and to ensure economic growth is not unintentionally inhibited because of disproportionate capital burdens placed on trade lending. Adnan Ghani, Head of Global Trade Origination at The Royal Bank of Scotland and Vice-Chair of the GTIC has been frequently involved in this dialogue. “The role I see the GTIC playing is to bring to the table common issues/challenges hampering global trade finance in front of the leading industry experts on trade, to find workable solutions. So far, it has been the leading group for advocacy of global trade finance challenges as well as opportunities,” he says. The GTIC is hopeful that the increasing dialogue will help bring about some positive regulatory relief for trade finance, such that banks can increase their commitments to supporting economic growth through trade. BAFT-IFSA published definitions for traditional trade finance, which has been a well-used tool in discussions with industry stakeholders, to help simplify the understanding of trade finance products, and make it easier for regulators and policy makers to engage in productive dialogue with both the banks and business community on the role of trade finance. Markus Wohlgeschaffen, Head of Global Trade Finance & Services at UniCredit, has pushed the definitions a step further and outlined Risk Clusters for the products. The GTIC has also published open account trade finance definitions and is developing a set of definitions for structured trade and export finance products.
The world of export finance and the use of Export Credit Agency (ECA) financing has been an increasingly important tool to fill the gap in funding capacity. Private or quasi-government agency institutions work with banks, national governments and exporters, to provide funding for export transactions. By its nature, this type of financing directly supports jobs related to national exports. The G-20 asked for multi-lateral development banks to increase resources supporting growth in developing countries after the crisis, and they have responded. International Bank for Reconstruction & Development (IBRD) commitments rose to over $44 billion in fiscal year 2010. Although that number dropped to $26.7 billion in 2011, it is still double the average from 2005-2008. IFC – part of the World Bank Group focused on private sector development in emerging markets – reached record levels for their trade finance programs in 2011. The U.S. Export-Import Bank has to address cap limits to continue to support its three consecutive recordbreaking years of financing growth in U.S. exports. U.S. Ex-Im financing supports over 290,000 jobs and it stands to reason that expanding the cap is critical to sustaining economic and job growth. Some economies recovered from crisis levels over a year ago and some are still working their way back. Still, the pain of the three-year-old banking crisis is fresh enough for policy makers, regulators and private citizens to be concerned about the effect of financing instruments, which may not be well understood. The anomaly is that trade finance lending is a core commercial role banks play, is relatively low risk and is exactly the type of lending banks should be doing in order to support economic growth as they have done for hundreds of years. The industry can benefit from new investors. Trade finance should be an investment alternative. The BAFT-IFSA Global Trade Industry Council continues to develop thought leadership around this topic. As the industry moves towards defining trade finance as an investible asset class, it is not just an investment; it is an investment in economic growth and an investment in jobs.
Tod Burwell, Sr. Vice President, Trade Products | email@example.com | BAFT-IFSA BAFT-IFSA is the trade association for organisations actively engaged in transaction banking. It serves as the leading forum for bringing the financial community and its suppliers together to collaborate on shaping market practice; influencing regulation and legislation through global advocacy; developing and adapting new and existing instruments that facilitate the settlement of products and service offerings for clients; providing education and training; and contributing to the safety and soundness of the global financial system.
BAFT-IFSA 1120 Connecticut Avenue, NW Washington, DC 20036 Telephone: (202) 663-7575 Fax: (202) 663-5538 For general information email: firstname.lastname@example.org
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banking & finance sector
ISP98 MODEL FORMS By Professor James E. Byrne, Director of the Institute of International Banking Law and Practice, and Professor at the George Mason School of Law in Arlington, Virginia.
The Institute of International Banking Law and Practice (www.iiblp.org) is a nonprofit organization dedicated to the harmonization of letter of credit law and practice. The Institute of International Banking Law & Practice (Institute) released its long anticipated ISP98 Model Forms on 15 May 2012 [The Institute is a not for profit educational organization. See www. iiblp.org.]. These forms are expected to set the standard for sophisticated standby letters of credit, a market in excess of US$750,000,000.00 in the United States and conservatively estimated at $1.5 trillion globally [See DOCUMENTARY CREDIT WORLD (DCW) which provides quarterly statistics for banks, US and non US, located in the US. In second quarter of 2011, the top 300 US banks reported outstanding standby obligations of US$427.1 billion and US$26.8 billion in commercial LCs. Nov./ Dec. 2011 DCW 40. Totals for the same quarter of 2010 for the top 300 US Banks were US$427.3 billion in standbys and US$25.4 billion in commercial LCs. Nov./ Dec. 2010 DCW 40. The top 185 non-US banks with offices in the US reported outstanding standby obligations at the end of the second quarter 2011 at US$179.4 billion and commercial LC obligations at US$7.7 billion. Jan. 2012 DCW. Totals for the same quarter of 2010 for the top 187 non-US banks were US$201.5 billion in standbys and US$7.3 billion in commercial LCs. Oct. 2010 DCW
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36. The top 300 US savings institutions reported obligations of US$3.7 billion (standbys) and US$0.2 billion (commercial LCs) in the second quarter of 2011. Nov./ Dec. 2011 DCW 46. For the same period in 2010, obligations for the US savings institutions were US$4.7 billion (standbys) and US$0.3 billion (commercial LCs). Sept. 2010 DCW 37. Produced 10 times each year, DOCUMENTARY CREDIT WORLD (DCW) contains news and written analysis on trends and developments impacting LC and guarantee practice and law. For further information, visit its website: www.doccreditworld.com or e-mail: info@ doccreditworld.com]. They are particularly intended to help standby users, including their regulators, to develop sound, workable, and appropriate texts for standbys in light of specialized standby practices and laws worldwide and can also be used for demand guarantees subject to ISP98. It is not uncommon for standby forms to be cumbersome, problematic, and to result in avoidable delay or even litigation. The templates in use, to the extent that they exist, are outdated, not aligned with modern standby letter of credit law or practice, and contain terms and expressions that are not understood even by those who promote them. Perhaps the worst offenders are standby forms required by governmental agencies to assure performance. They commonly contain terms that, at best, make no sense and, at worst, could result in a determination that the undertaking was not independent. Examples are that the undertaking is “unconditional” (it is not; it is conditioned on presentation of required documents), “primary” (what is “primary” is relative depending on which transaction is in focus), “payable from the issuer’s own funds” (most issuers hope that they will and do use the funds advanced by the applicant to honor a demand), or “absolute” (it usually has nothing to do with vodka). Problems regularly arise from requiring presentation of drafts, the original operative instrument, automatic extension clauses, automatic reduction clauses,
provisions for transfer, confirmation, and counter standbys. The International Standby Practices (ISP98) for which the Model Forms were designed are rules of practice that are widely used for standby letters of credit (and even demand guarantees). In the US, it is estimated that ISP98 accounted for more than 47 per cent of dollar value standbys. Moreover, it is the norm for financial standbys [James E. Byrne, “International Standby Practices (ISP98) (ICC Publication No. 590): Versatile Rules for Modern Practice”, DCW Oct 2011 24. See also DCW Oct 2011 3.]. Drafted by the Institute and endorsed by the International Chamber of Commerce as ICC Publication No. 590 and the United Nations Commission on International Trade Law [ISP98 is also recognized by the US Comptroller of the Currency as a permissible indicator that an undertaking is independent in its Interpretative Rulings. 12 C.F.R.7.1016.], the rules provide a thorough framework for standby practice, addressing many of the problems that have arisen in standby practice. As a result of the detail of ISP98, standbys can be simple and straightforward when subject to the rules. Just how simple is illustrated by ISP98 Model Form 5 (Simplified Demand Only Standby) which is 5 lines. Most standby issuers and users, however, prefer to say more. Indeed, it is often wise for them to do so since the transactions in which they are engaged call for more sophisticated undertakings than a simple demand standby. ISP98 Model Form 1 (Model Standby Incorporating Annexed Form of Payment Demand with Statement) provides the basic framework for all of the model forms and includes an annexed form for demand so as to reduce the possibility of discrepancies in drafting it (as do all the forms except short form Model Form 5). Other forms provide for automatic extension (Form 2), automatic reduction (Form 3), and transfer (Form 4). The practice by which service providers or sellers ask their banks to issue a counter standby in favor of a local bank in the buyer’s country so that it may issue its local undertaking is addressed in Form 6. Form 7 and 8 provide for requests to confirm and confirmation respectively. Because the terms contained in the model forms represent a sophisticated judgment and choice among various options, one of the most valuable features of the ISP98 forms is the extensive
endnotes that detail these issues and serve as a primer for standby practice. For example, the text of the model forms does not contain a provision for choice of forum, law, or arbitration although the Institute encourages the inclusion of such provisions. However, the endnotes not only discuss these issues and the various alternatives but also contains optional clauses which could be inserted. The endnotes also link the various clauses and provisions in the forms to the relevant provisions of ISP98 which are applicable. The ISP98 Forms also reflect the process of vetting with the Institute’s Advisory Councils. For example, although ISP98 Rule 1.06(b) (Nature of Standbys) provides that all ISP98 standbys are irrevocable, the ISP98 forms include that term. As explained by the endnotes, the term is included although it is unnecessary because standby users, shaped by outdated rules, insist on its inclusion, forcing banks to insert it in their forms. On other issues, though, the ISP98 Forms attempt to reform bad practice. For example they use demands and not drafts and in the endnotes actively discourage the use of drafts as an antiquated practice that does no good for anyone and can lead to serious problems for everyone. The forms also discourage requirement of presentation of the original operative standby instrument. In the event that it is decided to require presentation of the original instrument, the endnotes explain the potential problem for both the issuer and beneficiary and link them to potential clauses. The annexed demand form studiously avoids the highly problematic term “default” in favor of equally effective but less problematic terms such as “the amount due”. The endnotes to Model Form 1 detail the various options to be considered where the applicant desires a more comprehensive statement in connection with the drawing. The terms of this statement will inevitably engender negotiations between applicant and beneficiary with the bank usually sitting on the sideline as long as the proposed terms permit a documentary judgment that the terms of presented documents comply. Among the most interesting features of the model forms are the provisions of Model Form 2 regarding automatic extension. The transactions for which standbys are
issued often extend many years. However, the long term extensions of credit involved in such undertakings are neither safe nor sound even for the strongest customers. As a result, the evolution of the so-called automatic extension clause is to be welcomed as a means of balancing the beneficiary’s concern for a dependable mechanism for payment and the issuer’s concern to reassess the creditworthiness of its customer on a regular basis. Such clauses are encompassed and given effect as not constituting an amendment (i.e. operating without amendment) in ISP98 but it remains for the standby to express the terms. What is necessary to consider is a time frame for the cycle, an advance time and method of notice of a decision to extend being given to the beneficiary in advance of the then current expiration date, a provision permitting the applicant to replace the standby with another acceptable one, a provision permitting the beneficiary to draw in light of the notice of non extension, and a provision permitting the beneficiary to withdraw its drawing in the event that it has reached an accommodation with the applicant after having drawn but before being paid. ISP98 Model Form 2 and its endnotes address these issues and many more. Transfer of a transferable standby also can present issues. ISP98 Rule 6.01 contains detailed rules applicable to a standby that states that it is transferable. The transfer of a transferable standby, however, is not automatic and is subject to the discretion of the issuer. This provision, however, is not adequate for sophisticated financial standbys backing bond issues on the financial markets. For these standbys, the rating agencies require that the beneficiary (which is an indenture trustee on behalf of the bond holders) be able to effect a transfer by virtue of a demand since there must always be a beneficiary in place to protect the bond holders’ interest. Model Form 4 is designed for this specific situation and provides for an automatic transfer on demand without any discretion on the part of the issuer. Counter standbys are also a common source of confusion. Model Form 6 introduces standardized terminology and provides a useful template for these transactions. The confirmation forms (Model Forms
7 and 8) are also specialized in that they assume that the purpose of the confirmation of a standby is to have the confirmer’s undertaking and not that of the issuer. They provide, therefore, that presentation can only be to the confirmer and not to the issuer. The ISP98 Model Forms were drafted by James G. Barnes of Baker & McKenzie LLC and Professor James E. Byrne served as editor. The drafters were advised by an advisory group which met at sessions around the world and telephonically for over a five-year period. The forms are published in Documentary Credit World and will be available without charge on the Institute’s web site: www.iiblp.org. The Institute as copyright holder has granted unlimited permission to copy and use any of the forms for all purposes except publication for a charge to a purchaser or subscriber. The Institute is also publishing a booklet containing a URL drive with more detailed information and the text of ISP98. The forms are not intended to provide legal advice and are for educational purposes only. Potential users should consult their own advisers in drafting or use of a standby letter of credit. Further information about ISP98 and standby letters of credit, including The Official Commentary on the International Standby Practices, is available from the Institute. In addition, the Institute issues Official Interpretations of ISP98 from time to time. While these forms are complete, the project will continue to consider a specialized form for insurance or reinsurance standbys and for commercial standby letters of credit which can be used in lieu of commercial letters of credit. In addition, the forms were developed in conjunction with the SWIFT exercise to produce a template for electrification of standby issuance and presentation in a more flexible format which would permit incorporation of the ISP98 Model formats or a format based on them. As a result of the completion of the ISP98 Forms, standby letter of credit practice is situated for the electronic future of the 21st Century with sound rules and supple forms that can be plugged into a user friendly electronic communication system linked from customer to bank to beneficiary.
Institute of International Banking Law and Practice (IIBLP) T: +1 (301) 869-9840 F: +1 (301) 926-1265 E: email@example.com W: www.iiblp.org
June 2012 • Global Business Magazine • 69
Global Poll: Changing Careers Poll reveals 55 Percent are considering a career switch in response to the economic climate 19 April, 2012 – A poll conducted by Monster shows the like-minded nature of workers amid a challenging economic climate; over half of respondents (55%) said they are considering switching their career in response to economic troubles, while nearly one third (30%) would consider a move if they could find a better career. Conversely just 15 percent responded that their career was not impacted by the economy. Monster, the premier global online employment solution and flagship brand of Monster Worldwide, Inc. (NYSE: MWW) asked visitors to their site the question, “Are national or global economic troubles causing you to consider a complete career change?” and received 4,607 responses. International findings included: • Yes, I am trying to switch my career: 55% • Maybe, if I can find a better career: 30% • No, my career is not impacted by economic troubles: 15% Results indicate a consistent response from workers across Europe, North America and Asia, where more than half of respondents in these countries are looking to change their career in response to an uncertain economy, by a respective 54 and joint 55 percent. North American regions included US (56%), Canada (55%) and Mexico (51%).
Monster Europe PR Contact Hannah Lifford Weber Shandwick +44 (0)20 7067 0254 firstname.lastname@example.org
70 • Global Business Magazine • June 2012
Monster UK respondents were meanwhile overwhelmingly in agreement about considering a switch in their career due to economic troubles, with nearly two-thirds (62%) answering yes. Of those who aren’t already considering a career switch, many others are on the fence; one third of Canadian workers (33%) would consider a career change if something better came along, a response closely favoured by French (31%) and US (30%) respondents. In comparison, there is a significant difference in the responses of workers country to country who answered that the economy is not impacting their career. Just nine percent of workers polled in the UK answered their career was not impacted, compared to 15 percent of French workers who answered no to the same question. “There are many kinds of career change -- some people may be making a career ‘side-step,’ moving into a new kind of role within their current industry; others may be making a more radical change, ” says Charles Purdy, Monster.com’s career expert. “A first step is doing thorough research, making sure that they have realistic expectations and a concrete plan for filling skills gaps. People considering a career change should reach out to their networks and consider conducting informational interviews, for example. All of us should be actively managing our careers and making sure we’re on top of developments in our chosen industry. At the same time, employers can work to retain
employees by offering incentives such as training and skills development.” The results of the current Monster Global Poll are based on votes cast by Monster visitors from: February 6 – February 20 2012. Only one vote per user is counted toward the final tabulation. The Monster Global poll, a product of Monster�, the leading global online careers website and flagship brand of Monster Worldwide Inc., is a series of online polls that gauge users’ opinions on a variety of topics relating to careers, the economy and the workplace. These polls are not scientific and reflect the opinions of only those Internet users who have chosen to participate. About Monster Worldwide Monster Worldwide, Inc. (NYSE: MWW), parent company of Monster, the premier global online employment solution for more than a decade, strives to inspire people to improve their lives. With a local presence in key markets in North America, Europe, and Asia, Monster works for everyone by connecting employers with quality job seekers at all levels and by providing personalised career advice to consumers globally. Through online media sites and services, Monster delivers vast, highly targeted audiences to advertisers. To learn more about Monster's industry-leading products and services, visit www.monster. com. More information about Monster Worldwide is available at http://about-monster.com.
E.g marketing / IT / operations
Environment and architecture
Online recruitment up 8% y-o-y***
Production and manufacturing
Changing careers? If you’re thinking of moving, here’s a selection of online job opportunities across Europe
Online recruitment up 8% y-o-y***
Engineering said they are considering switching their career in response to economic troubles
would consider a move if they could find a better career
A recent poll* by Monster found over half of workers (55%) are considering switching their career in response to troubles in the economy, while an additional one third (30%) would consider a move if they could find a better career. To help job seekers make a decision, Monster reveals the top five industries creating the most opportunities in Europe, along with the types of workers that are most in demand. Figures are taken from the Monster Employment Index Europe.**
Online recruitment up 6% y-o-y***
Key to infographic Online job opportunities in the top five growth industries are highlighted through the below graphics where each represents specific types of workers in demand:
Professional level qualified positions E.g engineering science positions
Customer facing positions E.g customer support / transport service providers
Plant & machine operator & assembler Skilled positions E.g drivers / mobile plant operators
Online recruitment up 2% y-o-y***
Technician & associate professionals
Marketing, customer support, and operations
Support level positions E.g marketing / IT / operations
E.g telemarketing / general sales
Environment and architecture Online recruitment up 2% y-o-y***
The Monster Global poll is a series of online polls that gauge users’ opinions on a variety of topics relating to careers, the economy and the workplace. This poll took place in February 2012. There were 4,607 responses.
The Monster Employment Index Europe is a monthly gauge of online job opportunities available in different industries, countries and regions. It is based on a real-time review of millions of employer job opportunities taken from a large representative selection of career web sites and online job listings across Europe. The European Monster Employment Index also provides country-specific data measuring online job demand in Belgium, France, Germany, Italy, the Netherlands, Sweden, and the United Kingdom. All reports are available at: http://about-monster.com/employment/ index/17
Online recruitment up 8% y-o-y***
All references to yearly increases refer to a percentage increase of April 2011 vs. April 2012.
Production and manufacturing June 2012 • Global Business Magazine • 71
deal directory Man Group plc to Acquire FRM Holdings Limited On 21 May 2012, world-leading alternative investment management business, Man Group plc (‘Man’) agreed to acquire the entire issued share capital of FRM Holdings Limited (Financial Risk Management ‘FRM’), a global hedge fund research and investment specialist with funds under management of approximately $8.0 billion. Man will integrate FRM with its multi-manager business and, through combined resources and scale, will aim to offer clients deeper and more diverse capabilities, increasingly compelling products and services and better investment performance. Man and FRM’s combined multi-manager business will have total funds under management of approximately $19 billion, making it the largest independent non-US based fund of hedge funds. Peter Clarke, Chief Executive of Man, said: “This financially compelling transaction provides us with the opportunity to significantly improve the profitability of our multi-manager business. By combining the complementary investor bases of the two businesses and pairing FRM’s well regarded investment process with Man’s managed accounts infrastructure, we can increase revenues with no material change to Man’s current cost base.” For more information, visit www.mangroupplc.com.
Mecom Group plc: Completion of Acquisition of Minority Interest in Koninklijke Wegener N.V. On 21 May 2012, European consumer publisher Mecom Group plc (‘Mecom’) announced that it had completed the acquisition of acquiring 5,980,800 depositary receipts for ordinary shares in Dutch publishing group Koninklijke Wegener N.V. (‘Wegener’) from funds managed by Governance for Owners (‘GfO’). Mecom’s interest in Wegener has increased from approximately 86.4 per cent to approximately 99.7 per cent. As consideration for the acquisition, 8,659,201 new ordinary shares
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in Mecom have been issued to GfO. GfO now has a shareholding in Mecom of 7.1 per cent. Canaccord Genuity Limited acted as financial sponsor to Mecom in relation to this transaction. For more information, visit www.mecom.com.
Acquisition of New Primary Care Medical Centre On 23 May 2012, MedicX Fund, the specialist primary care infrastructure investor in modern, purpose-built, primary healthcare properties in the UK, announced it had contracted to acquire a new primary care medical centre in Kingston upon Thames, London, which is due to be completed in November 2012. The property will be let to one GP practice on the basis of a 25 year lease, subject to three-yearly rent reviews to market value. The total acquisition cost of the property is anticipated to be £2.9 million. The MedicX Fund’s total property portfolio now comprises 73 properties throughout the United Kingdom of which 61 are complete and 12 are under construction. The annualised rent roll for all properties is now £18.3 million.
OneSavings Bank plc Acquires Share Capital of the Interbay Group OneSavings Bank plc, the mutual Bank, announced on 25 May 2012 that it had entered into documentation to conditionally acquire the entire issued share capital of the Interbay Group, a specialist SME mortgage lender with gross assets of £56.3m, from CS Capital Partners II L.P (managed by Cabot Square Capital LLP). Kent Reliance, krbs.com, Reliance Property Loans, Jersey Home Loans and Guernsey Home Loans are all trading names of OneSavings Bank plc. Operating for over 150 years, the Bank originates from mutual roots and today operates as a hybrid modern mutual bank, with core values in terms of treating its customers fairly and offering long-term
sustainable value for money, but with the capital advantages of a bank. For more information, visit email@example.com.
Pearson’s World-leading English Learning Business Strengthens its Position in the Corporate Market Pearson, the world’s leading learning company, announced on 25 May 2012 the acquisition of GlobalEnglish from its current ownership group for $90 million in cash. Founded in 1997 in California, GlobalEnglish is a leading provider of cloud-based, on-demand Business English learning, assessment and performance support software. GlobalEnglish complements Pearson’s adult English language training business, Wall Street English, by enabling Pearson to expand more rapidly into the corporate market with cost-effective and scalable cloud-based Business English software solutions and to offer the world’s pre-eminent companies a full suite of relevant products and services. John Fallon, Chief Executive of Pearson’s International education business, said: “The rise of English as a global language of business continues. This acquisition enables Pearson to play a much more systematic role in meeting the need of major companies around the world for quality, effective, scalable and relevant English language learning. We can combine services, technology, brands and content from across the Pearson family with the GlobalEnglish product portfolio, to enrich the learning experience and enhance further the effectiveness of the teaching.” For more information, visit www.pearson.com.
Planet Payment Inc Acquires Branded Payment Solutions Ltd On 24 May 2012, leading provider of international payment processing and multicurrency processing services, Planet Payment, Inc. announced that it had completed the purchase of Branded Payment Solutions Ltd,
an Irish payments company based in Dublin (‘BPS’). The acquisition of BPS expands the scope of Planet Payment’s global technology solutions. Planet Payment currently interfaces to the merchant’s point of sale through its proprietary, currency-neutral, payment processing technology platform, but does not provide applications on the point of sale. With the acquisition of BPS and following integration, Planet Payment will be able to implement new and innovative solutions that can sit alongside and communicate with existing point of sale applications. Commenting on the transaction, Philip Beck, Chairman and CEO of Planet Payment said: “We are pleased to announce the acquisition of Branded Payments Solutions. We are excited by the opportunity that the acquired business, enabling technology and seasoned development team offers, to create new and innovative global solutions.” For more information, visit www.planetpayment.com.
Rostelcom Acquires 100% Control of Mosteleset Rostelecom OJSC, Russia’s national telecommunications operator announced on 24 May 2012 that OJSC National Telecommunications (‘NTK’), its wholly owned subsidiary, had won a tender to acquire 1.74 billion ordinary shares (representing a 26% shareholding) in OJSC Mosteleset (‘Mosteleset’) for a total cash consideration of RUB 1.8 billion. Mosteleset, through its wholly owned subsidiary Mostelecom, owns data and pay TV networks in Moscow which are used by the NTK group of companies to provide services to their subscribers. NTK’s acquisition of a 26% stake in Mosteleset gives Rostelecom 100% control of Mosteleset. Alexander Provotorov, President of Rostelecom, commented: ‘The consolidation of a 100% stake in Mosteleset enables us to fully integrate NTK’s network infrastructure into the structure of Rostelecom, to take forward the legal restructuring and consequently streamline our asset management structure. Rostelecom will also stop accounting for Mosteleset’s minority shareholders in its consolidated financial reports. Additionally, it becomes easier for Rostelecom to manage Mosteleset and it gives us the flexibility to
carry out capital construction and network modernisation programmes quickly, in order to provide high quality services to Moscow subscribers.”
Acquisition of Marishal Thompson & Co (Environmental) Ltd The Innovation Group plc (the ‘Group’), a global provider of business process services and software solutions to the insurance, fleet, automotive and property industries, announced on 23 May 2012 the acquisition of Marishal Thompson & Co (Environmental) Ltd (‘MT’) for a cash consideration of £5.2m. Following the acquisition, Paul Thompson, MT’s sole shareholder, will remain as Managing Director of MT, which will form a part of the Group’s Northern European Property division. Based in Alnwick, Northumberland and employing over 65 people across the UK, MT is one of the UK’s leading providers of environmental consultancy, specialising in the provision of site investigation, mitigation, arboriculture, ecology, soil and root analysis, with a core focus on subsidence insurance claims. Commenting on the acquisition, Andy Roberts, CEO of The Innovation Group said: “As one of the UK’s largest providers of subsidence claims management services, MT’s unique and unrivalled solutions will help us to further differentiate our own offering in this marketplace. This transaction is evidence of our strategy of investing in propositions that create true competitive advantage for the Group and significant value for our clients, built on the foundations of a strong track record of service delivery and balance sheet strength.”
Acquisition of Minority Interest in Cameroon Subsidiary On 22 May 2012, West African Minerals Corporation (the ‘Company), the iron ore exploration company with interests in Cameroon and Sierra Leone, announced that it had reached agreement to acquire the 5% interest (the ‘Minority Interest’) not previously in its control in Compagnie Minière du Cameroun SA (‘CMC Cameroon’)
(the ‘Acquisition’). Following completion of the Acquisition, CMC Cameroon will become an indirect wholly owned subsidiary of the Company. CMC Cameroon owns six exploration permits granting the exclusive rights to explore for iron ore and associated minerals in areas referred to as Djadom, Dja, Lélé, Minko, Sanaga and Binga in Cameroon covering a total area of approximately 6,000 square kilometres. Stephen Dattels, CEO and Executive Co-Chairman of WAFM, commented: “We are delighted to have reached agreement to acquire the minority interest in Cameroon. The acquisition results in the project being 100% owned by West African Minerals with full operational control of this major asset. Given the recent positive results from the aeromagnetic survey, we believe this is in the best interests of all shareholders.”
Acquisition of Bocad Group AVEVA Group plc (‘AVEVA’), one of the world’s leading providers of engineering design and design IT systems, announced on 23 May 2012 the acquisition of the Bocad group of companies (‘Bocad’) based in Belgium and Germany, from the founders for cash consideration of €17.5m (£14.0 million) on a debt free/cash free basis which has been settled from existing cash resources. The acquisition of Bocad significantly strengthens AVEVA’s 3D structural detailing capabilities for the plant, marine and fabrication markets. Bocad provides a comprehensive suite of applications for the design, detailing and assembly of structural steel and other materials and directly complements AVEVA’s world-class 3D design software, PDMS and AVEVA Marine. Commenting on the acquisition, Richard Longdon, Chief Executive of AVEVA said: “We are delighted to strengthen our product portfolio with Bocad’s industry leading solution for structural detailing. This acquisition further extends AVEVA’s position in the Engineering & Design market, providing the most comprehensive 3D design software for plant and marine. We’re excited about the opportunity to unlock the commercial potential for Bocad’s leading technology in a number of markets in which AVEVA already has a strong presence.” For more information, visit www.aveva.com.
June 2012 • Global Business Magazine • 73
Capita plc Acquires Medicals Direct Holdings Ltd Leading UK provider of business outsourcing, Capita plc (`Capita’), announced on 21 May 2012 that it had acquired Medicals Direct Holdings Limited (`MDG’), a provider of medical screening services, for £13.2m, on a cash free-debt free basis and a deferred consideration, linked to profit performance, of up to £2m. MDG made a pro forma operating profit of £2.25m on turnover of £18.6m for the year to 31 December 2011. Commenting on the deal, Capita plc Chief Executive, Paul Pindar, said: “MDG provides more than 150,000 medical screenings every year, primarily to the life and pensions sector. The acquisition adds new capabilities to Capita by, for example, allowing Capita to enter the home-based screening market. This investment works well with our existing portfolio of clinic and mobile unit screening services, aligns our health proposition with Capita’s existing life and pensions business, and adds important new capability to large scale contracts we may be targeting in the wider private and public sectors.” For more information, visit www.capita.co.uk.
Cluff Gold plc Completes Sega Acquisition On 24 May 2012, Cluff Gold (‘Cluff Gold’ or the ‘Company’), the West Africa focused gold mining company, announced a successful completion of its acquisition of the Sega Gold Project (‘Sega’) from Orezone Gold Corporation (‘Orezone’). As part of the completion of the transaction, Cluff Gold has issued 11 million new ordinary shares of 1p each in the Company to Orezone.
74 • Global Business Magazine • June 2012
Cluff Gold is a gold developer-producer with assets in West Africa. The Company generates significant cash flow through its Kalsaka gold mine in Burkina Faso, with a production profile that was enhanced by the recent acquisition of the neighbouring Sega project. Peter Spivey, Chief Executive of Cluff Gold, commented: “We are pleased to have completed the acquisition of the Sega project. This transaction will allow the Kalsaka mine to continue to provide significant cash flow through the development and early production phases of our flagship development asset, Baomahun in Sierra Leone. This transaction brings us closer to establishing Cluff Gold as a leading mid-tier West African focused gold producer.” For more information, visit www.cluffgold.com.
Etalon Group Announces New Acquisitions & Eight Step Programme On 21 May 2012, St. Petersburg - Etalon Group Limited (‘Etalon Group’ or the ‘Company’), one of Russia’s largest and oldest residential real estate developers, announced it had acquired development rights for two new projects in Moscow and St. Petersburg with a total expected NSA of 70 ths sqm. In 2012, the Company plans to launch sales on eight projects with a total NSA of 1.5 million sqm, which together with Emerald Hills, will drive 79% of 2014 deliveries. In line with Etalon Group’s strategy, the new acquisitions in Moscow and St. Petersburg are comfort class residential projects that should further enhance the Company’s geographic presence and brand equity. Etalon Group Head of Investments and Member of the Board of Directors,
Dmitri Boulkhoukov said: “This year we plan to launch sales and construction on eight new projects with a total NSA of 1.5 million sqm, which is fully in line with our strategy and construction programme. We intend to finish most of these projects in the next two or three years, and six of them should be driving delivery volumes in 2014. Together with Emerald Hills, this eight step program will drive 79% of our 2014 deliveries, and will have a significant positive impact on our new contract sales in 2012 and 2013.”
Acquisition of Conversen Inc. Experian, the global information services company, announced on 21 May 2012 that it had acquired Conversen Inc., a provider of multi-channel campaign management software in North America. Founded in 2006, Conversen has developed a single platform that helps marketers plan, execute, optimise and manage their campaigns in real-time and across multiple communication channels, including email, mobile, social, web and print media. This acquisition provides Experian with a next-generation, multi-channel platform that is highly complementary to its existing email, social, display and off-line point solutions. It is a further step in Experian’s strategy to become the global leader in digital marketing services and will form part of Experian’s Marketing Services activities. At 31 December 2011, Conversen reported gross assets of US$1m. Conversen has been acquired from its founding shareholders, employees and a private investor. For more information visit: www.experianplc.com.
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Published on Jun 10, 2012
This month: Should Greece leave the Euro? Family Business Services Travel Awards 2012 Spotlight on the UAE Focus on Guernsey & Mauritius Lea...