CLB March 2012

Joining Forces: The Rise Of Law Firm Mergers In China

合力开拓中国市场，律所并购掀热潮

march2012 WWW.LEGALBUSINESSONLINE.COM

亚洲法律杂志 - 中国版 CHINA

IPO REFORM Proposed changes promise greater clarity and efficiency

IPO法规改革：通往清晰与高效 YANGTZE SPOTLIGHT

POLLUTION POTENTIAL

COMPLIANCE BATTLE

INSIDE

Transportation convenience spurs legal market integration 长三角的同城时代

Lawyers capitalise on growing environmental awareness 污染事件频发，环境诉讼任 重道远

In-house counsel focus on training and communication 企业法务：合规的培训与 沟通

n THE BIG STORY

04

n Deals SPOTLIGHT

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PAGE 20

PAGE 24

PAGE 14

n LAW FIRM LEAGUE TABLES

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n SUNDRIES

48

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“We do feel pressure from the expansion of the national firms… but we have maintained deeply-rooted connections with local clients for decades, which the non-natives could not match.”

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Zhu Honglan, Yongheng Partners

20 COVER STORY Braving a bleak equity market

The dismal performances of Shanghai’s and Shenzhen’s stock exchanges in 2011 have chilled market sentiment. Many law firms are struggling to maintain a balanced IPO portfolio, and are adjusting their capital markets offerings to weather market maelstroms. Artemisia Ng reports

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FEATURES Yangtze River Delta focus Thanks to the most densely built regional high speed railway network, the Yangtze River Delta is becoming more closely connected geographically, economically and psychologically. The convenience of transportation is changing the legal market in this region, as the working radius of any lawyer is significantly extended and the integration of resources and markets brings in all sorts of opportunities, writes Liu Zhen

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If you can’t beat them, join them With competition among law firms in Asia hitting an all-time high, more mergers are expected in the coming year. Rob Green explores the growing trend of tie-ups between international and Chinese law firms

18

Polluted waters make way for environmental opportunities Water pollution has been thrust into the spotlight after a series of recent large-scale environmental incidents.

At the moment, environmental litigation in China is not easy for the victims or lawyers. But hopefully, this market will develop with heightened public awareness and proposed amendments to environmental laws.

Liu Zhen reports

20

The battle against corruption It has been eight months since the UK Bribery Act came into effect.

Combine this with the U.S.’ Foreign Corrupt Practices Act and stringent local laws, and it is clear that there is a global effort to purge corruption from within corporations. In-house counsel in Asia today are facing unique challenges in educating and training their companies’ employees, and creating effective, but practical compliance programmes, writes Candice Mak

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NEWS DEALS

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BRIEFS

4

LEAGUE TABLES

10

APPOINTMENTS

12

U.S. & UK REPORTS

43

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SUNDRIES

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ASIAN LEGAL BUSINESS March 2012

2 ON THE COVER

MANAGING DIRECTOR Andrew Goldner andrew.goldner@thomsonreuters.com NORTH ASIA REGIONAL EDITOR Candice Mak candice.mak@thomsonreuters.com SOUTHEAST ASIA REGIONAL EDITOR Ranajit Dam ranajit.dam@thomsonreuters.com MIDDLE EAST REGIONAL EDITOR Shaheen Pasha shaheen.pasha@thomsonreuters.com JOURNALISTS Artemisia Ng artemisia.ng@thomsonreuters.com Seher Hussain seher.hussain@thomsonreuters.com Zhen Liu zhen.liu@thomsonreuters.com Kathryn Crossley kathryn.crossley@thomsonreuters.com copy editor Vasundhara Chatterjee

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EDITORIAL

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3

Compliance and Capital markets In this month’s issue, we explore the challenges in-house counsel face with compliance and the effects of the UK Bribery Act that came into force last July. Compliance continues to be a hot topic within the in-house community, and ALB plans to continue coverage of the relevant and related professional developments in this area. For instance, we will be attending a Compliance Conversation event on March 30 which will be hosted by Thomson Reuters partner GRC (Governance, Risk and Compliance). The event promises to provide an in-depth report on key points discussed. Do stay tuned.

China’s IPO reforms have been in the spotlight recently with a bevy of proposed measures being worked on by the country’s securities regulator. These include the restructuring of IPO pricing practices and the streamlining of sponsor systems. As Jun He Law Offices partner Wang Yi told ALB senior journalist Artemisia Ng for her analysis, “the reform presents a new regulatory thinking, and heralds a road map for China’s IPO market in the next five years.”

In addition to these features, ALB correspondent Zhen Liu delves into the growth of environmental litigation in China. We also bring to you a tidy summary of a battle that has gripped technology and IP

LETTERS

enthusiasts alike: that between Apple v Proview.

On a personal note, I am extremely excited to join the new ALB team after my tenure with China Law & Practice as its editor. I look forward to continuing working with many of you.

It is our mission to become the heart of the legal community, and I encourage you to get in touch with me and share your insights on what you want to read about and how we can continue evolving into a useful tool for your practice and business. Please do not hesitate to reach out to me at candice.mak@thomsonreuters.com .

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

IF YOU WOULD LIKE TO SUBMIT A LETTER TO THE EDITOR, EMAIL: albeditor@thomsonreuters.com

LETTER OF THE MONTH

In Hong Kong we trust Hong Kong has long been known for her excellent legal and financial infrastructure (Is Hong Kong Asia’s next trust centre?, February 2012).

Currently, she is poised to support a robust trust industry, if and when, a new (and hopefully, keeping-withthe-times) trust legislation comes into force. Not unlike many HNWIs (high net worth individuals) in Asia and notably the West, the Chinese HNWI will certainly reap the benefits offered by bespoke wealth planning involving the use of common law trust structures. For a Chinese HNWI, understanding the concept of common law trusts and grappling with the idea of transferring his/her assets to trustees based in countries, which they have not even heard of (not too long ago “BVI Company” was still used as a noun...) is still a challenge. However, the addition of Hong Kong as a premier trust jurisdiction with modern trust legislation will not only be good for the wealth planning industry - and not only in terms of marketing to the estimated 535,000 (and growing) Chinese HNWIs - but will also help to add one more familiar Asian representative for them to consider and choose from.

Shipping Woes The falling markets have put numerous owners under huge pressure (Singapore: Cheer despite the slowdown, February 2012).

Finance has become considerably hard to come by, as banks have tightened lending or withdrawn completely from the market.

Restructuring, refinancing, and default work will, most likely, dominate the 2012 market for law firms. However, we have also seen a greater need for lawyers to be “facilitators” to get counterparties talking, rather than resorting to legal confrontation.

The outlook is grim. The full effects of “GFC2: The Sovereign Debt Death March” are starting to work their way through the system. Charter rates and resale/scrap prices are falling, and access to finance is becoming more difficult by the day.

There is still a considerable capacity “hump” to get over - a huge number of newbuilds are yet to come online, and this will put further pressure on the market. Yards are in for a few rough years, as the building boom comes to a crunching halt. Finance-wise, I expect we will see an increase in syndicated lending as banks spread their risk. Undoubtedly there will be, as there are now, further insolvencies and bankruptcies. The experienced players may get through this, and those with cash will look to consolidate and expand.

In terms of areas that continue to do well, LNG and offshore oil are performing strongly. Time will tell though, if the rush to these areas creates a new vicious cycle that seems to be a trait of the shipping sector.

SUNNY LIEW, Stephenson Harwood,

CHRIS GRIEVESON, Wikborg Rein, Singapore

Shanghai

Solar power in the Gulf The MENA region is blessed with an extraordinary potential for solar power. Yet, its contribution towards the energy mix in MENA countries has been marginal.

The low cost and availability of gas-fired power plants in the region have rendered solar power uncompetitive. But things are changing. A recent report by the Emirates Solar Industry Association demonstrates that solar power is now economically viable across most MENA countries, thanks to a dramatic fall in solar panel costs, the rising cost of fuels used in conventional power generation, and excellent fit-to-demand patterns.

MENA governments are beginning to demonstrate their commitment, no longer merely by announcing targets, but by rolling out commercial projects. Now is the time for MENA governments and stakeholders to work together to develop the necessary frameworks for the creation of a viable solar market. Unleash the power of the sun; we are poised to be dazzled.

MARC NORMAN, Chadbourne & Parke, Dubai

04

BRIEFS

ASIAN LEGAL BUSINESS march 2012

FORUM What lesson does this dispute teach?

the big story

REUTERS/Carlos Barria

Trans-Atlantic battle: iPad trademark

By Artemisia Ng

A

ll eyes are now on U.S. multinational corporation Apple, as it brandishes its legal sword before nearly-bankrupt monitor maker Proview over the ownership of the iPad trademark in China.

Apple is appealing against a Chinese court ruling that may rule it as an infringer of the iPad moniker, the PRC rights of which have been held by the Shenzhen subsidiary of HKEx-listed Proview International Holdings since 2000. Such a judgment may kill the sales and production of existing and future iPads in China. Additionally, Apple may be slapped with a huge fine — three times the profit it earned from its “illegal” operation — from China’s enforcement agency, the Administration of Industry and Commerce.

The feud started with a 2009 contract drawn between Apple’s special vehicle entity and Proview Electronics Co (Proview Taiwan) to buy 10 iPad marks from the latter in eight jurisdictions, including China. But the Taiwan entity, a sister company of Proview Shenzhen, did not own the marks in the PRC. Apple then turned around and sued Proview Technology Shenzhen Co (Proview Shenzhen) in 2011. However, a Shenzhen lower court rejected its case. The Guangdong High Court then heard Apple’s appeal on Feb. 29.

The event became a circus for China’s intellectual property lawyers and reporters, who flocked to the rare public hearing at the southern China court. They formed an impromptu jury as they blogged about the live hearing on China’s microblogs. Many of them were bemused by the apparent lack of due diligence by Apple lawyers, and hotly debated the validity of the evidence and whether China’s first-to-file trademark registra-

tion system needs to be reformed.

Should Apple lose before the Guangdong court, it will either have to reach a settlement with Proview Shenzhen to buy the rights of the iPad mark, or change the name of its tablet to something else. Even if Apple changes the name, it will still be required to deal with an infringement suit for use of the iPad mark in China before the name change, and pay damages for past infringement. Repercussions of the dispute could be far-reaching. Any person who commercially deals with iPad — its manufacturers, wholesalers, and retailers — will become prospective infringers, points out Mayer Brown JSM partner Kenny Wong. But whether the ruling will cripple tablet manufacturers in China, such as Foxconn, is still debatable.

Although Apple has managed to seek an interim injunction from the Hong Kong court, its legal proceedings against Proview there have slowly moved forward. Even if the Hong Kong court was to rule on the case, its judgment would not be enforceable in China.

Meanwhile, Proview has struck back, and has sued Apple in a Californian court in February, charging the tech giant for alleged fraud and unfair competition. It seeks to invalidate the 2009 trademark agreement, and thus jeopardise Apple’s rights to the iPad trademarks in major markets such as the European Union and Southeast Asia. As Proview calls for retailers to halt sales of iPads and its latest model in China, Apple is confronting a daunting risk and footing a legal bill that far exceeds the £35,000 ($55,044) it originally paid for the trademarks.

“It’s going to be a lose-lose situation. One of them may win the suit but lose the market… they should consider settling the case… a question one has to ask is who adds value to the iPad trademark?”

David Chen Naiwei AllBright Law Offices

“It doesn’t matter which law governs the contract — it has to comply with the respective trademark laws in each of the jurisdictions.”

Benjamin Bai Allen & Overy

“In China, an assignment of a registered trademark is not effective until approved by the Trademarks Office. In practice, the process takes about 10 to 12 months. The Trademarks Office is far from a rubber stamp and is strict on formalities.”

Kenny Wong Mayer Brown JSM

DEALS

WWW.LEGALBUSINESSONLINE.COM : @ALB_Magazine : Connect with Asian Legal Business n your month at a glance

$1.02 billion M&A Singapore developers’ acquisition of Chao Tian Men land in Chongqing • Acquirer is a joint venture between Singapore real estate developer CapitaLand’s retail arm CapitaMalls Asia and Temasek-owned Singbridge Holdings.

$2.5 billion Capital Markets and M&A Alibaba’s delisting from the HKEx and its privatisation • Latest company to go private after a string of privatisations in 2011, such as Shanda Games and Harbin Electric.

• The company will buy back its shares from investors in cash, offering them the same price the shares were available at during its 2007 IPO. ALB_186x119.5mm_bleed5mm.pdf 1 2011-8-13 17:12:41

C

M

Y

CM

MY

CY

CMY

K

Value ($ mln)

Firm

Jurisdiction

Deal name

Deal type

Allen & Gledhill

Singapore/ China

Singapore developers’ acquisition of Chao Tian Men land in Chongqing

1020

M&A

Clifford Chance

UAE

Emirates NBD’s potential RMB bond issuance

750

Debt

Eversheds

Hong Kong

Xiwang Special Steel’s Hong Kong IPO

171

Capital markets

Mayer Brown JSM

Hong Kong

IFC Development Ltd’s three-year syndicated term loan

1289

Banking

Paul Hastings

Hong Kong

TPG Asia's investment in Li Ning Company

168

M&A

Rajah & Tann

Singapore/ China

Singapore developers’ acquisition of Chao Tian Men land in Chongqing

1020

M&A

Rodyk & Davidson

Singapore/ China

Singapore developers’ acquisition of Chao Tian Men land in Chongqing

1020

M&A

Simmons & Simmons

Hong Kong

Hang Seng RMB-denominated physical gold ETF listing in HKEx

N/A

Slaughter and May

Hong Kong

Alibaba’s delisting from the HKEx and its privatisation

Capital markets

Capital 2500 markets, M&A

5

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ASIAN LEGAL BUSINESS march 2012

ASIAN STOCK EXCHANGES HIT BY ECONOMIC DOWNTURN Stock exchange

Equity proceeds – $ bln

% chg from ’10

Hong Kong

56.7%

Shanghai

47.0%

Singapore

18.0%

Australia

8.7%

Shenzhen SME

39.0%

Shenzhen ChiNext

20.7% 0

5

10

15

20

25

30

35

40

45

50

Source: Thomson Reuters.

Reuters graphic/Christine Chan

21/12/11

Asian interest rates holding steady into the New Year

GC INTERVIEW

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

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

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

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

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

The last year saw a downturn for Asian stock exchanges; worst hit was the HKEx, with more than 50 percent less in equity proceeds than in 2010. Singapore was the one exception, with the SGX performing strongly, throughout the year. Reuters reports that the Singapore Exchange and Australian stock exchange, ASX, have agreed to make further commitments in connection with a merger proposal, which will strengthen the development of the financial services sectors and the national interests of both Australia and Singapore. responsibilities/opportunities to allow for individual development into wellrounded legal advisers.

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

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

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

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

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

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

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

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

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

BRIEFS

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7

REUTERS

Analysis: Chinese investors to tread more carefully in Africa

By David Stanway

REUTERS/Mohamed Nureldin Abdallah

China’s oil and commodities firms are set to tread more cautiously in Africa after being stung by kidnappings, seizures of cargo and, most recently, the expulsion of a chief executive.

But they won’t pull back.

If anything, China will broaden its exposure to the region - home to some of the world’s most resource-rich but unstable countries as it scours the globe for resources needed by the factories and businesses of the world’s fastest-growing economy.

Any major change is, instead, likely to be in tone rather than intent, with Chinese investors expected to take a less aggressive approach and to increasingly partner with other foreign firms in dangerous and unpredictable markets.

“When Chinese firms started in Africa, it was more driven by the political motivations of top executives of state energy giants,” said a Beijing-based oil executive. “So the investments were made in a rushed and aggressive manner ... But (now) I think they will be more cautious when it comes to due diligence and investment decisions.”

Recent problems in Sudan have shown China the risks of being a big and politicised investor in a continent that accounted for 24 percent of China’s crude oil imports last year.

Rebel forces operating in Sudan, near the border with South Sudan, kidnapped 29 Chinese workers last month, and apparently used them as political pawns before releasing them 10 days later. This was the fourth case of abduction of Chinese in Sudan.

Chinese oil firms have also got entangled in a row between Sudan and the newly independent South Sudan. This has led to oil production shutdowns and the expulsion of the head of Chinese-Malaysian oil consortium Petrodar, the main oil firm operating in the new African nation, this week.

As Chinese firms go overseas in pursuit of profit and raw material, such problems have multiplied. In the last year alone, China has seen two dozen cement factory workers being kidnapped by Bedouin tribesmen in Egypt, and a spate of strikes for better pay and conditions at mining operations in Zambia and Zimbabwe.

NO OPTION Given that stepping back from Africa is not an option, China must learn to better navigate the region’s hazards, experts say.

China’s state-owned energy and mineral firms have usually tried to remain above the fray, saying disputes with workers or ethnic groups are the local government’s responsibility. But experts say they should work on being public relations savvy.

“They become associated too closely with the government and don’t make enough effort to tell the local people and the NGOs at home or from abroad that they are doing a good job,” said Zha Daojiong, a professor at Peking University who studies China’s overseas energy deals.

At the very least, China will certainly strive to improve the security of its projects in Africa, said Michael Arruda, Beijing partner with le-

gal firm Jones Day and a specialist in energy deals.

“China isn’t going to change its strategy when it comes to Africa. They are going to go where the oil is. You can’t say you’d like to go to nice places like California because that’s not where the super-sized resources are. In contrast, the resource potential of Africa remains enormous,” he says.”But I think they are going to be more cautious about the safety of their operations on the ground there.”

While Sudan may provide far less oil to China than Iran or Saudi Arabia, it ranks as Chinese oil company CNPC’s most valuable overseas investment.

In building investment ties, China sometimes trades off long political ties to many of the regimes in charge. It also has a lot of human capital invested in Africa and elsewhere around the world, with more than 800,000 citizens employed abroad.

Jobs for hundreds of thousands of Chinese at these overseas locations also relieves pressure on the teeming domestic job market, said Zha of Peking University.

“China is in a vulnerable position. It is different from the United States or Britain or other countries primarily because of the employment of its own nationals,” he said.

China’s focus on Africa and some other emerging markets also reflects its struggle to make inroads in other, more established regions, and not just because of political opposition. “(That) is one of the explanations and it remains true, but I don’t think it is the only explanation,” said Zha. “Oil and other energy investment is a competitive market and Chinese companies in comparison with their peers - not only in Europe and America, but closer to home in Japan and South Korea - are not as competitive in terms of quality and efficiency, the quality of equipment, post project services,” he says.

“In more stable places, the demand for quality is higher, and it is an issue whether Chinese companies are capable of winning contracts in those countries.”

(Additional reporting by Jim Bai and Aizhu Chen; Writing by Raju Gopalakrishnan; Editing by Mark Bendeich) The rest of this report can be found online at reuters.com

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BRIEFS

ASIAN LEGAL BUSINESS march 2012

REUTERS

Trademark dispute looming over who discovered Jeremy Lin

By Benjamin Kang Lim (Additional reporting by Liu Zhen)

The New York Knicks may have given Jeremy Lin his break in the NBA, but a sports ball maker in eastern China saw potential in the Harvard-educated, Chinese-American more than a year and a half ago; and quietly registered his trademark for $700.

The issue is the latest in a series of China trademark troubles for Western sports stars and companies that have ensnared American icons ranging from basketball star Michael Jordan to Apple’s iPad in recent disputes.

Registering is cheap and relatively easy, and since Chinese law favours those who register trademarks first, squabbles over them can prove thorny to unravel, legal experts said.

Lin, 23, the son of Taiwanese immigrants who had been cut by two National Basketball Association teams before getting his chance with the Knicks, rocketed from obscurity to worldwide celebrity this season, coming off the bench to spark a team that had been forced to play without its top players.

But before Lin got hot, in July 2010, Wuxi Risheng Sports Utility Co, which makes about one million basketballs, volleyballs and soccer balls a year, registered his name as a trademark.

The company applied to trademark a variation of Lin’s name, “Lin Shuhao (in Chinese characters) Jeremy S.H.L. (initials of Lin’s Chinese name)”, according to the website of the trademark office of China’s State Administration of Industry and Commerce.

The application was approved in August, with the company paying just 4,460 yuan ($710) for the rights and creating a headache for Lin and his corporate partner Nike, with whom he signed a three-year contract in 2010.

Nike and Lin could not be reached for immediate comment.

China’s relatively relaxed trademark policies could prove costly for Lin, whose $800,000 salary this season is modest

by NBA standards. Forbes SportsMoney, meanwhile, said that he was worth $15 million in its online edition.

“In China, first-to-register gets the rights.

You may have an idea, and you can register its trademark without ever using it. Unlike in the U.S., where one must first show actual use or an intention to use before one can

REUTERS/Adam Hunger

apply for a trademark,” says Horace Lam, Beijing-based intellectual property partner of global law firm Jones Day. “This trademark will be difficult to take from Risheng because Risheng applied for these trademarks for use in the same products that Nike sells: a wide array of athletic apparel and sports equipment.

“Nike and Jeremy Lin could buy the trademark from Risheng, which could potentially cost millions of RMB,” Lam said.

Nike Inc started selling Jeremy Linthemed shoes on its website and launched its “Linsanity” line of clothes at Foot Locker Inc stores this month, cashing in on the point guard’s fame.

Lin himself is applying for a trademark in the United States to the term “Linsanity”, widely used to describe his meteoric rise, according to the U.S. Patent and Trademark Office.

Eye for talent Risheng’s legal representative, Yu Minjie, said Lin caught her eye when she saw him playing on Chinese television in 2010.

“I’m a Harvard fan ... I like him very much.

He gave me a lot of surprises and inspiration,” Yu told Reuters.

Risheng will start selling basketballs under the “Lin Shuhao Jeremy S.H.L.” trademark across China in March.

“Several big companies looked me up to cooperate or buy (the trademark). I’m willing to sell, but there is no ideal offer now,” she

added.

Lin’s is the latest in a series of China-related trademark disputes that have arisen. Last week, basketball legend Michael Jordan filed a lawsuit in China against Qiaodan Sports Co, accusing the firm of unauthorised use of his Chinese name and jersey number.

Jordan is known as “Qiaodan” in China, where basketball is one of the most popular sports with its own own superstar, Yao Ming.

In another high-profile case, a unit of Proview International Holdings has sought to stop Apple Inc from using the iPad name in China, filing a lawsuit in California.

Last week, a Shanghai court threw out Proview’s request to halt iPad sales in the city.

But the outcome hinges on a high court in the southern province of Guangdong, which earlier ruled in Proview’s favour.

China’s trademark system is a minefield of murky rules and opportunistic squatters that even the world’s biggest companies and their highly paid lawyers find hard to navigate.

“Trademark hijacking issues are happening every day in China,” says Lam. “Looking from a pure legal issue, the system allows this to happen.”

“This is a big problem for companies and people trying to protect their IP in China when they are not familiar with the Chinese system.”

(Additional reporting by Liu Zhen from Asian Legal Business; Editing by Don Durfee, Brian Rhoads and Ron Popeski)

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北京市天同律师事务所

对赌协议效力之争：PE投资者利益如 何保障？ ——中国最高法院一起诉讼引发多方关注 彭卿, 合伙人

文/北京市天同律师事务所 彭卿 郑厚哲

对 郑厚哲, 实习律师

赌协议，又名估值调整机制，指投融资双方对未 来不确定情况进行的一种约定。对赌协议具有既 激励融资方实现盈利目标，也降低投资方信息不对称风 险的优点，在PE投资中运用广泛。投融资双方对企业未 来收益预期一致，才会达成对赌协议。但市场风险很难 预测，原有预期如果无法实现，则争端不可避免。一旦 涉诉，对赌协议效力问题往往首当其冲，成为诉争焦点。 北京市天同律师事务所合伙人彭卿律师指出，世界经济 波动加剧，中国经济增速放缓，PE投资纠纷势必增多， 大多会涉及对赌协议效力问题。目前很多对赌协议直接 从国外移植，在中国相对严格的金融体制下，这些舶来条 款是否有效争议极大。最近，作为专注中国高端民商事争 议解决的专业律所，天同关注到中国最高法院正在审理的 一起典型案件，即涉及对赌协议效力问题。

市场期待难兑现 补偿条款酿纠纷 在这起案件中，投资方与融资方及其原股东三方签署增 资协议，约定投资方以相当于增资20倍的溢价认缴融资 方增加的注册资本。协议约定了融资方的利润目标，如 未达标，投资方有权要求融资方补偿，如融资方未能履 行补偿义务，投资方有权要求原股东补偿。 因融资方利润远未达到预期，投资方向法院起诉，要求融 资方及其原股东支付补偿金。针对补偿条款效力，诉讼 双方争辩激烈：投资方主张依约补偿，融资方认为补偿 条款属于保底条款，因损害公司及债权人利益而无效。 一审法院认定，补偿条款损害公司及债权人利益，应认 定无效，投资方无权请求补偿。二审法院则认定，补偿 条款违反投资风险共担原则，属于名为投资实为借贷， 应认定无效，投资方溢价投入的资本，应予返还。两审法 院裁判结果迥异，但均认定补偿条款违反风险共担原则 而无效。融资方不服二审判决向最高法院申请再审。截至 本文发稿，该案尚在最高法院提审过程中。 北京市天同律师事务所 地址: 北京市东城区南河沿大街南湾

子10号 邮编：100006 彭卿 直线: 传真: 邮件:

86 10 5166 9666-212 86 10 6527 9996 pengqing@tiantong law.com

郑厚哲 直线: 传真: 邮件:

86 10 5166 9666-211 86 10 6527 9996 zhenghouzhe@ tiantonglaw.com

违反风险共担? 还是利益对赌?

PE投资中，常见的对赌协议多约定业绩达标时融资方行 权，业绩未达标时投资方行权。但该案补偿条款仅约定业 绩未达标时投资方行权，而未约定业绩达标时融资方行 权，看似保护投资方单方利益，有违公平。因此两审法院 均认定补偿条款违反风险共担原则而无效。 北京市天同律师事务所郑厚哲认为，原审法院观点值得 商榷。案涉补偿条款仍是对赌协议的一种表现形式。该 条款未约定融资方行权，系因投资方以高达20倍的溢价 投资，相当于融资方已预先行使了权利。如融资方业绩达 标，投资方高溢价投资只换取极少部分股权，溢价的绝大 部分让渡给了融资方。如融资方业绩未达标，补偿相当于 重新核定投资方投资额，并未增加融资方风险。补偿条

款并非保护投资方单方利益，相反已预先满足了融资方 利益，很难认定违反风险共担原则。 公司与股东对赌 效力存有风险 郑厚哲指出，案涉补偿条款是否有效，不在于是否违反风 险共担原则，而在于股东与公司对赌是否侵害公司及债权 人利益。补偿条款并非股东间对赌，而是约定公司与股东 双重责任。该约定未能考虑到中国公司法的规定，存有重 大瑕疵。补偿条款涉嫌公司向股东返还出资，侵害公司及 债权人利益，极可能被认定无效。 类似公司与股东对赌，域外比较常见，但如在中国直接 适用，极可能被认定无效。如红杉资本投资飞鹤乳业， 双方约定飞鹤乳业如业绩未达标，需溢价向红杉资本回 购股权。该约定适用美国法律可能并无障碍，但如将类 似约定直接移植到中国，协议效力将面临股权回购损害 债权人利益，名为投资实为企业间借贷等一系列风险。 对赌协议效力 亟待法律明确 对赌协议是否有效，我国尚无成文法规定。有观点认为， 证监会对拟上市公司对赌协议的“零容忍”，似乎表明了对 赌协议在中国不被认可。 北京市天同律师事务所彭卿律师认为，证监会对于对赌 协议并非一刀切，如机器人（SZ300024）对赌协议仅涉 及投资方对管理层的激励，并未引起股权不稳定，即顺 利过会。且证监会对可能引起股权不稳定的对赌协议， 要求事先清理并详细披露，并未否定其效力。相反，清 理的前提恰恰应是承认对赌协议有效。因此，很难将证 监会的态度，作为否定对赌协议效力的依据。 对赌协议效力应如何认定，或将只能通过权威司法机构 在个案中逐步厘清。最高法院对于本案的司法态度，天 同将继续关注。

LEAGUE TABLES

10

ASIAN LEGAL BUSINESS March 2012

CHINA ANNOUNCED M&A LEGAL RANKINGS

CHINA Announced M&A Financial Rankings

Slaughter and May

2,531.4

DEALS: 1 RANK

Credit Suisse

6,022.7

VALUE ($mln)

DEALS: 3

MARKET SHARE: 8.1

LEGAL ADVISOR

VALUE ($MLN)

DEALS

MARKET SHARE

RANK

VALUE ($mln)

MARKET SHARE: 19.4

LEGAL ADVISOR

VALUE ($MLN)

DEALS

MARKET SHARE

2

Vinson & Elkins LLP

2,500.0

1

8.0

2

CITIC

3,304.8

7

10.6

3

King & Wood

2,029.1

3

6.5

3

Deutsche Bank AG

2,768.0

3

8.9

4

Jingtian & Gongcheng

1,797.3

5

5.8

4*

Somerley Ltd

2,531.4

1

8.1

5

Baker & McKenzie

1,580.6

4

5.1

4*

Rothschild

2,531.4

1

8.1

6

Skadden

1,179.7

3

3.8

4*

HSBC Holdings PLC

2,531.4

1

8.1

7

Fangda Partners

1,007.2

2

3.2

7

Caitong Securities Co Ltd

2,334.6

6

7.5

8*

Conyers Dill & Pearman

991.3

1

3.2

8

Morgan Stanley

1,688.9

2

5.4

8*

Maples and Calder

991.3

1

3.2

9

Guosen Securities Co Ltd

1,192.8

1

3.8

8*

TransAsia Lawyers

991.3

1

3.2

10*

China Renaissance Partners

991.3

1

3.2

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

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

CHINA Announced M&A Legal Rankings

CHINA Announced M&A Financial Rankings

Davis Polk & Wardwell

760.1

DEALS: 9 RANK

China Renaissance Partners

456.7

VALUE ($mln)

MARKET SHARE: 1.6

LEGAL ADVISOR

VALUE ($MLN)

DEALS: 20 DEALS

MARKET SHARE

RANK

VALUE ($mln)

MARKET SHARE: 1.0

LEGAL ADVISOR

VALUE ($MLN)

DEALS

MARKET SHARE 0.9

2

Mayer Brown JSM LLP

522.5

4

1.1

2

China International Capital Co

416.9

14

3

King & Wood

494.8

10

1.0

3

China Merchants Securities Co

415.1

10

0.9

4

Mallesons Stephen Jaques

453.2

6

1.0

4

UBS

412.5

5

0.9 0.8

5

Fangda Partners

426.3

11

0.9

5

Deutsche Bank AG

380.6

4

6

Shearman & Sterling LLP

388.2

8

0.8

6

Citi

377.8

5

0.8

7

Allen & Overy

387.6

8

0.8

7

Guangdong Securities

354.4

9

0.8

8

Paul, Weiss

368.6

4

0.8

8

Credit Suisse

341.9

7

0.7

9

Freshfields Bruckhaus Deringer

345.1

5

0.7

9

Goldman Sachs & Co

333.9

4

0.7

10

O'Melveny & Myers

341.9

4

0.7

10

HSBC Holdings PLC

328.8

2

0.7

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

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

ANY CHINESE INVOLVEMENT ANNOUNCED M&A ACTIVITY - QUARTERLY TREND 80

Rank Value US$ billion

70

No. of Deals

60

46.7

50 40 30 20 10 0

83.5

8.3 9.5

16.6

10.7

15.7

12.4

17.0

23.4 21.0 22.3 22.4

1,200

76.4

39.6

42.4

36.4 27.4 16.9

46.0

42.1 40.2 43.6 45.1

1,000 44.9 43.5 47.0

800 600 400 200

No. of Transactions

Rank Value US$ Billion

90

0

3Q 06 the target, 1Q 07acquiror, 3Qtarget 07 ultimate 1Q 08parent,3Q 08 1Q 09 parent 3Qat09 10 transaction.

3Q 10 Announced 1Q 11M&A transactions 3Q 11 NOTES: League tables, quarterly trend,1Q and05 deal list3Q are05 based on1Q the06 nation of either or acquiror ultimate the time1Q of the excludes withdrawn deals. Deals with undisclosed dollar values are rank eligible but with no corresponding Rank Value. Non-U.S. dollar denominated transactions are converted to the US dollar equivalent at the time of announcement of terms. North Asia includes China, Hong Kong, Taiwan, South Korea, Japan. Data accurate as of February 28, 2012

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Sponsored Profile

11

GUANTAO law Firm

Guantao: Blazing a Trail

G

uantao Law Firm, founded in Feb 1994, headquartered in Beijing, is one of the pioneer law firms in China. Guantao now has nine branch offices in Shanghai, Hong Kong, Xi’an, Chengdu, Dalian, Shenzhen, Jinan, Tianjin, Xiamen, and nearly 300 staff including 200 qualified lawyers. .

Cui Liguo

Developing sustainably, Profession-oriented Guantao has always adhered to a sustainable development strategy, strengthening the professional capacity and speeding up the process of internationalisation. “Instead of rushing into the scale expanding of the law firm, our priority is the quality, guaranteeing the satisfactory services for our clients”, said Cui Liguo, the founding and managing partner of Guantao. During 2011, there was no new branch office opened by Guantao; nevertheless, the firm devoted itself to creating a more professional team of legal service, with an increase of 10% of qualified lawyers and partners. Among them, the Hong Kong office acts as an advanced guard to build a professional and international team, more involved in cross-border M&A and investment businesses.

First RMB REIT as outstanding achievement The most representative case of Guantao in 2011 is the Hong Kong Huixian REIT IPO. In this project, the firm represented CITIC Securities, BOCI International and HSBC. As the first RMB REIT (Real Estate Investment Trust), Huixian REIT IPO developed a school of its own in the HK dollars and US dollars leading Hong Kong market, raising a total amount of 10.5 billion yuan. The commercial real estate of Oriental Plaza was packaged in this project. Although this practice is common in Hong Kong locally, the participation of domestic assets doubtless has antecedent meaning.

Cui Liguo indicated that law firms will obtain more opportunities in the RMB REITs business with the market rebound of the internationalised RMB. 2012 business Outlook This year, Guantao still aims at the conventional fields of capital markets, natural resources & energy, infrastructure, M&A, bond, international investment & trade. Overseas investment, antitrust, cross-border M&A, and real estate trust dispute resolution may be the targets of vigorous expansion.

Since the past three years, the scope of overseas M&A by state-owned enterprises has been constantly expanding, cultivating increasingly potential customers, which creates more opportunities for law firms. Guantao is actively involved in the related business, for instance the establishment of overseas investment platform of national enterprises, oversea M&A and project investment & construction.

In addition, with the proceeding of the Macroeconomic regulation and control, real estate trust disputes have gradually increased. Issues stemming from the payment of trust in due course are predicted to be objects of Guantao’s legal services.

The capital markets is traditionally a core field of Guantao.

Holding a cautious optimism over the trend of capital markets in 2012, Cui Liguo pointed out that the direct IPO and refinancing business will be confronted with a reduction this year, but other opportunities begin to be stimulated from various changes in the market, including the issuing reform led by the national regulatory authorities, innovative products in financial market, such as junk bonds, and risk control requirement of listed companies brought by the strict market supervision. Therefore, Guantao will maintain a balance in its capital markets business.

观韬：基石之上，拓路未来

观

韬律师事务所成立于1994年2月，是总部设于中国北京的专业

一只人民币Reit（地产投资信托），共集资105亿元，在港币和美元主导

化、综合性大型律师事务所。观韬目前已在上海、香港等城市

的香港市场中独树一帜。此项目将东方广场的商业地产打包；这一做法

开设了9个分所共10个办公室，拥有合伙人及律师近200人，全部职员

在香港较为常见，但国内资产的参与尚属先行。

300人。

崔利国认为，随着人民币国际化的市场回暖，律所将有更多机会参与人 民币的地产信托投资业务。

稳健发展、专业为本

Beijing Headquarter Office A: 17/F, Tower 2, Yingtai Center, No. 28 Finance Street, Xicheng District, Beijing 100033, China T: +86 10 6657 8066 F: +86 10 6657 8016 E: guantao@guantao.com

观韬始终坚持稳健持续的发展策略，强化专业能力，加快国际化进程。创

2012业务展望

始合伙人崔利国律师表示，“我们并不盲目追求律所发展的规模和速度，

2012年，观韬的业务重点依然是在资本市场，自然资源与能源，基础建

而是以质量为重，保证为客户提供满意的服务。”2011年间，观韬没有开设

设，并购，债券，国际投资与贸易等领域；可能大力拓展海外投资，反垄

新的分所，但致力于打造更加专业的律师团队，合伙人及律师数量同比增

断，跨境并购，地产信托争议解决等。

长了10%。其中，在香港分所加强了专业国际团队的建设，更多地参与到

过去三年内，国有企业海外并购的规模正在不断扩大，潜在客户和业务增

跨境并购和投资的业务中。

多，为律所提供了更多的机会。观韬积极参与的业务包括：央企海外投资

“专业能力是律所发展的根本所在；并且，观韬的服务重在发挥团队优

平台的设立，海外并购，以及海外工程的投资和承建。

势，以团队而非某个律师为单位，向客户提供专业服务”，崔利国指出，“

此外，随着宏观调控的进展，地产信托争议逐渐释放，比如解决信托到

客户才是观韬谋略的核心，项目并不是单一的出发点；我们希望通过优

期支付中产生的纠纷，成为观韬的又一项业务目标。

质的服务赢得长期的顾客”。此外，观韬坚持“职业为先，事业为本”，崇

资本市场业务是观韬的传统核心领域。崔利国对2012年资本市场的

尚职业的律师精神，倡导敬业、勤勉、审慎、诚信的准则，鼓励律师追求

走势持谨慎乐观的态度。他认为，2012年，观韬的直接IPO和再融资业

事业上的长远发展。

务可能会有所削减，但国家监管部门倡导的发行制度改革，金融市场推 出的创新产品，如垃圾债券，以及严格的市场监管为上市公司带来的风

典型业绩：首只人民币REIT

控要求，可能会给律所创造其它的业务机会，因此观韬在整个资本市场

观韬2011年度最具代表性的案例是香港汇贤房托IPO。在这个

中的业务将维持平衡状态。

项目中，观韬代表承销商中信证券、中银国际以及汇丰银行。这是国内第

12

APPOINTMENTS

ASIAN LEGAL BUSINESS MARCH 2012

Lateral hires NAME

Leaving

GOING TO

PRACTICE

LOCATION

Bai, Baoen

Fulbright & Jaworski

HaoLiWen

Tax, IP

Beijing

Simmons & Simmons

Financial markets

Beijing

Zhong Lun

IP, Dispute resolution

Beijing

Cai, Yongmei (Evers)

King & Wood Mallesons

Gu, Ping

Unitalen

Jiang, Ren

King & Wood Mallesons

Phua, Patrick

King & Wood Mallesons

Zhao, Yudong (Steve)

Freshfields Bruckhaus Deringer

FDI, M&A, Infrastructure projects

Beijing

Ashurst

Derivatives, Structured finance, Banking

Beijing

Zhong Lun

FDI, M&A, PE/VC, Carbon trading

Shanghai

Practice

from

to

London

Beijing

Broad & Bright

Relocations NAME

Clark, Nigel

FIRM

Minter Ellison

Banking and Finance

The Recruiters Partners speak to in Asia.

Discreet. Professional. Effective.

CmlAsia

CareerAsia

Partners • Team Moves • Associates • In House

+852 2836 6382

www.cmlrecruitment.com.hk

BRIEFS

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13

REUTERS

China FDI fall puts potential policy response in focus

By Aileen Wang and Nick Edwards

China’s foreign direct investment (FDI) in February shrank from a year earlier, a fourth straight fall, with anaemic inflows from debtriddled Europe an additional sign that the People’s Bank of China may act to ensure steady money supply growth.

The Commerce Ministry said on Thursday that the country drew $7.7 billion (4.9 billion pounds) in FDI in February, down 0.9 percent on the same month in 2011, while January and February combined saw FDI flows fall 0.56 percent from a year earlier to $17.7 billion.

Given that China’s trade balance plunged to be $31.5 billion in the red in February - the largest deficit in at least a decade - analysts said there was a growing likelihood that to keep money supply steady, the central bank would cut the ratio of deposits it makes banks keep as reserves (RRR).

“Falling FDI and the big trade deficit in February put pressure on capital flows. Capital inflows will be sluggish and there may even be net outflows. From this perspective, it supports the case for more RRR cuts,” said Zhang Xinfa, economist at Galaxy Securities in Beijing.

The inflow of foreign capital is a basic component of money supply in the financial system. A fall in its level implies a need to expand domestic credit creation by easing monetary policy in order to keep money supply growth steady.

The central bank has cut RRR from a record high of 21.5 percent in two 50 basis point steps - the first in November and a second in February - to keep credit flowing.

China targets 14 percent growth in money supply this year.

The market consensus is for cuts of 150 bps more in RRR through the course of this year. Galaxy Securities expects three or four cuts of 50 bps each.

But any move by the central bank probably will be tempered by belief the trade position will change. Analysts think trade surpluses will return - an assumption echoed by Commerce Ministry spokesman Shen Danyang.

“Our judgement is that the trade deficit in February is unlikely to persist. Overall, we will still see a trade surplus this year, but it will gradually shrink and account for a smaller percentage of GDP,” Shen told reporters at the monthly media briefing where the Febru-

REUTERS/Guang Niu

ary FDI data was released.

The FDI data follows a raft of other reports which showed lower inflation and slower increases bank lending, retail sales and industrial output, which analysts say point to a gradual economic slowdown, not a hard landing.

SHRINKING SURPLUS China’s trade surplus has been shrinking in part as imports have been ramped up to help drive a rebalancing of the economy away from dependence on external demand towards the country’s gigantic domestic market.

China’s overall current account surplus, as a percentage of economic output, has fallen steadily in recent years. It dropped to 2.7 percent of GDP in 2011 from 5.1 percent in 2010.

Exports were a net drag on GDP growth in 2011, a fact that may placate some critics - particularly those in the United States and the European Union - who say China unfairly supports exporters, a charge Beijing rejects.

FDI from the U.S. rose a marginal 0.87 percent in the first two months of 2012 from a year ago, to $525 million.

Inflows from the EU, China’s biggest trading partner, were down sharply at just $906 million in January-February combined, off 33.3 percent from that period of 2011.

The overall pace of decline from the

27-member EU slowed versus January, when flows plunged 42.5 percent to $452 million.

However, data showed China’s more economically buoyant Asian neighbours were putting money to work in the country. Investment from 10 Asian economies including Japan, South Korea, Taiwan and Hong Kong rose 2.66 percent in the first two months from a year earlier to $15.4 billion.

Service sector FDI in the first two months was $8.0 billion, down 3.51 percent from a year ago. Manufacturing sector FDI was $8.4 billion in January-February, down 0.1 percent over the same period a year earlier.

Meanwhile, China’s efforts to expand its own direct investments in foreign countries were revealed to be surging. Non-financial Chinese firms invested $7.4 billion abroad in the first two months of 2012, up 41.1 percent from a year earlier.

Despite a gloomy economic outlook thanks to Europe’s festering debt crisis and under-spending U.S. consumers, China drew in a record $116 billion of FDI in 2011.

The Commerce Ministry targets an average of $120 billion in investment inflows in each of the next four years.

It has also unveiled new rules to encourage foreign investment in strategic emerging industries, particularly those that bring new technology and know-how to China.

14

Spotlight: yangtze river delta

ASIAN LEGAL BUSINESS march 2012

REUTERS/Claro Cortes

Closing the gap Integrating the Yangtze River Delta legal market Thanks to the most densely built regional high speed railway network, the Yangtze River Delta is becoming more closely connected geographically, economically and psychologically. The convenience of transportation is changing the legal market in this region, as the working radius of a lawyer is significantly extended and the integration of resources and markets brings in all sorts of opportunities, writes Liu Zhen

T

he final leg of the so-called “one hour travel triangle” on the Yangtze River Delta (YRD) will be completed soon.

Also, a new railway line connecting Nanjing and Hangzhou is due to open in the second half of this year.

With the 350 km per hour high speed train, a trip between the capital cities of Jiangsu and Zhejiang provinces will be reduced to less than one hour. This is an additional reduction of travel time, together with the 75 minutes and 45 minutes on the existing ShanghaiNanjing and Shanghai-Hangzhou high speed railways respectively.

As a result, Jiangsu, which is China’s number two province in terms of GDP and Zhejiang, which occupies the number four position, have been technically tied to Shanghai, the nation’s most populous city and also its financial capital. This makes the YRD one of the wealthiest and most economically-active regions in the country.

“The integration of the region is speeding up,” says Louis Meng, a Shanghai-based senior partner at AllBright Law Offices. “A train trip

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Spotlight: yangtze river delta

to Nanjing is even shorter than a taxi ride home from the office.”

Even the Shanghai city metro network has extended to Suzhou, the neighbouring city of Jiangsu. The YRD, consisting of Shanghai and the surrounding cities in Jiangsu and Zhejiang, is getting much smaller. Economic activities have been altered and lifestyles have also changed. Anyone living in Hangzhou can make it to an afternoon tea party in Kunshan in Jiangsu province even upon late notice at lunch. “The convenience of transportation is changing the shape of service industries like us,” says Meng.

Once the railway and metro network are eventually completed, it would take a client the same time to see a lawyer based in the same city as the time needed to visit one 300 km away. Such an idea is beyond imagination in other regions of China. But in the YRD, it is a reality that is taking shape. Wu Chenyao, a Shanghai-based partner at Dacheng Law Offices says the “same city effect” is bringing more equal opportunities to everyone covered by the rail network. “When distance is no longer a problem, service quality becomes the priority,” he says.

With the remarkable speed and convenience of the transportation infrastructure, it is no surprise that big national firms would target more regional cities by either doing more one day trips from the old base – normally Shanghai – or by opening more branches all over the region. It is now technically possible for lawyers to be officially “located” in smaller cities, while still living a metropolitan life outside work in Shanghai; their preferred base.

Native appeal Firms based in Jiangsu and Zhejiang are acutely aware of the threat that competition poses. “We do feel pressure from the expansion of the national firms,” says Zhu Honglan, a partner at Nanjing firm Yongheng Partners. “We may not be as large as they are. It is where we are originated. We have maintained deeply-rooted connections with local clients for decades, which the non-natives could not match.

The clients know us well and trust us.”

It is the same case in Zhejiang. Hangzhou-based T&C Law Firm also enjoys a comfortable advantage in competing for local cases, “because we are highly recognised by Zhejiang clients,” says partner Wang Lixin.

In terms of language, culture and social connections, native lawyers are more appealing to local clients on a regional basis, given that the YRD region has a very unique traditional sub-culture. According to AllBright partner Bao Fangzhou, such a well-built network could also be advantageous for the local firms when handling litigation jobs.

However, due to the size and development level of the local economy, the non-litigation practices of the local firms trail behind those in first tier cities. According to Zhu, one thing that has not changed despite the YRD region’s continuing merger with Shanghai in terms of city functions and economic activities, is the quality of service.“We are still cheaper relatively, yet the level of our services is not necessarily lower. It is something about price ratio,” she says. “This advantage is quite significant when assisting Chinese companies’ outbound FDI.” Zhu adds her firm would rather explore new frontiers than fight a price war. As the national firms approach from the more developed end, local firms could always be pioneers another way. One of Yongheng’s targets is Anhui province, a far less developed province towards the west of Jiangsu. “We have the geographical advantage of bridging the developed and undeveloped regions,” she says.

Another direction for local firms is heading to Shanghai, the base of those national firms where the market has already been

cultivated into a sizable and mature one.

The convenience caused by integration is fair for everyone, although leaving home soil is not that easy. The ambitious ones have already started. Referring to T&C’s already open Shanghai office, Wang says: “Outside Zhejiang, our brand appeal is not as strong as well-established firms based in Shanghai and Beijing. This is a general headache for provincial-level firms to open up outside the province.”

Localisation National firms, in the meantime, are trying hard to localise their branches in the second and third tier cities. “Local branches are psychologically closer to the clients,” says Bao of AllBright.

Generally, the YRD region is known for its prosperous small and medium-sized enterprises (SMEs) in the private sectors.

In fact, law firm clients there are very diverse. In Jiangsu, Suzhou is well known

“We are carrying out guerilla warfare to encircle the central city from second or third tier regions.”

Wu Chenyao, Dacheng Law Offices

for attracting foreign investment; coastal city Ningbo is close to two major ports with a busy logistics business; and Nanjing, the capital, has many state-owned enterprises (SOEs).

In Zhejiang, Wenzhou is the hometown of thousands of private entrepreneurs and their companies; the Zhoushan Islands manage maritime affairs; capital Hangzhou boasts of advanced tertiary industries and plans to become an international city like Shanghai.

A high-profile legal player in the region is Dacheng Law Offices that has opened 11 offices all over the region in order to cover as many cities as possible. “Our strategy is to further increase our high proportion of market share, maintain a strong presence and the exposure of our brand, and bring forward our involvement in deals ahead of time with our client information-collecting organs,” says Wu, who runs Dacheng’s Shanghai office and oversees the 11 YRD branches.

“When a potential deal is known to the legal community, all the firms will try very

15

16

Spotlight: yangtze river delta hard to push in,” he says. “We want to make sure that we have hooked it up way before that stage.” He cites a Maoist idea to explain the strategy. “We are carrying out guerilla warfare to encircle the central city from second or third tier regions,” he says. “We do not directly clash with some of our highend competitors in the first place. We go to localities, develop distinguishing practice expertise, and grow ourselves.”

Some other firms are less radical. For instance, maritime law specialist firm Wintell & Co recently opened its first two YRD offices in Zhoushan and Ningbo. “Our strategy is entering this region with a clear image of our expertise, as very few local firms have such

“We do feel pressure from the expansion of the national firms… but we have maintained deeply-rooted connections with local clients for decades, which the non-natives could not match.”

Zhu Honglan, Yongheng Partners a market segmentation identity,” says Chen Youmu, a Shanghai-based partner at Wintell & Co. “We are like foreign missionaries with a few shortcomings in understanding the local language and culture,” he says. “Therefore, we would like to recruit native people from partners to sales and administrators to make our offices both ‘professional’ and ‘localised’.” Good lawyers originating from the YRD cities are in high demand and working in the hometown is also a popular option for them, according to Meng of AllBright.

Another common “localisation” approach is merging with local firms, which is being used in many expansion deals. Even some famous firms with long histories have given up their names to become part of leading national firms. “AllBright is one of the best known brands in the YRD, and so local firms would be willing to join us. We are always careful to choose the strong ones,” says Bao, whose firm has now reached out to firms in Nanjing, Hangzhou and Suzhou.

Once merged, according to Meng, the local lawyers can also benefit from an incorporated national network of resources and enjoy a rise in the quality of practice.

“We are working on passing on our expertise

ASIAN LEGAL BUSINESS march 2012

in many high-end practices to our branches and training the local lawyers to our standard,” he says.

However, according to Zhu, some mergers are not as successful.

“Some mergers are all about the change of name, while every substantial thing remains the same,” she says. “So we always cautiously evaluate each and every one of the possible merger opportunities, although we are open to such offers.” As a late starter, the YRD region has not matured. But with the increasing mergers, it is undergoing a consolidation, which is running parallel to the integration of the regional economy.

Management For local firms, the arrival of national firms in their backyard means a provision of case studies to observe and learn from apart from competition and mergers. “Some provincial lawyers used to have an old fashioned mindset,” says Wu. “When we enter a city, we directly export the advanced management to local branches in terms of practice, operation, and branding. And we will continue the exchange with other firms.”

Yongheng, according to Zhu, has adopted the internal organisational and management systems of top national and international firms. It has been using many means to promote the brand which, until a couple of years ago, was not a popular concept.

“We also started doing promotion campaigns in law schools and running graduate intern schemes. We are learning this kind of things from the industry leaders,” she says. “Also, we are trying to connect with foreign firms. We now have a broadened view.” Wang of T&C says his firm is improving its management, marketing and sales tactics in order to facilitate professional development.

Economic opportunities The SME and private sector clients of several Jiangsu and Zhejiang firms have been suffering since the global economic crisis broke out in 2008.IPOs in Shanghai and on overseas bourses, which used to be strong, have been decreasing, and the once red hot real estate market has shifted from the first tier cities to second and third tier ones. However, other areas have made up for these - private equity (PE) and RMB-denominated investments are getting stronger.

YRD investors are trying out cross border mergers and acquisitions (M&As), says Bao. “It used to be foreign capital coming in. But in current economic conditions, Chinese companies are the buyers.

Not only are the central SOEs’ strategic moves directed by the government, but also the private enterprises are going out,” he says.

“This is good timing for us to help out.”

Zhu is acting on an EPC (engineering, procurement and construction) project in India for a local client. She is also advising Chinese enterprises’ real estate acquisitions in Australia and the U.S. “Many of our clients are quite ambitious,” she says. “We advise them to be particularly careful about labour, tax and environmental problems.”

Trade in scientific and technological innovations is a potential market for YRD firms. The economic crisis has forced enterprises to upgrade their technology and innovation is highly encouraged by governmental policies, says Wu. Some practice areas are flourishing due to the easier access to Shanghai. For example, more and more multiprovincial or multinational disputes are undergoing arbitrations in Shanghai, partially due to better legal service. “The market is big enough in this region. We can position ourselves differently from the competition, and we can all still make money,” says Bao.

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17

yongheng partners

Yongheng Partners’ Steady Growth and Commitment to Quality has it Poised for International Success

Y

Chen Yingning

ongheng Partners has been a leading firm focused on commercial law in the Yangtze Delta region since 1997.

The firm originated with very humble beginnings. As Mr. Chen Yingning, a managing partner since the firm’s creation, says, “We were very small. We only had five partners and three associates. However, we grew up rather quickly.”

Today Yongheng has 68 practicing lawyers and 14 partners.

While this number does not stand out in quantity compared to other large domestic firms, Mr. Chen maintains that it is the firm’s commitment to quality and developing talent internally that has allowed it to stand apart. “Only 1 or 2 partners came from other firms. I think that is one reason why our firm has remained so stable this decade. Very few people ever leave our firm.”

The commitment to developing talent does not only apply to young associates at Yongheng. Under the support of Nanjing Normal University Law School, the firm has made a commitment to integrate legal theory and the actual practice of law. The firm has long provided scholarships for outstanding students, hosted summer and winter internship programs and for the last 3 years has helped set up an exchange program with Northwestern University in Chicago.

Seven practicing attorneys are also full time professors at the law school.

Yongheng’s founding ideals of “Strategic Planning, excellence in service, teamwork, and goal-oriented productivity” have also played a role not only in keeping

talent but allowing that talents to thrive, leading to the success the firm has experienced for the last 15 years. “Our product is our service,” Mr. Chen says. “When our service is accepted by our clients we keep a stable client base.” Like internal talent Yongheng’s clients tend to stay: Mr. Chen continued: “And actually most of our clients have been with us for over ten years.”

Yongheng has long been highly regarded in Jiangsu province but over the past several years has been expanding and succeeding in other Chinese provinces as well as internationally. Mr. Chen attributes this success to being a local firm familiar with local regulations as well as government while having vast international experience.

“Law firms in the delta are more traditional. Domestically they are full service but we are more specialized and experienced internationally. On the other hand, compared to international firms in Beijing or Shanghai we have focused more on Jiangsu. We have a lot of experience with the local government regulations and the big companies in region.

We are more localized but at the same time we can provide high quality work for international clients.”

According to Mr. Chen, Yongheng will continue to grow at a stable pace while developing internal talent and promoting the firm’s culture. Moreover, as Yongheng transitions from a regionally lauded firm to an international player, it is clear quality legal service will still be at the heart of Yongheng Partners.

永衡昭辉律师事务所稳健的增长和对服务质量的承诺，使其获得了 国际性的成功

自

江苏永衡昭辉律师事务所 地址：南京市珠江路222号长 发科技大厦13层，邮编：210018 电话：+86 25 8319 3322 传真：+86 25 8319 1022 电邮：chenyingning@yhpartners. com 网址 : www.yhpartners.com Yongheng Partners A: 13/F, Changfa Science & Technology Building, 222 Zhujiang Road, Nanjing, China, P.C. 210018 T: +86 25 8319 3322 F: +86 25 8319 1022 E: chenyingning@yhpartners. com W: www.yhpartners.com

1997年成立以来，永衡昭辉律师事务所已成为长三角地 区专门提供商事法律服务的行业翘楚。该所在成立之初 并不起眼。陈应宁先生是该律所成立以来一直于此执业的执行 合伙人之一，其业务专长包括企业上市和并购等领域。他称：“ 我们当时规模非常小，只有5名合伙人和3名律师。不过，我们成 长得很快。”如今，永衡昭辉已有68名执业律师和14名合伙人。 虽然与国内其他大型律师事务所相比，这些数字在数量上并不 出众，但陈应宁先生认为，正是永衡昭辉的质量承诺和内部人 才培养方略使得它卓然独立而自成一家。“我们所只有一两名合 伙人来自其他律所。我想这就是我们所这十年来一直很稳定的 原因之一，很少有人离职。” 培养人才的承诺并不仅限于针对永衡昭辉内部的年轻律师。 在南京师范大学法学院的支持下，永衡昭辉承担起了法律理论 联系实务的责任，永衡昭辉长期为该院优秀学生提供奖学金、 寒暑假实习岗位，永衡昭辉的七名资深执业律师同时也是该法 学院的全职教授。同时，永衡昭辉与美国西北大学法学院成立 了一个合作的交流项目，在过去的3年中持续向该法学院学生 提供暑期实习岗位。 永衡昭辉秉持“专业筹划、勤勉服务、团队智慧、成就价值”的 创立理念，不但要留住人才，而且要让人才茁壮成长、走向成功，

这就是永衡昭辉在过去的15年中所经历的。“我们的产品就是我 们的服务”， 陈应宁先生说，“当客户认可了我们的服务，我们就有 了稳固的客户基础。” 陈先生接着说：“而且实际上，大多数客户 都已经跟我们合作了十多年之久。” 在江苏省内，永衡昭辉得到了长期的高度评价，而在过去的几 年中，永衡昭辉也将业务拓展到了中国其他省份，甚至在国际领 域取得了一定的成就。陈先生将永衡昭辉的成功归因于以下方 面：作为一家本地律所，通晓当地法律法规，熟悉当地政府，并 具备丰富的国际经验。“长三角地区律师事务所都比较传统。在 国内方面，他们能提供周到而全面的服务。而我们则在国际方面 上更为专业，经验也更为丰富。另外，与北京或上海的国际性律 师事务所相比，我们的关注点更多在江苏省内。我们熟知当地政 府的法规、条例、制度等，在这一地区的大型企业的法律事务处 理方面有着丰富的经验。一方面，我们更本土化，另一方面，我们 同时又可以为国际客户提供高质量的服务。” 就像陈应宁先生所说的那样，在培养内部人才和加强企业文 化的同时，永衡昭辉将以稳健的步伐继续进步、成长和发展。 此外，在永衡昭辉从为人称道的地域性律师事务所转变为国际 性事务参与者的过程中，提供高质量的法律服务毫无疑问依然 会是永衡昭辉律师事务所的重中之重。

18

mARKET MOVEMENT

If you can’t beat them, join them

ASIAN LEGAL BUSINESS MARCH 2012

REUTERS/Petar Kujundzic

The rise of law firm mergers in China With competition among law firms in Asia hitting an all-time high, more mergers are expected in the coming year. Rob Green explores the growing trend of tie-ups between international and Chinese law firms

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T

owards the end of 2011, the legal industry press seemed to be full of whispers - followed by confirmations and then details - of the exciting merger between Chinese legal giant King & Wood and market leading Australian firm Mallesons Stephen Jaques.

This much publicised merger clearly indicates the growing strength of the Asian legal market, and the importance of China’s role in the region. With the balance of the global economy moving away from the U.S. and Europe towards Asia, international law firms that are looking to gain a foothold in the potentially hugely profitable China market are starting to pursue ways in which they can buy into the action. Some of these firms may have existed in the region for years, but may have never really been able to get the critical mass that they enjoy in other markets. However, by tying into a relationship with a prominent domestic firm, they could get the foothold they are looking for practically overnight.

Globally, there has never been so much merger activity among law firms. About 60 mergers took place across the globe last year, and it is forecast that this number will be even greater in 2012.

One reason that can be pinpointed to explain the increase in mergers is that competition among law firms is at an all-time high. With respect to law firms in Asia, as the Chinese market emerges, both regional and international firms are continually fighting for a leading position in the Asian legal market. Rather than stand by and allow other firms to take the lead, firms must deal with this competition, and one of the most obvious ways to deal with it may be to join forces.

The combination that formed King & Wood Mallesons represents the largest merger deal involving a local Chinese firm till date. The new firm has more than 1,800 lawyers across five countries.

Chinese firms looking to increase their footprint outside their home market appear to be attempting to follow in King & Wood’s footsteps. As the widely reported King & Wood Mallesons merger takes shape, two of China’s largest law firms, Dacheng and Yingke, are opening offices in London, while smaller Chinese firm Broad & Bright is reportedly in merger discussions with Clifford Chance; all in a bid to gain access to a wider international market.

The benefits for a China-based firm tying

mARKET MOVEMENT

“There are arguments that the success or failure of partnership with Chinese law firms could largely depend on decisions made by the ever-changing policies of a rapidly developing nation.”

Rob Green, CML Recruitment

up with an international brand are obvious: they may gain more international exposure and access to technology over time; they may be able to garner the expertise and marketing power they may not have had before, without the risk of losing significant amounts of referral work from UK or U.S. firms.

Clifford Chance is by no means a stranger to mergers, having “rebranded” two mid tier Australian law firms last year to give them a firmer presence. By joining forces with a Chinese firm, however, they hope to achieve the presence they have desired in Asia. As the Asia market strengthens, international firms are increasingly seeing the need for Chinese partners in their firms.

But mergers aren’t always plain sailing. It can take time for the old firm to become the new firm, and takes more work than a change of letterhead and signage. Attitudes and cultures, and most importantly clients’ attitudes towards pricing structures, can be hugely conflicting and lead to complications. It may be difficult to ascertain which of the two firms is the more dominant and which should receive the larger share of the business; something which is bound to affect the overall efficiency of the business.

There are arguments that the success or failure of partnership with Chinese law firms could largely depend on decisions made by the ever-changing policies of a rapidly developing nation. The business rationale for a combination between a Chinese and international firm is not necessarily as straightforward as one between, for example, an Australian firm and a British firm.

Another factor which might be a cause for concern is that the finances of the other firm may not always be as expected, and this could easily result in failure for one or both firms. Both King & Wood and Mallesons are avoiding this risk by remaining financially independent of one another as King & Wood Mallesons. They will share a common name, and thus reap all the benefits of the merger, while maintaining separate budgets and expenses.

Only time will tell if these mergers between two hugely culturally different firms will work. There are speculations that if the King & Wood Mallesons merger succeeds, it could only be the beginning.

Mallesons is reportedly also in discussions with Singapore firm WongPartnership. But some believe the alliance would not stop in Asia. Instead, in order to gain more of an international presence, the merger will only really take off if it ends up forming a further merger with a UK or U.S. firm. If this initial merger succeeds, it is impossible to predict how many firms will try to follow suit. Suffice to say, 2012 could be a very interesting year to watch.

Rob Green is Managing Director, Asia at CML Recruitment

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20

Analysis

ASIAN LEGAL BUSINESS march 2012

Polluted w

make way for environmental A series of large-scale incidents in China have recently turned the spotlight onto water pollution. At the moment, environmental litigation in China is not easy for the victims or the lawyers. But hopefully, this market will develop with heightened public awareness and proposed amendments to environmental laws. Zhen Liu reports

Analysis

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21

T

he arrest of 10 chief officials of two companies responsible for a massive water pollution disaster in southern China on Feb. 15 did little to eliminate peoples’ doubts about the execution of environmental protection laws in the country.

On Jan. 26, 2012, the 3.7 million residents of Liuzhou city in southern China were warned by officials to avoid drinking tap water because of a carcinogenic cadmium discharge from two mining and metal processing companies in upstream Hechi city. It was found that this discharge by these two companies in the Guangxi region had polluted a long stretch of the Longjiang River since Jan. 15, and had left an enormous amount of fish dead.

Some 20 tonnes of cadmium from the plants’ waste water was pumped into the river, and ultimately flowed into the heavily populated Pearl river area. Local firemen poured hundreds of tonnes of neutralisers into the water, hoping to dissolve and precipitate the toxic heavy metal substance.

This disaster was followed by more industrial accidents that resulted in large-scale water pollution: a South Korean chemicals barge sank in the Yangtze River on Feb. 2, releasing phenol that caused tap water to smell strange in the city of Zhenjiang located 290 kms upstream from Shanghai. Two weeks later in Guangdong, export industrial city Foshan had its water supplies disrupted after a fish farm discharged sewage into the local water source.

The arrested officials responsible for the cadmium spill included the board director, the CEO, the environmental department head of the Guangxi Jinhe Mining Co, in addition to three shareholders and four operational officials of the Hongquanlide Powder Material Co. They were accused on the “suspicion of environmental pollution” offence, a charge that could lead to up to seven years imprisonment if convicted.

In the meantime, the Hechi city government announced it would assist the affected fisheries to claim indemnity from the polluters.

However, many worried that the governmental interference once again demonstrated the powerlessness of the law to protect the environment in China.

waters

environmental opportunities

Running the show Among the three applicable types of accountability systems in China, namely the administrative responsibilities, civil liabilities and criminal liabilities, the government normally prefers the first one when handling environmental disasters.

“The government prefers exercising its administrative power as it feels more comfortable with this,” says Zhao Jingwei, partner at Yingke Law Firm.

Zhao represented the 107 fishermen from the coastal province of Hebei, who were attempting to sue oil giant ConocoPhillips for damages caused by a massive oil spill that originated in the latter’s

REUTERS/Stringer Shanghai

“So far the environmental litigations are basically non-profit ones, mainly for the public interest.”

Zhao Jingwei, Yingke Law Firm

22

Analysis joint venture oilfield with China National Offshore Oil Corp (CNOOC) in the Bohai Sea. In January this year, China’s Ministry of Agriculture, as the caretaker of all fisheries in China, reached an agreement with the oil duo. A total of one billion yuan ($159 million) was agreed upon for compensation and the restoration of polluted areas. Regarding the case itself, Zhao and his clients found it in a stalemate at the very initial stage.

“The government runs the whole show,” says Professor Zhou Ke, the head of the Institute of Environmental and Natural Resource Law at Renmin University.

Critics believe government involvement should not replace legal action, and relevant legal liabilities should not be overlooked even if the government resolution has made some progress. In fact, the agriculture authority’s legitimacy in representing maritime interests or human health rights was also questioned during the Bohai case.

After an oil spill took place in the Bohai Sea in 2006, a settlement was reached between the victims and the oil company via a legal procedure. A group of burglars damaged the equipment at the Sinopec Shengli Oilfield (SLOF), causing oil to leak into the sea water. Eight fishermen from the Hebei province filed a lawsuit, and eventually reached a final agreement of compensation in 2011 after a court conciliation.

The legal advisor to the fishermen in this case, Xia Jun of Zhongzi Law Office, suggests that the successful legal resolution was, to some extent, due to its relatively low profile and smaller scale.

“When an accident involves a large amount of victims, maintaining social stability becomes the top priority,” he says. “In this type of case, governments in China are used to handling things themselves instead of processing it through the courts.”

One such high-profile case was the explosion of a chemical plant of the China National Petroleum Corp (CNPC) in Jilin province in December 2005. This sent an 80 km long toxic benzene slick flowing along the Songhua River. The water supply of 10 million people in

“The government policy is favourable (for green industries), and there are plenty of opportunities everywhere.”

Lin Wei, Zhonglun W&D

Northeast China and Russia was cut off for five days.

It took the government 7.84 billion yuan ($1.24 billion) over the next five years to treat the polluted water and restore the environment. However, very little of this amount was contributed by CNPC. Current laws and regulations set the maximum fine imposed upon environmental polluters at an embarrassingly low 100,000 yuan ($15,887). The media reported that CNPC, the largest oil company in China, paid just one million yuan ($159,000) to the state environmental agency, and only another five million yuan ($793,000) to Jilin province.

“It is unfair that the government foots the polluters’ bill with taxpayers’ money, resulting in the polluters’ cost being very little,” says Zhao.

ASIAN LEGAL BUSINESS march 2012

Environment protection agencies do not have the teeth to enforce laws. “The environmental protection administration should be empowered, and their supervision over natural resources be enhanced,” says Zhou.

Rocky road Many lawyers who are working on environmental litigation cases are willing to sacrifice some profit to build their reputations as socially responsible crusaders. They see potential for this market segment to mature and become lucrative, even though going through the full course of a case can be unpredictable and toilsome. As public attention to environmental issues grows and a possible environmental law amendment is discussed, the profiles of these lawyers are also expected to be enhanced.

Some environmental lawsuits end up going nowhere, while others are not even considered by the courts.

“The main problem is the evidence collection,” says Lin Wei, partner at Zhonglun W&D. The victims of environmental disasters are most likely vulnerable individuals who do not have enough technical capability, legal knowledge, or financial support to provide clear and sound proof required by the court.

“Many environmental pollution incidents are not as obvious as other kinds of accidents in which you can easily identify the responsible party,” says Zhao, who notes that the polluters of the Longjiang incident were confirmed only weeks after the toxic spill.

For instance, damage assessment is necessary evidence for the court. But it is not fully acceptable unless it is issued by an officially licensed institution, either governmental or third party. It is a long and complicated procedure which ranges from sampling the polluted substance to finally estimating and calculating the economic loss. Every step has to strictly follow the relevant technical manual.

The problem is that there are very few institutions being licensed to make such assessment reports, and the qualified ones are either less than efficient or excessively expensive for the victims, according to Xia. “Theoretically, once the court accepts a case, a certain degree of presumption of causation is supposed to be used to reduce the burden of proof upon the victims,” says Zhao. “But in practice, this principle is not

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implemented that well.”

Supposing that a court verdict is made, the problem of execution then comes to a head. The polluters are often key industry players who drive local GDP growth. As a result, they enjoy a degree of immunity as they carry much more weight with local authorities than the government’s environmental protection aspirations. But Xia suggests the bigger enterprises are more likely to be compliant.

“There is local protectionism in many places and smaller companies might be financially unable to afford the decided compensation,” he says.

From public interest to profit?

Laws and regulations on water pollution are relatively more complete than other environmental laws due to the repeated occurrence of water-related incidents across the country. The Law of Prevention and Control of Water Pollution was last updated in 2008. In contrast, the Marine Environmental Protection Law has not been revised since 1999, and some of its items contradict the Tort Law that came into force in 2009. “The legislation is still loose,” says Lin. According to Zhao, an obvious gap is that almost nothing regulates environmental damage. The laws are mainly concerned with human property rights or personal rights. But in the Longjiang case, it was not only the fisheries that were harmed, but also the water, the soil, and other environmental elements.

Although the officials said the detected cadmium level had dropped to normal levels after the neutralisation treatment, the long-term impact of the cadmium compound sediment that has settled at the bottom of the river is worrisome. Cadmium poisoning can soften human bones and cause severe pains in the joints and spine, and sometimes lead to anaemia and kidney failure resulting in the death of a person. In Japan, it is known as the Itai Itai (“painful painful”) disease, with hundreds in the country suffering from the illness after being subjected to decades of cadmium pollution by Japanese mining companies.

Zhou suggests that China add “public environmental rights” into the current laws, which contain entity rights to live in a good environment and procedural rights such as the right to know about them as well as the power to supervise and litigate environmental issues. By 2000, over 200 countries had officially recognised

Analysis

environmental or similar rights, he says.

According to Professor Cao Mingde of the China University of Political Science and Law, if such rights are confirmed, a foundation will be set up to amend the Environmental Protection Law and Civil Procedural Law. This will, in turn, encourage environmental and civil public interest lawsuits.

Legal practitioners would also then see a surge in litigation mandates, not only from the direct victims seeking justice in court, but also from other individuals and non-governmental organisations (NGOs). In fact, organisations could then voluntarily cite environmental rights to sue the polluters.

“The eligible organisations are not that interested in doing this.

On the opposite end, many NGOs, grass root groups and activists that have the willingness and resources to do this are currently sidelined by the laws and regulations,” says Xia. After the 2005 Songhua River benzene disaster, several faculty members and students of the Peking University Law School filed a lawsuit against CNPC on behalf of the victims and affected wildlife, water, and islands in the Songhua River. But the claim was rejected by the court as the group was not regarded as proper plaintiffs.

Together with an expected increase in the number of environmental litigation cases, lawyers might enjoy better pay.

To realise this, Cao believes China should set up a rule (that many other countries already apply) which states that volunteer plaintiffs would receive a considerable share of the final compensation award as a reward if they win.

Non-litigation Post-pollution is when revenue can be generated, given that the Chinese government is generously investing in pollution treatments and environment friendly projects to improve the growth of encouraged industries (for example, clean tech and green tech) and upgrade their technologies.

A historical example is found in Japan, where the infamous “Four Big Diseases” caused by industrial pollution – including the Itai Itai disease – broke out in the second half of the 20th century. The island nation has since established its health damage compensation fund.

Some of the bigger state-owned enterprises (SOEs) and energy giants in China are now considering the need to set up special environment compensation funds in light of heightened risks.

Moreover, a compulsory insurance system in which most industrial companies are mandatorily charged in accordance to their environmental risk levels is being discussed by legislators, says Cao. Although these funds are yet to be structured, law firms will undoubtedly be able to seek opportunities in the founding and operation of these presumably massive fund pools.

Meanwhile, a burgeoning demand for water treatment technologies and facilities will lead to an active market which will incorporate various practice areas such as cross border M&As, project finance, intellectual property, and tax among others.

“These businesses are growing rapidly,” says Zhao, “They are strongly backed by the state. They make commercial profit from the market, while getting subsidies from the government.”

In other developments demonstrating China’s commitment to improving its environmental image, the China Banking Regulatory Commission (CBRC) recently introduced the “Green Credit Guidelines”. These were aimed at facilitating the financial needs of the “greener” enterprises. “The government policy is favourable, and there are plenty of opportunities everywhere,” says Lin.

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ASIAN LEGAL BUSINESS march 2012

The battle against corruption

Life after the UK Bribery Act It has been eight months since the UK Bribery Act came into effect.

Combine this with the U.S.’ Foreign Corrupt Practices Act and stringent local laws, and it is clear that there is a global effort to purge corruption from within corporations. In-house counsel in Asia today are facing unique challenges in educating and training their companies’ employees, and creating effective, but practical compliance programmes. Candice Mak reports REUTERS/Christian Hartmann

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In-house survey: compliance

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“The rather stringent policy arising from the UK Bribery Act has given rise to a lot of practicality concerns from the business folks.

Hence, we see the need to draft local policies to better fit their needs and circumstances.”

Kitty Yu, Assa Abloy

T

here was an anecdote floating around last summer that spoke of a global law firm down in Southeast Asia which had recently held a media and client briefing to discuss the impact of the newly-enacted UK Bribery Act (which came into effect on July 1, 2011). The message from its lawyers was stern: that corruption would not be tolerated. In particular, the firm highlighted the practice of gift-giving – a business cultural norm for Asians – and how this would need to be severely clamped down upon with the broadened definition of what a ”bribe” constituted. As the attendees shuffled out after the presentation, each was handed a gift bag – inside which was the firm’s marketing material and a shiny, brand new bottle of Moët champagne. “Is this a test?” one departing in-house counsel reportedly quipped. Others politely refused to take the goodies.

Since the UK Bribery Act became effective and U.S. authorities ramped up enforcement of their tough Foreign Corrupt Practices Act (FCPA), in-house counsel in Greater China have also tightened their focus on compliance and training. Although many agree that compliance had always been a long-term objective, the intensified scrutiny by anti-corruption officials around the globe and the rising number of high-profile corruption cases have added further urgency to their training programmes and policies. “We have been putting a lot of emphasis on anti-bribery in recent months,” says Kitty Yu, an in-house counsel at Assa Abloy, a Sweden-based lock manufacturer.

“The rather stringent policy arising from the UK Bribery Act has given rise to a lot of practicality concerns from the business folks. Hence, we see the need to draft local policies to better fit their needs and circumstances.”

Putting a compliance programme in place to prevent bribery is now a standard practice for many companies operating across Asia.

Andrew Martin, Singapore-based principal of Baker & McKenzie.

Wong & Leow, tells TrustLaw, a Thomson Reuters Foundation Service that implementing a compliance programme entails establishing a culture on what is considered behaviour that will not be tolerated.

It also involves sending a message to employees that appropriate action will be taken if they are caught in acts of bribery. “Otherwise the compliance programmes will be just a piece of paper,” he says. In this regard, many companies are increasingly looking to adopt a riskbased approach while developing their compliance programmes.

The UK Bribery Act and its relatively recent inception has in-house counsel holding their breath. Its long extraterritorial reach and stand on holding companies accountable for acts of bribery from thirdparty service providers are yet to be tested, and nobody is quite sure how the law is going to be enforced. “Because of this, people are holding up their compliance standards to a very strict level,” says Yu of Assa Abloy. In the TrustLaw report, Hong Kong-based Baker & McKenzie dispute resolution partner Gary Seib singles out third-

party agents as one of the main challenges to firms when they put processes and procedures to prevent bribery in place. “It is consistent under the principles of guidance, and would require proper due diligence,” she says.

Bad examples The first person to be convicted under the UK Bribery Act was jailed for three years on Nov. 18, 2011. Munir Patel, a court clerk who worked in London, had pleaded guilty to accepting £500 ($786) to “get rid” of speeding charges by keeping the details off a court database.

“The sentencing demonstrates the significant sentences that the courts are willing to impose on individuals who commit an offence under the (Bribery) Act,” said London-based dispute resolution partner at Ashurst, Angela Pearson, while speaking to Reuters. “It is only a matter of time before the SFO (Serious Fraud Office) bares its teeth and prosecutes the first corporate or its directors under the Act. In the meantime, the business community collectively holds their breath.”

Closer home, just before Patel’s sentencing on Nov. 10, 2011, China executed Luo Yaping – an official dubbed the “land granny” – after she was found guilty of having amassed 145 million yuan ($23 million) in bribes and illicit wealth. Luo was head of a land sub-bureau in a district of Fushun, a city in northeast China; not an especially high position. Despite this, she was able to use her power over land development and compensation to accumulate a fortune in bribes and embezzled compensation. A leader of the ruling Communist Party’s anti-corruption agency said Luo’s crime involved “the lowest ranked official, the biggest amount, and the most evil means”.

On July 22, 2011, former China Mobile vice president Zhang Chunjiang was sentenced to death with a two-year reprieve for

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accepting bribes. He was convicted of accepting more than $1.15 million in bribes between 1994 and 2005 while working at various state-owned telecommunication companies. The same week, two former vice mayors of Hangzhou and Suzhou, Xu Maiyong and Jiang Renjie, were executed for bribery.

In 2009, 60-year old Chen Tonghai, former chairman of Sinopec, was also given the same sentence as Zhang for taking more than $2 million in bribes. Ex-food and drug safety chief Zheng Xiaoyu was executed in 2007 after a swift sentence that found him guilty of derelict duty and taking bribes worth 6.5 million yuan ($850,000) from eight companies. His execution marked China’s first death sentence imposition on an official of Zheng’s rank since 2000.

This parade of examples demonstrates China’s increasingly rigorous efforts to root out corruption. Five years ago, many executives would not have thought twice about how their actions could be construed in terms of accepting or giving gifts, says a Shanghai-based Asia general counsel of a multinational company (MNC). “We are helping senior executives and senior leaders to realise that compliance is not just about protecting the company’s interests, but it’s about protecting them as individuals too,” he says. “Recently there have been many cases and whereas before it may have been difficult for them to buy into the concept, now they see people sitting in jail or being executed, so they really believe it.”

Tone from the top The tone of the top management of companies with regard to compliance programmes and their involvement in championing the cause against corruption is crucial. Statements issued by several prosecuting agencies in the UK commenting on cases of bribery also pointed out that companies involved in such acts often had a culture of non-compliance, and lack proper procedures with the top management turning a blind eye to these issues. One of the principles that the guidance of the Bribery Act has identified is top-level commitment. Speaking on the

ASIAN LEGAL BUSINESS march 2012

subject, Seib says: “Compliance programmes will not be effective unless there is proper tone at the top. It is important that the senior management instill a culture within the organisation that bribery is never acceptable.”

Senior level executives are now paying more attention to compliance, and realising their stake in the process. All in-house counsel surveyed agree they are adequately supported by their top-level management. “You have to scare them a bit,” says the Shanghai-based MNC general counsel. “But they do understand the seriousness of it, and definitely see how the corruption laws can go all the way up.” A China-based legal counsel at a European conglomerate emphasises that his superiors follow the tone of his company, and will act swiftly to keep its reputation untarnished.

“Our principle is integrity and once we know a franchisor or an advisor is being corrupt, we will terminate the relationship without any hesitation,” he says.

Hospitality and gift-giving Another major area of concern outlined in the TrustLaw report is hospitality; a common feature of building business relationships in Asia. According to Martin of Baker & McKenzie.Wong & Leow, the UK government has stated that reasonable promotional expenditure incurred to generate goodwill and in the context of business contacts should be acceptable. Although the UK Bribery Act has put the onus primarily on UK firms and individuals, Martin says that Asian companies will find themselves burdened to help their foreign partners avoid liability for bribery. They will do so by assisting them to establish the so-called “adequate procedures” defence if they were to continue with the commercial partnerships or arrangements. Martin says Asian companies will increasingly find that they will be expected to provide more information about themselves to their foreign partners, who might also ask for certain contractual undertakings with respect to the former’s conduct, to suitably comfort these partners.

“There will be a lot more demand placed on them by not just UK firms, but also U.S. and other companies subject to the FCPA. Companies that have established international codes of conduct for doing business will also have higher expectations on Asian third parties,” Martin adds.

Even seemingly innocuous actions will need to be tested and approved by legal officers of companies. In a 2009 case that shocked locals in Hong Kong, an employee from the construction company Brilliant Ray was sent to prison for two months for offering 15 boxes of mooncakes to police officers who had helped direct traffic around a project he had been working on. The mooncakes were offered just 11 days before the mid Autumn Moon Festival, when the delicacies are traditionally offered as gifts. Charged with violating Hong Kong’s Bribery Ordinance, the employee was sentenced by the city’s Independent Commission Against Corruption. Evidently, it is not just the UK Bribery Act and FCPA that companies need to be aware of. Yu says local regulations can be even tougher, pointing out India and China as examples. “We try to incorporate local relevant laws and regulations in policy as well,” she says.

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In-house survey: compliance

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REUTERS/Bobby Yip

In this context, the in-house counsel of the European conglomerate says: “We impose an upper limit of value on any business gifts and enact a supervision and approval system.” The MNC Asia general counsel also confirms that his team goes through a list of typical “gifts”, and discusses each item to deem what is appropriate and what is not, and then conveys this to company members. “Where there are some grey areas or if someone is not sure, they need to approach us and we will make a judgment caseby-case,” he says. “We are sure to pass a clear message as there are definite black areas of actions you absolutely cannot do, and some things we cannot touch.”

The Assa Abloy compliance team prefers a more pragmatic approach of telling its employees to use common sense and business judgment to determine what’s reasonable and culturally acceptable for gifts or entertainment. Yu says that her team is still in the middle of discussions about what constitutes a “reasonable amount”, but stresses the need to be practical. One item on the agenda for her team is possibly drafting up a list of approved restaurants to visit or entertain at. “Disclosure is very important,” she says. She encourages employees to write in as many details as possible when claiming expenses, such as where the expense was incurred, how many people were entertained, what was ordered, and what the purpose of the dinner was. Having these items on

record goes a long way in preventing malpractices. “The more we encourage people to disclose details and they know someone is watching them, the less likely it is for them to try something fraudulent,” she says.

According to a recent Reuters report, U.S. law enforcement officials are pursuing several high-profile investigations, including one into whether Avon Products used bribes to win the first-ever license given by China to a Western company to sell products door-to-door. The Securities and Exchange Commission is also looking into Wynn Resorts’ $135 million donation to the University of Macau and its gaming licenses in the Chinese gambling hub. Suffice to say that in the light of the increased scrutiny from officials across the globe, Asia-based in-house lawyers will continue to wage war on corruption with more focused training and localised compliance programmes.

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Braving a bleak equity market PRC firms strive towards resilience

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T

he CSRC is considering passing on the rights of registration management to the Securities Association of China. China’s major brokerages too are lobbying the regulator to green light the launch of buyout funds, ease capital rules and give them more power in the marketing of and pricing of IPOs. “The reform presents a new regulatory thinking, and heralds a road map for China’s IPO market in the next five years,” says Wang Yi, a Shanghai-based partner at Jun He Law Offices.

The new move is expected to speed up China’s IPO approvals process and shorten it to three months from six, Wang believes. “It will give more certainty to IPO applicants and their advisors,” he says.

Meanwhile, PRC law firms are carefully studying other proposed aspects of the IPO market overhaul to ensure their capital markets offerings are in line with the new policy. To them, the key to smooth sailing is staying nimble and remaining resilient.

“As a full-service firm, we have always tried to maintain a healthy balance of our capital markets work — we are handling a large amount of restructuring, M&As and PE (private equity) advisories now in addition to IPO matters,” says Zhao Xiaohong, a Shanghaibased partner at King & Wood.

REUTERS/Claro Cortes

The dismal performances of Shanghai’s and Shenzhen’s stock exchanges in 2011 have chilled market sentiment. Many law firms are struggling to maintain a balanced IPO portfolio, and are adjusting their capital markets offerings to weather market maelstroms. Artemisia Ng reports

Disclosure demands One of the reform’s focuses is market transparency. The CSRC published details of more than 500 IPO aspirants in January 2012 to expose them to public scrutiny. In fact, beginning from February 2012, the regulator has made the information of potential issuers, their underwriters and law firms public in weekly announcements.

A glimpse of these listing applications has provided lawyers with valuable market data that can help them formulate their business strategies better. “Looking at hundreds of these listing applications, more than 40 percent of them are funded by VC (venture capital) and PE firms such as Sequoia Capital, Intel Capital and Jiuding Capital. It shows that the A-share market is still a favourable exit for PE investors,” says Wang Wei, a partner at Zhonglun W&D Law Firm.

For many firms, the interconnectedness of their IPOs and PE teams has become more apparent as PE investors intensify their search for competitively-priced targets during the down cycle. This keeps lawyers busy with the due diligence work, and pairing cashstrapped PRC entrepreneurs with the right funders.

Wang of Zhonglun W&D often comes to the aid of less experienced corporations and advises them on common pitfalls such as meeting the profit requirement when they receive their first round of funding from a PE investor. He also warns them of the risks of the valuation adjustment mechanism.

As the CSRC maps out the reform blueprint, practitioners differ on the effectiveness of these measures to reinvigorate the sluggish equity capital market.

Some believe the overhaul is a move towards the market-driven, disclosure-reliant model of U.S. bourses. “The reform will not be done overnight,” says Guo Kejun, a Beijing-based senior partner at Zhong Lun Law Firm. “I believe the CSRC will gradually lessen its approval power of IPOs and let the market regulate them instead.”

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ASIAN LEGAL BUSINESS march 2012

But Wang of Zhonglun W&D takes a different view. He believes the CSRC is aiming to relax the IPO approvals process in the long run, but will tighten regulatory oversight for listed companies in the meantime. Hence, more public companies will need to meet higher compliance requirements and seek advice from lawyers.

“The added scrutiny may result in a drop in the IPO approval rate initially, but the higher hurdle for IPO entrants will play in the favour of first tier firms who are more careful in vetting high-quality clients,” says Wang of Jun He. His firm achieved a 100 percent approval rate for all of its IPO applications in 2011, and has 35 partners, who have served as members of the CSRC’s listing committee in the past, on board.

For many firms, 2012 is the time to rework some of their clients’ IPOs that were stalled last year. Lawyers are required to update and resubmit their clients’ financial data so that these IPOs can receive the necessary regulatory clearances to come to the market when the timing is right.

Protecting minority shareholders China’s securities watchdog has been vocal about busting insider trading and protecting the interests of minority shareholders, who make up 85 percent of China’s traders. In the first six months of

2011, the CSRC accepted 83 new cases of market malpractice, with 45 of them concerning insider dealings.

China is poised to publish a precise definition of what constitutes insider trading and make it easier to punish the wrongdoers.

According to an article published by the New Century magazine in February, China’s Supreme Court will soon make its interpretations, which allow the use of indirect evidence such as phone conversation recordings or text messages, public in order to nail insider trading.

China’s High Court will also formulate the legal basis for insider trading victims to seek civil compensation. However, the report said the nation is unlikely to create a mechanism that supports class action lawsuits that are common in the U.S. The clampdown on insider dealing requires all public companies in China to set up records of their suppliers and contractors. Such a tedious task is likely to drive more public companies to outsource disclosure work.

“In the past, only PRC companies dually listed at A- and H-share markets hired outside counsels to make disclosure announcements.

But more and more PRC companies are following the international practice now,” says Wang of Jun He. Pricing going Dutch?

To cool down overzealous IPO pricing that is a common feature in China, the Securities Times reported that the securities regulator may introduce the Dutch pricing system to replace the traditional allocation mechanism. The CSRC is also mulling increasing the IPO shares earmarked for institutional investors beyond the current 20 percent.

In a rare move, the securities regulator also slashed the size of jumbo IPOs. China Communications Construction downsized its Shanghai IPO by 75 percent to five billion yuan ($793 million) in January, while Shaanxi Coal faces similar pressures from the regulator and has lowered its expectation to raise about 17.3 billion

Top 15 PRC legal advisors for all ECM issuers in China for 2011 Firms Grandall Law Firm AllBright Law Offices King & Wood Zhong Lun Law Firm Grandfield Law Offices Jingtian & Gongcheng Beijing Kang Da Law Firm Llinks Law Offices Tian Yin Law Firm Jun He Law Offices DeHeng Law Offices Jiayuan Law Firm Dacheng Law Offices Tianhe Law Firm JunZeJun Law Offices Commerce & Finance Law Offices Shu Jin Law Firm Subtotal with issuer advisor Subtotal without issuer advisor Industry total

No. of Issues 51 24 23 19 17 16 14 13 12 9 8 8 7 7 6 6 6 399 4 403

Rank 1 2 3 4 5 6 7 8 9 10 11* 11* 13* 13* 15* 15* 15*

Market Share 12.7 6 5.7 4.7 4.2 4 3.5 3.2 3 2.2 2 2 1.7 1.7 1.5 1.5 1.5 99 1 100

Proceeds amount and overallotment sold ($ mln) 6,348.1 2,664.1 4,719.2 1,987.2 2,496.7 2,767.7 1,479.3 1,754.1 1,182.4 2,257.4 704.8 3,183.8 874.7 653.6 757.9 1,959 527.8 69,364 623.2 69,987.2 (*): tie (Source: Thomson Reuters)

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Top 15 PRC legal advisors for IPO issuers in China for 2011 Firms Grandall Law Firm Zhong Lun Law Firm AllBright Law Offices Grandfield Law Offices King & Wood Jingtian & Gongcheng Llinks Law Offices Beijing Kangda Law Firm Tian Yin Law Firm Jun He Law Offices Dacheng Law Offices Chen & Co. Law Firm GF Law Firm Shu Jin Law Firm Anhui Chengyi Law Firm Beijing Junzhi Law Firm DeHeng Law Offices Guantao Law Firm Hunan Qiyuan Law Firm V&T Law Firm Tian Yuan Law Firm Subtotal with issuer advisor Subtotal without issuer advisor Industry total

No. of Issues 40 16 15 14 14 13 10 9 9 7 6 5 5 5 4 4 4 4 4 4 4 270 3 273

yuan, according to International Financing Review (IFR), a Thomson Reuters publication. Practitioners believe the CSRC wants to cap the fundraising target at 10 billion yuan, or even better, to stay below five billion yuan.

“Such an initiative can prevent issuers from freezing a large amount of capital from the market,” says Jincheng Tongda & Neal (JT&N) Beijing partner Zheng Xiaodong. “The last thing it (CSRC) wants to see is money sitting in the banks. But it is still debatable whether this is indicative of a sustained policy approach.”

A-share listings: Strong demand remains The secondary market may look weak, but it does not necessarily reflect the state of the primary market. “The pace of regulatory hearings and approvals of IPO applications have not slowed down. An IPO is still an attractive financing platform for many enterprises,” says Chen Wei, a partner at Llinks Law Offices in Shanghai.

Many first-tier PRC firms that ALB interviewed reported a strong IPO pipeline as cash-hungry enterprises flocked to the domestic bourses to enjoy higher valuations.

“The need for capital is always there,” says Zhao of King & Wood.

Currently, more than 3,000 companies listed on the mainland’s bourses coupled with the financing platform fail to satisfy the huge funding needs of China’s enterprises - especially those in sectors that are in line with national development mandates, such as new materials, pharmaceuticals, biotech, green tech, retail, and agricultural technologies.

The CSRC has shown signs of green lighting the listings of restaurant businesses, which was once discouraged for their poor

Rank 1 2 3 4* 4* 6 7 8* 8* 10 11* 12* 12* 12* 15* 15* 15* 15* 15* 15* 15*

Market Share 14.7 5.9 5.5 5.1 5.1 4.8 3.7 3.3 3.3 2.6 2.1 1.8 1.8 1.8 1.5 1.5 1.5 1.5 1.5 1.5 1.5 98.9 1.1 100

Proceeds amount and overallotment sold ($ mln) 4,774.2 1,749.7 1,728 2,136.8 2,615.8 2,343.4 1,439.5 811.1 913.9 1,435.9 439.2 1,367.3 365.9 472.9 462.7 761.3 239.8 284.6 497.3 389.5 824 41,007.9 486.3 41,494.3 (*): tie (Source: Thomson Reuters)

record keeping, says Wang of Zhonglun W&D. Listings of lenders at the city and provincial levels will also be more commonplace from now on.

Prospectus writing In China’s competitive IPO advisory landscape, sponsors and auditors often take home the lion’s share of IPO commission fees.

Therefore, legal professionals are calling for an industry change so that they can pen IPO prospectuses and create another stream of revenue — Zhong Lun’s lawyers even belted out their wishes with their revamped lyrics of L’internationale (see Sundries, pg. 48).

Zheng of JT&N believes lawyers’ nononsense and vigilant approach will best serve the investment community. “Right now, lawyers only write a few chapters or issue legal opinions for IPO prospectuses,” he says. “If it’s written by lawyers, we will certainly refrain from using the promotional tone that is used by underwriters.”

Delisting, relisting Since U.S.-listed PRC companies are tainted by the recent spate of accounting frauds

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“The pace of regulatory hearings and approvals of IPO applications have not slowed down. An IPO is still an attractive financing platform for many enterprises.”

Chen Wei, Llinks Law Offices

and corporate governance mishaps of their backdoor-listed counterparts, many of them are considering delisting or going private. Some of them are even seeking to relist in China or Hong Kong to enjoy higher valuations.

“Many PRC companies realised that listing in the U.S. didn’t serve their purpose, since the cost of compliance is high and the PE valuation is comparatively lower. Many companies cannot meet their financing needs by floating in the U.S.,” says Guo of Zhong Lun. While some PRC companies have managed to delist from London’s Alternative Investment Market or the Singapore stock exchange and relist on the Hong Kong Stock Exchange, a test case for a successful relisting on the mainland bourses is yet to happen.

Zhao of King & Wood points out that relisting back home is often easier said than done. She has advised clients who entertained the idea, but could not move forward with it.

A common problem she found was that these overseas-listed PRC companies failed to comply with China’s current restriction that bars small and medium enterprises from listing abroad. “Some of them overlooked their original registrations of foreign capital and remittance when they ventured abroad,” she explains. “And these historical problems could not be remedied.”

Dismantling red chip structures As more PRC companies seek to relist back home, lawyers are also seeing a spike in offshore-incorporated Chinese companies that want to be PRC-domiciled.

“Being a locally listed company can enhance its corporate branding and help gain better public recognition,” explains Chen of Llinks. “This has proved to be useful in their tendering and procurement process in China.”

To meet PRC listing requirements, these offshore entities have to dismantle their red chip structures. Ripping off their offshore holding framework is a complicated process

which requires lawyers to confront issues over foreign exchange, remittance and tax that are governed by various PRC regulators such as the National Development and Reform Commission, the PRC State Administration of Industry and Commerce, and the tax bureau.

“This requires careful planning and liaison with various regulatory bodies. Only firms that have mastered it, and are knowledgeable about the inner workings of these authorities can do it right,” says Chen. His firm has performed such corporate structure overhauls for more than 10 companies.

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“Right now, lawyers only write a few chapters or issue legal opinions for IPO prospectuses.

If these are written by lawyers, we will certainly refrain from using the promotional tone that is used by underwriters.”

Zheng Xiaodong, Jincheng Tongda & Neal

Surge in M&As The down market may have suppressed valuation, but it has spurred on cash-rich Chinese companies to shop for attractive targets and move up the value chain.

“To put it simply, China’s M&A market has been red hot,” says Chen.

His team advised on the Wanhua Group’s 1.3 billion euros ($1.66 billion) takeover of Hungarian chemicals maker BorsodChem in the summer of 2011.

Similarly, King & Wood advised on one of the largest Sino-Austrian deals to date. The firm acted for the Wolong Group’s 100 million REUTERS/Bobby Yip

euros ($138 million) acquisition of insolvent Austrian electric motor manufacturer ATB in October, 2011.

Restructuring needs rise As the valuation of stocks returns to a more reasonable level, more PRC conglomerates are seizing the chance to buy back their shares and reorganise their subsidiaries.

In the fall of 2011, Llinks, Grandall and Jun He advised on China’s first asset restructuring and subsequent listing of a new media giant.

This was a result of the share swap of the Shanghai Media and Entertainment Group Co (the SMG) and the restructuring of SVA Information Industry (SVA).

SMG bought a 37 percent stake of SVA for 1.9 billion yuan ($287 million) and the latter acquired SMG’s subsidiaries BesTV and Shanghai Radio, Film & TV Production Co for 1.2 billion yuan. The landmark merger of radio, television, telecommunications and Internet networks also saw the combination of IPTV and Mobile TV. “Restructuring is a less competitive area.

It requires expertise in M&A and capital markets work,” says Wang of Jun He, who finds that his team has seen an increase in restructuring mandates which balances out the drop in IPO work. Other law firms too are helping their clients streamline their corporate structures.

King & Wood’s Zhao has been advising on the restructuring of China’s largest hotel operator Shanghai Jin Jiang International Hotels (Group) Co since last year. She is helping the Hong Kong-listed conglomerate to better manage its resources and assets in its portfolio after it acquired the NYSE-listed Interstate Hotels & Resorts in 2010.

Despite the ups and downs in the equity market, professional advisory is often most treasured during times of crisis.

“In a bear market, clients are more concerned about reining in risks in their transactions and will appreciate our advice on such matters,” says Zhao.

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Singapore

Cheer despite the slowdown The economic growth may be slow, and the forecasts may be negative, but not everything is doom and gloom in Singapore. M&A work, while having declined somewhat, is still fairly robust, arbitration is moving ahead in leaps and bounds, banking and finance is seeing the country benefit from the woes of the West and Singapore is emerging as one of Asia’s major entertainment hubs, providing much to savour for the legal community, finds Ranajit Dam

W

ith the global financial outlook continuing to look uncertain, it is no surprise that the Singapore economy has been slow-moving as well. In the third quarter of 2011, the last quarter for which statistics are available, domestic economic activity rose modestly; at the same time, key industries like electronics continued to contract alongside global economic demand. As the Eurozone crisis simmers, and the U.S. economy seems stuck in second gear, Singapore can look ahead to slower growth amid a downturn in external demand. According to the Monetary Authority of Singapore (MAS), the country’s economic growth for 2012 is expected to be between 1 and 3 percent, with traderelated sectors likely to face significant headwinds over the next few quarters.

From a law firm’s perspective, work is declining in some cases as a result of the slowing economy, and firms are feeling the pinch, the least of which is not the continuing downward pressure on fees.

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“Singapore is increasingly recognised in addition to Hong Kong – and overtaking Tokyo – as a thriving international finance centre for South and Southeast Asia, and a necessary second limb to any Asian strategy for international business not just for western MNCs, but for private equity – both the international houses and local ones – and for Asia's own multinationals.”

Andrew Martin, Baker & McKenzie.Wong & Leow

“Singapore is increasingly recognised in addition to Hong Kong – and overtaking Tokyo – as a thriving international finance centre for South and Southeast Asia, and a necessary second limb to any Asian strategy for international business not just for western MNCs, but for private equity – both the international houses and local ones – and for Asia's own multinationals,” says Andrew Martin, principal at Baker & McKenzie.Wong & Leow. Clearly, Singapore has much silver lining to savour.

REUTERS/Tim Chong

Singapore currently has 100 foreign law firms involved in a variety of structures – joint law ventures, law alliances, QFLPs and so on – to go with the myriad local practices.

Competition is understandably intense, as investors look to exploit the potential of the ASEAN region and India.

But despite the negative forecasts, Singapore isn’t all gloom and doom. M&A work, while having declined somewhat, is still fairly robust, arbitration is moving ahead in leaps and bounds, banking and finance is seeing the country benefit from the woes of the West, aviation is seeing the rise of the low-cost carriers, and Singapore is emerging as one of Asia’s major entertainment hubs.

Corporate/M&A: Cautious optimism Two important developments looming ahead for Singapore include an overhaul of the Companies Act, which last saw a total revamp back in 2005, and proposed amendments to the Singapore Code on Takeovers and Mergers, as the country looks to keep pace with market innovations and international practices. While the Companies Act is expected to be overhauled in 2013, the amendments to the takeover code are could take effect sometime early this year. “We expect to see a number of changes being brought about by the amendments,” says Andrew Ang, partner at WongPartnership. “For example, it will alter the existing financial assistance rules, close the gap for compulsory acquisitions, and also bring changes to procedures for schemes and amalgamations under the code.” Ang adds that the code will be “good for some, bad for others,” and says that as it will be more difficult to squeeze out minority shareholders in an acquisition, he expects a number of M&As to happen quickly before the amendments come into play. Martin from Baker & McKenzie.Wong & Leow calls the ground rules of the takeovers code and the listing manual “well understood and encouraging.” “We note recent signs of greater flexibility on the part of the regulators, in line with international standards, regarding certain areas such as the tricky issue of special deal arrangements on takeovers,” he says.

However, for many law firms in Singapore, a lot of the work has been cross border and multijurisdictional, with a focus on emerging markets like China, Indonesia and India. Ang says that more than half of his work in 2011 was related to China, particularly the delisting of Chinese companies listed on the Singapore Exchange (SGX) or S-chips, which are headed back to China and Hong Kong for relisting on the exchanges there. “I expect this to continue until all the S-chips are gone,” he says. “Good S-chips,” says Ang, or the ones with high PE ratios, are moving to Hong Kong as they find better value there

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Special report than from the SGX. The ”bad S-chips,” on the other hand, are being forced out following corporate scandals involving embezzlement, forgery, accounting fraud and the like. Ng Wai King, also a partner at WongPartnership, says he has seen a sizeable amount of work come from Japanese acquisitions in Southeast Asia. Martin concurs.

“In terms of acquirers, the Chinese and Japanese strategic acquirers have been very active,” he says. “For the Chinese entities, a lot of the focus has been on resources. For the Japanese, their focus is more across the board, especially food and beverage, but also financial services, principally insurance.”

In terms of how deals are put together, Martin says that there is a lot more stress on due diligence, especially on compliance issues including antitrust and anti-corruption. Ang says that the market has evolved and become more sophisticated, with the introduction of what he calls a “PE approach to deals with unique structures.” Ng says that clients have become more discerning, asking for specialised lawyers to work on transactions. “Three years ago, the same lawyer may have been working on different aspects of a transaction,” he says. “These days, clients will ask for lawyers with different specialisations, such that a deal can be divided into different work streams with specialist lawyers working on each part.”

Overall, the M&A picture has looked a bit bleak for the past year, and this is expected to continue into the first quarter of 2012 at least.

“Partly because of the intensity of the competition, partly because of the shortage of real quality assets in emerging markets, and in part because of caution about the integrity of targets and the broader macro environmental uncertainty which has stifled some of the traditional sources of bank credit, we are still short of where we were in terms of M&A activity levels pre-GFC,” says Martin of Baker & McKenzie.Wong & Leow. Ng of WongPartnership says he remains optimistic even in difficult times. “The Eurozone crisis has made it difficult for a number of M&A transactions, particularly with respect to financing,” he says. “The crisis will continue to have an impact on deal volume and deal value in Asia”. That said, he notes that the firm has made a “pretty good start” in 2012, given deals that have been signed up in January and existing corporate/M&A work in the pipeline.

Firms remain hopeful for the year ahead. Ng and Ang say they are “cautiously optimistic,” noting that in difficult times, M&A deals still take place, as there are a number of distressed assets available.

Martin says that he is “quietly confident” for 2012 and beyond.

“The macroeconomic picture may be one of uncertainty from which Singapore and the rest of Asia is not insulated, but there are areas of opportunity,” he says. “The depressed public markets raise prospects of ‘take private’ transactions, and so we expect to see several of these.”

Arbitration: Singapore comes into prominence As reported in ALB’s December issue, Singapore is now seriously

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vying with Hong Kong to become Asia’s premier arbitration hub and this, says Chong Yee Leong, partner at Rajah & Tann, is no accident. “This has come about… as a result of the concerted efforts made by the Singapore government, judiciary, and the whole legal and arbitration industry over the last few years,” he says. But circumstances are also playing their part. “The current economic lassitude is leading to disputes stemming from failed transactions, deals and investments going awry,” says Randolph Khoo, director at Drew & Napier. “The extent of foreign investment into Asia has also led to the internationalisation of arbitral disputes being resolved in Singapore.”

The numbers show that arbitration is certainly on the up: The Singapore International Arbitration (SIAC) Annual Report for 2010 said that SIAC arbitral filings had risen for the 10th consecutive year.

Interestingly, a significant number of cases heard in the island state involved parties and matters that have no connection with Singapore, including matters from far-flung jurisdictions such as Iran, Cyprus and the UAE. “[Their] choice is driven mainly by Singapore's reputation for transparency, integrity and efficiency,” says Davinder Singh, CEO of Drew & Napier. India and Greater China contribute the bulk of international arbitration at the SIAC, with Southeast Asia (in particular, Indonesia) featuring prominently, notes Chong. There has been a spike in the number of arbitrations originating from the Indian subcontinent; the number of cases involving at least one Indian party at the SIAC has gone up by nearly 200 percent in the past two years.

Not surprisingly, Singapore is beginning to attract law firms with the amount of business on offer. “In addition to the local Singapore practices, there are currently over 100 foreign law firms located in Singapore, many of which have arbitration practices to service the industry,” says Chong, pointing that the last couple of years have

“The current economic lassitude is leading to disputes stemming from failed transactions, deals and investments going awry… The extent of foreign investment into Asia has also led to the internationalisation of arbitral disputes being resolved in Singapore.”

Randolph Khoo, Drew & Napier

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REUTERS/Tim Chong

seen the arrival of new global entrants to Singapore like Bankside Chambers and Nabarro, and also specialist arbitration firms such as Hanotiau & van den Berg.

Additionally, local Singapore law firms are fast gaining recognition as world players in arbitration. “At the same time as the landscape here is being liberalised to allow greater participation of foreigners in the corporate and dispute resolution spaces, Singapore lawyers are increasingly involved in cross-border work and are being seen in international arbitrations seated elsewhere,” says Singh.

One of the ways in which the approach of Singapore firms to arbitration has changed of late is an increased emphasis on specialisation. “Rajah & Tann’s approach to arbitration has qualitatively moved to focus on high-yield, complex arbitration covering larger claims,” says Chong. “A major factor behind this approach has been the increase in client demand for specialised legal advice in industries such as oil and gas, telecommunications, power and energy, infrastructure development, and process engineering.” Singh says that because some of Drew & Napier’s cases involve esoteric issues, it has required the firm to “acquire indepth knowledge on the latest developments in the fields of bilateral investment treaties, international law, and technology.”

Looking ahead, Singapore can expect to see the amount of arbitration growing.

“With an economic slowdown predicted in Europe cast against the broader shift in economic influence from the West to the East, steady economic growth in mainland and maritime Southeast Asian jurisdictions is

likely to represent an increase in arbitration work for… all international arbitration practices in Singapore,” says Chong. Singh of Drew & Napier, who notes that the continuing global slowdown will result in more parties being “prepared to fight,” says that the bulk of the work will likely continue to come from Asia, in particular India, Indonesia, China and Vietnam.

Projects and energy: A surprisingly busy year For a country that possesses a particularly well-developed energy and infrastructure sector, 2011 was a notable year for the number of major projects and financings that achieved key milestones in Singapore, say David Platt, project finance partner, and Ajoy Halder, senior associate at Pinsent Masons MPillay. The year’s biggest project finance deal was executed in May, when Jurong Aromatics Corp signed a S$2 billion ($1.57 billion) package to finance its Singapore petrochemical plant. In July, GMR Energy secured a limited recourse term-loan facility of $549.7 million, and a credit and working capital facility of $270 million for its 800 MW Island Power project, one of the largest independent power projects in Singapore. A consortium consisting of Siemens and Samsung will design and build the plant, which is expected to become operational in 2013. Meanwhile, in the water sector, Hyflux was awarded a contract in March to develop the S$890 million Tuas II desalination plant – Hyflux’s biggest project – and in early July, Sembcorp started construction on a $40 million integrated wastewater treatment plant in Jurong Island. In the energy sector, Singapore-based electricity provider SP PowerGrid started the tendering process for the construction of two multibillion dollar underground cable tunnels. Finally, in the transport sector, the Singapore Land Transport Authority has awarded contracts over the last year for the development of the 21 km Downtown Line Stage, the final and longest section of the 42 km Downtown Line.

Around 12 contracts with a combined value of about $2 billion were awarded to 12 companies.

With most projects and energy lawyers in Singapore handling work from around the region, 2011 has also been a busy year for countries like Indonesia and Vietnam, say Platt and Halder. Vietnam has seen progress in its infrastructure sector with the successful financing of AES' Mong Duong power project. “However, the boost that investors

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Special report hoped this would give to private sector infrastructure development in Vietnam has not yet happened,” they say. “Uncertainties over the economic situation, and government concerns as to the level and nature of guarantees needed to support projects still persist.”

On the other hand, the Indonesian government continues to be a strong supporter of infrastructure development. In May 2011, it launched the Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development between 2011 and 2015.

Around the same time, it also announced plans for 17 new projects (including infrastructure) across four provinces, with the total cost estimated at $21 billion. “In Indonesia, there is always a concern that the announcement of projects is not always followed by the implementation,” say Platt and Halder, “but this year, there are positive signs that indicate some real activity is possible in 2012.” One of the biggest energy projects, the Central Java Power Plant, in Indonesia was awarded in 2011 by the state-owned electricity firm, Perusahaan Listrik Negara, to a consortium consisting of JPower, Itochu and Adaro.

The consortium will develop a 2x1000 MW power plant in Central Java at an estimated cost of $3.48 billion. The project is notable for two reasons: Firstly, it is the first project effected under Indonesia's publicprivate-partnership (PPP) law, and there are indications that future projects in both the power and other (for example, transport and water) sectors will be implemented next year. Secondly, it is the first project to enjoy the Indonesia Infrastructure Guarantee Fund’s support and guarantee, representing a major improvement in terms of clarity and transparency on the previous guarantee regime.

The further development of the PPP model, say Platt and Halder, is possibly the most significant trend in the projects and energy sector around the region. “This may seem at first to be a strange statement as far fewer PPP projects have been announced than hoped for in 2011,” they say. “However, there are indications that, in the Philippines and Indonesia particularly, progress is being made in the capacity building that is a necessary first step to implementation of projects. Most participants are hoping that after the false starts we have seen in 2011, there will be some real progress in 2012.”

Looking ahead to 2012, they say that an inevitable lull is expected in construction activity in Singapore, particularly given the number of public and private projects effected over the last two years, with construction expected to recover in late 2012. “The primary reasons for the expected growth in construction activity in 2012 are execution of several large-scale commercial construction contracts in 2011, the ongoing attempt by the government to boost supply of affordable housing for Singaporeans, and the completion of tendering process for most of the railway contracts,” say Halder and Platt. Meanwhile Indonesia, with its newly minted investment grade status, is expected to be a significant help in developing infrastructure investment.

“More generally, the need for infrastructure (transport and energy in particular) is becoming more and more obvious around the region, and the pressure on governments to actually deliver projects is likely to increase,” they add. “Given this, guarded optimism seems to be the order of the day.”

Banking and finance: Overseas woes bring benefits With U.S. and European banks mired in troubles, there has been a significant increase in regional banking transactions, with Singaporean banks benefiting from their troubles, says Susan Kong, director at Stamford Law Corporation. “More international loans and capital market transactions are now being denominated in Singapore dollars,” she says. “Previously, they were in other more international currencies like the U.S. dollar, or borrower’s or issuer’s domestic

ASIAN LEGAL BUSINESS march 2012

currency. This has happened in part due to the credit crunch in other parts of the world, and the liquidity of Singapore dollars.”

Kong adds that she has seen a continued development in the wealth management space amid tightened regulatory controls and licensing requirements for professionals rendering financial advice and/or managing funds.

From a professional firm’s perspective, with the introduction of the QFLPs, there is now stiffer competition for work in the Singapore-law-governed banking and finance space, says Kong. “Also, we see many mid and junior banking and finance lawyers leaving large Singapore firms to join foreign firms,” she adds. The proposed merger of Allen & Gledhill and Allen & Overy is also looking like it will complicate things. “The larger Singapore firms in the Tier 1 and Tier 2 space will be watching it closely, and will be under pressure to either find a partner firm to merge or collaborate with,” she says. “This merger is perceived to have the effect of putting pressure on these Singapore firms to compete for the Tier 1 and Tier 2 work, and poses great challenges for talent retention and recruitment.”

Additionally, she says that she expects to see more fragmentation in the market, with some firms undertaking small local “vanilla” transactions, other firms undertaking such transactions and some larger domestic real estate driven transactions, and the rest undertaking large capital market transactions and regional transactions.

Despite these pressures, she expects to see healthy growth in the banking and finance space as “Singapore becomes increasingly successful as a significant international financial center and is well-poised to take advantage of the growth in Asia.”

Yu-En Ong, Singapore-based partner at Norton Rose, says that he expects to see some banks downing shutters in the country.

“Singapore is a major financial centre with many Asian and international banks having a presence,” he says. “Any bank that wanted to establish a presence is already here.

This year, we anticipate there to be some consolidation in the banking and finance sector, and even one or two banks exiting from the country.”

Intellectual property: ADR comes into focus Among the significant developments in the intellectual property (IP) space in recent times, has been the boost to alternative dispute resolution (ADR) infrastructure

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“The larger Singapore firms in the Tier 1 and Tier 2 space will be watching the proposed merger of Allen & Gledhill and Allen & Overy closely, and will be under pressure to either find a partner firm to merge or collaborate with. This merger is perceived to have the effect of putting pressure on these Singapore firms to compete for the Tier 1 and Tier 2 work, and poses great challenges for talent retention and recruitment.”

Susan Kong, Stamford Law Corporation

for IP conflicts in Singapore by way of the introduction of a joint dispute resolution procedure framework between the Intellectual Property Office of Singapore and the WIPO Arbitration and Mediation Centre (WIPO Centre) in 2011. “The procedure, which is expected to be available from early 2012, enables IP disputes to be resolved through mediation which is administered by the WIPO Centre in Singapore,” says Yvonne Tang, director in Drew & Napier’s intellectual property department.

Tang says she has found more parties prepared to turn to the courts to resolve their IP disputes, and local courts signaling a willingness to depart from the UK approach in trademark infringement matters.

For example, she says, in the Polo/Lauren Co v Shop-In Department Store case, the Singapore Court of Appeal, while adopting the “threestep” test in British Sugar v James Robertson & Sons, made clear the fact that a sign is similar to a registered mark does not automatically mean that there will be a likelihood of confusion. It also held that the court is entitled to look outside the mark and the sign, as well as the articles, to assess whether a likelihood of confusion exists.

“This approach was followed or referred to in notable subsequent cases,” says Tang, citing as examples MiTac International v Singapore Telecommunications, City Chain Stores v Louis Vuitton, and Ferrero SpA v Sarika Connoisseur Cafe. Tang notes that ADR options and recent developments in local case law have become increasingly important in her firm's approach towards IP conflicts. “We can expect the alternative dispute resolution scene to gradually shape up, and play an increasingly important role in IP conflicts over the next one to two years,” she says.

Shipping: A perfect storm While it is obvious that the shipping markets are in a fairly difficult state, what has surprised industry watchers is just how bad it is. “It’s obvious that this is a tough market,” says Martin Green, managing partner of Stephenson Harwood’s Singapore office. But this downturn is unlike any other. Unusually, both lenders and borrowers are facing problems - banks in accessing funding, and shipping companies in creating value from the loans they’ve taken.” The upshot, he says, is that there is bad news on the horizon. “Quite a few substantial shipping companies are having problems,” he says. “I foresee trouble ahead in 2012.”

A consequence of this market, he says, is an increase in the amount of restructuring and enforcement work. “There’s a far greater requirement for enforcement of security,” says Green. It has been a

similar experience for Goh Mei Lin, partner at Watson Farley Williams’ Asia Practice.

“There has been a marked decrease in predelivery (construction) financing of ships, and a marked increase in the number of restructurings and enforcements over the last 12 months or so, which is another area in which we have been actively involved,” she says. “We were, and are, involved in the majority of ship arrests undertaken by banks in Singapore.” Goh adds that with access to commercial bank funded transactions being tightened, there has been a significant increase in the number of ECA-backed ship finance transactions, particularly SINOSURE and K-SURE transactions.

Hard times have meant that an increasing number of borrowers are now approaching courts in order to seek protection from creditors. Green from Stephenson Harwood says that one avenue is attracting increasing attention: U.S. courts. A verdict won last year by Netherlands-based global maritime shipping company Marco Polo Seatrade in the Southern District of New York showed that U.S. Chapter 11 proceedings were a viable restructuring strategy for international shipping companies, as long as they had the minimal connections needed to satisfy U.S. jurisdictional requirements, and confirmed that U.S. bankruptcy courts would maintain jurisdiction over foreign debtors as long as the Chapter 11 filings were made in good faith and with the intention to properly reorganise the business. “Since much of the shipping business is a U.S. dollar business, I think we will see more local shipping companies seeking recourse to U.S. courts now,” says Green.

Looking ahead, Green sees the trend of enforcement and restructuring work continuing. At the same time, he says, banks

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will continue to lend in order to make loans to cover loans that have been repaid or otherwise recovered. “However, they will be a lot more selective about it,” he says. Goh expects about a year or more of pain before things begin to look up. “The continued tightening in the banking market, the still-challenging shipping market, and the fact that many companies no longer have the cash reserves which they had two or three years ago will make the next 12 to 18 months a difficult period. But with it come opportunities, and from this we anticipate a consolidation cycle occurring over the next 12 to 24 months,” she says.

“Given our experience and expertise in the corporate, commercial, finance and dispute resolution areas within the maritime and aviation sectors, we are well placed to help the borrowers, lessors, lessees and the banks, and financial institutions through this challenging period.”

Aviation: Budget carriers buck turbulence Much like the global economy, the world aviation industry has been facing turbulence of late. According to Paul Ng, partner and global head of aviation at Stephenson Harwood, the reasons are numerous.

For one, new lending practices introduced under Basel III regulations, some of which will be enforced as early as 2013, will increase the cost of funding for banks, and whilst not specifically targeted at the aviation industry, is expected to be passed to borrowers (such as airlines) through increase in pricing of their loans. Aircraft flying into and out of European airspace began to be subject to the EU Emissions Trading Scheme from January, potentially increasing operating costs greatly, and a number of countries are talking about bringing into force retaliatory measures. Finally, under the 2011 OECD Aircraft Sector Understanding (ASU), the cost of export credit (ECA financing) has increased. ECA financing has become one of the backbone sources of financial support for the industry, and as the cost of such funds, in some cases, have doubled, industry players may be forced to seek cheaper financing in an already liquidity-scarce environment. This has contributed to a period of belt-tightening in the aviation industry, says Ng. Over the course of last year, quite a few aircraft lessors have also been going through a phase of divestment of their fleet; these include ILFC, Macquarie and the aircraft finance arm of RBS. This shortage of funds, says Mehraab Nazir, partner at Watson Farley Williams’ Asia Practice, is leading to more borrowers seeking funding from capital markets, and equity from third party funds. Nazir adds that the number of Japanese operating lease transactions has also been increasing. Assets covered by the Japanese operating leases include both aircraft, and an increase in the use of Japanese operating leases for container box transactions. There are also an increased number of private equity, junior debt, and mezzanine finance players and products available in the market.

Ng says that the silver lining in the industry has come from low-cost carriers, especially regional low-cost carriers like Lion Air, AirAsia, Cebu Pacific and Indigo. “These airlines have the steepest growth trajectory at the moment,” he says. With profits continuing to grow – AirAsia made $500 million in 2010 – they are targeting corporate customers now by introducing business class seats and other perks.

“Budget carriers are now established brands,” says Ng. “They are the ones who need capital now; they are the ones who the market arguably have the most confidence in. It is no surprise that the investors are circling.”

Media and entertainment: A new level of excitement With Singapore growing in prominence as an Asian entertainment hub, financing opportunities for its entertainment industry have increased correspondingly. Samuel Seow, managing director of

Samuel Seow Law Corporation, says that Singapore’s Media Development Authority’s (MDA) recent announcements of new funding schemes have “sparked a new level of excitement in the entertainment industry in Singapore, and indeed, worldwide.” He adds that these should have the effect of renewing interest in Singapore as a fastdeveloping entertainment base.

In October 2011, the 46 assistance schemes previously made available by the MDA were streamlined to just five, with a $88 million budget being set aside for these five schemes, all of which were open to the seven sectors of the media industry namely animation, broadcast, film, interactive media, music and publishing. Seow says that a key change in these new financing schemes is that MDA will no longer seek to own a share in funded projects, and companies under the schemes can own all rights to their works. “The regime has changed from one of ‘investment’ into ‘grants,” he says. “As much as the new found freedom is welcome, it also brings with it the responsibility of ensuring that companies develop their own expertise in the protection and exploitation of their intellectual property around the world, without the formidable shadow of the government funding body looking over them in protection.” Seow adds that he

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believes the new grant scheme will allow enterprises to build on their capabilities, and develop competitive advantages for long-term growth.

Another development is that funding is now available to any company incorporated in Singapore, with the previous requirement of a minimum percentage of local shareholding being removed from the funding criteria. “This could have the effect of attracting even more international entertainment businesses to set up a base in Singapore for the financing opportunities,” says Seow.

Seow adds that international cooperation between Singapore and other countries will lead to the creation of new work for consumption worldwide. “Singapore has signed many co-production treaties with other countries, including Australia, Canada, New Zealand and China,” he says. “However, few official co-productions have been completed and exploited under these treaties. It is anticipated that there will be increasing pressure to use these coproduction treaties in the coming years.” Seow’s firm has worked on Bait 3D, an upcoming horror film that is the first Singapore-Australia 3D co-production, and he says he believes this film could provide Singapore’s film industry a shot in the arm. In a similar vein, the partnering of the MDA and Singapore’s Cybersports and Online Gaming Association with China Information Broadcast Network has allowed Singapore produced games access into the Chinese market, which consists of an estimated 60 million gamers, says Seow.

Looking ahead, he says that with international heavyweights turning their eyes to the region, as well as substantial government support in the form of funding and partnership platforms for local businesses to reach a regional and international audience, the media and entertainment industry should “grow more outward looking for its local players to become more mature in their negotiations and approaches to intellectual property.” “We are heartened by the tremendous growth in the industry within the region in the last few years, and anticipate sustainable future growth,” he adds. “The development of sound stages in Mediapolis in Singapore and Pinewood Iskandar Malaysia Studios in Malaysia is set to further establish the region’s significance in the global media and entertainment market.”

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UK Report Pinsent Masons, McGrigors step up merger plans UK law firm Pinsent Masons and Scottish firm McGrigors recently announced their previously agreed upon merger.

The combined firm will have a reported turnover of more than £280 million ($442 million), and will employ more than 1,500 lawyers.

The new firm will operate under the Pinsent Masons name, and will have four offices within the Asia-Pacific region. Offices in France and Germany are slated to open by the end of 2012. News of this latest merger, which will create a firm that is close to the Silver Circle within the UK, comes after related merger talks between two other firms, DWF and Cobbetts, broke down.

Linklaters MP vote needs full partner meeting Managing partner of global law firm Linklaters, Simon Davies, failed to secure the required electronic voting numbers to declare his successful reelection. He will now have to wait until a full partnership meeting in April.

Local media sources reported claims that the partnership restructuring underway at the Magic Circle firm had impacted the voting, which could mean that the partners will now have to ratify the appointment at the meeting. At the time this news was reported, Simon Davies was the only candidate who had been put forward for the position. Davies has been the firm’s managing partner since Jan. 1, 2007.

Norton Rose confirms Parish as chairman Stephen Parish has been re-elected as the chairman of international law firm Norton Rose, and is scheduled to start his second three-year term on May 1. Parish was the firm’s former global banking head, and he succeeded the firm’s first ever chair, Paul Giles. Giles held the role for six years after it was created in 2002.

The newly elected chairman has announced that his focus during his second term will be on growing the Norton Rose business, and on promoting cross referrals around the 43 offices in the firm’s network in particular. Parish will also continue to advance internal staff initiatives, including working on a diversity committee.

ROUND UP Herbert Smith and Linklaters have recently been named as the advisers for Vodafone’s takeover of multinational telecommunications company Cable and Wireless Worldwide (CWW). Herbert Smith is advising CWW, while Linklaters is advising Vodafone on the potential bid.

Berwin Leighton Paisner plans to vote on the sale of Lawyers on Demand, its spin-off freelance legal resource service. The firm is expected to retain an 80 percent stake in the business, which posted a £5 million turnover in 2010 and 2011.

In the wake of the Linklaters shake up, international law firm Simmons & Simmons is also set to restructure its partnership in an effort to boost profitability. Around 12 equity partners are expected to be asked to leave, step down from equity, or receive formal warnings for underperformance.

Linklaters announced a retention rate of 86 percent for spring 2012.

In late January, Allen & Overy, Clifford Chance and Freshfields Bruckhaus Deringer also announced that they were retaining 89 percent, 76 percent and 89 percent of their workforce respectively.

Simmons & Simmons, on its part, posted a significantly lower retention rate for its trainees. The firm made offers to six out of eight of its trainees.

However, only two accepted the offer which made the retention rate fall to just 25 percent; down from a comfortable 80 percent in spring 2011.

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U.S. Report U.S. law firm results show “sustained recovery” possible The top 100 U.S. law firms have reported growth across the board, despite the issues plaguing the troubled euro zone and political grandstanding over the state of the U.S. economy, which led to a more difficult second half in 2011. The standout success so far has been Arnold & Porter, which reported a revenue increase from $555 million to $639.5 million, a 15.2 percent hike. Profits per equity partner (PEP) rose considerably more; from $1.12 million to $1.4 million, a 25.4 percent rise. The firm’s net income also rose by 27.4 percent, reaching $304.5 million. While the overall increase wasn’t as significant as Arnold & Porter, Latham & Watkins saw an 11.6 percent rise in revenue, and reached a record $2.15 billion. PEP rose 13.8 percent bringing it into line with its 2007 figure of $2.27 million.

Among those who achieved the strongest growths is DLA Piper, which could be set to establish itself as the world’s largest practice by revenue, according to media reports in (the firm maintains separate profit pools for the U.S. and the rest of the world). It managed to grow revenue by 14.6 percent to reach $2.25 billion. Other notable increases include Kirkland & Ellis which saw an 8 percent revenue rise. But PEP for the firm rose by 23 percent off the back of the firm’s ambitious 2011 lateral hiring. The firm is now in the elite group of firms with partner profits above $3 million.

Following on from Arnold & Porter, DLA Piper and Kirkland & Ellis, Sidley Austin and Weil Gotshal & Manges rounded out the top five firms that have released revenue figures, with revenue increases of 5.6 percent and 4 percent respectively.

DLA Piper fixed-fee venture takes shape Law Vest, the DLA Piper-backed legal venture, which offers a team of solicitors and barristers to do high volume, fixed-fee work, recently unveiled its new business model and plans. Law Vest is set to offer a range of services including commoditised work, including small debt collection, remortgaging and low value litigation.

According to reports, DLA Piper intends to use the service to funnel lowvalue, high-volume work from existing clients. The company will operate as an alternative business structure with Law Vest as the name of the parent holding company – much the same as Australian law firm Slater & Gordon will operate in the UK following its recent acquisition of a boutique UK firm.

ROUND UP Full-service law firm Debevoise & Plimpton has also seen its 2011 revenue results increase, thanks to its involvement in several notable M&A deals, and a number of Russian deals. Turnover increased 2.8 percent, hitting $615.5 million.

Profit per equity partner was stable at $2.08 million, but revenue per lawyer rose 7.2 percent to reach $1.05 million.

Global law firm Bingham McCutchen saw its London office revenue increase by 14 percent during 2011, well outpacing the performance of its other international offices. The London office posted a revenue of $49.1 million; a rise from $43.2 million in 2010. Firmwide, the story wasn’t as positive owing to a marginal dip in fee income, which ended 15 consecutive years of growth.

K&L Gates and Paul, Weiss, Rifkind, Wharton & Garrison are recently named as the lead advisors on Grupo Elektra’s takeover of U.S. payday lender Advance America. Grupo Elektra is owned by Mexican billionaire Ricardo Salinas Pliego. Paul, Weiss, which is advising Group Elektra, has also represented Pliego in his capacity as chairman of Mexican broadcaster TV Azteca, a Mexican multimedia conglomerate owned by Grupo Salinas.

International law firm Winston & Strawn recently hired Andrei Yakovlev from Norton Rose as partner, for its London and Moscow offices. Yakovlev is a U.S., UK and Russia qualified corporate finance lawyer, and used to split his time between Moscow and London when he was working with Norton Rose.

Yakovlev is the fourth partner to leave the London-headquartered firm for a U.S. one in as many months.

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International tax

供应链企业提供贸易融资服务的法律问题

France and Germany to align corporate tax rates

供

应链指以生产和消费特定产品为目标，将商 流、物流、资金流及信息流进行有效整合并 贯穿原材料或零部件采购、生产加工、仓储运输、贸 易服务、分销配送等相关交易环节的链条。供应链 模式下的金融，使银行有可能从传统的单做一家的 业务，发展到围绕一个核心企业而做一片企业的业 务；从只能做贸易链条中一个节点或一小段过程中 的业务，发展到能做几个节点或一大段过程的业务。这使那些长期 无法取得银行授信或授信不足的上下游众多中小企业取得有效的 融资服务。 供应链企业重点掌握商流、物流、资金流以及信息流某一部分或 全部，覆盖供应链的多个环节，其作用是减少环节，优化资源，提 高效力，降低成本。这种企业在供应链中的重要作用和地位使银 行往往将主要的授信给予他们。他们则扮演了次银行的角色，利 用介入供应链相关环节诸多交易的便利，为上下游企业提供贸易融 资服务。 供应链企业提供贸易融资的事务中，有些法律问题值得重点关注。 首先是部分交易模式中的企业的法律地位限制了其为保证资金安 全而本可以采取的有效的法律保障手段。比如，一些供应链企业为 规避贸易风险（比如质量纠纷），往往不愿承担买方或卖方的一些 义务，而更愿意作为买方的采购代理或卖方的销售代理的身份，但 同时上述法律地位将直接影响供应链企业基于控制的物流便利而 本可以采取的保障安排（比如因为并非所有权人而无法变卖货物 收回融资款）。其次是因动产担保物权制度不健全而引发风险。中 国的《担保法》和《物权法》对动产担保做出诸多制度安排，如明 确动产抵押效力、明确动产抵押登记原则、引入动产浮动抵押以及 动产质押等。但是在动产抵押方面，登记制度不完善，优先规则不 明确，动产浮动抵押物法律界定不明晰。在动产质押方面，不允许“ 未来财产”和“价值量浮动的财产”作为担保物。 因此，以贸易融资为核心竞争力的供应链企业应结合其自身实际情 况，充分考虑交易当事人情况、融资品种、担保措施等因素，克服 相应法律问题带来的风险，制定适合的交易模式。

G

ermany and France moved even closer to full fiscal union by announcing they will be “harmonising” their corporate tax rates by 2013 - a move that will increase the prospect of an EU-wide enforced tax rate, which Ireland and the UK have been heavily opposed to.

The proposals are a first step towards more European coherence and support the recent Euro Plus Pact treaty, which sets out rules for economic and fiscal co-ordination - which the UK, Sweden, Czech Republic and Hungary did not sign up to. Thus ever more cracks appear in the EU. The tax reforms join France and Germany, ahead of similar proposals from the European Commission for a single “aligned” business tax rate known as the Common Consolidated Corporate Tax Base (CCCTB) for all of Europe.

Last year however the EC struggled to gain consensus across all 27 EU member states. Britain has been hostile to the EU Tax Commissioner’s plans for both an energy tax directive and the CCCTB because both are seen as eroding national sovereignty.

The CCCTB is also seen as hugely damaging for countries such as Ireland, which has an ultra-low business tax rate of 12.5 per cent. Last year, Ireland, along with Bulgaria, Malta, the Netherlands, Poland, Romania, Sweden and the UK, all worked to fight off the tax harmonisation drive which would force them to raise their own low tax rates.

The perception is that the reluctance of many low-tax countries to back a unified tax system for Europe has been enough to push Germany and France into moving ahead alone. While the UK was always going to be the usual vociferous opponent, this will set up a potentially dangerous fission between Ireland and the core EU countries.

Some commentators have also accused Germany of using the CCCTB to eliminate low-tax competition in the EU after being forced to pay for Ireland’s 2011 €85bn bailout.

Announcements at ECOFIN, the committee of European finance ministers, by François Baroin and Wolfgang Schäuble, identified five priority areas: group schemes, tax treatment of dividends and of interest charges, transferring tax deficits, repayment rules and the partnership scheme.

The plans will also be likely to hit the Big Four accountancy firms, which provide tax advice for companies doing business under the different regimes. The Big Four are in any case fighting off EU proposals to make them “audit only” firms, with automatic rotation of major clients audits every six years.

Please note the 11th November 2011 article on the Gaines-Cooper case was not written by any staff at AzureTax ltd, but by Peter Mitchell, news editor at STEP Journal. The article was originally published on 20th October by STEP Journal, who retain the copyright’

Hui Zeng (David) / 曾辉, Partner T: +86 592 239 3355 F: +86 592 239 2255 E: zeng.h@sphere-logic.com A: Sphere Logic Partners / 世礼律师事务所

26/F, COSCO Building, 268 Lujiang Road

Xiamen, China 361001

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

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新加坡上诉庭对协议安排一案的判决

PRC Commercial Franchise

A

s the development of modern commercial modes and the expanding of international enterprises, PRC has promulgated several laws and regulations to govern commercial franchise, such as the Administrative Regulation on the Commercial Franchises in 2007 by State Council, the Administrative Measures for Archival Filing of Commercial Franchises revised in 2011 and the Administrative Measures for the Information Disclosure of Commercial Franchise revised in 2012 by the Ministry of Commerce. The main contents of these regulation and measures are summarized as below.

协议安排的一般介绍 在公司的经营活动中，可能需要对其债权人或股 东的权利进行重新调整。该些权利基本源于合 同，虽然可以通过合同的转让受让来调整该些权 利，不过该些转让需要取得相关协议方的同意， 比较繁琐。公司可以通过协议安排(Scheme of Arrangement)来进行该些权利的调整。 协议安排一般需要三个程序，即，一向法院申请召 开股东或债权人会议；二是召开该会议并取得一定 数额与会有效投票权的同意，新加坡公司法令（50 章）规定该数额为75%；三是法庭批准该会议决 定。一旦法庭批准后，该协议安排即对所有股东或 债权人生效，即使该股东或债权人投反对票不同意该项安排。

Definition: Commercial franchise refers to the business operation by which an enterprise owning a registered trademark, enterprise mark, patent, know-how or any other business resource (hereinafter referred as “franchiser”) confers the said business resource to any other business operator (hereinafter referred as “franchisee”) by means of contract, and the franchisee operates the business under the uniform model stipulated by the contract and pay franchise fees to the franchiser.

案情回顾 协议安排经常被用于债务重组中。TT 国际公司在2008年金融 危机中遭受严重影响，面临现金流困难，2009年1月向新加坡高 等法院申请协议安排并获得批准。TT国际公司的其中一位债权 人，Royal Bank of Scotland NV & Ors 反对该安排，并向新加 坡上诉庭提起上诉。2012年2月，新加坡上诉庭作出裁决，认为 原先债权人会议未依法进行，新加坡高等法庭不可批准该协议 安排，并裁定债权人会议重新进行。

Information Disclosure: A franchiser shall enclose the following information to the franchisee in written form at least 30 days before signing the franchise contract.

1. the franchiser basic information; 2. business resource information on registered trademark,

enterprise mark, patent, know-how or any other business resource; 3. the distribution of all franchisees’ stores in PRC; 4. the franchiser’s related parties’ basic information; 5. bankruptcy information of the franchiser or related

parties in the latest two years; 6. basic information on franchise fees; 7. information on price and condition of the products,

services and equipment; and 8. information on providing continuous services to the franchisee.

判决要点及精神 上诉庭重申协议安排的上述三个步骤，并列出下述精神/原则须 得到遵守： (1) 在召开债权人会议之前，应对债权进行确认及登记。如 果债权人有证据证明某债权不应被确认，该债权人可以要求查看 该债权的相关资料；若债权被拒绝，债权人可向法庭提起上诉； 在会议召开前，经确认的债权须予以公布； (2) 不同性质的债权应予以分类，然后根据不同类别的债 权，决定召开一个或多个债权人会议，如相关联的债权或从属债 权人应分开投票； (3) 协议管理人（scheme manager）应不具利益冲突关系， 并须透明、独立、公正的审核申报的债权及安排债权人会议；协 议管理人应在会议前审核所有申报的债权及其支持文件，并通 知债权人关于该债权的确认结果； (4) 债权人会议前应及时披露关于公司的重要事项，以免影 响投票结果；债权人投票结束后，应立即进行唱票，并公布投票 结果。

Archival Filing: The franchiser shall report to local commercial department for archival filing within 15 days upon the execution of the franchise contract for the first time. And the franchiser shall also apply for modification within 15 days upon any occurrence of above information change 1, 2 and 3. All commercial franchise information in PRC shall be subject to the national network filing.

The commercial department shall complete the filing and announcement through the commercial franchise information management system within 10 days from the date when the commercial department duly accepts the filling documents.

法庭应根据债权人会议前安排及债权人会议进行结果来考虑是 否批准该协议安排。该判决明确了协议安排实践中的诸多议题， 引导协议安排的具体操作。

吳艷娟, 企業事務部资深法律顧問 T: +65 6322 2232 F: +65 6534 0833 E: wuyanjuan@loopartners.com.sg

邹其鸽. 主任合伙人 T: +86 21 6211 2390 F: +86 21 6211 2387 E: jacky.zou@victorylegalgroup.com

陈姝, 企業事務部资深法律顧問 T: +65 6322 2230 F: +65 6534 0833 E: chenshu@loopartners.com.sg A: 俊昭法律事務所 16 Gemmill Lane, Singapore 069254 W: www.loopartners.com.sg

45

陶丽, 合伙人 T: +86 1 39 1100 0063 F: +86 21 6211 2387 E: li.tao@victorylegalgroup.com

A: VICTORY LEGAL GROUP 双胜律师事务所 Unit J, 14 Floor, Huamin Empire Plaza, No. 726, Yan An West Road, Shanghai, 200050 PRC W: www.victorylegalgroup.com

46

SPONSORED UPDATES REUTERS

China property market risks chaos if controls eased: Wen By zhou xin and nick edwards

China’s home prices are still far from falling to a reasonable level, and efforts to curb real estate speculation must be maintained or risk chaos and a property bubble which would harm the economy if it burst, Premier Wen Jiabao said on Wednesday.

“Housing prices are still far from a reasonable level. Therefore, we can’t relax property control measures,” Wen told a news conference on the last day of the 2012 National People’s Congress meeting.

“If we relaxed, all we have achieved would lost and it would cause chaos in the property market, which is bad for the long-term, healthy and stable development of the housing market,” Wen said, adding that reasonable housing prices should reflect personal income, investment and reasonable profits.

Wen’s opening address last week to the largely rubber-stamp annual meeting of parliament, the National People’s Congress (NPC), made it clear that the leadership will push ahead with property tax reform.

But a chorus of carefully nuanced complaints from officials in relatively rich coastal provinces is likely to have delayed a substantial widening this year of a test of a new property tax scheme beyond Shanghai and Chongqing.

The government’s plan for a nationwide property tax is designed to consolidate existing levies and replace a slew of restrictions on multiple and speculative home purchases that had seen property prices surge 10-fold in a decade, until a two-year tightening campaign began to bite in the autumn.

Wen stressed that the underlying fundamentals of the real estate market remained strong, with demand for property solid and sustainable thanks to rapid industrialization and urbanization of China’s 1.3 billion-strong population -- more than 50 percent of which now live in towns and cities.

RENTING ENCOURAGED But Wen said that home ownership should not be the goal of everybody in the country. “Of course, when we say people should have a place to live, it does not mean that everyone should own a property. In terms of direction, we should encourage more people to rent,” Wen said.

Getting property right is crucial for China nationally as real estate investment makes up about 13 percent of economic output and the country’s vast factory sector is battling with a downturn in external demand from debt-ridden Europe and under-spending U.S. consumers.

Home prices fell in January from December, marking the fourth monthly fall in a row and showing that the policy-driven property market downturn is deepening.

Economists polled recently by Reuters see prices falling 10-20 percent this year. Meanwhile, local governments must find a way to repay the 10.7 billion yuan ($1.7 trillion) in debt they have racked up. In 2011, their land sale revenue dropped 13 percent from the previous year to 1.86 trillion yuan, three domestic property consultancies estimated, and further falls are expected.

The predicament is leading local officials to try to flout property tightening measures and forcing Beijing to hit back hard whenever it sees something running counter to its core campaign to drive down runaway home prices.

ASIAN LEGAL BUSINESS march 2012 Sponsored Update

outbound investment Distressed M&A: Risks and Advantages

T

o buy a company which is doing well could be very expensive, if not impossible: very often a company will only be sold, when the owner has run into financial problems and is short before or even in the middle of the insolvency. This has been proved by many acquisitions. But if a company is insolvent, the chance is good that investors from Asia are among the potential bidders.

To buy a company out of insolvency could be promising, if it is well structured and managed.

In practice two techniques to consummate such a distressed M&A transaction have evolved in Germany. In the first place, it is possible for the buyer to overtake the company free of the old burden which causes them the most headaches: the high labor costs, the pension, the rent of the real estate, the liabilities out of payables, the bank credits etc. Under certain circumstances, the insolvency administrator could do the dirty job for him, i.e. to free the company from its liabilities and employees. However, every coin has two sides: while the old problems with liabilities and employees could be done away with in this way, the company is also significantly weakened. At the end of this time consuming clearing process, business partners or clients have turned away, the best people are often gone, the diminished leftovers are confronted with the huge task to build up and win back the lost position in the market.

In order to avoid this scenario, the insolvency administrator often set up a rescue company, which is free of debt and could immediately continue the business of the insolvent company. This so called rescue company could be an interesting target for the acquisition. But then we are back to the beginning of this article: the insolvency administrator who has invested time and money to make the bride beautiful would do his best to make the most out of his efforts. And if business runs well, the price could be high.

Instead of the share deal, it is possible to buy the assets out of the insolvent company. But even if the investor has bought the main assets (machines, real assets, technology, know-how etc.), the investor faces the challenge of transferring also all contractual commitments with third parties to the new business. This very often time consuming exercise needs the consent from the third parties and it is especially tiresome and risky if you need regulatory approval or licenses for the business.

For buyers from Asia, the good news is, it is possible to buy a company without the burden of the past. But you need a good adviser to get it done.

Dr. Max Hirschberger, SZA Schilling, Zutt & Anschütz Rechtsanwalts AG A: Taunusanlage 1, D-60329 Frankfurt T: +49 69 976 9601 351 F: +49 69 976 9601 102 E: max.hirschberger@sza.de W: www.sza.de Meiting Zhu, SZA Schilling, Zutt & Anschütz Rechtsanwalts AG A: Taunusanlage 1, D-60329 Frankfurt T: +49 69 976 9601 360 F: +49 69 976 9601 352 E: meiting.zhu@sza.de W: www.sza.de

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Country / Regional editors

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

China

Malaysia

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

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

The Philippines

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

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

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

Vietnam

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

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

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

Outbound Investment Update

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

PRACTICE AREA AND INDUSTRY EDITORS

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Emerging Markets

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

ATMD Bird & Bird is a dynamic and progressive firm with an established IP, corporate & commercial, competition and dispute resolution practice. The firm also has extensive regional experience advising both domestic and foreign clients on cross-border transactions.

ATMD Bird & Bird has been voted Singapore’s Intellectual Property Firm of the Year at the 2005 and 2006 ALB Awards and the 2005 AsiaLaw (IP) Awards.

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

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

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

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

JICN

HKCCA

The Japan In-House Counsel Network (“JICN”) is a diverse and dynamic community of corporate legal professionals working in Japan. Its members give legal related advice to both large and small companies in a broad range of industries including banking and finance, insurance, health care, manufacturing, and technology. JICN seeks to enhance the competency and professional development of its members through regular continuing education courses and skills training seminars. It also offers members opportunities to network, and exchange ideas and information relevant to their work as corporate legal professional.

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

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IPBA 2012 New Delhi - India

48

SUNDRIES

ASIAN LEGAL BUSINESS march 2012

L’Internationale with a capitalistic twist MI L L ION The amount that the chairman of South Korea’s Samsung Electronics, Lee Kun-Hee, is being sued for by his elder brother, Lee Maeng-Hee. The dispute is over the multimillion dollar (mainly in Samsung shares) inheritance left to Lee Kun-Hee by their father.

QUOTE OF THE MONTH

“THERE WAS NO MR. KING AND NO MR. WOOD.” Mark Schaub, an attorney at Chinese firm King & Wood tells Reuters about the origins of the firm’s name. A number of Chinese firms use names that are perceived to be West-friendly.

Shaanxi’s White Knight lawyer A Zhong Lun lawyer in Shaanxi, China, recently made headlines by rescuing a drowning boy and then quietly disappearing, preserving his anonymity. Our intrepid hero, Wu Fan, was enjoying a leisurely stroll in a park with his family when he heard a distant cry. Racing towards the sound, he saw a boy, who having fallen through the thin ice of the lake, was floundering in the frosty water.

Linking arms with his family, Wu valiantly pulled him out, and deposited him on solid ground. When the boy’s family arrived on the scene, his rescuer left unannounced, reticent to take the credit. Left wondering, the family only discovered his true identity weeks later.

“I don’t think I did anything ‘heroic’,” said Wu, “Nothing ‘great’ or ‘brave’. It’s just what an ordinary man should do. It’s human nature.”

Hats off to Wu for improving the reputations of lawyers everywhere.

Xie Xiaoyu, Zhong Lun Law Firm

PRC lawyers advising on IPOs are feeling the crunch with China’s bourses having had a dismal showing last year. Concerned lawyers at Zhong Lun Law Firm are voicing an industry-wide appeal to allow legal professionals to write IPO brochures.

In China, IPO prospectus writing is dominated by brokerages and their financial advisors, and lawyers have to fight an uphill battle to realise this potential new revenue stream.

To help their wishes comes true, Xie Xiaoyu, who is an

associate at Zhong Lun, put a new twist to L’Internationale, the de facto national anthem of China which was penned when its communist party was formed in 1930s. Zhong Lun’s lawyers sang their own lyrics to the anthem’s tune in unison at their recent annual general meeting to herald China’s hybrid communist-capitalist market.

REUTERS/Jason Lee

L’Internationale for lawyers Lyrics by Xie Xiaoyu, Esq. Translation by Artemisia Ng Arise, the stock market that can’t trail any lower Arise, overworked lawyers who toil day and night Our octane-high passion is ready To struggle for capitalism Let’s beat the cutthroat mandates Colleagues, stand up, stand up Never say we are useless We have to be the masters of IPOs This is the last struggle, let’s unite for tomorrow Lawyers writing IPO prospectuses must be realised This is the last struggle, let’s unite for tomorrow Lawyers writing IPO prospectuses must be realised There were never perfect clients, and no need to rely on regulators To create the wealth for lawyers, it’s all dependent on us We have to get back the fruits of our labour And think outside the box Hurry, let’s make this call resonate loudly Success will only come from the bottom up This is the last struggle, let’s unite for tomorrow Lawyers writing IPO prospectuses must be realised This is the last struggle, let’s unite for tomorrow Lawyers writing IPO prospectuses must be realised

律师版《国际歌》 作词:谢晓宇律师 起来，不能再低的股市 起来，总熬夜加班的人 满腔的热情已准备好 要为资本而斗争 低价格打个落花流水 同事们起来，起来 不要说我们一无是处 我们要做IPO的主人 这是最后的斗争，团结起来到明天 律师撰写招股书就一定要实现 这是最后的斗争，团结起来到明天 律师撰写招股书就一定要实现 从来就没有完美的客户， 也不靠监管部门 要创造律师的财富，全靠我们自己 我们要夺回劳动果实 让思想冲破牢笼 快把这呼声唱得更响 自下而上才能成功 这是最后的斗争，团结起来到明天 律师撰写招股书就一定要实现 这是最后的斗争，团结起来到明天 律师撰写招股书就一定要实现