HKALB Aug

Diners Club ALB Japan Law Awards 2012 winners The Macallan ALB Hong Kong Law Awards 2012 finalists

august2012

NORTH ASIA EDITION

Game on

Hong Kong’s new Competition Law FATCA impact Complying with U.S. withholding tax revamp

PAGE 12

China compulsory licence Another layer of risk for Big Pharma PAGE 18

Indonesia projects

INSIDE

Waiting for infrastructure

n Deals SPOTLIGHT

PAGE 34

04

n THE BIG STORY

05

n LEAGUE TABLES

08

n SUNDRIES

76

INTERNATIONAL BAR ASSOCIATION

ANNUAL CONFERENCE DUBLIN 30 SEPTEMBER – 5 OCTOBER 2012

S

teeped in history, yet buzzing with youthful energy, Dublin’s medieval, Georgian and modern architecture provide a backdrop to a bustling port where the cosmopolitan and charming meet in delightful diversity.

Serving as Ireland’s historical and cultural centre, as well as the nexus of Irish education, administration, economy and industry, Dublin is perfectly suited to host the IBA’s 2012 Annual Conference.

What Will Dublin 2012 offer?

• The largest gathering of the international legal community in the world – a meeting place of more than 4,000 international legal professionals • More than 180 working sessions covering all areas of practice relevant to international legal practitioners • The opportunity to generate new business with the leading firms in the world’s key cities • Registration fee which entitles you to attend as many working sessions throughout the week as you wish • Up to 25 hours of continuing legal education and continuing professional development • A variety of social functions providing ample opportunity to network and see the city’s key sights • Excursion and tours programme

OFFiCiAL COrpOrATE SUppOrTErS

To register, please contact: International Bar Association 4th Floor, 10 St Bride Street, London EC4A 4AD, United Kingdom Tel: +44 (0)20 7842 0090

Fax: +44 (0)20 7842 0091

www.ibanet.org/conferences/Dublin2012

CONTENTS

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34

1

“The new regulation gives China a clearer regulatory basis and flexibility for issuing compulsory licences.

But China is likely to continue to be prudent and measured.”

Chiang Ling Li, Jones Day

20 COVER STORY Game on: Hong Kong’s new Competition Law

42

All eyes are on Hong Kong as the world’s last developed economy finally implements a competition law. In the making for over a decade, the bill has seen its fair share of controversy, attracting criticism from both SMEs and big businesses for being alternately toothless or overly harsh. Kanishk Verghese and Seher Hussain investigate the nuances of the bill, its effect on the marketplace, and the challenges facing Hong Kong in the future.

NEWS

FEATURES Bracing for FATCA

The U.S. Foreign Account Tax Compliance Act (FATCA) represents a major revamp to the U.S. withholding tax system – a revamp set to impose new reporting requirements on organisations throughout the AsiaPacific region, and cost financial institutions globally billions. And with time running out, many organisations in the region may not be ready to comply. Paul Pimentel investigates

The misunderstood drug CL

When administrative measures related to the strengthening of China’s compulsory licence framework came into effect from May 1, popular media misconstrued the regulation tweak. Various articles declared that compulsory licences could now be issued in China, and that Big Pharma companies were in trouble. Despite the sensational headlines, lawyers tell Candice Mak plainly that there is nothing revolutionary in the new law – compulsory licences were always in the law books – and that the clearer provisions will simply add another layer of risk to foreign pharmaceutical players.

Waiting to build

Indonesia may have been one of the most impressive growth stories of the past few years, but the fact remains that poor

12

18

34

infrastructure could really undo much of the good work. The country is in desperate need of ports, roads, railways, power and broadband. The Land Acquisition Law, signed in December 2011, but yet to be implemented, is expected to give provide infrastructure construction a major shot in the arm, apart from providing a major fillip to project finance, finds Ranajit Dam

Women in law

04

BRIEFS

05

LEAGUE TABLES

08

APPOINTMENTS

11

INDEX

75

SPONSORED Regional Updates 40

Diners Club ALB Japan Law Awards 2012 winners announced

50

The Macallan ALB Hong Kong Law Awards 2012

58

Finalists announced for this year’s exciting event to be held on 7 September at Conrad, Hong Kong. Baker & McKenzie and Linklaters have received a total of 18 nominations each, the most among law firms, while Goldman Sachs leads the inhouse pack with 10 nominations for the 11th annual The Macallan ALB Hong Kong Law Awards 2012, co-hosted by event partner The Macallan.

DEALS

— China

Paul, Weiss — Singapore

Loo & Partners — Malaysia

Wong & Partners — Philippines Sycip Salazar Hernandez & Gatmaitan

SPONSORED UPDATES

68 69 70 70

— Emerging Markets

Kelvin Chia Partnership — International Tax AzureTax

72

SUNDRIES

76

72

ASIAN LEGAL BUSINESS august 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 Seher Hussain seher.hussain@thomsonreuters.com Zhen Liu zhen.liu@thomsonreuters.com Kathryn Crossley kathryn.crossley@thomsonreuters.com Kanishk Verghese kanishk.verghese@thomsonreuters.com copy editor Vasundhara Chatterjee

REUTERS/Paul Yeung

associate copy editor Sanchita Ghosh director OF SALES Andrew Smart andrew.smart@thomsonreuters.com

THOMSON REUTERS TRUST PRINCIPLES 01

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

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

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

HEAD OF SALES May Wong may.wong@thomsonreuters.com DIRECTOR, EVENTS Lucinda Maguire lucinda.maguire@thomsonreuters.com ACCOUNT MANAGERS William Lo (North Asia and Global Business Development Manager, North Asia) Yvonne Cheung (Senior Account Manager, China) yvonne.cheung@thomsonreuters.com Rebecca Ng (Account Manager, North Asia) rebecca.ng@thomsonreuters.com Brian Chu (Account Manager, North Asia) brian.chu@thomsonreuters.com Wendy Tan (Account Manager, Southeast Asia) wendy.tan@thomsonreuters.com Alison Towle (Account Manager, Middle East) alison.towle@thomsonreuters.com DESIGNERS John Agra Yvette Chiu TRAFFIC MANAGERs Rozidah Jambari (Singapore) Ivy Tsang (Hong Kong) intern Jacob Michael Wildstein

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

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EDITORIAL

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3

Grappling with giants Our cover story this month features an indepth look at Hong Kong’s new cross sector competition law, which was finally enacted on June 14 by the city’s outgoing Legislative Council during its final days. Even though the new ordinance provides a regulatory framework, implementation remains far off in the distance (2014 some say). According to lawyers ALB spoke to, the Hong Kong government will begin to assemble a new Competition Commission and Competition Tribunal during the upcoming transitional period. Once the Commission is formed, it will issue policy guidelines, clarify exemptions, and stipulate procedures on enforcement, handling complaints and conducting investigations.

The introduction of antitrust legislation in Hong Kong has been long awaited.

Anyone who lives in Hong Kong can easily point out several sectors that are dominated by certain companies and conglomerates. For example, as ALB points out in its report, Hong Kong residents are hard-pressed to find supermarkets that aren’t either Park ‘n Shop or Wellcome (or higher end shops owned by the same parents). Over a decade ago, French supermarket giant Carrefour attempted to enter the Hong Kong market, but was allegedly squeezed out. Carrefour claims the reigning local duopoly forced suppliers to ostracise it for lowering its prices below their own.

It will be very interesting to see the impact of the new ordinance once it is fully formed and applied – will the landscape for Hong ALB_210x87mm_bleed10mm.pdf 1 2011-8-12 11:04:50

Kong consumers change? Hopefully, a range of sectors will follow in the telecom and broadcasting industry’s footsteps.

Prior to the new competition law, it was the only one regulated by the antitrust conventions. As ALB writes: “Sources indicate that given the success of these policies, Hong Kong has seen one of the lowest mobile phone charge rates in the world, in addition to notably high levels of market penetration.”

Our Hong Kong report is worth reading, so I encourage you to turn to page 42. In addition to this, we bring you enlightening features on FATCA, the infrastructure need in Indonesia, the growth of LPOs in Asia, and the reality check on drug compulsory licences in China. Please enjoy and if you have any comments or feedback, don’t hesitate to get in touch with the editorial team.

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

DEALS spotlight

4

$2.2 billion M&A HONG KONG EXCHANGE’S ACQUISITION OF LONDON METAL EXCHANGE • The deal, which is still subject to approval by LME shareholders, would give the HKEx a lucrative commodity trading platform, and strengthen its position in the major market against the Shanghai Futures Exchange, which trades in base metals.

• Under the terms of the offer, HKEx will acquire 100 percent of LME Holdings’ issued and outstanding shares. It will finance the acquisition using its existing funds and an additional 1.1 billion pound bank loan.

• HKEx beat InterContinental Exchange, a U.S. commodities exchange, in a contest that began in September last year with about 15 expressions of interest.

ASIAN LEGAL BUSINESS august 2012 n your month at a glance Deal name

HK Exchange’s acquisition of London Metal Exchange for $2.2 bln

MEDIATEK’S OFFER TO BUY 40 PERCENT OF MSTAR • Mediatek is looking to purchase between 212 million and 254 million MStar shares (40 percent to 48 percent of MStar’s outstanding shares).

• Demand for chips and devices such as the ones Mediatek and MStar manufacture could increase up to 40 percent annually until 2014.

Ontario Teachers’ Pension Plan’s acquisition of a 9.9 percent stake in Kyobo Life Insurance

SINOPEC’S NOTES ISSUANCE • Sinopec’s first global debt offering, and the largest cross border debt offering by a PRC company to date.

• Sinopec’s offering: $1 billion 2.75 percent senior notes due 2017, $1 billion 3.9 percent notes due 2022, and $1 billion 4.875 percent notes due 2042.

Value ($ mln)

Deal type

Allen & Overy Freshfields Bruckhaus Deringer

HK/UK

2200

M&A

Mori Hamada & Matsumoto

Japan

1300

PE/M&A

Canada/ S.Korea

400

PE/M&A

China/HK

1000

Debt

Taiwan

3830

M&A

China/HK

3000

Debt

China/HK

902

Equity

Weil, Gotshal & Manges Shin & Kim Yulchon Baker & McKenzie King & Wood Mallesons

Yancoal’s $1 bln notes offering

Freehills Jingtian & Gongcheng Davis Polk & Wardwell

Mediatek’s offer to buy 40 percent of MStar for $3.83 bln

Jones Day Lee and Li Skadden, Arps, Slate, Meagher & Flom

$3 billion Debt

Jurisdiction

Ropes & Gray Bain Capital secures $1.3 bln Japanese TV investment

$3.83 billion M&A

Firm

Sinopec’s $3 bln notes offering

Davis Polk & Wardwell Haiwen & Partners Conyers Dill & Pearman Freshfields Bruckhaus Deringer

Yitai Coal’s $902 mln IPO

Clifford Chance Jingtian & Gongcheng

08.2012

BRIEFS

05

the big story

The Asian face of patent trolling SHEER NUMBERS AND THE POTENTIAL FOR REWARD COULD MAKE UTILITY PATENTS A TARGET FOR TROLLING IN ASIA.

FORUM WHAT ARE SOME OF THE KEY FACTORS INFLUENCING PATENT TROLLING IN ASIA?

By Paul Pimentel

P

atent trolling – the practice of aggressively enforcing patents that a firm is not currently practising – has matured into a huge and heterogeneous industry. The growing number of patents registered by Asian corporations – particularly those in China – means that the practice has strong potential for growth in Asia.

A recent study by researchers at Boston University estimated that defending and settling claims from non-practising entities (NPEs) – the more polite term for patent trolls – in the U.S. cost firms $29 billion last year. Data for Asia is scant, but Apple Inc’s recent $60 million settlement to end a trademark dispute with Shenzhen Proview Technology, followed – within days – by a suit brought by Shanghai Zhizhen Network Technology Co Ltd over voice recognition software used in the iPhone 4S, suggests Chinese firms have the potential to generate strong revenue from intellectual property (IP) enforcement.

Traditionally, NPEs were firms that acquired patents not to use them, but to generate revenue through licensing and litigation.

The strategy proved quite successful. For example, Acacia Research Corp, a Californiabased NPE, generated about $100 million in revenue in the first quarter of this year.

Such results have led large multinationals to adopt similar tactics. IBM and Hewlett Packard have created business units aimed at generating licensing revenue from their patents.

Similarly, Micron Technology Inc sold 4,200 patents to Round Rock Research LLC, an NPE which subsequently reached several licensing deals and launched a number of lawsuits.

These strategies are less likely to unfold in Asia due to the different composition of patent holdings here. Countries such as China have

traditionally been production rather than research and development bases, and the bulk of key patent holdings remain with Western companies. Moreover, IP infringement awards tend to be higher in Western jurisdictions.

However, several countries in the region – including China – allow the registration and enforcement of utility model patents, a model absent in many jurisdictions, including the U.S. Utility patents are granted for shorter terms – 10 years versus 20 years for an invention patent, which is the patent model akin to what is confusingly called the “utility patent” in the U.S. Chinese utility model patents, however, are easier to obtain, says Christine Yiu, senior associate at Bird & Bird.

Utility patents are granted without any substantive examination of novelty or inventiveness, which is required for an invention patent. Therefore, there is more scope for abuse by a patent troll trying to enforce an invalid utility model patent. The validity of a utility model patent would only be properly examined when the patent is challenged before China’s Patent Reexamination Board.

The number of such patents dwarfs that of invention patents, and is growing at a substantially faster rate. Last year, China granted 43 percent more utility patents than the year earlier, compared to 35 percent growth for invention patents, according to China’s State Intellectual Property Office. And as of the end of 2010, the country had cumulatively granted more than 1.7 million utility patents compared to just over 700,000 invention patents.

Such numbers, combined with the ease of granting and the potential rewards, make the enforcement of utility patents a likely hotbed for future IP enforcement activity in China.

“Over half of patent infringement cases in China are related to utility model patents and design patents.

It has become an almost daily commodity for people suing each other to use that as a vehicle.”

Zhu Nongfan

King & Wood Mallesons

“The utility model is an area to watch, in particular because it requires a lower threshold at the inventive step, and the patent invalidation system in China is not yet fully developed with respect to how common general knowledge can be proven by way of technical evidence.”

Christine Yiu Bird & Bird

“Most Asian corporations are primarily engaged in manufacturing. They have good technology, but most of them do not have very strong patent portfolios.”

Professor Liu Shang-Jyh

Graduate Institute of Technology Law, National Chiao Tung University, Taiwan

6

BRIEFS

ASIAN LEGAL BUSINESS august 2012

Soaring to new heights GLOBAL, JAPAN TOP IPOS JAL’s IPO is expected to be floated at $8 bln which will make it the second largest listing globally this year Top IPOs globally 2012 Proceeds – $ bln

Issuer

Exchange

Top Japan IPOs of all time Proceeds – $ bln

Facebook

Nasdaq

NTT Mobile

Japan Airlines

Tokyo

NTT Corp

Felda

Dai-ichi Mutual

Kuala Lumpur

Banco BTG Pactual BMFBOVESPA Activia Properties Ziggo

0

5

10

Issuer

East Japan Railway

Tokyo

Japan Tobacco

EuronextAM

Japan Airlines

DKSH Holding

Swiss

Alpek

Mexico

West Japan Railway

Allison Transmission

NYSE

Central Japan Railway

15

Source: Thomson Reuters.

Reuters graphic/Christine Chan 19/06/12

DDI

0

5

10

15

Eclipsed only by Facebook’s listing, Japan Airline’s (JAL) proposed IPO is set to float at $8 billion in September, easily topping the charts for second largest global listing in 2012. It comes not long after another Tokyo-listed success, Activia Properties’ $1.2 billion IPO, which currently sits as fifth largest listing worldwide. Evidently, Japanese companies have been going from strength to strength this year, despite the general economic gloom.

JAL experienced a significant turnaround in fortune, having filed for bankruptcy in 2010, owing more than $25 billion to both shareholders and creditors. The Japanese government then stepped in, giving the carrier $11 billion in state-backed support in an attempt to salvage the company. The airline has rebounded sharply, having doubled the government’s investment in a rare successful case of state-led restructuring in Japan and is now the third-largest airline in the country and sixth-largest in the world.

Hong Kong’s contingent takes part in the athletes parade during the opening ceremony of the London 2012 Olympic Games at the Olympic Stadium July 27, 2012. REUTERS/Suzanne Plunkett

BRIEFS

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7

GC INTERVIEW

‘Keep it short and simple’

WILSON TAN Position: Director of Corporate Responsibility, Legal and Public Affairs Company: TNT Express Asia-Pacific Main external counsel used: Drew & Napier (Singapore); Rodyk & Davidson (Singapore); Asia Legal (Singapore); Baker & McKenzie (Indonesia, Thailand)

REUTERS/Robin van Lonkhuijsen

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

WT: A successful general counsel is one who demonstrates a profound understanding of the business within the risk and compliance framework of the organisation. The GC is viewed as a business enabler, but at the same time, can be relied upon to provide an independent and objective viewpoint in the best interest of the company, even if it seems unpopular. The GC is an active listener who is comfortable dealing with a complexity of views, and can be called upon to be an impartial facilitator to foster collaboration between diverse stakeholders to promote the interests of the organisation.

ALB: How would you describe the strategy of the legal team?

WT: My legal department can only provide effective support as part of a cohesive team of business enablers.

My organisation strongly encourages teamwork and collaboration to achieve results collectively, which are greater than the sum of its parts, and the provision of legal support strives to work that way. In-house counsel are in a unique position where they usually bring things together, be it

the various aspects of a customer contract or in negotiations, interfunctional considerations in a position paper, or general day-to-day inputs in commercial risk management.

ALB: How would you describe your criteria for selecting external counsel?

WT: External counsel play a complementary role to in-house counsel with their specific knowledge and expertise of local law and local practice implications.

However, external counsel need to demonstrate a good understanding of their client’s business, giving advice that is “first time right,” and wherever feasible, ensuring that the advice rendered is as definitive as possible. This comes about when lawyers on both sides are willing to take a longer perspective on relationship building, and invest quality time and resources to better understand the needs of business.

ALB: What can in-house counsel do to make themselves an indispensable part of the organisation?

WT: It is important that in-house counsel understand their value proposition to the organisation, and where this value is applied. In-house

lawyers are appreciated when they have established credibility with their business partners by demonstrating a good working knowledge of the business, an ability to translate company policy and risk assessment into practical commercial application, and a willingness to be part of the decision-making process to drive business objectives. With established credibility, in-house lawyers will be respected for their independent and objective counsel even when it means that denying the business the initiatives that do not comply with the organisation’s risk profile.

ALB: What is the best advice you have ever received?

WT: “Keep it short and simple.”

That was the advice given to me by a global leader in my organisation so that the most significant aspects of an in-house counsel’s advice can be appreciated and will be well received. In dealing with the myriad of regulations, policies and restrictions lawyers have to navigate around, the value of lawyers who are able to distill these sometimes conflicting positions into easy-to-understand implications for the organisation cannot be overemphasised.

LEAGUE TABLES

8

ASIAN LEGAL BUSINESS august 2012

NORTH ASIA Announced M&A Legal Rankings

HONG KONG Announced M&A Legal Rankings

Nagashima Ohno & Tsunematsu

27,411.6

DEALS: 42 RANK

Freshfields Bruckhaus Deringer

4,849.8

VALUE ($mln)

DEALS: 4

MARKET SHARE: 10.3

LEGAL ADVISER

VALUE ($MLN)

DEALS

MARKET SHARE

RANK

VALUE ($mln)

MARKET SHARE: 13.4

LEGAL ADVISER

VALUE ($MLN)

DEALS

MARKET SHARE

2

Paul, Weiss

26,026.6

8

9.8

2

Allen & Overy

3,781.7

6

10.5

3

Blake Cassels & Graydon

24,206.5

3

9.1

3

Sullivan & Cromwell

3,779.1

3

10.5

4

Davis Polk & Wardwell

23,326.5

11

8.8

4

Clifford Chance

3,107.3

12

8.6

5

Stikeman Elliott

23,060.6

4

8.7

5

Baker & McKenzie

2,394.7

5

6.6

6

Burnet Duckworth & Palmer

20,584.5

4

7.8

6

Jones Day

2,158.7

1

6.0

7

Nishimura & Asahi

20,404.3

46

7.7

7

Zhong Lun Law Firm

2,104.1

2

5.8

8

Skadden

18,375.7

21

6.9

8

Linklaters

1,259.6

4

3.5

9*

Richard A Shaw Professional Corp

17,672.3

1

6.7

9

Skadden

850.0

1

2.4

9*

Osler Hoskin & Harcourt

17,672.3

2

6.7

10

Latham & Watkins

775.6

3

2.2

(*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)

JAPAN Announced M&A Legal Rankings

SOUTH KOREA Announced M&A Legal Rankings

Lee & Ko

Nagashima Ohno & Tsunematsu

27,411.6

DEALS: 42 RANK

6,057.7

VALUE ($mln)

MARKET SHARE: 30.4

LEGAL ADVISER

DEALS: 36

VALUE ($MLN)

DEALS

MARKET SHARE

RANK

20,404.3

46

22.6

2

9,687.0

67

10.7

3*

VALUE ($mln)

MARKET SHARE: 19.5

LEGAL ADVISER

VALUE ($MLN)

DEALS

MARKET SHARE

Jipyong Jisung

3,526.1

2

11.4

Freehills

3,309.1

1

10.7

2

Nishimura & Asahi

3

Mori Hamada & Matsumoto

4

Jones Day

8,632.1

9

9.6

3*

Latham & Watkins

3,309.1

1

10.7

5

Skadden

7,985.3

8

8.8

5

Kim & Chang

3,098.4

39

10.0

6

Paul, Weiss

6,404.2

3

7.1

6

Bae Kim & Lee

1,914.7

14

6.2

7

White & Case

5,703.4

11

6.3

7

Yulchon

1,018.6

6

3.3

8

Morrison & Foerster

5,683.5

12

6.3

8

Shin & Kim

1,009.1

10

3.3

9

Blake Cassels & Graydon

5,600.0

1

6.2

9

Yoon & Yang

503.1

5

1.6

10

Slaughter and May

5,394.5

3

6.0

10

Allen & Overy

429.9

2

1.4

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

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

160 140 120 100 80 60

Series1 93.9

93.9 64.0 63.0

72.7 54.5

128.9

Series2 112.5 103.4 61.7

104.9

3,000 136.6 127.1 130.2 128.3 128.0 2,500 116.4 114.6 112.1 107.0 100.8 2,000 98.4 83.8 81.8 1,500

143.7 99.7

92.4

70.5

75.3 54.1

1,000 500

40

0

20 1Q 05

3Q 05

1Q 06

3Q 06

1Q 07

3Q 07

1Q 08

3Q 08

1Q 09

3Q 09

1Q 10

3Q 10

1Q 11

3Q 11

1Q 12

NOTES: League tables, quarterly trend, and deal list are based on the nation of either the target, acquiror, target ultimate parent, or acquiror ultimate parent at the time of the transaction. Announced M&A transactions excludes withdrawn deals. Deals with undisclosed dollar values are rank eligible but with no corresponding Rank Value. Non-US dollar denominated transactions are converted to the US dollar equivalent at the time of announcement of terms. North Asia includes China, Hong Kong, Taiwan, South Korea, Japan. Data accurate as of July 27, 2012

No. of Transactions

Rank Value US$ Billion

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

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SPONSORED PROFILE

9

J.P. Morgan

Escrow solutions: Reduce risk & facilitate results Minimizing transactional risk has never been more important. Commercial law firms on both sides of a transaction require flexible solutions to mitigate risks on behalf of their clients.

Samuel Chen, Executive Director, Escrow Sales, Asia Pacific, J.P. Morgan Treasury Services T: (852) 2800 1922 E: samuel.yj.chen@ jpmorgan.com

I

n today’s economic climate, lawyers are acutely aware of the need to manage risks associated with their business while using resources in a costeffective manner. This is particularly important with transactions that may require long-term oversight and the careful monitoring of complex financial obligations.

The solution to these challenges is provided by escrow accounts, which allow lawyers to mitigate risk for both their firm and for their client.

An independent solution The right escrow structure can address risk issues for participants on both sides of a transaction and can be used to either prevent risks from occurring or to mitigate against existing risks. The escrow agent acts as a neutral third-party to the deal.

An essential part of the value of an escrow is that it is a legal agreement, with the terms and conditions carried out by an independent escrow agent. The agreement controls the disbursements of assets pursuant to pre-agreed conditions agreed upon by the parties to the escrow. Escrow structures are often seen in mergers and acquisitions (M&A), good faith or hold back deposit, litigation/dispute resolution, construction funds, and collateral related deals (typically to ensure performance in trade and financing arrangements). When selecting an independent escrow agent, the scale and scope of its operations are important for peace of mind. By executing transactions with J.P. Morgan escrow services team, legal firms tap into an integrated global network of escrow specialists that are backed by the firm’s reach and financial strength.

The benefits for the law firm While many commercial lawyers historically arranged joint solicitor accounts, holding client money in escrow themselves, they are increasingly aware of the risks involved and are concerned about compromising client relationships. An escrow solution lets the law firm diversify risk by handing over management of funds in a transaction to a neutral third party, allowing the firm’s lawyers to focus on what they do best.

Some law firms have actually formulated internal

policies prohibiting solicitors from arranging joint solicitor accounts for their clients’ escrows. Going to a commercial escrow agent such as J.P. Morgan is no longer the exception, but the rule.

A trusted provider As business activities and transactions become increasingly global and complex, clients look for an escrow provider that can translate their unique risk mitigation requirements into a simple, workable solution. J.P. Morgan’s escrow experts are knowledgeable in a wide array of transactions, including M&A, litigation/dispute resolution, construction funds, and collateral related deals (typically to ensure performance in trade and financing arrangements), and joint ventures. We are one of the few banks in the world with a dedicated escrow group, with more than 100 professionals around the globe in Asia, Europe, Africa and the Americas enabling clients to deposit a wide range of foreign currencies and who understands the varied nuances of regional settlement systems.

Our on-the-ground specialists work closely with clients to navigate local laws and regulations in all major legal jurisdictions, helping commercial law firms close cross-border transactions easily and efficiently.

Escrow is most commonly used in M&A transactions. The solution reduces the risks faced by both the buyer and the seller, while M&A experts structure the escrow to ensure the deal closes quickly and securely. For example, if a client is concerned about the accuracy of the acquired company’s financials, the bank can hold a percentage of the purchase price in escrow for up to 18 months. If no claims are made after this period, the funds are paid to the seller. This is just one example of the variety of solutions available. In such deals, the J.P. Morgan team works closely with our clients, guiding them through the steps and simplifying documentation, to ensure the transaction is completed in a timely manner.

Beyond escrow, J.P. Morgan clients have access to a broad range of related solutions, including leading payment services, foreign exchange services and investment products that provide liquidity, safety, and return. This end-to-end solutioning capability is a powerful cocktail that allows clients to benefit from comprehensive solutions that deliver more than risk mitigation in complex deals.

"J.P. Morgan is one of the few banks in the world with a dedicated escrow group in Asia, Europe, Africa and the Americas."

10

BRIEFS

ASIAN LEGAL BUSINESS august 2012

IN CASE YOU MISSED IT

THIS MONTH’S TOP HEADLINES FROM WWW.LEGALBUSINESSONLINE.COM

Skadden,CC star in $850 mln Infastech purchase

Skadden Arps and Clifford Chance have advised on tool manufacturer Stanley Black & Decker’s agreement to acquire Hong Kong-based engineered mechanical fastener maker Infastech for $850 million.

REUTERS/Tim Chong

Singapore Exchange toughens listing rules

Singapore Exchange Ltd is toughening rules for companies looking to list on its main market in the wake of a series of accounting scandals at small Chinese firms listed on the bourse.

REUTERS/Yuriko Nakao

Kirin, F&N prepare for brewery battle

Japan’s Kirin Holdings and Singapore’s Fraser and Neave have hired investment banks to advise them through the takeover battle for a prized Asian beer maker, adding to signs that a bidding war will intensify in the coming days.

REUTERS/Stringer China

China’s M&A dollars remain, but deal volume drops

Despite global uncertainty, China’s outbound M&A deal values for the first half of 2012 remained almost unchanged last year at $51,201 million, according to a new Allen & Overy report.

Freshfields welcomes new China energy head

Freshfields Bruckhaus Deringer has appointed Gang Yuan, a former partner of the now-defunct Dewey & LeBeouf, as its new head of energy and natural resources at its Beijing office.

REUTERS/STRINGER Japan

STB, S&C advise Takeda’s $3 bln debt offering

Simpson Thacher and Sullivan & Cromwell have advised in Takeda Pharmaceuticals’ $3 billion debt offering. Japan’s largest pharmaceutical company issued $1.5 billion in 1.031 percent unsecured dollardenominated bonds due March 2015, and $1.5 billion in 1.625 percent bonds due March 2017.

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12

tax and compliance

BRACING FOR

ASIAN LEGAL BUSINESS AUGUST 2012

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tax and compliance

13

THE U.S. FOREIGN ACCOUNT TAX COMPLIANCE ACT (FATCA) REPRESENTS A MAJOR REVAMP TO THE U.S. WITHHOLDING TAX SYSTEM – A REVAMP SET TO IMPOSE NEW REPORTING REQUIREMENTS ON ORGANISATIONS THROUGHOUT THE ASIA-PACIFIC REGION, AND COST FINANCIAL INSTITUTIONS GLOBALLY BILLIONS. AND WITH TIME RUNNING OUT, MANY ORGANISATIONS MAY NOT BE READY TO COMPLY. PAUL PIMENTEL INVESTIGATES

F

ATCA has been called many things – an affront to sovereignty, a U.S. attempt to outsource taxation, and an awfully big stick with which to prevent just a fraction of American tax evasion, among them. The reality is that it’s an effort to prevent tax avoidance by Americans – an effort that’s going to cost financial institutions globally up to $40 billion. Moreover, the deadline for compliance is looming, and many institutions are not ready. Oh, and it doesn’t only apply to financial institutions.

Unsurprisingly the law, which comes into effect on Jan. 1, 2013, has financial institutions in the region up in arms.

“FATCA is an attempt by the U.S. to unilaterally super-impose its tax system – arguably the most complex regime in the world – on all of the world’s financial institutions,” says a joint submission by the Hong Kong Investment Funds Association, the Investment Management Association of Singapore, and the Association of Mutual Funds in India, among others, to the U.S. Internal Revenue Service (IRS) and Treasury Department. It was one of more than 150 submissions the IRS received calling for changes to the Act. The widely held nature of U.S. securities means that most financial institutions will have to be FATCA-compliant. This means the impact of FATCA is quite significant: Compliance with the Act could cost financial institutions globally anywhere from $30 to $40 billion, according to Charles Kinsley, a principal at KPMG China.

“Many of the major international banks are very focused on FATCA, and aim to be on track for compliance. Unfortunately, many other financial institutions are far from prepared,” says Richard Weisman,

head of Baker & McKenzie’s Global Tax Practice Group, who has worked as a member of a FATCA working group representing Hong Kong financial services industries. Part of the challenge is that the Act’s final regulations – due to come out this fall – have not been released.

A REVAMP OF THE U.S. WITHHOLDING SYSTEM The Act imposes a 30 percent withholding tax on payments to foreign financial institutions (FFIs) and non-financial foreign entities (NFFEs) that are not FATCA-compliant.

To comply, FFIs must enter an agreement with the IRS to identify and disclose U.S. persons who are account holders, “follow due diligence rules and withhold on ‘recalcitrant account holders’. NFFEs must disclose any U.S. persons who own more than 10 percent of the NFFE, directly or indirectly,” according to information posted on the website of U.S.-based taxation law firm Burt, Staples & Maner, LLP (BSM). Any U.S. source income or “proceeds from the sale of securities that theoretically could generate U.S. source

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tax and compliance

KEY FATCA DATES • FALL 2012:

Final regulations to be

released

• JAN. 1, 2013:

FATCA comes into effect; IRS begins accepting FFI agreements

• JUNE 30, 2013:

Deadline for FFI agreements to be in place to avoid withholding tax starting on Jan. 1, 2014

Source: Burt, Staples & Maner LLP

BARRIERS TO FATCA COMPLIANCE •

Regulations are not finalised

•

Organisations are adopting a wait-and-see attitude

•

Financial institutions lack systems to capture information required by FATCA

FATCA EXEMPTIONS FOR NON-FINANCIAL ENTITIES Operating companies (which generally should fall under the “non-financial foreign entity” category in FATCA) could be subject to the 30 percent withholding tax. But there are a number of exceptions, including:

•

Publicly traded corporations and certain affiliates of publicly traded corporations

•

“Active” entities (generally, an entity that derives less than 50 percent of its gross income from passive investment sources or has less than 50 percent of its assets in passive investment assets)

•

Governments and wholly-owned government entities and other recognised “exempt beneficial owners”

Source: Karl Paulson Egbert, Dechert

ASIAN LEGAL BUSINESS AUGUST 2012

income” would be subject to the tax.

The Act covers a variety of organisations, including non-financial corporations: Any U.S.-source payment to a non-U.S. entity could be subject to the 30 percent withholding.

“The challenge (in the region) is because it’s a tax matter, it’s often being buried away within the tax group of an organisation, and the impact of it is not being brought to the CEO’s attention,” says Mark Jansen, partner with the Financial Services Industry Practice of PriceWaterhouseCoopers Singapore.

Initially, there was an opinion among many financial institutions that much of the cost of complying with FATCA could be avoided by merely avoiding U.S. clients. However, “as they understand more about FATCA and as the regulations are firming up, they understand that’s not a suitable approach,” says Gary Robert Haran Doyle, financial services director at KPMG Singapore.

The Act requires financial institutions to search existing “know your client” (KYC) data for seven specified indicia, which if found, may indicate the client is a U.S. person. Indicia include things like a U.S. residential address or a U.S. telephone number. If any of these indicia turn up, the financial institution is required to conduct additional due diligence on those clients to determine whether they are indeed U.S. persons. In addition, they must incorporate procedures for identifying U.S. persons into the process for opening new accounts.

“You can do the search and come up with no indicia, but you still have to do that search regardless of whether you have U.S. clients because you have to be able to prove under the agreement you have with the IRS that you’ve done these searches, and turned up no U.S. persons,” says Kinsley. “There’s an additional cost if you have Americans, but we don’t believe it’s substantial.”

TIGHT TIMELINES One of the key issues with FATCA is the timing of its implementation.

Some financial institutions have indicated that to do the additional data searches, they will need to either change or upgrade systems – something that can take 18 to 24 months, says Kinsley. However, financial institutions must enter into FFI agreements with the IRS by

June 30, 2013, or face the 30 percent withholding beginning in 2014.

“With this kicking in next year, we don’t have 18 months left to implement those changes, and a lot of the financial institutions in Asia have been slow to take off,” says Kinsley.

Part of the reason such institutions have been slow to act is because FATCA’s final regulations have not been released.

Organisations may also be hoping for government-to-government solutions that would ease the compliance burden.

“We’ve got to the point where it’s prudent for institutions to start working, and not just take a wait-and-see attitude,” says Karl Paulson Egbert, a Hong Kong-based national partner at Dechert. “It’s also abundantly clear that many institutions are still trying to waitand-see. That problem is particularly acute outside of Hong Kong.”

Some of the larger financial institutions have implemented dedicated FATCA teams.

They have put together operational flow charts that go through how each of their business units will be impacted by FATCA, says Egbert. “They’ve come up with a plan to respond to it. They’ll slot in the details of how to comply as they’re available, but they have the structures in place.”

In contrast, he says, some private banks in other jurisdictions have indicated that they would not even try to comply with FATCA because not all of the information regarding compliance is available.

“They’re holding out for extensions in FATCA deadlines,” says Egbert, which even if they do occur, may not provide sufficient time to make the system changes necessary for compliance. “People that are waiting now are walking into a bit of a trap.”

“The timeline is incredibly tight, and right now the indications are that there will be no relaxation either,” adds Jansen.

“Organisations typically underestimate the effort around this. A lot of people see this as a tax or compliance issue only; they don’t realise this is much broader than that.”

BROAD SCOPE OF APPLICABILITY FATCA was drafted very broadly in an effort to capture as many types of financial institutions as possible. The consequence is that any financial institution that holds U.S. securities would be required to comply. The act also captures non-financial corporations.

For example, says Kinsley, a bank may hold

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tax and compliance

15

REUTERS/Rick Wilking

U.S. treasuries as part of its liquidity management, in which case the bank would have to comply. If it does not, it would suffer 30 percent withholding on the interest flows and gross sale proceeds on those instruments.

“If you have no U.S. investments, potentially there’s nothing that could suffer the 30 percent withholding. But with the current economic conditions, the U.S. dollar is still the world’s safe haven,” says Kinsley. “If you’re going to suffer withholding, you can’t suffer 30 percent withholding on U.S. treasuries.”

Similarly, if a financial institution makes U.S. securities available to its clients, it would have to make sure the client is not a U.S. person before paying out any proceeds associated with those securities. It would also have to withhold 30 percent if it failed to verify that the client is not a U.S. person, or do the additional due diligence and disclosure to the IRS if the client is a U.S. person, he adds.

FFIs are also broadly defined under FATCA

“MANY OF THE MAJOR INTERNATIONAL BANKS ARE VERY FOCUSED ON FATCA, AND AIM TO BE ON TRACK FOR COMPLIANCE. UNFORTUNATELY, MANY OTHER FINANCIAL INSTITUTIONS ARE FAR FROM PREPARED” RICHARD WEISMAN, Baker & McKenzie and would include fund houses, securities houses, pension funds, and private trusts. Even provident funds, such as Singapore’s Central Provident Fund, are potentially within scope.

“Unless they satisfy the requirements for specific narrow exemptions provided by the February 2012 FATCA (draft) regulations, mandatory provident funds (MPFs) do fall within the scope of FATCA,” says Weisman. “Unfortunately, the exemptions were drafted very narrowly.

So MPFs in Hong Kong, Singapore and Malaysia generally would fall within the scope of FATCA under the draft regulations.”

“If you take a Hong Kong MPF – with some of those funds you can invest directly in the U.S. – those funds would overnight be worth 30

16

tax and compliance “IN ASIA, A LOT OF GOVERNMENTS HAVE NOT REALLY WOKEN UP TO FATCA. THAT’S WHY THERE MAY BE LITTLE OR NO INVOLVEMENT FROM (THESE) GOVERNMENT(S) IN HELPING LOCAL FINANCIAL INSTITUTIONS DEAL WITH FATCA” CHARLES KINSLEY, KPMG China percent less if that MPF does not comply with FATCA, or if it is not ultimately exempt,” says Kinsley.

Financial institutions may also face significant implementation challenges with regard to corporate clients. FATCA requires that financial institutions report substantial U.S. owners of corporate clients – that is any U.S. person who owns more than 10 percent of the corporation, either directly or indirectly.

“If you’ve got 100,000 corporate clients and they may be owned by other corporations that are owned by other corporations, the level of drilling down that has to go on is going to be one of the major cost pieces for the industry,” says Haran Doyle of KPMG Singapore.

CORPORATIONS OTHER THAN FINANCIAL INSTITUTIONS In addition, FATCA also has significant implications for companies other than financial institutions.

“What’s slipped under the radar a bit is the idea of non-financial foreign entities, which are technically subject to FATCA,” says Jeremy Naylor, a partner with White & Case in New York, who focuses on FATCA issues.

Any non-financial entity that has U.S. source income will be subject to the 30 percent withholding tax, unless it certifies that it does not have substantial U.S. ownership, or falls within one of the enumerated exceptions. Alternatively, if such a non-financial entity does have substantial U.S. ownership, it must provide the IRS with the identifying information of those owners required by FATCA, says Naylor.

Furthermore, the definition of financial institution in the Act is so broad that it covers entities that would not traditionally be considered financial institutions. “They might find themselves inadvertently considered financial institutions anyway,” says Egbert.

“Corporations other than financial institutions need to understand their obligations under FATCA,” adds Weisman of Baker & McKenzie.

These include potential obligations to impose withholding tax in certain circumstances, and to provide certain FATCA-related information to payors when requested.

There are a number of carve-outs for NFFEs – the most prominent of which is an exemption for publicly traded companies – but if those do not apply, the company must comply with FATCA or face the withholding tax.

“Corporate counsel should be keeping this in mind,” says Naylor, “because when FATCA’s withholding taxes apply, they’ll need to be able to certify that they are FATCA compliant. They need to take a look at their organisations, and make sure they’re able to make these certifications.”

CONFLICT OF LAWS Another issue with FATCA is that it may conflict with local laws in some jurisdictions – particularly data privacy laws – making compliance a challenge, and local governments may not be addressing this challenge.

ASIAN LEGAL BUSINESS AUGUST 2012

“There is a lack of government assistance with regard to FATCA across Asia. Largely, governments are saying to the financial institutions that you need to comply with FATCA, but make sure you comply with local law. But the two may be in conflict,” says Kinsley.

For example, he says, no Chinese banks could comply with FATCA at present because Chinese law prevents them from reporting the information they would be required to report to the IRS under the Act – and four of the top 15 banks in the world are Chinese. “We are not aware of the Chinese and American governments having addressed this issue to date,” says Kinsley.

“In Asia, a lot of governments have not really woken up to FATCA. That’s why there may be little or no involvement from (these) government(s) in helping local financial institutions deal with FATCA,” he adds.

GOVERNMENT-TO-GOVERNMENT SOLUTIONS What many FFIs are hoping for is a government-to-government solution to FATCA compliance challenges. To date, two models for such solutions have emerged.

The first is a model intergovernmental agreement developed by the U.S. in collaboration with the UK, Germany, France, Italy and Spain.

Under this model, local governments would implement laws requiring their financial institutions to report FATCA-type information to local tax authorities. Financial institutions in these countries would not have to enter into agreements directly with the IRS, because they would be required to comply with rules similar to FATCA imposed by local governments. Local tax authorities would then automatically pass that information on to the IRS. By entering into such an agreement with the U.S., a government could ease the burden of compliance on its financial institutions. For example, under the model agreement, financial institutions would only have to indentify controlling persons of NFFEs according to local anti-money laundering and KYC principles, rather than reporting U.S. ownership greater than 10 percent, as required by the draft FATCA regulations. In many jurisdictions this means financial institutions would only have to report U.S. ownership of 25 percent or greater.

“The beauty of that is you would not have to amend your procedures to drill down in greater detail than normally required,” says Kinsley, noting that this model agreement also pushes back some of the compliance

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deadlines, and enables governments to negotiate a possible exemption for retirement funds.

This model agreement has two versions – a reciprocal and non-reciprocal version.

Under the reciprocal version, the IRS would provide the tax authorities of its FATCA partners with equivalent information about their nationals in the U.S. For example, the tax authorities in the UK will collect information about U.S. citizens and their investments in the UK and share that information with the IRS. In turn, they would receive information from the IRS about UK citizens and their investments in the U.S. The reciprocal version will be available only to jurisdictions with which the U.S. has an income tax treaty or tax information exchange agreement and where the partner government can ensure the information remains confidential and is used solely for tax purposes. The U.S. will make this determination on a case-by-case basis.

The main challenge with this model is that it requires local governments to pass new laws or enact new regulations. “If you go to

tax and compliance

a legislature and say we want to pass something similar to FATCA so we can basically be agents of the U.S. government, you may find that it meets with a lot of resistance unless there is a benefit to the country concerned,” says Kinsley. “It’s one thing to say we’ll pass these laws; it’s another thing to actually get them passed.”

Japan and Switzerland have announced they are working with the U.S. to develop an alternative intergovernmental agreement to facilitate FATCA compliance. Under this model, which is due out in September, financial institutions would enter into agreements directly with the IRS. However, where local privacy laws prevent financial institutions from sharing information about recalcitrant accountholders directly with the IRS, the IRS could request such information directly from the Japanese or Swiss tax authorities. These authorities would then obtain such information from their local financial institutions, and share it with the IRS. The benefit of the second model is that the local country’s government may not have to pass any new local laws. “They will agree to pass the sensitive information on, but they don’t have to go and pass local laws similar to FATCA, which is a very time-consuming issue,” says Kinsley.

However, while the proposed government-to-government arrangements address data privacy issues, they do not deal substantially with the cost burden of compliance.

They “change nothing fundamentally, except who you actually report to,” says Jansen. “The wish is that such agreements actually reduce the cost burden.”

17

18

Patent

don’t believe the china’s drug compulsory licence

ASIAN LEGAL BUSINESS august 2012

Patent

19

REUTERS/Mukesh Gupta

S

When administrative measures related to the strengthening of China’s compulsory licence framework came into effect from May 1, popular media misconstrued the regulation tweak. Various articles declared that compulsory licences could now be issued in China, and that Big Pharma companies were in trouble.

Despite the sensational headlines, lawyers tell Candice Mak plainly that there is nothing revolutionary in the new law – compulsory licences were always in the law books – and that the clearer provisions will simply add another layer of risk to foreign pharmaceutical players.

tarting June 8, media around the globe announced with great gusto that China had overhauled parts of its intellectual property law to “allow its drugmakers to make cheap copies of medicines still under patent protection”. “China to license copies of patented medicines” boomed Aljazeera; “China’s drug law revamp rattles Big Pharma” proclaimed Reuters; “China breaks patent barriers on drugs” extolled The Times of India; even industry website PharmaTimes warbled “China amends patent laws to enable compulsory licensing”. However, none of these headlines or the ensuing reports got it quite right.

The core misconceptions disseminated by the general media were that: 1) Compulsory licensing was now added into China’s patent law; 2) The timing of the “regulation change” was somehow related to the fact that India had, in March, issued its first compulsory licence for the generic manufacturing of anti-cancer Bayer drug Nexavar; and that 3) Large foreign pharmaceutical companies (Big Pharma) were especially unnerved by “China’s latest move”.

But do not always believe everything you read. As numerous lawyers ALB spoke to asserted, in actuality there is nothing alarming about the newest amendments to China’s compulsory licensing regulation under China’s current patent law. Compulsory licences have “always” been allowed and inked into the country’s patent law for over a decade.

The new administrative measures related to compulsory licensing the revised version of the Measures for the Compulsory Licensing for Patent Implementation, which came into effect on May 1 - were issued by the State Intellectual Property Office (SIPO). They simply strengthened the compulsory licensing framework, and implemented detailed procedures regarding application and defence against applications.

“The new regulation does not set out a new law, but merely provides detailed rules for implementing the compulsory licensing provisions already in the law,” says Chiang Ling Li, a Hong Kong-based partner at Jones Day. August Zhang, a Beijing-based partner at Rouse, echoes: “From the legal point of view, there is very little that is new.

Of course, the media articles will try to spin the update. But these are not big steps legally.” Benjamin Bai, the Asia IP head of Allen & Overy also comments that though the “whole world got really excited, the measures were actually quite a non-event”.

Key changes Even prior to the new measures, a compulsory licence (CL) could be granted under the Patent Law if a company or entity is unable to obtain a licence within a reasonable timeframe on reasonable terms and conditions. The main changes in the latest provisions are that clarity is given to the application process and timing, anti-monopoly exploitations are specified as potential grounds for a CL grant, and the scope for compulsory licensing is expanded to include “any matters of public health”. Lawyers have highlighted the antitrust element as one of interest. Zhang of Rouse believes that of the grounds for a CL grant, the antitrust angle would be the toughest since proving a company’s monopoly – as the applicant would have to do – is very difficult. However, it is still possible, and is now included in the much clearer guidance from SIPO. “Anti-monopoly litigation is an area of law that is rapidly developing, and it is likely that future compulsory licences may come on the heels of a finding of an anti-monopoly

20

Patent

ASIAN LEGAL BUSINESS august 2012

“The new regulation gives China a clearer regulatory basis and flexibility for issuing compulsory licences. But China is likely to continue to be prudent and measured.”

Chiang Ling Li, Jones Day

violation by the court or competent administrative authority,” says Beijing-based Fangda Partners lawyer, Fang Qi. Timing In March, India granted its first ever CL, allowing a domestic drugmaker to manufacture a copy cat version of Nexavar, a cancer drug developed by Germany’s Bayer. This enabled India’s Natco Pharma to sell its generic version of Nexavar at a fraction of the cost of Bayer’s version. Bayer is now challenging India’s CL ruling.

When China issued its CL frameworkstrengthening measures in May, many in the media drew a link between China’s actions and India’s move, to insinuate that China was following in India’s footsteps. However, the timing of when the new regulation went into effect was purely coincidental because the draft rules had been under preparation since the beginning of 2011, and were promulgated only at the end of last year. “I spoke to SIPO officials last November when the draft measures were published for comments. They said, ‘We promulgated a number of rules last year in response to the 3rd Amendment to the Patent Law, so because the law got changed, we are doing the administrative job of cleaning up the rules and regulations in response to the amendment to the law’,” recounts Bai, who emphasises that the CL measures had been planned well in advance, and were a necessary refinement to accompany the most updated Patent Law. “SIPO’s revised measures for compulsory licences were necessary after the 2009 revisions to the Patent Law,” confirms Fang. “So unless proven otherwise, I do not think the revised measures signal a change to SIPO’s cautious approach to compulsory licences.”

Big Pharma effect Despite the fact that CLs have been in the law

books for a long time, China has never granted one. By all accounts of pharmaceutical intellectual property (IP) specialists, this is unlikely to change in the near future. “I am willing to bet that there will be no compulsory licence issued in the next five years, absent the occurrence of a pandemic or national emergency,” says Bai. “I told my clients not to overreact; it’s much ado about nothing.” Li of Jones Day agrees: “China has never granted a compulsory licence, even during SARS. Due to various considerations, China is unlikely going to issue compulsory licences on a routine basis.” Several lawyers noted that in a high-profile example from 2003, a Chinese company applied for a CL for the Roche-owned drug Tamiflu, but the government denied the request.

This ought to be reassuring to Big Pharma. Although there is clearer guidance for the framework of CLs now, China’s track record reflects that it is not really interested in granting them freely. “There is no need to panic as we have not seen aggressive enforcement of compulsory licences from SIPO, other than the issuance of the administrative measures,” says Fang. The lawyers underscore China’s desire to protect its international IP reputation, and its continued efforts to attract foreign investment. “The new regulation gives China a clearer regulatory basis and flexibility for issuing compulsory licences. But China is likely to continue to be prudent and measured,” says Li. Zhang concurs: “It’s not something it would do very easily or quickly.”

However, this does not mean that Big Pharma should turn a blind eye to China’s CL rules. Alison Wong, a Hong Kong-based partner at Bird & Bird, does feel that Big Pharma should be wary.

“Understandably, the CL provision dealing specifically with patented drugs will be of great concern to pharmaceutical companies, and time will tell as to whether the authorities will exercise their discretion in exceptional cases only,” she says. Just because China has never issued a CL, that does not mean it may never happen. Drug companies need to be aware of the potential effects of the new measures. “Even though nobody has been successful so far in applying for a compulsory licence, the developments do bring some possible concern for foreign drug companies,” says Zhang.

The new regulation provides the Chinese government with the upper hand when negotiating with foreign companies on drug prices and access, or in regular licensing negotiations. “The new regulation is a reminder to patent rightholders that China has the option to issue CLs if disputes are not resolved, or compromises are not reached,” says Li. “Even if it (Chinese government) continues not to issue compulsory licences, it will probably use the new rules as a bargaining chip.” Bai of Allen & Overy deems this a “real risk” for Big Pharma. “I think the real threat is the possibility of the government dangling a compulsory

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Cadwalader, Wickersham & Taft LLP

VIE Contracts & Corporate Governance

I

n July, the U.S. Securities and Exchange Commission (the “SEC”) issued a “formal order of investigation” against New Oriental Education & Technology Group Inc. [NYSE: EDU] (“New Oriental”). The SEC appears concerned about New Oriental’s accounting practices and the inability of its variable interest entity (“VIE”) companies to transfer profits to foreign investors.

Rocky T. Lee, Asia Managing Partner, Head of Greater China Corporate Practice

A similar intra-company liquidity concern plagued Sino-Forest Corporation (“Sino-Forest”) from June of 2011. Sino-Forest ultimately filed for bankruptcy and was delisted from the Toronto Stock Exchange after being accused of misstating its cash position and business assets in the People’s Republic of China (“PRC” or “China”).

The VIE structure (the “VIE Structure” ) is inherently imperfect because it encompasses and intersects two different legal systems: common law and civil law. Complicating matters further, any Chinese issuer listed on the NASDAQ or the NYSE must simultaneously comply with PRC law, U.S. law, and both jurisdiction’s accounting rules. Tension has escalated between the PRC Ministry of Finance, the SEC, and the Public Company Account Oversight Board (“PCAOB”) over accounting and working paper disclosures.

Stark differences between common and civil law systems account for some of the VIE Structure’s inherent risks.

Furthermore, most legal and investment professionals are cognizant of the potential conflict of interest in the VIE Structure and its set of contracts controlling capital flows (the “VIE Contracts”). However, unsophisticated managers and ill-informed professionals have exacerbated the VIE Structure’s risk profile.

As early as 2001, the fragility of the VIE Structure was exposed when dismissed CEO of Sina.com [NASDAQ: SINA], Mr. WANG Zhidong, refused to resign and asserted his majority shareholder interest in the domestic VIE company (the “VIE Company”) which held the requisite license to operate Sina.com’s internet business in China. Certain PRC foreign investment limitations and telecommunications regulations bar the listed company (“ListCo”) from owning any shares of the VIE Company.

An episode reminiscent of the 2001 Sina.com incident occurred in April of this year involving Mr. Ron CHAN, the former CEO of ChinaCast Education Corporation [NASDAQ: CAST] (“ChinaCast”). Mr. Chan forcibly entered ChinaCast’s offices while accompanied by supporters to claim ownership of physical assets held by ChinaCast’s VIE Company. Countless other incidents have plagued the market.

Cadwalader, Wickersham & Taft LLP A: Beijing

2301 China Central Place

Tower 2, No. 79 Jianguo

Road, Beijing 100025 China T: +86 10 6599 7200 F: +86 10 6599 7300

A: Hong Kong 27th Floor, 100QRC 100 Queen’s Road Central Hong Kong T: +852 2946 1100 F: +852 2946 1200 E: rocky.lee@cwt.com W: www.cadwalader.com

Periodic strengthening of VIE Contracts since 2001 has not induced commensurate improvements in corporate governance. Such corporate governance improvements are predicated upon corporate managers actually enforcing their VIE Contracts (e.g. the VIE Company must actually make payments to the ListCo or a subsidiary thereof). Unfortunately, VIE Contracts are often loosely enforced, and rarely do we see effective intra-company capital flows because most companies prefer to reduce such flows to minimize their PRC tax liability. If funds actually flowed in accordance with the VIE Contracts, most if not all of the VIE businesses would pay more taxes. Taxes should not be a primary concern of managers, as auditors will have already provisioned such tax liabilities in the

company’s consolidated financial statement in accordance with U.S. GAAP rules.

There is, however, a devious technical nuance where crossborder laws and accounting intersect with China’s currency control regime, one of the world’s largest. Under the PRC’s currency repatriation rules, a wholly foreign owned enterprise (“WFOE”), usually the ultimate PRC subsidiary of a ListCo, may only repatriate its Renminbi (“RMB”) profits offshore if the WFOE has complied with a complex set of PRC tax rules, foreign exchange circulars, and profitability requirements.

If money was not periodically paid by the VIE Company to the WFOE pursuant to the VIE Contracts, PRC laws and foreign exchange regulations will likely prevent the WFOE from paying a dividend. This strikes at the heart of the threshold issue of financial consolidation: whether the financial performance of the VIE Company can be attributed to the ListCo when the failure to implement and enforce the VIE Contracts creates substantial doubt (or substantial uncertainty) as to the going concern of the ListCo because its RMB proceeds earned in China cannot be adequately repatriated.

Severely limited offshore intra-company liquidity is but one of many symptoms of a WFOE failing to recover payments from the VIE Company. This prompts one to ask: at what point do years of non-enforcement of VIE Contracts by the company’s directors and managers trigger the termination and/or expiration of those VIE Contracts rendering them unenforceable? An interesting and related legal question is whether the principles of laches, estoppel, and statutes of limitation might be applied by PRC judges to VIE Contracts when parties persistently fail to fulfill contractual obligations.

Let us also not forget to ask whether the WFOE actually provided substantive services to the VIE Company under the VIE Contracts. If the VIE Contracts are not enforceable then one can further anticipate that the VIE Company’s shareholders can walk away from a VIE Structure unscathed.

Many Chinese companies employing the VIE Structure have succumbed to the aforementioned problems due in part to a failure by their corporate managers to understand the VIE Structure and adequately enforce VIE Contracts. Resulting intra-company liquidity problems then often precipitate deficiencies in corporate governance and improper payments to affiliates and related parties.

As such, experience has taught us that corporate managers have a considerable role to play in triggering the inherent weaknesses of the VIE Structure.

Strong corporate governance and sustainable business growth are created by people and not by contracts alone. By understanding the VIE Structure and requiring VIE Contracts to be actually enforced, corporate managers can thwart malfeasance, just as their laxity can trigger it. It is therefore incumbent upon each and every corporate manager to vigilantly implement corporate compliance programs in concert with VIE Contracts. Such vigilance on the part of corporate managers can ensure accountability and strengthen corporate governance, thereby bolstering the sustainable growth of offshore listed Chinese companies for shareholders and for the market at large.

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licence to force companies to provide access to certain drugs,” he says.

One example of the new CL effect is, as Reuters reported on June 8, related to Gildead’s HIV drug, Tenofovir. The drug, known by its brand Viread, had worldwide sales of $737.9 million last year. China’s government, initially slow to acknowledge its growing problem of HIV/AIDS in the 1990s, now admits to having a ballooning number of HIV/AIDS cases. Although Gilead moved to share its IP rights on its medicines in a patent pool with generic drugmakers from many countries last July in return for a small royalty, China was excluded. This meant it had to continue paying high prices for Tenofovir.

Since the change in China’s Patent Law, Gilead has offered certain concessions including giving China a substantial donation of Tenofovir if it continues to buy the same amount, said Paul Cawthorne, coordinator for Medecins Sans Frontieres’ Access Campaign in Asia. “This is all a negotiation game; this offer from Gilead came about once the news that the Chinese were considering issuing a CL came out. The end game is okay; you get a better deal or you use the CL. It’s a strategy that many countries use,” he told Reuters.

“I think the real threat is the possibility of the government dangling a compulsory licence to force companies to provide access to certain drugs.”

Benjamin Bai, Allen & Overy

Big Pharma response Lawyers say the new CL regulation simply adds another layer of risk and challenge to what Big Pharma already deal with on a daily basis around the globe. “The risk won’t be any greater for them than in the U.S.,” says Bai. But he does counsel that “the MNCs (multinationals) should have a strategy in dealing

REUTERS/Michael Caronna

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Court-sanctioned compulsory licences

A

lthough the term “court-sanctioned compulsory licence” (CSCL) is not officially recognised, numerous academics and a growing number of lawyers are viewing this approach as amounting to a de facto compulsory licence (CL). In essence, it is where a court denies a permanent injunction but awards damages and so infringers continue infringing. “This is tantamount to the same thing as a CL,” says Allen & Overy Asia IP head, Benjamin Bai. The hallmark case demonstrating this judiciary route to obtain a de facto CL is found in the U.S., in a 2006 Supreme Court decision on eBay Inc v MercExchange LLC. According to a Fordham Law Review article

by H. Tomcis Gómez-Arostegui: “The Supreme Court held that traditional equitable factors apply to injunctions in patent and copyright cases, and therefore, the mere fact that a defendant has infringed a patent or a copyright does not necessarily mean a final injunction must issue. In the three years since, lower courts have denied final injunctions more frequently than before and are now struggling with what relief, if any, to give prevailing plaintiffs in lieu of an injunction. Some courts permit plaintiffs to sue again later. But most award prospective relief to plaintiffs-sometimes a lump-sum damages award or more commonly a continuing royalty-to compensate plaintiffs for the defendant’s anticipated post-judgment infringements. Plaintiffs often object to prospective-compensation awards as constituting compulsory licences.”

In China, although the prospect of a CSCL is still quite rare, it has happened in a handful of cases. In one famous instance, Wuhan-based China Environmental Project Tech (CEPT) sued Fujikashui Engineering (FKK) and Wuhan Huayang Electricity (WHE) in a Fujian Higher Court for patent infringement. After an eightyear long battle that went all the way up to

the Supreme People’s Court, FKK and WHE were found guilty of infringement and held jointly liable for damages in December 2009. Even though an injunction was granted against FKK, an injunction was denied against WHE for public interest reasons - thus resulting in a de facto CL, a CSCL. Upon paying a licence fee, WHE was able to continue using CEPT’s technology.

August Zhang, a partner at Rouse, says that because the Supreme People’s Court made an interpretation that the court does not need to grant an injunction, CSCLs are possible in practice. “Particularly if you have a good reason for public interest, the Supreme People’s Court has made it clear that courts may not be able to stop the infringement of a patent and the infringer can continue use,” he says. Alison Wong of Bird & Bird agrees that a CSCL is rare: “Only in a case of public interest would a Chinese court refuse a permanent injunction.” She points out that if the courts too easily granted CSCLs in patent infringement cases, “the value of a 20-year patent right should be seriously undermined”.

Despite the fact the CSCLs may lead to the same result as a CL, another school of thought from legal practitioners is that they are not CLs. By definition, a CL must be issued by the government and allows an individual or company to use a patent without seeking the owner’s consent, though it does need to pay the patent holder a set licence fee. Jones Day partner Chiang Ling Li says that CSCLs may not always end up with the same result as a CL, so including “CL” in the term is not accurate. Fangda Partners’ Fang Qi also does not view the CSCL as the same as a CL. He notes that a court’s refusal to grant an injunction would mostly originate from public interest concerns, which differs from the grounds for a CL as outlined in the Patent Law. “First, even though the court may not grant an

with the Chinese government when it waves a CL over their heads.”

Li concurs and says that MNCs “do not need to be overly worried. But they need to consider management strategies”. Zhang feels that at the moment, what all his clients need to do is to “keep an eye on this development”, and find out whether there are real applicants in the process of applying for a CL on their products. “Keep in close contact with SIPO,” he says. Constant communication with the authorities is always recommended. “Big Pharmas need to keep open communica-

injunction in a case, the infringing party is still identified as an infringer and not a licencee. Second, because of the characteristics of civil litigation, the court is only dealing with one particular dispute instance. Thus, the fact the infringer may continue infringement in a particular dispute instance does not mean it can freely exploit the invention,” he says. Thirdly, he says the CLCS is an ex post remedy, and that the damages awarded in these particular cases are based on the infringer’s gains or patentee’s losses. “The royalty rate for a compulsory licence is decided ex ante, likely based on prevailing rates for comparable patented technologies between parties in similar situations,” Fang elaborates.

“If one were to take a strict definition of CLs as government-agency granted rights, then court-sanctioned CLs are not CLs,” says Bai. “However, most people don’t take that narrow a view. There are definitional differences, but it does not change the fact that a de facto CL accomplishes the same goal as a regulatory CL.” Regardless of the varying viewpoints on the definition of CSCLs, the lawyers are in agreement that it is part of a host of IP litigation strategies. The judiciary route to acquire a CSCL is “easier and quicker” than applying and waiting for the government to issue a CL (especially given the fact that it has never acceded to a request). “A CL is a useful tool, like a bargaining chip; it works in a multifaceted way. The threat of a CL – both a court-sanctioned one and one from the government – should always be in anyone’s war chest,” says Bai. “When I defend patent infringement claims, I consider the option of going to a court to get a CSCL. In the meantime, I also weigh the option of getting a CL from the Chinese Patent Office. It’s a multipronged approach.”

tion and regular contact with authorities so that they are up to speed as to the government’s policy on how to implement the new CL provisions under the patents law,” says Wong. Other suggestions from IP specialists include brand owners reviewing pricing issues in China and considering whether there are any new licensing strategies to utilise.

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REUTERS/Richard Chung

“Even though nobody has been successful so far in applying for a compulsory licence, the developments do bring some possible concern for foreign drug companies.”

August Zhang, Rouse

One core aspect for Big Pharma success in China is to ensure they are meeting the market’s demands for their products. If there is enough supply, it is likely the Chinese government will not focus much attention on the drug company. However, as Bai points out, “if the fear of an undersupply develops, the government may consider issuing a CL for generics to produce the drug to meet demand”.

“The real solution is to be more engaged with the Chinese consumers, and to work with the government to make sure if you have a patent; that you meet domestic demand. This would be a win-win situation for the government and the drug companies, and a CL can be avoided,” he says. Bai is a proponent of the “holistic approach” to China – one that “balances profits with consideration for the real human aspect and the social responsibilities”,

and encourages Big Pharma to implement this type of strategy.

Innovation-bound Rather than homing in on the potential issuance of a CL, outsiders should instead be watching China’s gradually-shifting pharmaceuticals landscape.

Unlike India, which has developed a formidable generics industry, China’s ambition is to become the next great drug innovator country.

“Thus, I do not see the widespread use of the CL for pharmaceutical products,” says Fang. Bai says that “from its latest Five-Year Plan, it’s clear that China wants to develop an innovative biotech and pharmaceuticals industry. This is a planned economy”. There has been financial support and incentives from the government to bolster research and development (R&D) efforts, and the authorities have consistently been encouraging domestic pharmaceuticals to acquire patents.

“Domestic companies are continuing work on generics, but they are also developing the R&D side for innovation,” says Li. According to various statistics, 88 percent to 95 percent of Chinese pharmaceutical companies manufacture generic drugs. However, there are a handful

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“There is no need to panic as we have not seen aggressive enforcement of compulsory licences from SIPO, other than the issuance of the administrative measures.”

Qi Fang, Fangda Partners

REUTERS/Jacky Chen

that are working on morphing into innovative players. Zhejiang-based Simcere Pharmaceuticals, a New York Stock Exchange-listed company, is one such example. “Innovation is the key driver of our progress towards excellence. In recent years, we have refined our strategy to focus on the development of first-to-market generic and innovative pharmaceuticals,” says the firm’s website. Last year, it received approval from the State Food and Drug Administration for a new disease modifying anti-rheumatic drug named Iremod. It was independently developed by the company, and will be the first Iguratimod drug on

the global market. Jiangsu Hengrui Medicine is another domestic player investing in R&D. Shanghai-based Hutchison MediPharma states on its website that it is “a novel drug R&D company focusing on discovering, developing and commercialising innovative therapeutics in oncology and autoimmune diseases”. The company has compounds in pre-clinical, phase I, phase II, and phase III development stages.

With the developmental timelines being so long, an innovative drug will not go to market anytime soon from China. However, numerous domestic companies are working hard to make it a reality. “They are in the process of developing the next generation blockbuster drugs that will be sold all across the world,” says Bai. So when will China emerge as the newest drug innovator country? It is too soon to tell for sure, but industry watchers estimate that within a decade, China will likely reach its goal. “When has China not met its goals?” asks one domestic lawyer. “Look at China’s track record; it achieves whatever it states in its Five-Year Plan.” Since domestic Chinese drug companies are seemingly on the right track toward novelty and innovation, what Big Pharma really need to watch out for is the impending competition it will face from China in this generation – and not wring their hands over a nebulous potential CL grant.

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LPO

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LEGAL PROCESS OUTSOURCING (LPO) IS EVOLVING INTO A SOPHISTICATED MECHANISM BASED ON INNOVATIVE PROCESSES AND TECHNOLOGY SOLUTIONS THAT ALSO REQUIRE HIGHLY SKILLED LEGAL PROFESSIONALS AT ONSHORE LOCATIONS. WITH GREATER RECOGNITION FROM THE LEGAL COMMUNITY AND LARGE CORPORATIONS IN THE U.S., LPO VENDORS NOW PERFORM HIGH-END TASKS AND GENERATE MUCH HIGHER REVENUES, REPORTS RAGHAVENDRA VERMA

“W

e clocked $40 million with 670 employees last year,” says Pavan Vaish, global chief operating officer of UnitedLex. This revenue figure of $60,000 to $70,000 per employee, according to him, is far more than the $15,000 and $25,000 averages generated by the business process outsourcing industry and finance and accounting outsourcing respectively.

Furthermore, UnitedLex has registered a 60 percent revenue growth in 2011, and hopes to continue the trend.

It is noteworthy that the stagnation in the major economies of the world has not dampened spirits in the industry, which is benefiting from its ability to provide increasingly higher value addition. A critical aspect of its recent achievements has been global delivery – being capable of delivering services from multiple centres around the world, and most importantly, from close proximity of their client locations. A physical presence in the U.S. and UK not only attracts hitherto reluctant customers, but also helps in devising new costeffective delivery models.

“With very robust processes and extensive use of technology, we create a tripartite relationship between law firm on one side, and company’s legal department on the other,” says Ram Vasudevan, CEO of QuisLex. According to him, the big LPO providers, including QuisLex, are involved in complex work streams relating to litigation, M&As, due diligence, and end-to-end contract management.

With its new-found confidence, the primary pitch of the LPO industry does not any longer centre around cheap delivery options for the traditional legal tasks. According to Mark Ross, vice-president of Integreon, it is important that they are able to deliver a suite of options to their

clients. “A global delivery platform provides clients with choices, and enables LPO providers to allocate the most appropriate resources to a particular engagement,” he says.

Integreon has 17 offices around the world including LPO delivery centres in New York, Washington D.C., Atlanta, Los Angeles, Fargo (North Dakota), London, Bristol, New Delhi, and Mumbai. It employs over 750 lawyers, paralegals, eDiscovery support staff, and project managers.

“They help us provide 24x7 follow-the-sun legal services delivery to our clients,” says Ross.

Onshore delivery also adds to the confidence and the comfort of the clients. According to Suchorita Mookerjee, director, legal operations at Bodhi Global in Pune near Mumbai, “most of the prospective customers are usually averse to outsourcing due to a perceived risk of poor operational performance of delivery centres at far away locations.”

ANTI-OUTSOURCING DEBATE Furthermore, the outsourcing debate in the U.S. is as alive as ever before. Recently, while outlining the proposed amendment to the model rules of professional conduct for legal outsourcing in the U.S., a commission set up by the American Bar Association (ABA) made some very pertinent observations on the industry. In its report to the ABA’s House of Delegates, the “Commission on Ethics 20/20” said that “certain outsourcing is controversial in light of the current employment market for lawyers, and the economic hardships faced by lawyers currently seeking jobs.”

The commission’s report said that the proposed changes are “neither an endorsement, nor a rejection of the practice of outsourcing.”

Rather, it said that the proposals “respond to the existence and continuing growth of these practices, and are intended to clarify a lawyer’s

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obligations in this context so that lawyers who decide to outsource do so in an ethical and responsible manner.”

In fact, the commission’s recommendations, which will be considered in ABA’s annual general meeting in August, do not demand any sweeping changes. One of them, for example, merely clarifies that the “lawyers may not engage in outsourcing when doing so would facilitate unauthorised practice of law.”

At the same time, while admitting the complexities associated with the definition of outsourcing, the commission, in its 17-page report, said that the “diversity of outsourcing arrangements make bright lines impossible to draw.”

FADING DISTINCTIONS Indeed, some of the complex tasks now undertaken by the LPO providers could easily be classified as those of law firms. For example, UnitedLex undertakes patent drafting assignments for the electronics, automotive and medical devices companies, which according to Vaish, is an extremely high-end task for them. “We also have eDiscovery professionals who are certified 30(6)B experts and testify on behalf of our clients,” he says.

Regarding the talent employed to gain domain expertise for such specialist tasks, Vaish says that with the exception of some financial services, sector-specific skills are not required for LPO work. “We (only) need very deep skills in particular horizontal areas like forensics, eDiscovery, document review, contract management, and intellectual property,” he says.

REUTERS/Beawiharta Beawiharta

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CHOOSING DELIVERY CENTRES To maintain a cost-effective model, the LPO providers try to deliver most of their routine legal work out of India or other offshore centres. However, at the same time, clients are offered a choice from the available resources along with the linked cost structures. As expected, the services delivered from offshore

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“WITH VERY ROBUST PROCESSES AND EXTENSIVE USE OF TECHNOLOGY, WE CREATE A TRIPARTITE RELATIONSHIP BETWEEN LAW FIRM ON ONE SIDE, AND COMPANY’S LEGAL DEPARTMENT ON THE OTHER.” RAM VASUDEVAN, QuisLex

locations are always cheaper than those from within the U.S. or UK. In addition to cost, there are numerous other factors that determine the choice of outsourcing location. According to Ross, these include legislative restrictions such as the Data Protection Act in the UK, and the Export Control Regulations in the U.S. Furthermore, he says that the decision could depend upon the complexity of the task, familiarity with the client’s particular legal system, the amount and type of communication required, project duration, client comfort with a location, time zone preference, and language skills.

Giving an example of a legislative restriction, Ross says that when a U.S. patent application drafting is outsourced to India, it is possible that the information sent to enable this drafting could be deemed technology, export of which may have been prohibited. He, however, adds that: “The ultimate arbiter as to determining the suitability of outsourcing a particular engagement must rest with the client; otherwise, we would be providing legal advice to our clients, and (thereby) engaging in the unauthorised practice of law.”

TECHNOLOGY APPLICATION For managing their global delivery operations, it is important that LPO providers install workflow technology platforms to enable seamless interaction among various teams around the world. “Platform LPO vendors have an extra edge in the market as they offer integrated service delivery,” says Mookerjee.

“Processes relating to document review for litigation support, contract management, due diligence, legal research, and intellectual property are best managed through a platform,” she says.

As technology applications are integral parts of the LPO business, its innovative and integrated platform-based solutions tend to be far superior than the other systems. For this reason, many law firms and corporate legal departments prefer not to have in-house

technology solutions, and instead subscribe to SaaS (software as a service) solutions offered by LPO providers.

According to Vaish, UnitedLex benefits hugely from this new trend of sharing technology platforms as it manages to attract even those customers who do not outsource their legal work. “The customers log in and work on our SaaS environment hosted in our private cloud,” he says.

Furthermore, Vaish says that the clients are willing to pay a premium for processes that help in the effective use of its technology.

No wonder then, the technology solutions generate almost half of UnitedLex’s revenue. The practice also helps the company to understand customer business, and become capable of offering other outsourcing solutions in the future.

However, contrary to expectations, UnitedLex does not claim to use the latest technology, and there are good reasons for it to be slightly conventional. “While we want technology solutions that are best of breed, some of them may not be fully established, and therefore, we prefer proven and stable solutions,” says Vaish. “At the end of the day, we are in the business of reducing risk for our clients,” he says.

COST PRESSURES Risk minimisation and compulsions of cost reduction always emerge as the two big competing factors in the corporate boardrooms discussing outsourcing options. According to Vaish, until a few years ago, there was no pressure on the in-house legal departments to cut costs; however, it is no more the case. “Companies are going into more and more litigation, and at the same time, legal budgets cannot go on increasing,” he says, “these companies then also put pressure on law firms to be more cost efficient.”

The choice is not easy and initially, the companies and law firms are always very tentative in their approach to outsourcing. According to Vasudevan, who is based in the southern Indian city of Hyderabad, “the streams of work from a new client are often limited. But once they get comfortable with our quality and performance, the work increases significantly.” Furthermore, he says that most of the growth for QuisLex, which also has offices in New York and Chicago, comes through references and more work from existing clients.

Though corporate in-house legal departments initiate the outsourcing trend, law firms are equally good customers for LPO providers.

Confirming the trend, Ross says that both the streams contribute equally to Integreon’s business. The outsourcing benefits for law firms, according to him, include increased flexibility, increased scalability, use of the best technology, and continuous improvement in service delivery.

Over the course of the last three years, says Ross, law firms like Simmons & Simmons, Allen & Overy, Pillsbury Winthrop Shaw

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QUISLEX

Best Practices for a Defensible Document Review

By Andrew Goodman and Philip Algieri

T

he recent predictive coding cases in the U.S. - Da Silva Moore, Kleen Products and Global Aerospace - signal a growing judicial acceptance of the use of technology to effectively review everincreasing volumes of data. However, as Judge Carter noted in Da Silva Moore, “[t]here simply is no review tool that guarantees perfection.” It is critical that litigants follow Magistrate Judge Peck’s mandate that “counsel must design an appropriate process, including use of available technology, with appropriate quality control testing, to review and produce relevant ESI.” Ultimately, the defensibility of a party’s approach to document review will rely more on the review and quality control process employed than on which particular technology is used. In another context, Judge Grimm stated with regard to Federal Rule of Evidence 502 and potential waiver of privilege that, “Reviewing courts must remember that the bellwether test under Rule 502(b)(2) is reasonableness, not perfection.” What then, is the key to a defensible document review? The answer is to follow best practices that leverage people, process and technology.

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Design a robust process A defensible review process begins with a reliable, tested, quality assurance program and a processoriented approach to quality measurement and reporting. ISO certifications are the internationally accepted standard when evaluating the robustness of a process, and an ISO 9001 certified Quality Management System for review is an ideal starting point in demonstrating defensibility. These certifications demonstrate that a review process has been thoroughly vetted by a reputable, independent third party and serve as an important indicator of quality to clients, courts, and opposing parties.

Another key element of a robust process is the effective use of data-driven quality-improvement systems like

Six Sigma. Manufacturers have successfully utilized Six Sigma for decades, and its underlying principles can be applied to create methodologies to track and improve quality on large scale document reviews.

Related techniques such as PDCA (Plan Do Check Act) or DMAIC (Define Measure Analyze Improve Control) can also be implemented to continuously improve the review process. Most importantly, it is not enough to just have processes; it is imperative that you adhere to these processes, document this adherence and be prepared to testify if required.

Demonstrate quality and defensibility Key elements of demonstrating and proving defensibility are the use of advanced statistical methods and intelligent searching in your processes.

A robust process that integrates these concepts can help you make defensible decisions regarding Early Data Assessment, intelligent document reduction or in utilizing a technology-assisted review solution. You should establish appropriate quality control protocols for every stage of the review and use advanced statistical concepts to select sample sets, measure accuracy and gauge performance. You must test and validate searches and search results, because as Judge Grimm noted in Victor Stanley, and Judge Scheindlin cited approvingly in Pension Committee, the failure “to assess the accuracy and validity of selected search terms” can constitute negligence. You create a more effective and defensible search process when you refine searches to accepted levels of recall and precision, use sampling methodologies backed by advanced statistical concepts to test results, and create efficient iterative feedback loops. In addition, the review process itself must be subject to the same rigorous processes. Finally, this overall emphasis on a quantitative approach to quality creates essential audit trails should anyone ever challenge your process.

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People Matter A process is only as strong as its weakest link, and even the most sophisticated process will fail without adequate human capital. A document review process that relies on the exclusive use of permanent employees at all levels is inherently more robust and repeatable than one that only uses full-time employees at key positions or above a certain level of responsibility. By relying exclusively on full-time employees, you can provide comprehensive training in your processes across all levels. As a result, your reviewers become immersed in your processes and develop institutional knowledge of your clients’ matters, industries, documents and preferences for handling document reviews, all of which makes them more effective than the usual temporary reviewer and bolsters defensibility.

This applies beyond the “core” review team as well.

You should have full-time experts, such as search specialists, statisticians and linguists, who help drive quality and defensibility. For example, a separate quality group that serves as an independent check on all projects can enhance the team’s performance on any given matter, and also take valuable insights learned across matters and industries and apply them to make all reviews more defensible.

Incorporate Technology A defensible review process should also leverage technology to the maximum extent possible. By failing to do so, you subject yourself to the accusation that you have not chosen the most effective review option available to you. You should be able to work with any review tool to gather the data necessary to measure and drive quality, and your Six Sigma driven processes should allow you both to fill in the gaps where technology leaves off and to enhance a review tool’s strengths. It is also important to understand the difference in the search algorithms a particular tool employs and the implications these differences have on your processes. If you fail to account for such differences, you could be at risk if something goes wrong as a result of a particular technology’s unique features.

Involve counsel at all times Your process should not be a “black box.” At the end of the day, counsel is responsible for the review and must stand behind the quality of your work product.

Among other best practices, you should work with counsel to: (1) initiate project kick-off calls and project-

specific training; (2) assist in Early Data Assessments and search term validations to better understand the documents and reduce risk (and cost); (3) tailor your workflow to account for counsel’s preferences and the project’s requirements, and integrate them into your processes; (4) customize your quality and productivity reports and create a reporting schedule that ensures transparency into the review; and (5) perform calibration exercises where your review teams and counsel independently code and discuss a set of documents to make sure your responses are consistent. Throughout the review, you should stay in constant communication with counsel and continuously obtain and apply their feedback. By following these practices, you ensure that counsel has complete insight into the review, can make timely changes or improvements to the process and can appropriately monitor the review team’s performance and provide feedback.

Conclusion Process is the key to a defensible document review, whether with regard to technology assisted review, validation of search terms, inadvertent production or any other aspect of document review that can be called into question as part of an adversarial process. By employing the best practices discussed above, you attain a higher level of quality, adopt the most defensible approach to document review and remove any doubt that what you have done is both appropriate and reasonable.

The authors are the Executive Director and Director of Litigation Services for QuisLex, Inc., a Chambers Band 1 Legal Process Outsourcing (LPO) company.

2 Da Silva Moore, et al. v. Publicis Group SA, et al., No. 11 Civ. 1279 (S.D.N.Y. Apr. 26, 2012) (No. 175), at 4 (Opinion & Order upholding Judge Peck’s ruling allowing predictive coding).

3 Da Silva Moore, No. 11 Civ. 1279 (S.D.N.Y. Feb. 24, 2012) (No. 96), at 25-26 (Opinion & Order approving the use of predictive coding).

4 Paul W. Grimm, Lisa Yurwit Bergstrom & Matthew P. Kraeuter, Federal Rule of Evidence 502: Has It Lived Up to Its Potential?, XVII RICH. J.L. & TECH. 8 (2011), http://jolt.richmond.edu/v17i3/article8.pdf, at 45.

5 See Pension Comm. of Univ. of Montreal Pension Plan v. Banc of Am. Sec., 685 F. Supp. 2d 456, 465 (S.D.N.Y. 2010) (citing Victor Stanley, Inc. v. Creative Pipe, Inc., 250 F.R.D. 251, 259-62 (D. Md.2008)).

1

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LPO

ASIAN LEGAL BUSINESS AUGUST 2012

Pittman, King & Wood Mallesons, and Corrs Chambers have publicly acknowledged LPO relationships with Integreon. According to him, “the law firms that embrace legal outsourcing are now viewed as innovative, ground breaking, and cognisant of their clients’ concerns.”

CHALLENGES AHEAD There are many issues that the LPO companies themselves would need to resolve before they succeed in helping others. According to Mookerjee, there is a lack of industry wide standardisation of processes, materials and configurations, which according to her, makes global delivery difficult. Mookerjee is particularly concerned about the lax attitude among various Indian LPO providers towards information security and confidentiality aspects. “There are some small time players who do not put proper preventive measures for confidentiality and data protection,” she says.

Mookerjee says that during recruitment interviews for Bodhi Global, many lawyers with prior LPO experience disclosed that in previous jobs, they were never subjected to body searches and used to carry personal electronic items including pen drives in the office premises.

This, she says, may give a bad name to the entire industry.

Furthermore, according to Mookerjee, the clients who experience laxity in quality or delivery of service in their first outsourcing venture rarely agree to consider that option again. She, however, claims that

However, the high attrition rate among these young lawyers, who form the main task force, is another challenge that the LPO industry has to deal with. “They have many career options, and by just becoming the highest payer, one doesn’t reduce attrition,” says Vaish.

Hiring senior lawyers – with more than 15 years of experience – having appropriate skills face a different kind of problem. “The cost of hiring such a talent at offshore locations is very high, sometimes very similar to the cost in the U.S.,” says Vaish, “there are very few people with specialised skills, and (a) lot of companies are going after them.”

According to Mookerjee, LPO providers in the U.S. look for qualified Juris Doctors with experience of seven to twelve years with law firms in relevant jurisdictions.

BRIGHT FUTURE With almost all the LPO providers employing less than thousand lawyers, a consolidation seems to be on the cards. “LPOs are “WHILE WE WANT TECHNOLOGY SOLUTIONS THAT ARE progressing towards large-scale acquisiBEST OF BREED, SOME OF THEM MAY NOT BE FULLY tions and mergers, ESTABLISHED, AND THEREFORE, WE PREFER PROVEN wherein big players AND STABLE SOLUTIONS. AT THE END OF THE DAY, WE ARE would like to consolidate their marIN THE BUSINESS OF REDUCING RISK FOR OUR CLIENTS. ket spread, capacity, PAVAN VAISH, UnitedLex and provide wider span of legal services through takeovers,” says Mookerjee. in the past decade of the LPO industry, she has never heard of an However, according to Vaish, currently instance of a data leak. there is very little to acquire, and companies Regarding the availability of workforce in India, Mookerjee says that have to build the business. For this reason, though young lawyers in the country have the required qualification, he says there are large venture capitalists they lack some important skills. For example, she says: “American investing in smaller companies. According to English is very different from the English that is taught in our schools. him, the LPO companies could provide global So we do have to train them in basic American business correspondelivery only if they achieve a certain scale dence.” because as the labour cost will keep rising, Another problem affecting the capability of global delivery is the the smaller LPO providers will face severe fluctuations in the amount of work, which is particularly common in margin pressures. The only way out, he says, litigation assignments. According to Vaish, “in the U.S. we are able to is by increasing productivity through investget temporary workforce. However in India, flexible staffing for proment in technology and processes, which will fessional talent like lawyers does not exist.” For this reason, he says be a tall task for a small company. that the offshore delivery centres are usually assigned with the base At the time, when corporations have to work, while the fluctuations are handled onshore. UnitedLex’s, India deal with increasing regulations around the delivery centre employs 500 lawyers, while there are around 150 in world and a virtual explosion in electronically the U.S. and 20 in the UK. British Telecom is one of its major clients. stored information, the role played by the LPO Availability of highly-trained lawyers in India was the basis for the industry cannot be overstated. Vasudevan start of LPO services, and will probably remain a major factor for the says: “LPO is enabling access to much better country’s position in the industry. “Today, 85percent of all the offshore information, which is leading to more effeclegal outsourcing companies are still located primarily or exclusively tive decision making and an improved way of in India, and despite the ongoing emergence of other destinations, implementing the law as a practice.”

India will continue to play a dominant role,” says Ross.

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NEWS

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REUTERS

Insight: China’s CNOOC scoped Nexen, partnered, then pounced

By David Ljunggren, Denny Thomas and Michael Erman

When Canada’s Nexen Inc fired its CEO in January, an oil giant on the other side of the world sprang into action.

Nexen had been on the wish list of Chinese state oil company CNOOC Ltd for five years. The removal of CEO Marvin Romanow was just the opening the Chinese needed to make their move, according to sources familiar with the situation.

By the Chinese New Year later that month, CNOOC had hired BMO Capital Markets and Citigroup Inc as financial advisers, according to these sources. That kicked off negotiations culminating on Monday with a deal to buy Nexen for $15.1 billion, the biggest foreign acquisition ever by a Chinese company.

The agreement is a triumph for China’s third-largest oil company, which had to abandon its $18.5 billion bid for Californiabased Unocal in 2005 because of bitter opposition on sovereignty grounds from U.S. lawmakers, and shows how far the Chinese have come as dealmakers on the global stage.

It also feeds China’s demand for resources to sustain an economy that despite six quarters of deceleration still grew at 7.6 percent in the second quarter, and will give it a platform from which to grow further in Canada’s energy sector.

Interviews with people familiar with the Nexen deal reveal CNOOC heeded lessons from the Unocal debacle. It also closely studied Australian miner BHP Billiton Ltd’s failed $39 billion bid to buy fertilizer maker Potash Corp in 2010 - a deal killed by the Canadian government - as it methodically went about laying the groundwork for the Nexen deal.

Among its tactics was the establishment of a joint venture so it could become familiar with the target and its assets, as well as the way of doing business in North America.

Importantly, it quickly started building relationships with governments in the countries where Nexen operates, including Canada, the United States and Britain, the sources said.

CNOOC, which offered a 61 percent premium to Nexen’s Friday stock price, already has interests in Canada - including oil sands operations in Alberta, and shale gas in British Columbia - as well as extensive exploration and production holdings in the North

Sea, Gulf of Mexico and offshore West Africa.

Nexen, Canada’s sixth-largest independent oil explorer and producer, also operates in the Gulf of Mexico, Colombia, the North Sea, Yemen and offshore West Africa.

A big step for China is that the Nexen offer is for the entire company. In the wake of Unocal, many Chinese buyers have chosen to buy stakes in overseas companies rather than attempt full takeovers.

“It’s partly the valuation, partly an evolution of the Chinese mindset. You couldn’t do this deal a year after Unocal,” one of the sources familiar with the deal said. “They had to have made the smaller steps in the meantime that made everyone comfortable that they knew how to behave responsibly, operate effectively, treat employees well.”

SMALL STEP Nexen spokesman Pierre Alvarez declined to comment on how the deal came together, saying the company will provide details in its information circular to be sent to shareholders in about a month. A CNOOC media official said Nexen had been a partner of the company for years, declining to comment further on the deal.

Despite its size, the deal may prove to be only a small step in China’s ambition to acquire resources and technology. In the West, and particularly in the United States, there is still suspicion about sales of major assets to Chinese companies because of Beijing’s controlling influence in the nation’s corporate sector and anti-China sentiment among some lawmakers.

Although some experts and people familiar with the transaction expect the Canadian government to approve the deal, that could change if popular sentiment suddenly turned against it.

Pulling off a similar deal in the United States is also likely to remain a pipedream for Chinese buyers.

“My guess is that they continue to be wary of investments in the United States and concerned that they might either be blocked or subject to conditions that may be complicated for them,” said William Reinsch, president of the National Foreign Trade Council, a U.S. business association focused on international trade and investment issues. “I wouldn’t

take it as a given that (Canada) would simply say yes and move on.”

CAREFUL PREPARATION CNOOC stepped up its pursuit of Nexen after Canadian Prime Minister Stephen Harper visited China in February and said he wanted to sell more oil to Chinese and Asian markets. Canada has also stressed the need for more foreign investment to help develop its oil sands.

“CNOOC would have read very real signals into that... It would have been very strange for political leaders from countries at the most senior level to come and ask for investment and then say ‘No’,” said a person familiar with how the deal was forged.

In the wake of Harper’s comments, the Chinese firm sought meetings with senior officials in the federal government and the government of Alberta to gauge the appetite for a possible approach.

CNOOC, realizing a hostile bid of this size would be virtually impossible to pull off after BHP’s failed approach for Potash, felt a crucial advantage was that its approach had the full support of the Nexen board, the sources said.

CNOOC hired Hill and Knowlton for lobbying in Canada and the United States, and Bell Pottinger in Britain, according to one source. New York law firm Davis Polk provided legal counsel. Hill and Knowlton declined to comment. The firm filed its lobbying disclosure forms in Washington on Monday but listed the effective date of registration as May 14.

A Bell Pottinger official in the United States did not have an immediate comment.

“I don’t think the problem is whether CNOOC can complete the deal,” said a China-based source familiar with the matter.

“The key is whether CNOOC can successfully consolidate and manage the new company, whether it can reach its targets over the next five years.”

The rest of this report can be found on reuters.com

34

PROJECT FINANCE

INDONESIA MAY HAVE BEEN ONE OF THE MOST IMPRESSIVE GROWTH STORIES OF THE PAST FEW YEARS, BUT IT DESPERATELY LACKS PROPER INFRASTRUCTURE. THE LAND ACQUISITION LAW, SET TO BE IMPLEMENTED SOON, IS EXPECTED TO GIVE PROVIDE INFRASTRUCTURE CONSTRUCTION A MAJOR SHOT IN THE ARM, APART FROM PROVIDING A MAJOR FILLIP TO PROJECT FINANCE, FINDS RANAJIT DAM

T

o talk about Indonesia’s negatives might seem absurd at this point. For one, GDP growth is expected to be 6 percent in 2012, with the government estimating it to go up to 7.2 percent in 2013. Over the next several months, the country is slated to join the exclusive club of countries with an annual GDP of more than $1 trillion. In 2011, foreign direct investment reached a record $19.3 billion and exports grew by 29 percent, reaching $203.62 billion. Two of the three ratings agencies – Fitch and Moody's – now rate the country as investment-grade, a spectacular turnaround from the economic basket case that it was some 14 years ago following the Asian Financial Crisis.

However, one of the major roadblocks to Indonesia’s growth was highlighted recently by the third ratings agency, Standard & Poor’s.

In a report titled “Greater Investment In Infrastructure Could Rev Up Indonesia's Growth Engine,” it noted that the country scored poorly in efficiency and productivity mostly because of the poor state of its roads, airports, and other economic lifelines. These were resulting in increasing congestion in urban areas, high transport costs, electricity blackouts, and limited access to improved sanitation. “The inadequacies in Indonesia's transportation infrastructure are likely to hinder the country's global competitiveness unless addressed,” said S&P credit analyst Rajiv Vishwanathan in the report. “Indonesia is also at risk of deeper power shortages over the next few years as demand multiplies.”

It is not something the government is unaware of. In June, finance minister Agus Martowardojo noted a number of growth challenges, singling out infrastructure issues. "There are still many obstacles to land acquisition," he said. To tackle this problem, Indonesia in December 2011 passed the Land Acquisition Law, which is set to reduce uncertainty in acquiring land for development, and allow for the acceleration of road, port and airport projects. “The Land Acquisition Law is an important milestone for infrastructure development,” says Ken Hawkes, partner at White & Case. “In the past, with no compulsory acquisition for land to support public infrastructure or other

ASIAN LEGAL BUSINESS AUGUST 2012

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PROJECT FINANCE

35

REUTERS/Beawiharta Beawiharta

36

PROJECT FINANCE governmental uses, there was only the ability to acquire land privately and for negotiated prices. Projects that placed a heavy emphasis on land – such as toll roads – had to rely on separate negotiations with many land owners. This caused delays, and ultimately led to the termination of many projects.” Hawkes adds that while there are other causes of project delays in Indonesia – a complex bureaucracy, for example, when it comes to seeking approvals – the passage of the Land Acquisition Law should provide a boost to those infrastructure projects that have been delayed or affected in some way due to issues related to land acquisition.

Luke Devine, a consultant with Baker & McKenzie, agrees on the importance of the law. “Land acquisition risk has been the single-largest problem in recent years which has held back the development of infrastructure projects, particularly in those land-intensive projects such as toll roads and transmission lines for power projects,” he says. “Having a clear, streamlined process with clear deadlines for the steps involved in the land acquisition process will significantly help turn a number of these projects from plan to reality.” He adds that the law

“THERE IS SIGNIFICANT PRESSURE ON THE PRESIDENT TO ISSUE THE IMPLEMENTING REGULATIONS REQUIRED

BY THE NEW LAW, AS WITHOUT IT, THE COMPULSORY ACQUISITION POWERS AND PROCESSES UNDER THE LAW ITSELF CANNOT BE UTILIZED. AS A RESULT, THERE IS A HIGH LIKELIHOOD THAT THE REGULATION WILL BE ISSUED THIS YEAR.” LUKE DEVINE, Baker & Mckenzie will also enable state-owned companies that have public service functions (such as PT Perusahaan Listrik Negara, or PLN, the government-owned electricity company that has a monopoly over electricity distribution in Indonesia) to avail themselves of these new land acquisition powers, which will speed up the development of power generation projects. “To date, PLN has been reluctant to take on the responsibility of acquiring land corridors to connect new power plants to the existing grid because PLN does not

ASIAN LEGAL BUSINESS AUGUST 2012

have compulsory land acquisition powers, and PLN has instead been trying to push this responsibility to the private sector developers who similarly have no power to compulsorily acquire land,” says Devine. “It is expected with these new powers, PLN will take on the responsibility of transmission corridor land acquisition.”

James Harris, managing partner, and Justin Patrick, associate at Hogan Lovells Lee & Lee term the law to be of “fundamental importance” as they see it facilitating the development of privately funded public infrastructure. “The law represents a formal statutory regime giving the government a power roughly equivalent to ‘eminent domain’ or compulsory purchase, so it is rightly receiving a lot of media attention,” they say. “Depending on its implementation, the law could potentially provide a huge boost to the government's public private partnership (PPP) programme.”

WAITING FOR THE LAW The law may have been passed in December 2011, but it cannot be practically implemented because the government has yet to issue a presidential regulation on it. However, with local media quoting representatives of the private sector as saying that acquiring land is equal to between 75 and 85 percent of an infrastructure project’s completion, the pressure is mounting with every passing month. Even an IMF mission to Indonesia in early July pointed out the fact that the implementation of the law was sorely needed to accelerate infrastructure projects. “There is significant pressure on the president to issue the implementing regulations required by the new law, as without it, the compulsory acquisition powers and processes under the law itself cannot be utilised,” says Devine. “As a result, there is a high likelihood that the regulation will be issued this year.” He adds that the issuance of this regulation is expected to enable government and the relevant state-owned companies to take on a stronger commitment in infrastructure concession agreements in relation to completing land acquisition in a timely manner. This will help reduce the risk level for developers, which in turn, will attract a larger number of developers.

“As these projects are awarded and move into project financing, it will certainly be a boon for project finance lenders,” he says.

According to Devine, the biggest trend he expects to see once the law is implemented relates to the willingness of more developers to seriously commit to bidding for these new projects. “This is on the assumption that with these new powers, the government and stateowned companies take on firm obligations to deal with land acquisition under concession agreements, rather than leaving land acquisition as a risk that the private sector developers must find a way to deal with,” he says. “Hence, the volume of deals and higher levels of interest from serious developers is what is expected.” Meanwhile, Hawkes expects to see more investment coming from domestic developers and banks.

“The Land Acquisition Law would benefit those projects that have the greatest need for land, such as toll roads,” he says. “Traditionally, investment in the Indonesian toll road sector has come from domestic construction and toll operating entities.”

Harris and Patrick say that the passage of the law's implementing regulations - which is anticipated this year - should be viewed as the first step in improving Indonesia's land acquisition regime. “After the regulation is promulgated, there will have to be a period of settling into the new regime; that could take a few months or longer,” they add. “The market would also benefit from further reforms in relation to registering title to unregistered rural land and how rights of way are to be established.”

Keeping that in mind, they do not expect the new regulation to have an immediate impact on the project finance market. “Most

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SPONSORED PROFILE

37

King & Wood Mallesons

Project Finance Deals with Chinese Factors

T

Liu Zhigang Partner King & Wood Mallesons’ Banking Group, Beijing Office

he history of Project Finance in China is not long, but it is rich. In its earliest stage, Project Finance was used mainly in power plant deals, then later extended to water plant deals and petrochemical projects. At that time, Chinese sponsors were short of funds and experience, and Chinese banks were short of foreign exchange and caught up in bad loans. Furthermore, China’s infrastructure base was very weak, and the production capability of Chinese entities was also unreliable. Therefore, the lenders in the Project Finance market were mainly foreign banks, whose loans included commercial loans, export credit, and soft loans. As well as the collateral on all project assets, the lenders were able to attain sponsors’ guaranties and even governmental guaranties for almost every project.

Twenty years later, the Project Finance deals with Chinese factors have developed significantly. Nowadays, two main types of deals exist within the Project Finance model, with different attributes. The first are projects within mainland China and the second are projects outside mainland China.

Projects in Mainland China The attributes of the current Project Finance market in mainland China include: Chinese banks have now become the main, if not the only, source of funds for projects; The large state-owned enterprises have now accepted this model (gradually), including PetroChina and Sinopec, the biggest players with the strongest negotiation position in the market; With few power plant projects in action, most projects are in the petrochemical, nuclear power plant, highway, bridge and other infrastructure areas; All deals are subject to regulations and rules promulgated by Chinese regulators. Applicable regulations include the Guidelines for Project Finance Business as well as indirect rules, for example, the Provisional Measures on the Administration of Fixed Assets loans, the Provisional Measures on the Administration of Working Capital Loans, the Guidelines for Syndications Loan Business, etc.

It is largely a buyers market.

A: 40th Floor, Tower A, Fortune Plaza 7 Dongsanhuan Zhonglu, Chaoyang Beijing, 100020, P. R. China T: +86 10 5878 5126 F: +86 10 5878 5577 E: liuzhigang@cn.kwm.com W: www.kwm.com

Although there is a contractive domestic monetary policy, as well as a shortage of funds in foreign banks, borrowers still hold a strong negotiation position and are able to request favorable loan conditions. This is because the sponsors are generally powerful, the deals are generally very big, and government support is generally strong.

The borrower sometimes requests a clause stating that if any member bank fails to grant its portion in the facility, the lead manager should take such portion. Another example is a clause stating that if a lender or agent fails to make the money available on time, such lender or

agent will be fined based on the default interest. Other clauses may be specific to China. For example, under the Provisional Measures on the Administration of Fixed Asset Loans, the China Banking Regulatory Commission (CBRC) requests that when the disbursement fund is not a small amount (over RMB 5 million or 5% of the total investment amount), the loan must be transferred directly by the lender into the bank account of the payee rather than payor (i.e., the borrower) under the applicable commercial contract.

Projects outside Mainland China The second type of deal relates to projects outside of mainland China. In the past ten years, “outbound” deals increased rapidly. Among these deals, many took the project finance model and have the following features: Chinese banks have increasingly become leading actors in financing overseas projects. Although not yet market leaders, Chinese banks have gained more experience and influence as a result of their significant funds.

Most of the sponsors or borrowers have a Chinese background. The lenders request collateral not only on the assets of the projects, but also request a guarantee or commitment from the Chinese holding companies.

Most deals are in the natural resources industry.

Due to the cross-border nature of the deals, certain rules and regulations are now applicable which otherwise would not be. For example, when the Chinese holding companies provide security to the lenders, the relevant foreign securities rules will become applicable. The Chinese holding companies must get approval from and register such securities with the State Administration of Foreign Exchange.

When carrying out Project Finance outside of China, Chinese companies and banks face many unfamiliar rules and regulations. For example many deals have failed as a result of environmental issues as well as issues related to local residents, such as compensation for destruction of their homes. The Chinese companies and banks have been accustomed to the soft environmental and native requirement in China. When they step into the international market, they normally disregard the importance of these issues in the local jurisdiction. They may have made a feasibility report without considering such factors and thus arrived at a very low fee quote.

When the project starts, they become aware of a large and unanticipated cost, or even potential material disputes. Stamp duty also sometimes becomes a major issue. In some jurisdictions, bank guarantees are required to be stamped. This additional cost normally also falls outside the Chinese companies’ and banks’ initial projections, and if the financial advisor or counsel failed to make it clear in advance, this factor might render the deal unprofitable.

38

PROJECT FINANCE

ASIAN LEGAL BUSINESS AUGUST 2012

Workers work to build new toll road in Jakarta. REUTERS/Supri Supri

immediately, the law should allow the government to acquire land for infrastructure projects more easily,” they say. “Naturally, infrastructure projects, such as roads and transmission lines, could facilitate project finance for private businesses indirectly, such as for pulp processing plants and industrial facilities. There is also tremendous potential for the law to facilitate PPP projects. But project finance for PPP projects in Indonesia will continue to be constrained by the speed at which the government can get bankable projects to market and complete tenders.”

AREAS OF FOCUS Hawkes says that toll roads will probably be the initial area for investment once the new law comes into effect. “Anyone having experienced the traffic delays and seen the overloaded transportation infrastructure in Indonesia would agree that this is a high priority!” he quips. Devine agrees that the toll road sector will be of great interest to developers, and explains why it is likely to see more domestic interest than foreign. “However, as the revenues from these toll road projects are not linked to U.S. dollars, unlike, for example, the revenues from the power projects, the toll road projects lend themselves more to domestic developers and domestic financing, where the currency

of revenues can be matched with the currency of financing and equity return requirements,” he says. “That said, as the Indonesian rupiah has maintained a relatively stable level over the past decade, if the government can tighten up the bankability of the concession agreements, a healthy amount of foreign interest in these projects is expected.”

Toll roads aside, he notes that the offering to the private sector for concessions in the other transportation sectors are more sporadic.

“Indonesia's current master plan (Masterplan for Acceleration and Expansion of Indonesia, or MP3EI) does contemplate a number of airports and seaports being offered to private sector developers. But as there is not a long track record of private sector concessions for seaports and airports – and these projects may be exposed to issues around the ability of the government to dictate revenue levels by controlling tariffs to consumers and users – the level of risk around these projects is higher than for toll roads, and certainly much higher than the tried and tested models for power generation projects,” he adds.

However, for Devine, power generation projects continue to be the most fertile area for project finance lenders. “The government is currently pursuing Indonesia's Second Fast-Track Program which is 10,000MW power projects, the majority of which are to be awarded to the private sector for development and financing. Hence, there has been significant interest from developers and lenders in these projects, and as there is a long-established model for internationally financed private sector power generation projects, a number of developers and lenders are familiar with the structure of these projects and the risks arising from these projects. Hence, the award of these projects has been moving relatively quickly.”

Harris and Patrick at Hogan Lovells Lee & Lee say that coal-fired power plants may continue to receive a majority of funding because PLN's power-purchase agreement (PPA) terms for these projects are

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well established. “We can see from Genting's Banten 660MW IPP project that there may be appetite to finance these projects without a government guarantee,” they say. “However, multilateral support for such projects seems to be on the wane. The government has also indicated that, from an energy mix perspective, new projects will include cleaner energy sources (such as natural gas and renewables).

The recent indications that natural gas exports may be subject to moratorium are one result of these policies.”

They say that outside the power sector, however, the government's PPP programme has been relatively slow in ramping up. “However, the government has port, water, waste management and toll road projects in the pipeline, in addition to three mine mouth IPP projects proposed for Sumatera,” they add. “Development of transportation infrastructure is expected to be critical in facilitating the government's private development goals. Toll road projects appear to have made the most progress, but railway and port projects have also been in planning stages. Additionally, the Tanah Ampo terminal expansion in Bali is one project that has been recently promoted, with a formal tender process expected to kick off soon.”

Harris and Patrick add that after the implementing regulations of the land acquisition law are promulgated, they expect to see an immediate positive effect on projects, such as some toll road projects, where the government initiator has been awaiting guidance on how to proceed with land acquisition. “We also expect that the government initiator will select the sites for most (if not all) new projects coming to market,” they say. “This is a departure from previous procurement schemes, where in some cases, the private sector would be required to select its own site based on criteria set by the government initiator.”

A DIFFERENT KIND OF MARKET Baker & McKenzie’s Devine says that project finance in Indonesia differs from many of its neighbours in two ways. Firstly, a number of other markets in Asia, such as Thailand and Malaysia, have developed very deep liquidity in the domestic bank market, and have moved away from reliance on foreign currency borrowing to develop infrastructure projects. But Indonesia is different. “The depth in the market and the willingness of domestic banks to whom true project finance may still be somewhat of a novelty, has meant that Indonesia continues to rely heavily on foreign currency project financing,” he says. “Additionally, Indonesia is still perceived as a jurisdiction where developers and lenders face political risk in relation to the long-term concession agreements, and accordingly, most of the cross border project finance transactions will necessarily involve commercial project finance lenders needing political risk cover provided by export credit agencies and multilaterals such as the IFC, the Asian Development Bank and the like.” He notes that in other jurisdictions in Asia, even some developing jurisdictions such as Thailand, foreign lenders have been willing to provide uncovered financing to those infrastructure projects.

Hawkes of White & Case also points out the lack of governmental support for key infrastructure projects. “For example, the lack of any direct guarantee for any of the state-owned entities that are engaging in infrastructure development – like PLN, the monopoly state utility,” he says. “This is gradually changing with the need for more infrastructure investment from the private sector. The Indonesia Infrastructure Guarantee Fund has been recently established to facilitate infrastructure investment though a structured guarantee from a state entity.”

PROJECT FINANCE

39

Devine says that the biggest problems faced by developers and lenders in Indonesia, however, are front-end issues, rather than issues with implementing the project finance model. “For instance, for a lot of the sectors where PPP models are still relatively new in Indonesia, such as airports and seaports, the challenge is to ensure that the concession model that is adopted by government is one which meets the ‘bankability’ requirements of international lenders,” he says. “Without a bankable model, potential bidders lose interest, tender processes become fraught with danger as winning bidders seek to knock the contracts into shape post-bid, and the biggest loser in this is Indonesia.” Additionally, he notes that as infrastructure concessions must be awarded through a competitive tender process, since internal government delays in preparing projects for the bidding stage have been a source of frustration for developers who are actively seeking new opportunities.

Finally, he notes that in the past, issues surrounding the creditworthiness of the entity awarding the infrastructure concession to a private sector developer had been a big concern, as the authoriser took the form of a limited liability state-owned company, such as PT Jasa Marga in the toll road sector, PT Pelindo in the seaports sector, and PT Angkasa Pura in the airports sector. “This led to concerns as to how these entities were going to be able to fund termination and buy-out

“ANYONE HAVING EXPERIENCED THE TRAFFIC DELAYS AND SEEN THE OVERLOADED TRANSPORTATION INFRASTRUCTURE IN INDONESIA WOULD AGREE THAT THIS IS A HIGH PRIORITY!” KEN HAWKES, White & Case

payments under the concession agreements in the event of a government-related default under those concessions,” he says. “However in recent years, the government has removed the ‘authority’ role from these state-owned companies, and taken it back. Accordingly now, the government-related obligations under the concession agreements are supported by the full government balance sheet, hence reducing these creditworthiness concerns.”

Devine says that the moves of the government bode well for the sector in general. “If these front end problems can be resolved, we expect to see a significant increase in the number of deals closed,” he says.

40

WOMEN IN LAW

ASIAN LEGAL BUSINESS AUGUST 2012

NETWORKING

NETWORKING IS A KEY ELEMENT OF ANY SUCCESSFUL LEGAL CAREER. SIX FEMALE PARTNERS TALK TO PAUL PIMENTEL ABOUT THE CHALLENGES OF NETWORKING FOR WOMEN IN THE LEGAL PROFESSION, AND HOW TO OVERCOME THEM

KNOW YOUR INDUSTRY It is very important to understand the industry you are in, and know the players.

Networking within your industry is very important for success.

Being seen to be "part of" the industry is key to increasing your share of the work available.

team. Several of my senior clients now were the young bankers on deals I did when I first came to Hong Kong 14 years ago.

I think it is too easy to think that networking boils down to playing golf and other events that tend to be male-dominated. While there are large pockets of that, it is still possible to successfully network as a woman lawyer.

Writing articles and speaking at conferences is a good place MICHELLE TAYLOR to start to establish Asia Managing Partner your credentials in your Orrick, Herrington & Sutcliffe, Hong Kong industry. However, it should be used in moderation and not to the exclusion of face-time with clients and industry participants.

Make an effort to force yourself to talk to someone you don't know at events you go to – cocktail parties, seminars, even CPD lectures. Start small, get over your nerves and then keep at it.

The simplest networking to do when you are a young lawyer just starting out is to develop a relationship with the junior clients on the

Sadly, there are many obstacles to effective networking among women in the profession.

Some are talked about all the time, but oth-

PLAY TO YOUR STRENGTHS AND BE YOURSELF

ers are more subtle. The obvious ones are networking activities skewed towards men, such as visits to breweries and golfing events, or events held in the evening, which can be a challenge if you have children.

What may be less obvious is that women tend to have a smaller pot of contacts they ELLE TODD can draw upon in the Partner first place. One of the Olswang, Singapore first groups law yers network with tends to be friends from college, university or law school. People also tend to have their closest friends be of the same gender as them. With women, those groups of contacts become smaller and smaller because many women drop out of the workforce to have children. For example, of all my friends from college, only one is still in the workforce.

WOMEN IN LAW

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I try and network in different ways. In terms of meeting people, it will be lunch or coffee rather than evening activities. I focus on my strengths, which include listening, responding and staying in touch. I remember little things about people, such as the fact that they’re going on holiday, and think of ways of helping them out.

It’s also important to start building and maintaining your network early. When I started out, I thought I would only be judged on merit and how hard I worked. Later, I realised how valuable having this network of people is, and I wish I worked on that earlier.

BARRIERS GRADUALLY DISAPPEARING When I started out, there were fewer opportunities, and more social barriers. At that time, networking was difficult because many clients had concerns about working with a woman, such as whether a woman would be able to work late into the night, travel, and so on.

Whenever we went to meet a prospective client, we always went in a team consisting of at least one male member. You needed the token male presence initially, as on the client side, there was no visible female representation.

KUMKUM SEN Partner Bharucha & Partners, India

Now, there are several women in high positions in the senior legal ranks in most large corporations. Networking is always a challenge, but it’s not so much of a gender issue as it’s one of competition. There’s only so much legal work in any one organisation, and there are many firms pitching for that work. So networking in Delhi, Bombay, Bangalore as a female lawyer is not a problem. Most doors would open easily.

In smaller cities, there could be issues as clients’ culture and background is different and they may not be comfortable with empowered women lawyers. There are few law firms, and women lawyers may face networking barriers. But Justice Leila Seth, the first woman judge to head a high court, started

practice in one such small town more than 50 years ago.

STANDING OUT IN A MALE-DOMINATED PROFESSION Obstacles women in Japan face when it comes to networking effectively are probably not that different from those in other jurisdictions, e.g. getting close to male clients through client entertainment may be easier in an allmale context, especially in some industries and practices where the clients are still maleoriented.

REIKO SAKIMURA Partner Clifford Chance, Japan

As an associate, occasionally a female lawyer may, for no particular reason, be assumed by a client to be more junior, perhaps sometimes taken more lightly, than a male lawyer working in the same team.

However, there can also be advantages to being a woman professional in a still predominantly male business culture. For a start, you are more likely to stand out, be remembered, make an impression; so long as that impression is good – by delivering excellent service – you can leverage on that for further developing your network. Women lawyers are often also in a better position to strike up close relationships with women clients.

PRIORITISE THE IMPORTANT OVER THE URGENT Relationships built on casual meetings with people who do not necessarily require my assistance at that point in time have translated to long-lasting key client relationships.

MICHELLE PHANG Partner Shook Lin & Bok, Singapore

I would advise prioritising between seemingly competing demands and learning to remember to choose what is important over what is urgent. Be wise with your time. Be discerning with what you commit to. We're not

41

Sadly, there are many obstacles to effective networking among women in the profession. Some are talked about all the time, but others are more subtle.

ELLE TODD, Olswang, Singapore super-humans. Don't blindly follow a trend, but at the same time, ensure that whatever you've committed to, you undertake it with absolute drive and determination.

OVERCOME STIGMA BY PROVING IT WRONG When companies or individuals are looking for a legal service, they are looking for a firm they know they can trust. When they know the attorney on a personal level – whether as an acquaintance or through referral – the trust comes more easily.

More women are becoming more prominent in the legal indusHANIM HAMZAH try, although it is still an Resident Partner industry dominated by Roosdiono & Partners, Indonesia men. For networking, I have joined some women-focused groups.

But generally speaking, I look objectively at the value of any group for networking based on its members, focus and reach.

I can believe that the stigma that men are more capable still exists, but that has not hampered my ability to network. For women starting out in the industry, I would say: Don’t presume you will face gender-related obstacles. And if you do, the best way to overcome any stigma is to prove it wrong. Just keep working hard, and show what you are capable of.

It is important to remain up-to-date with happenings in the industry so that people know you are well informed. However, it is just as important to be confident when presenting that knowledge. As long as you are confident, people will take you seriously, regardless of any prejudice they may have.

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ASIAN LEGAL BUSINESS august 2012

Game on

REUTERS/Bobby Yip

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Hong Kong Country Report

43

Hong Kong’s new Competition Law All eyes are on Hong Kong as the world’s last developed economy finally implements a competition law. In the making for over a decade, the bill has seen its fair share of controversy, attracting criticism from both SMEs and big businesses for being alternately toothless or overly harsh. Kanishk Verghese and Seher Hussain investigate the nuances of the bill, its effect on the marketplace, and the challenges facing Hong Kong in the future.

A

nnounced on June 26, Hong Kong’s first cross border competition act has officially come into play. Broad-reaching in scope, it bars a substantial amount of anti-competitive activity including cartels and bid rigging, and possesses significant enforcement powers.

Although often viewed as an unrestricted capitalist dreamland due to low taxes and ease of conducting business, certain markets in Hong Kong are simultaneously dominated by a handful of massive conglomerates. As such, the bill has faced fierce public debate from small and medium-sized enterprises (SMEs) that advocate for a tougher, more aggressive stance while the government has come under pressure from big businesses to relax the proposed restrictions.

The resulting law is an intriguing mix, which sources say, will take some time to play out in the marketplace.

A tale of mobiles and markets Prior to the bill, the only sector that was regulated by antitrust conventions was the telecom and broadcasting industry. Overseen by a committee that was set up post handover, the Competition and Policy Advisory Group had no enforcement powers. However, it would spot issues, which soon led to competition regulations for the telecom sector.

Sources indicate that given the success of these policies, Hong Kong has seen one of the lowest mobile phone charge rates in the world, in addition to notably high levels of market penetration.

Margaret Wang, counsel at Freshfields Bruckhaus Deringer, says: “We’ve benefited as a community from the competition regimes that are present in the telecom industry. So the development of an economy wide general competition law is likely to be a positive change for the domestic economy if it is enforced properly with the right safeguards in place.”

People often equate free trade and minimal regulatory barriers in Hong Kong with a competitive domestic economy. But market observ-

ers note that this is not always the case.

One of the most striking examples of the perceived anti-competitiveness of certain industry sectors is French hypermarket giant Carrefour’s attempted entry into Hong Kong over 10 years ago. Dominated by the supermarket duopoly of ParknShop and Wellcome, owned respectively by Hutchison Whampoa and Jardine Matheson, media reports indicate that the two closed ranks, forcing suppliers to ostracise Carrefour for lowering prices below theirs. The French retailer eventually pulled out, providing the Hong Kong Consumer Council with a list of 22 companies that allegedly applied pressure on it to not cut prices. A challenger to ParknShop and Wellcome is yet to be seen.

The public debate is clearly very polarised between those that cite the fact that Hong Kong consistently scores as one of the freest economies in the world with vigorous competition, and others who use the Carrefour example to suggest that there are markets which are unfairly dominated by a few major players.

However, most lawyers see this as a positive development. Clara Ingen-Housz, partner at Baker & McKenzie, affirms that “the ordinance is a way for Hong Kong to conform to international standards, and introduce principles that are now shared across the world, and specifically the Asia-Pacific region”.

“The Hong Kong Ordinance is no more vague than competition laws in other leading jurisdictions.

However, people in Hong Kong need some time and guidance to better understand the concepts and the consequences in the way they conduct business.”

Clara Ingen-Housz, Baker & McKenzie

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Hong Kong Country Report Breaking it down Essentially, the ordinance is based on a threepart system. The first handles the gravest offences, prohibiting price fixing, bid rigging and even joint distribution agreements.

The second focuses on abuse of significant market power, which is aimed at preventing businesses with a prevailing position in the industry from engaging in anti-competitive behavior. The final section deals with merger controls.

John Hickin, partner at Mayer Brown JSM, elaborates: “The first point to make is that the ordinance is a cross sector law that includes fairly generally-worded provisions. That will give the commission the ability to target the hardcore cartel-type activity in Hong Kong, or wherever they find it. It’s going to be a powerful weapon once it’s established. However, there are certain significant omissions and concessions that have been made, which people have complained have watered down the effect of the law.”

The most egregious of those concessions has been the merger control provision. At the moment, the ordinance only contains merger control restrictions if the transaction involves the telecom industry. Sources pinpoint this as a definite limitation for the regulator, as most major competitive regimes around the world include a broad-reaching merger control element. “There is no good theoretical reason for singling out the telecom sector for merger review,” says Thomas Cheng, Assistant Professor, Faculty of Law, at the

ASIAN LEGAL BUSINESS august 2012

“When you have a new law where there is uncertainty about the scope of application and a lot of pushback from the business community, it would take a very bold regulator to be using those dawn raid powers from day one.”

Margaret Wang, Freshfields Bruckhaus Deringer

University of Hong Kong. Wang agrees: “The government has left the door open so that they can revisit this issue once the bill has been in operation for a few years.”

Another bone of contention that practitioners highlight is the lack of standalone private action, which specifies that an individual with a complaint cannot bring a lawsuit in court to sue a wrongdoer. Under the current rules, the individual can only complain to the competition commission and wait for them to investigate.

Other controversial sticking points include concessions by the government that have exempted businesses with a turnover of less than HK$40 million ($5.16 million) from certain offences, which is an increase from the previously suggested HK$11 million; as well as proposing that the maximum penalty that can be imposed is now capped at 10 percent of the local Hong Kong turnover; something which was originally suggested at 10 percent of the global turnover.

The question of how to define market power also remains, and is a crucial debate for businesses as they may or may not be exempt from certain provisions depending on how their market power is characterised. Sources have differing views on this. “It’s impossible to say in advance how market power will be defined and evaluated in the context of a specific case, and that is what caused businesses some discomfort and anxiety,” says Cheng. “The determination of market power is very case-specific, and unless provided with a concrete case, it is very difficult for someone to say in the abstract how market power will be assessed and evaluated.”

Ingen-Housz further details that: “The Hong Kong Ordinance is no more vague than competition laws in other leading jurisdictions. However, people in Hong Kong need some time and guidance to better understand the concepts and the consequences in the way they conduct business. The Competition Commission will assist in the process, in particular by issuing guidelines about a wide range of key substantive and procedural issues, such as market definition, market power or the handling of complaints. All in all, getting this ordinance off the ground is a huge enterprise for Hong Kong, and people need to understand that.”

Finally, practitioners say that unlike many REUTERS/Erik de Castro

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“It is surprising how little effort has been made to ensure a consistent approach with the competition authorities in China.”

Marc Waha, Norton Rose

REUTERS/Bobby Yip

antitrust regimes around the world, the ordinance does not specify that the impact on competition needs to be substantial. It merely references the fact that certain behaviour has the effect of restricting, preventing, or distorting competition. Ingen-Housz says: “But what if the distortion to competition is really minimal, for example, involving price fixing affecting a minor part of the Hong Kong economy. Do you really want to use the Hong Kong Competition Commission’s (HKCC) resources to be going after that kind of behaviour? Most laws around the world will request that the effect on the market be substantial; and the ordinance today does not contain that kind of language.”

Whether it is merger controls, government concessions on turnover, or simply murky language, it is evident that the ordinance has gone through several iterations throughout its history.

“As a result of all of those things, one could say that the impact of the law compared with what it might have been has been lessened,” says Hickin. “But having said that, it’s still a significant piece of legislation and will have an impact on the way that business is conducted throughout the territory.”

EU building blocks Hong Kong’s government made it clear during the law-making process that the competition law follows the legislative rubric found in the EU. “If you look at the two key provisions - sections 6 and 21 - you see language that reminds one of the corresponding provisions in the EU law,” says Cheng. While the ordinance clearly has its roots in EU

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Hong Kong Country Report

law, several practitioners also note that the Hong Kong government refrained from referring to China’s anti-monopoly law, adopted in 2008, for guidance. “It is surprising how little effort has been made to ensure a consistent approach with the competition authorities in China,” says Waha. On the other hand, while Hong Kong and China’s relationship has become increasingly connected post handover, the legal system has arguably been an area where the former has taken the one-country-two-systems approach most seriously. “People in Hong Kong jealously guard their legal and judicial autonomy, and I think the legal profession still likes to keep a somewhat polite distance

from the mainland legal system,” says Cheng.

Nonetheless, it is highly likely that the two authorities will ramp up cooperation as more cross border investigations emerge.

For her part, Ingen-Housz is unsurprised by the absence of cooperation between the two authorities, stating that the Chinese law itself is very much modelled after the EU model.

The origins of the ordinance aside, legal

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Economists: A lawyer’s best friend?

Bryane Michael, University of Hong Kong

F

ew lawyers receive training in econometrics and advanced statistics. And why should they? Negotiating contracts, bringing suits against parties who violate the law, and interpreting the way new laws affect Hong Kong’s companies does not usually require heavy statistical analysis.

Yet, in-house counsel with experience in the U.S. and/or the EU know that statistics provide a key method of helping to detect and file civil actions against the anti-competitive behaviour of commercial rivals. As Professor Rubinfeld of the New York University Law School notes: “To obtain a financial recovery in a private action, the plaintiff must prove three distinct elements: (1) an antitrust violation; (2) antitrust injury; and (3) damages – a measure of the extent of the injury.” 1 Hong Kong’s law firms and in-house counsel will find that economists can help them with each of these points.

Consider the case of a hotel owner in Kowloon wishing to show that other hotels in the area are keeping their prices too low in order to drive him out of business. Without an economist, that owner would need to obtain written proof that these hotel managers had met and come to an agreement. He would need copies of e-mails or preferably one of the hotel owners to “squeal” on the others in their collusive agreement. With statistics though, the hotel owner’s legal counsel could more easily obtain information useful to start litigation. Such information might include correlations between room 1

prices, discounts below estimated marginal costs, and expected losses taken by rival hotels in the area. Such information would certainly convince a judge to order further material investigation.

Three key statistical tests prove useful in this kind of litigation. Lead counsel should know about these tests when working with economists, particularly on competition law-related cases. The hypothesis test (or test of similarity) can show – with a certain level of certainty – that one hotel owner’s prices, occupancy rates and other factors are not like the other hotel owners’. For example, an economist can tell you with a 99.999 percent level of probability that hotels in a district advertise prices below their expected marginal costs. Economic methods can actually remove the distorting effects of factors like seasonal demand, how well the stock market is doing, the prices of inputs like labour, and so forth. The regression analysis can tell legal counsel how much the prices, quantity offered, amount of innovation, product quality, and so forth has changed in response to changes in factors like the number of other hotels in the area, the size of these hotels (the amount of assets they hold) and so on. Such regression analysis can show (with a certain level of confidence) that the profits of our hypothetical hotel owner have changed because of the actions of the other hotel owners. Economists can also do cost-benefit analyses – showing the profits our hypothetical hotel owner

http://ec.europa.eu/competition/antitrust/actionsdamages/rubinfeld.pdf

has lost because of collusion by neighbouring rival hotels. Such analysis can “take out” the effects of a weakening economy, changes in hotel regulations, and other factors.

Economists can provide law firms and in-house counsel with information useful in three venues. They detect anticompetitive behaviour – showing with a level of probability – when rivals are engaged in such behaviour. Presenting proof of such behavior can be useful when asking regulators and judges for more in-depth investigatory work. They prove (in some jurisdictions) which anticompetitive behaviour occurs. We cannot directly observe secret meetings in which trading partners agree to manipulate prices, quantities, and so forth. But we can observe their effects. In some instances, a 99.999999 percent statistical probability of engaging in anti-competitive behaviour is enough for regulators or judges to provide injunctive relief, assess fines, and provide other remedies. In this way, an economist can be a lawyer’s best friend, while enforcing Hong Kong’s new Competition Law. Bryane Michael is currently at the University of Hong Kong’s Centre for Comparative and Public Law. He has previously advised on anti-competition law in Russia for the EU, and in the developing world for the OECD and World Bank since 1995. He has done his doctoral work in economics at Oxford and Harvard.

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REUTERS/Kin Cheung

“People in Hong Kong jealously guard their legal and judicial autonomy, and I think the legal profession still likes to keep a somewhat polite distance from the mainland legal system.”

Thomas Cheng, University of Hong Kong experts expect case law to provide the commission and the public with the actual details.

“It is possible that Hong Kong courts will turn to EU case law more because of the government’s professed desire to follow the EU regime. But the devil is in the detail, and they will not be supplied until the courts actually decide cases. By then, we will know whether the Hong Kong law is really modelled after EU law,” says Cheng.

Effects on the marketplace Much media attention has been focused on the HKCC’s range of enforcement powers as alongside traditional sanctions, it also has the power to conduct dawn raids. A hot topic, given its dramatic implications, Wang says: “Judging on the track record of regulators in Hong Kong, they are usually quite careful and especially when you have a new law

where there is uncertainty about the scope of application and a lot of pushback from the business community, it would take a very bold regulator to be using those dawn raid powers from day one.”

Also notable are the leniency provisions. Businesses can approach the commission and report on cartel activity that they have been involved in with others, and can benefit from being treated more leniently for having blown the whistle. “That traditionally has been a destabiliser of cartels in many jurisdictions where this power has been included,” says Hickin.

How will these new regulations and enforcement powers affect SMEs? “The greatest impact it will have is to the extent the businesses and SMEs currently pursue anything that would be deemed illegal under the competition law,” says Cheng. “For example, a lot of SMEs talk about prices in the context of trade association meetings. That would likely have to be stopped.”

It is generally agreed that SMEs have less to worry about than big businesses. “SMEs, by definition, do not have market power in their relevant markets,” continues Cheng. “The only provisions in the bill that would apply would be the prohibition of the so-called serious offences.” For SMEs, their main focus in terms of compliance efforts

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Hong Kong Country Report

“Creating a real fair competition culture in an organisation takes some time to develop. It is something that needs to be done over the medium term. You can’t flip a switch and say we will now become compliant with the law.”

can expect to see a transition in client work; from playing an advisory role to enforcementrelated matters.

John Hickin, Mayer Brown JSM

should be on those offences.

What about big businesses? Sources indicate that the ordinance will mostly affect companies that are selling in Hong Kong. Those companies, especially any with a significant degree of market power, will most likely have to undergo essential compliance. “Competition law is so new to Hong Kong and laissez-faire economics is so deeply ingrained in the mind of business people, that the idea that the law will prohibit some business conduct that has been so far deemed as perfectly legitimate, will be quite a foreign idea to them,” says Cheng.

Advanced preparations As a result, companies are doing their utmost to avoid getting entangled in legal proceedings. Several have adopted a conservative and risk-averse approach by making preparations long before the law was passed. This has provided competition lawyers with ample work over the last few years, with a considerable increase in interest this year. “Our message to clients is that you still have time to get prepared,” advises Waha.

Indeed, there is still time. The ordinance has been vetted, but now the commission awaits creation, and guidelines need to be issued before any active enforcement can occur. But despite a grace period that could last up to 18 months, Hickin stresses that clients should not delay their compliance preparations. “Creating a real fair competition culture in an organisation takes some time to develop. It is something that needs to be done over the medium term. You can’t flip a switch and say we will now become compliant with the law,” he says.

The new law will not be completely foreign to all businesses. Several Hong Kong-based companies that have been selling abroad should possess sound knowledge and understanding of antitrust issues. The task of rolling out a compliance programme in Hong Kong should not be too rigorous for MNCs, as most already follow their own internal rules and standards around antitrust compliance. However, it is vital that these businesses take their programmes seriously. “It is not so much about penalties, but about the reputation and damage that they need to think about,” cautions Wang, who advises MNCs to review their business conduct and internal rules on antitrust compliance, and implement necessary changes quickly.

Nonetheless, law firms with dedicated competition teams are witnessing a spike in inquiries and activity from Hong Kong-based businesses. Antitrust lawyers are keeping busy assisting businesses with creating compliance policies and training, reviewing existing contractual agreements with suppliers and competitors, and identifying areas of exposure. Once the commission has been fully formed and appropriate guidelines have been disseminated, private practitioners

Competing for talent The threat alone of enforcement will urge established market players to deliver quality products at the right prices, says Waha. He adds that the law will also enhance the possibility of new entrants to the market. Others, like Cheng, believe that the impact of the law on the market remains to be seen, as it will depend on the intensity of enforcement efforts. These efforts will in turn be a reflection of the individuals that are appointed to the commission.

Few would contest that the greatest challenge for the newly elected chief executive and his government in the next 12 months is the search for, and the appointment of appropriate people for the commission. “This will be absolutely key in determining the nature and quality of the enforcement of this law. If the law is going to carry any weight, it is going to be a function of who is sitting on the commission,” states Ingen-Housz.

To find individuals who have the political clout and the sense to drive the regulatory agenda forward will certainly be a challenge, given Hong Kong’s nascent competition law jurisprudence and the scarcity of human capital in this field.

Open dialogue Once the commission and competition tribunal are set up and guidelines on enforcements are circulated, the commission is likely to invest heavily in public advocacy and education to inform businesses about the law.

This will provide a valuable opportunity for businesses to engage with the government and put forward their concerns. “I don’t think that now that public consultation has ended and the bill has been signed, the door is closed. You should be proactive right now,” says Wang. The transition period is in effect, and the government is on the search for appropriate individuals to spearhead the competition commission. Case law surrounding anti-competitive behaviour in Hong Kong is still far on the horizon, but businesses need to gear up for this inevitability and review their operations, compliance standards and contractual agreements. The stage is set. “We have the bones, but now we have to see flesh on these bones,” says Waha.

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japan law awards

ASIAN LEGAL BUSINESS august 2012

Best Best of the

Asian Legal Business (ALB) is delighted to announce the official list of winners at Diners Club ALB Japan Law Awards 2012, held on June 7 at the Ritz Carlton, Tokyo.

The 8th annual event, co-hosted by Diners Club and ALB, welcomed Guest of Honour – C. Lawrence Greenwood, Jr. – Senior Managing Director for Government Relations (Japan) at MetLife. He was joined by over 200 lawyers, in-house counsel, investment bankers, and CEOs from Japan who assembled to celebrate with the winners as they accepted their awards on stage.

Awards in a total of 24 categories were presented to firms, companies and individuals.

Anderson Mori & Tomotsune claimed the most awards. Five in total, including IP Law Firm of the Year, Employment Law Firm of the Year and Best China Practice of the Year. The firm also acted on the CIC & GLP JV Acquisition of Modern Logistics Facilities transaction, which won Real EsDEAL AWARDS CATEGORIES

tate Deal of the Year, and on Resona Holdings Global Offering, which won Equity Market Deal of the Year.

Freshfields Bruckhaus Deringer, Mori Hamada & Matsumoto, Morrison & Foerster/Ito & Mitomi and Nagashima Ohno & Tsunematsu each took home three trophies on the evening.

Domestic investment bank Nomura was one of the big winners – winning Japanese Investment Bank of the Year, Japan In-House Team of the Year; M&A Deal of the Year and Diners Club Award Japan Deal of the Year (for its work on the Takeda Pharmaceutical Acquisition of Nycomed Deal) In addition to recognising the collective talents of law firms and inhouse legal teams, the awards also singled-out Japan’s leading individual talents. Ken Siegel of Morrison & Foerster/Ito & Mitomi took home the trophy for Managing Partner of the Year, while Tomohiko Oshikawa of JP Morgan was awarded Diners Club Award Japan In-House Lawyer of the Year.

IN-HOUSE AWARDS CATEGORIES

FIRM AWARDS CATEGORIES

Award

Winner

Award

Winner

Award

Winner

Debt Market Deal of the Year

Bain Capital Debt Financing for its Acquisition of Skylark

The Japan In-House Counsel Network Award Banking & Financial Services In-House Team of the Year

Sumitomo Mitsui Financial Group

IP Law Firm of the Year

Anderson Mori & Tomotsune

Equity Market Deal of the Year

Resona Holdings Global Offering

Morrison & Foerster/Ito & Mitomi

Energy & Resources Deal of the Year

Tokyo Gas LNG Purchase and Equity Interest in Australia Queensland Curtis LNG Project

Japanese Investment Bank In-House Team of the Year

Nomura

Canadian Chamber of Commerce in Japan Award Litigation Specialist Law Firm of the Year Employment Law Firm of the Year

Anderson Mori & Tomotsune

Insolvency Law Firm of the Year International Investment Bank InHouse Team of the Year

Morgan Stanley MUFG Securities

Dual Winners: Bingham McCutchen; Nishimura & Asahi

Offshore Law Firm of the Year

Maples and Calder

American Chamber of Commerce in Japan Award International Arbitration Law Firm of the Year

Herbert Smith

Best China Practice of the Year

Anderson Mori & Tomotsune

Managing Partner of the Year

Morrison & Foerster/Ito & Mitomi - Ken Siegel

International Deal Firm of the Year

Davis Polk & Wardwell

Japanese Deal Firm of the Year

Mori Hamada & Matsumoto

M&A Deal of the Year

Takeda Pharmaceutical Acquisition of Nycomed

Real Estate Deal of the Year

CIC & GLP JV Acquisition of Modern Logistics Facilities in Japan

Structured Finance Deal of the Year

JAL Turnaround Financing

Technology, Media & Telecoms Deal of the Year

Lenovo - NEC Joint Venture

Diners Club Award Japan Deal of the Year

Takeda Pharmaceutical Acquisition of Nycomed

Trading Company In-House Team of the Year

Itochu Corporation

Japan In-House Team of the Year

Nomura

Diners Club Award Japan In-House Lawyer of the Year

JP Morgan - Tomohiko Oshikawa

CONGRATULATIONS! The Baker & McKenzie Tokyo office would like to congratulate all the winners of the 2012 ALB Japan Law Awards.

We modestly accepted Deal of the Year Awards in the following categories: Debt Market - Bain Capital Debt Financing for its Acquisition of Skylark Energy & Resources - Tokyo Gas LNG Purchase and Equity Interest in the Australia Queensland Curtis LNG Project We combine an uncompromising commitment to excellence with fluency in the way we think, work and behave—an instinctively global perspective, commercially pragmatic advice, a genuinely multi-cultural approach and a passion for collaborative relationships. With more than 3,800 lawyers in 43 countries, we have a deep understanding of the language and culture of business around the world and are able to bring talent and experience needed to navigate complex issues across practices and borders with ease.

To learn more, please visit us at www.bakermckenzie.com or our Tokyo site at www.taalo-bakernet.com.

Baker & Mckenzie GJBJ Tokyo Aoyama Aoki Koma Law Office is a member of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm.

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japan law awards

ASIAN LEGAL BUSINESS august 2012

DEAL CATEGORIES Debt Market Deal of the Year

Winner Bain Capital Debt Financing for its Acquisition of Skylark Firms: Baker & McKenzie GJBJ; Mori Hamada & Matsumoto; Nagashima Ohno & Tsunematsu; Nishimura & Asahi; Ropes & Gray Bank: Mizuho Corporate Bank (L-R) C. Lawrence Greenwood, Jr., MetLife; Kosuke Shibukawa; Taku Ishizu, Nishimura & Asahi; Gavin Raftery; Shinichiro Kitamura, Baker & McKenzie GJBJ; Tsuyoshi Imai, Ropes & Gray; Rintaro Shinohara, Mori Hamada & Matsumoto; Shinichi Araki, Nagashima Ohno & Tsunematsu

Equity Market Deal of the Year

M&A Deal of the Year

Structured Finance Deal of the Year

(L-R) Keiko Takabayashi, Deutsche Securities Inc.; Takeshi Nakao, Freshfields Tokyo; Lokki Woo; Andrew Welch, Nomura Securities Co. (L-R) Alan Cannon, Simpson Thacher & Bartlett; Kazuhiro Yoshii, Anderson Mori & Tomotsune; Shinichi Araki, Nagashima Ohno & Tsunematsu

Winner Resona Holdings Global Offering Firms: Anderson Mori & Tomotsune; Linklaters Tokyo; Nagashima Ohno & Tsunematsu; Simpson Thacher & Bartlett

Energy & Resources Deal of the Year

(L-R): Anne K.T. Hung, Baker & McKenzie GJBJ; Klaus Pfeifer, Thomson Reuters

Winner Tokyo Gas LNG Purchase and Equity Interest in Australia Queensland Curtis LNG Project Firms: Baker & McKenzie GJBJ; King & Wood Mallesons

Winner Takeda Pharmaceutical Acquisition of Nycomed Firms: Bech-Braun; Blake, Cassels & Graydon; CMS Cameron McKenna; Edwards Wildman Palmer; Freshfields Bruckhaus Deringer; Plesner; White & Case Banks: Credit Suisse; Deutsche Bank Group; Goldman Sachs; Moelis; Nomura

(L-R) Claire Chino, ITOCHU Corporation; Hiroki Aoyama, Mori Hamada & Matsumoto

Winner JAL Turnaround Financing Firms: Clifford Chance; Mori Hamada & Matsumoto; Okuno and Partners Banks: Development Bank of Japan; Japan Bank of International Cooperation

Real Estate Deal of the Year

(L-R) Etsuko Hara, Anderson Mori & Tomotsune; Daniel Lin, Milbank Tweed; Theo Seltzer, Morrison & Foerster/Ito & Mitomi; Naohiro Nishimura, Nagashima Ohno & Tsunematsu; Thomas Granger, Walkers; Edmond Courtroul, Galileo Japan

Winner CIC & GLP JV Acquisition of Modern Logistics Facilities in Japan Firms: Anderson Mori & Tomotsune; City Yuwa Partners; Milbank, Tweed, Hadley & McCloy; Morrison & Foerster/Ito & Mitomi; Nagashima Ohno & Tsunematsu; Walkers Bank: M3 Capital Accountant: KPMG

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

japan law awards

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Technology, Media & Telecoms Deal of the Year

Diners Club Award Japan Deal of the Year

(L-R) Takeshi Nakao; Will Heath, Freshfields Tokyo

(L-R) Keiko Takabayashi, Deutsche Securities Inc.; Takeshi Nakao; Will Heath; Akiko Yamakawa; Nick Wall; Peter Lawle, Freshfields Tokyo; Lokki Woo, Nomura Securities Co.; Marco Reverdito, Citi Cards Japan, Inc.

Winner Lenovo - NEC Joint Venture

Winner Takeda Pharmaceutical Acquisition of Nycomed

Firms: Clifford Chance; Freshfields Bruckhaus Deringer

Firms: Bech-Braun; Blake, Cassels & Graydon; CMS Cameron McKenna; Edwards Wildman Palmer; Freshfields Bruckhaus Deringer; Plesner; White & Case Banks: Credit Suisse; Deutsche Bank Group; Goldman Sachs; Moelis; Nomura

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ASIAN LEGAL BUSINESS august 2012

IN-HOUSE CATEGORIES The Japan In-House Counsel Network Award Banking & Financial Services In-House Team of the Year

Trading Company In-House Team of the Year

FIRM CATEGORIES Offshore Law Firm of the Year

Winner Maples and Calder

(L-R) Charles McJilton, Second Harvest Japan; Claire Chino; Susumu Aoyama; Junji Higashi, ITOCHU Corporation Royanne K. Doi, The Japan In-House Counsel Network

Winner

International Deal Firm of the Year

Itochu Corporation

Winner Sumitomo Mitsui Financial Group

Japanese Investment Bank InHouse Team of the Year

Diners Club Award Japan InHouse Lawyer of the Year

(L-R) Theodore Paradise; Miles Hawks, Davis Polk & Wardwell; Mas Nakamura, Nakamura Arai Partners Office

Winner (L-R) Tomohiko Oshikawa, JP Morgan; Marco Reverdito, CitiCards Japan, Inc. And Mr Oshikawa was also presented with a gift, by last year’s winner, David Monroe, Nikko Asset Management (L-R) Jane Lewis, Thomson Reuters Japan; Andrew Welch; Lokki Woo, Nomura Securities Co.

Winner JP Morgan - Tomohiko Oshikawa

Winner Nomura

International Investment Bank In-House Team of the Year

(L-R) Surya Soni, Morgan Stanley MUFG Securities; Ayako Hashimoto, Thomson Reuters

Davis Polk & Wardwell

Insolvency Law Firm of the Year

Japan In-House Team of the Year

(L-R) Lokki Woo; Andrew Welch, Nomura Securities Co.; Klaus Pfeifer, Thomson Reuters

(L-R) Yuki Oi, Nishimura & Asahi; Hideyuki Sakai, Bingham McCutchen

DUAL Winners

Winner

Winner

Morgan Stanley MUFG Securities

Nomura

Bingham McCutchen Nishimura & Asahi

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

japan law awards

Japanese Deal Firm of the Year

(L-R) Jane Lewis, Thomson Reuters Japan; Toru Ishiguro and team, Mori Hamada & Matsumoto

Winner Mori Hamada & Matsumoto

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Employment Law Firm of the Year

IP Law Firm of the Year

(L-R) Kazutoshi Kakuyama, Anderson Mori & Tomotsune; Edward Gilbert, Shinsei Bank

Winner

Best China Practice of the Year

(L-R) Yasufumi Shiroyama, Anderson Mori & Tomotsune; Jeremy Entwisle, JP Morgan

Winner

(L-R) Hiroshige Nakagawa, Anderson Mori & Tomotsune; Tsuneyuki Fukamachi, Thomson Reuters Japan

Anderson Mori & Tomotsune

Anderson Mori & Tomotsune

American Chamber of Commerce in Japan Award International Arbitration Law Firm of the Year

(L-R) Emi Rowse; David Gilmore, Herbert Smith; Eric Sedlak, Jones Day and ACCJ Governor

ASIAN LEGAL BUSINESS august 2012

Canadian Chamber of Commerce in Japan Award Litigation Specialist Law Firm of the Year

(L-R) Louise Stoupe, Morrison & Foerster/Ito & Mitomi; Haig Oghigian, Baker & McKenzie

Winner

Winner

Herbert Smith

Morrison & Foerster/Ito & Mitomi

Winner Anderson Mori & Tomotsune

Managing Partner of the Year

(L-R) Shozo Uchida, Westlaw Japan; Ken Siegel, Morrison & Foerster/Ito & Mitomi

Winner Morrison & Foerster/Ito & Mitomi - Ken Siegel

award sponsors event partner

SUPPORTING ORGANISATIONS

CANADIAN CHAMBER OF COMMERCE IN JAPAN CHAMBRE DE COMMERCE DU CANADA AU JAPON

Diners Club

Diners Club International is owned by Discover Financial Services (NYSE: DFS), a direct banking and payment services company with one of the most recognized brands in U.S. financial services. Established in 1950, Diners Club International became the first multi-purpose charge card in the world, launching a financial revolution in how consumers and companies pay for products and services. Today, Diners Club is a globally recognized brand serving the payment needs of select and affluent consumers, offering access to more than 450 airports lounges worldwide, and providing corporations and small business owners with a complete array of expense management solutions. With acceptance in more than 185 countries and territories, millions of merchant locations and access to over 845,000 cash access locations and ATMs, Diners Club is uniquely qualified to serve its card members all over the world.

Website: www.dinersclub.com

ALB SUPPORTS

official card

proudly presented by

58

hong kong Law Awards

Conrad, Hong Kong – 7 September

THE FINALISTS REVEALED The 11th annual The Macallan ALB Hong Kong Law Awards 2012 recognises the excellence and outstanding achievements of Hong Kong’s leading law firms and inhouse legal teams, as well as the top deals and dealmakers of the past 12 months. ALB congratulates all the finalists across 37 categories.

ASIAN LEGAL BUSINESS august 2012

WWW.LEGALBUSINESSONLINE.COM : @ALB_Magazine : Connect with Asian Legal Business COMPLETENESS OF INFORMATION –BANKS, ACCOUNTANTS AND LEGAL ADVISORS Please note that the names of banks, accountants and legal advisors on a transaction reflect the information received from nominees and this information may be incomplete. Omission of an advisor from the list should therefore not be taken as commentary on the role that party played in the deal.

If your firm is missing from this list, please contact iris.ma@ thomsonreuters.com with the requisite information and we will ensure that the list of winners, to be published in 2012 Nov issue, is updated as appropriate.

FIRM MERGERS – NAMING OF FIRMS A number of firms have changed names during 2011 and 2012 following mergers. While the 2012 Law Awards relates to work undertaken between April 2011 to March 2012, we have allowed firms to refer to themselves with their new branding if this is considered desirable.

However, new entities were not eligible for any “firm of the year” awards if they did not exist in 2011.

Wealth Management Law Firm of the Year FINALISTs • Baker & McKenzie • Herbert Smith • Stephenson Harwood • Withers

Dispute Resolution Law Firm of the Year

FINALISTs • Baker & McKenzie • Clifford Chance • Clyde & Co • DLA Piper • Freshfields Bruckhaus Deringer • Gall • Herbert Smith • Hogan Lovells • King & Wood Mallesons • Latham & Watkins • Linklaters • Mayer Brown JSM • Simmons & Simmons • Stephenson Harwood • Vivien Chan & Co • Wilkinson & Grist

Insolvency & Restructuring Law Firm of the Year

FINALISTs • Baker & McKenzie • Gall • Hogan Lovells • Latham & Watkins • Linklaters • Mayer Brown JSM • O’Melveny & Myers • Stephenson Harwood • Tanner De Witt

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BDO Limited Award Matrimonial Law Firm of the Year

FINALISTs • Boase, Cohen & Collins • Haldanes • Withers

Insurance Law Firm of the Year

FINALISTs • Baker & McKenzie • Clyde & Co • Herbert Smith • Kennedys • Mayer Brown JSM • Simmons & Simmons • Stephenson Harwood

Intellectual Property Law Firm of the Year

FINALISTs • Baker & McKenzie • Bird & Bird • Freshfields Bruckhaus Deringer • Hogan Lovells • Mayer Brown JSM • Simmons & Simmons • Vivien Chan & Co • Wilkinson & Grist

Investment Funds Law Firm of the Year

FINALISTs • Baker & McKenzie • Clifford Chance • Debevoise & Plimpton • King & Wood Mallesons • Kirkland & Ellis • Linklaters • Mayer Brown JSM • Sidley Austin • Simmons & Simmons • Simpson Thacher & Bartlett • Stephenson Harwood • Weil, Gotshal & Manges • White & Case

IT/Telecoms Law Firm of the Year

FINALISTs • Baker & McKenzie • Freshfields Bruckhaus Deringer • Herbert Smith • Hogan Lovells • King & Wood Mallesons • Paul, Weiss • Vivien Chan & Co

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Real Estate Law Firm of the Year

FINALISTs • Baker & McKenzie • Mayer Brown JSM • Paul Hastings • Stephenson Harwood

Shipping Law Firm of the Year

FINALISTs • Clyde & Co • Holman Fenwick Willan • Ince & Co • Mayer Brown JSM • Stephenson Harwood

Construction Law Firm of the Year

FINALISTs • Baker & McKenzie • Clyde & Co • DLA Piper • Haley & Co in association with Clayton Utz • Hogan Lovells • King & Wood Mallesons • Mayer Brown JSM • Pinsent Masons • Simmons & Simmons • Stephenson Harwood

Boutique/Specialist Law Firm of the Year FINALISTs • Charltons • Gall • Haley & Co. in association with Clayton Utz • So Keung Yip & Sin

Criminal Law Firm of the Year

ASIAN LEGAL BUSINESS august 2012

Employment Law Firm of the Year

FINALISTs • Baker & McKenzie • Herbert Smith • Linklaters • Mayer Brown JSM • Simmons & Simmons • Stephenson Harwood

Offshore Law Firm of the Year

FINALISTs • Appleby • Conyers Dill & Pearman • Maples and Calder • Ogier • walkers

Corporate Citizen/CSR Law Firm of the Year

FINALISTs • Baker & McKenzie • Clifford Chance • Freshfields Bruckhaus Deringer • Hogan Lovells • King & Wood Mallesons • Linklaters • Skadden, Arps, Slate, Meagher & Flom

Taiwan Deal Firm of the Year

FINALISTs • Baker & McKenzie • Jones Day Taipei • LCS & Partners • Lee and Li • Tsar & Tsai

withers award PRC Firm, Hong Kong Office of the Year

FINALISTs • Boase, Cohen & Collins • Haldanes

FINALISTs • Jun He • Zhong Lun

AzureTax Award Tax Law Firm of the Year

Korea Deal Firm of the Year

FINALISTs • Baker & McKenzie • DLA Piper • Withers

FINALISTs • Bae, Kim & Lee • Kim & Chang • Lee & Ko • Shin & Kim • Yulchon

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

hong kong Law Awards

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Korea Deal of the Year

Debt Market Deal of the Year

FINALISTs • Asiana and Daewoo Sale of Korea Express Shares Firms: Lee & Ko; Shin & Kim • Fila Korea acquisition of Acushnet Company Firms: Bae, Kim & Lee; Kim & Chang; Lee & Ko; McDermott Will & Emery; Orrick, Herrington & Sutcliffe; Shin & Kim; Walkers; Yulchon Banks: Korea Development Bank; Nomura • Jinro - Hite merger Firm: Kim & Chang • Lone Start Funds-KEB Holdings Sale of Stake in

Korea Exchange Bank to Hana Hinancial Group Firms: Bae, Kim & Lee; Kim & Chang; Linklaters Banks: Credit Suisse; Hana Daetoo Securities • NACF Debt Liability Reorganisation Firm: Clifford Chance • Negotiations of KNOC Oil and Gas Concessions in Abu Dhabi Firms: Hadef & Partners; Kim & Chang; Linklaters; Shearman & Sterling • Restructuring of Novelis Term Loan Agreement Firms: Bae, Kim & Lee; Skadden, Arps, Slate, Meagher & Flom; Torys Bank: Bank of America Merrill Lynch • Sale of Hyundai Engineering & Construction to the Hyundai Motor Group Firms: Bae, Kim & Lee; Kim & Chang Banks: Bank of America Merrill Lynch; Korea Exchange Bank • Sales of KB Financial Group Shares Firms: Cleary Gottlieb; Clifford Chance; Kim & Chang; Yulchon Bank: Citigroup Global Markets Korea • Samsung Electronics America Debt Offering Firm: Simpson Thacher & Bartlett Banks: Citigroup Global Markets; Goldman Sachs International; J.P. Morgan Securities; Merrill Lynch International; Samsung Securities • Samsung Electronics Sale of Its Hard Disk Drive Business to Seagate Technology Firms: Lee & Ko; Paul Hastings; Shin & Kim; Wilson Sonsini Goodrich & Rosati • SK Telecom Acquisition of Hynix Semiconductor Firms: Bae, Kim & Lee; Kim & Chang; Shin & Kim Bank: Korea Exchange Bank • Spin-off of Shinsegae business into E-Mart Firm: Lee & Ko

FINALISTs • Bank of China Commercial Paper Programme Firms: King & Wood Mallesons; Mayer Brown JSM; White & Case; Latham & Watkins Bank: DBS Bank • China Resources Gas Group MTN Programme Firm: Latham & Watkins Bank: DBS Bank • CITIC Pacific Bond Offering Firms: Clifford Chance; Jun He; Linklaters; Zhong Lun • CNOOC Finance Notes Offering Firms: Clifford Chance; Commerce & Finance; Davis Polk & Wardwell; Linklaters; Walkers • CNPC (HK) Overseas Capital Bond Offering Firms: Appleby; Clifford Chance; Davis Polk & Wardwell; Jun He; King & Wood Mallesons; Shearman & Sterling • HKSAR iBonds Offering Firm: Clifford Chance Banks: Bank of China (Hong Kong); HSBC • Hutchison Whampoa 1.5bln Investment Grade Notes Offering Firms: Allen & Overy; Drew & Napier; Maples and Calder; Shearman & Sterling; Woo, Kwan, Lee & Lo Banks: Goldman Sachs (Asia); J. P. Morgan Accountants: KPMG; PwC • Mega Advance Investments Senior Notes Offering Firms: Commerce & Finance; Conyers Dill & Pearman; Haiwen & Partners; Linklaters; Mayer Brown JSM • The PRC Government (Ministry of Finance) Bonds Issuance Firms: Haiwen & Partners; Linklaters; Simmons & Simmons • Yanzhou Coal Mining Company Notes Offering Firms: Baker & McKenzie; Davis Polk & Wardwell; Freehills; Jingtian & Gongcheng; King & Wood Mallesons Banks: Deutsche Bank; UBS

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China Legal Career Award Equity Market Deal of the Year FINALISTs • Alibaba Group Private Secondary Sale of Shares Firms: Debevoise & Plimpton; Goodwin Procter; Paul, Weiss; Simpson Thacher & Bartlett Accountant: PwC • Bank of Communications Share Placement Firm: Simpson Thacher & Bartlett • Beijing Jingneng Clean Energy IPO Firm: Latham & Watkins Banks: Bank of China International; Barclays Capital; Goldman Sachs; UBS • Chow Tai Fook Jewellery Group Hong Kong IPO Firms: Commerce & Finance; Conyers Dill & Pearman; Freshfields Bruckhaus Deringer; Haiwen & Partners; Iu, Lai & Li; Linklaters Banks: Citigroup Global Markets; Credit Suisse; Deutsche Bank; Goldman Sachs; HSBC; J.P. Morgan ; Rothschild; UBS; VMS Investment Group Accountant: Deloitte Touche Tohmatsu • CITIC Securities Global Offering Firms: Baker & McKenzie; Freshfields Bruckhaus Deringer; Jiayuan; King & Wood Mallesons; Latham & Watkins Banks: ABCI; Bank of America Merrill Lynch; BOCI; BOCOM International; CCBI; CITIC Securities (HK); CLSA/ CA-CIB; HSBC; ICBCI Capital; Morgan Stanley Accountant: Ernst & Young • Glencore International IPO Firms: Clifford Chance; Jun He; Linklaters; Mourant Ozannes Banks: Citigroup; Credit Suisse; Morgan Stanley • HKT Spin-off on the Hong Kong Stock Exchange Firms: Anderson Mori & Tomotsune; Conyers Dill & Pearman; Freshfields Bruckhaus Deringer; GW & Associates in association with Gibson, Dunn & Crutcher; Haiwen & Partners; King & Wood Mallesons; Nagashima Ohno & Tsunematsu; Reed Smith Richards Butler Banks: CICC; DBS Bank; Deutsche Bank; Goldman Sachs; HSBC; J.P. Morgan; Mizuho; Standard Chartered Bank Accountant: PwC • Hui Xian RMB REIT IPO Firms: Baker & McKenzie; Commerce & Finance; Guantao; Linklaters; Maples and Calder; Wilkinson & Grist; Woo, Kwan, Lee & Lo Banks: BOCI Asia; CITIC Securities Corporate Finance (HK); HSBC • MGM China IPO Firms: DSL Lawyers; Freshfields Bruckhaus Deringer; Henrique Saldanha; Herbert Smith; Walkers; Weil, Gotshal & Manges Banks: Bank of America Merrill Lynch; BNP Paribas Capital; CLSA; Deutsche Bank; J.P. Morgan; Morgan Stanley; The Royal Bank of Scotland • New China Life Insurance IPO Firms: Commerce & Finance; Davis Polk & Wardwell; Freshfields Bruckhaus Deringer; King & Wood Mallesons; Slaughter and May; Sullivan & Cromwell Banks: CICC; Goldman Sachs; UBS • Prada IPO Firms: Bonelli Erede Pappalardo; Clifford Chance; Davis Polk & Wardwell; Fangda Partners; Haiwen & Partners; Jun He;

Slaughter and May Banks: CLSA; Goldman Sachs • Shanghai Pharma H-share IPO Firms: Clifford Chance; Freshfields Bruckhaus Deringer; Grandall; King & Wood Mallesons; Sullivan & Cromwell Banks: BOCOM International Securities; CICC; Credit Suisse; Deutsche Bank; Goldman Sachs Accountants: PwC; Shinewing • Sun Art Retail Group IPO Firms: DLA Piper; Freshfields Bruckhaus Deringer; Herbert Smith; Jun He; King & Wood Mallesons; Lee and Li Banks: BNP Paribas; CICC; Citigroup; Goldman Sachs; HSBC; Morgan Stanley; UBS AG, Hong Kong Branch

Synmax Translation Award M&A Deal of the Year FINALISTs • AIG Strategic Sell-down of Its Shareholding in AIA Firm: Linklaters • AXA SA Acquisition of the Asian Insurance Businesses Previously Held by AXA Asia Pacific Holdings Firms: Allens Arthur Robinson; Appleby; Haley & Co in association with Clayton Utz; Freehills; King & Wood Mallesons; Norton Rose Banks: J.P. Morgan; Macquarie Bank; UBS • Chareon Pokphand Food Acquisition of a Controlling Interest in CP Pokphand Firms: Davis Polk & Wardwell; Linklaters Bank: UBS AG, Hong Kong Branch • China Petroleum & Chemical Corporation and ENN Energy Holdings Pre-Conditional Voluntary Cash Offer for China Gas Holdings Firms: Haiwen & Partners; Kirkland & Ellis; Linklaters; Sullivan & Cromwell Bank: Citigroup Global Market Asia

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

• Cinda Selling Stake to UBS, Standard Chartered, Citic Capital Holdings and China’s national pension fund Firms: Clifford Chance; Sullivan & Cromwell • Joy Global Acquisition of Shares in International Mining Machinery Holdings Firm: Hogan Lovells • Northumbrian Water Group Takeover by UK Water Firms: Freshfields Bruckhaus Deringer; Hogan Lovells • Ping An Selling Stake to Chow Tai Fook Firm: DLA Piper • Yunfeng Capital investment in Alibaba Group Firm: Simpson Thacher & Bartlett

Pinsent Masons Award Construction In-House Team of the Year FINALISTs • Dragages • Gammon • Leighton • MTR Corporation

Banking & Financial Services InHouse Team of the Year

FINALISTs • Bank of America Merrill Lynch • Citigroup Global Markets • Deutsche Bank AG, Hong Kong Branch • HSBC • ICBC • Standard Chartered Bank

Insurance In-House Team of the Year FINALISTs • AIA • Aon/Essar • AXA • Chubb/Federal • Prudential

Lewis Sanders Award Investment Bank In-House Team of the Year FINALISTs • Bank of America Merrill Lynch • Citigroup • Deutsche Bank AG, Hong Kong Branch • Goldman Sachs (Asia) • J.P. Morgan Securities (Asia Pacific) • Morgan Stanley • Nomura International (Hong Kong) • UBS AG, Hong Kong Branch

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Paul, Weiss Award IT/Telecoms In-House Team of the Year

FINALISTs • Alibaba Group • Hutchison Telecom • PCCW/HKT • SunGard

Paul, Weiss Award Media & Entertainment In-House Team of the Year FINALISTs • Microsoft • News Corp • PCCW/HKT • Yahoo!

Holman Fenwick Willan Award Shipping In-House Team of the Year FINALISTs • COSCO Pacific • Hutchison Port • Maersk • Noble Group • Pacific Basin

Real Estate In-House Team of the Year FINALISTs • Cheung Kong • Hongkong Land • Hutchison Whampoa • MTR Corporation • Shun Tak

Hong Kong Corporate Counsel Association Award Innovative In-House Team of the Year FINALISTs • Alibaba Group • COSCO Pacific • Hongkong Land • Morgan Stanley • MTR Corporation

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ASIAN LEGAL BUSINESS august 2012

The Macallan Fine Oak Single Malt Scotch Whisky Award Hong Kong In-House Lawyer of the Year

Managing Partner of the Year

FINALISTs • Baker & McKenzie - Poh Lee Tan • Davis Polk & Wardwell - William Barron • Freshfields Bruckhaus Deringer - Robert Ashworth • Gall - Nick Gall • Hogan Lovells - Allan Leung • King & Wood Mallesons - Stuart Fuller • Li & Partners - Robin Li • Mayer Brown JSM - Y. M. Elaine Lo • Stephenson Harwood - Voon Keat Lai • Vivien Chan & Co. - Vivien Chan • Weil, Gotshal & Manges - Akiko Mikumo

FINALISTs • Alibaba Group - Tim Steinert • Bank of America Merrill Lynch - Peter Siembab • COSCO Pacific - Michelle Hung • Credit Suisse - Patricia Sindel • Morgan Stanley - James Bidlake

IPP Wealth Advisers Ltd Award Hong Kong Dealmaker of the Year

FINALISTs • Baker & McKenzie - Dorothea Koo • Clifford Chance - Amy Lo • Davis Polk & Wardwell - Eugene Gregor • Freshfields Bruckhaus Deringer - Robert Ashworth • Kirkland & Ellis - Nicholas Norris • Linklaters - William Liu • Paul, Weiss - Jeanette K. Chan • Simpson Thacher & Bartlett - Celia Lam • Stephenson Harwood - Voon Keat Lai

The Macallan Highland Single Malt Scotch Whisky Award Hong Kong Law Firm of the Year Finalists will be announced on the event night

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

Event Partner

hong kong Law Awards

65

BDO Limited

BDO Limited is the Hong Kong member firm of BDO International Limited, a global accountancy network with over 1,100 offices in more than 130 countries and over 48,000 people providing advisory services throughout the world.

BDO Limited is served by 50 directors and a staff of over 1,000. Since our establishment in 1981, we have committed ourselves to facilitating the growth of businesses by advising the people behind them. Our professional services include assurance, taxation, business recovery, forensic accounting, litigation support, matrimonial advisory, risk advisory and business services. We possess comprehensive knowledge of accounting standards, tax and investment regulations prevailing in Hong Kong , China and other major countries, and conduct ourselves with the highest professional standards.

The Macallan

The Macallan is one of the world’s most awarded and admired Single Malts. This peerless reputation has been built by the commitment of The Masters of Spirit and Wood, those craftsmen at the heart of The Macallan for almost two centuries.

Their obsessive pursuit of perfection has ensured the consistent quality that has characterized The Macallan since it was legally licensed in 1824.

The Macallan Fine Oak The Macallan Fine Oak is Triple Cask Matured in a unique, complex combination of Exceptional Oak Casks; Spanish oak seasoned with sherry, American oak seasoned with sherry, and American oak seasoned with bourbon. This Triple Cask combination delivers an extraordinarily smooth, delicate yet complex Single Malt.

American oak casks, which have previously held bourbon or sherry, impart a subtle, delicate colour with hints of apple, floral, vanilla and sweet citrus aromas and flavours.

European oak casks, which have previously held sherry, impart a deep, rich colour with aromas and flavours of dried fruit, spice and chocolate orange.

The Macallan Sherry Oak Over many years, The Macallan became synonymous with a sherry oak style. Its character is driven by oak sherry casks from Spain. The long journey from acorn to glass begins in the forests of northern Spain. In these ancient forests grow the mighty European oaks that will become the predominant casks to mature The Macallan Sherry Oak. From this rich timber are the casks hand fashioned in Cadiz, Spain, where traditional toasting changes the chemistry of the wood and adds yet another vital ingredient to the maturing process.

The casks will then be filled with aged sherries and left to season for up to two years in Jerez, before they are deemed ready to begin the 2,000 mile journey to The Macallan distillery in Speyside in Scotland. Here they will receive The Macallan ‘new make’ spirit that will slowly mature into the satisfying complex Single Malt.

Award sponsors AzureTax Ltd

AzureTax is exclusively dedicated to high-level global tax planning and wealth protection and spearheads a transparent, strategic and ethical approach to tax advice. Answering the increasing need for tax planning to be a discipline in its own right, AzureTax provides independent, innovative and rigorous solutions which deliver both results and long term accountability. Our professionals bring clarity to the often complex and ever changing world of tax.

We are committed to each client and their individual needs. This gives AzureTax its distinct edge.

Contact details AzureTax Ltd Chartered Tax Advisers, Suite 1010, 10/F Lippo Centre, Tower Two, 89 Queensway Hong Kong.

Tel: 852 2123 9370 Fax: 852 2122 9209 website: www.azuretax.com

Contact details BDO Limited, 25/F, Wing On Centre, 111 Connaught Road Central, Hong Kong Tel: +852 2218 8288 Fax: +852 2815 2239 E-mail: info@bdo.com.hk Website: www.bdo.com.hk

China Legal Career

CLC is a leading legal executive search firm with offices in Beijing, Shanghai and Hong Kong to cover the whole Greater China legal market. We work with top US and UK law firms for their partner and associate placements, and with multinational corporations for their senior legal talent placements. We differentiate ourselves by our depth and width of our local connection, specialization in legal search and focusing on the high echelon of the market. Our recruiting consultants all come from international and legal background who adhere to the highest ethical standards and conduct searches in strict compliance with professional codes.

Contact details Beijing: +86 10 6510 2236 Shanghai: +86 21 6360 7270 Hong Kong: +852 2545 5907 Email: clc@chinalegalcareer.com Website: www.chinalegalcareer.com

Holman Fenwick Willan

Holman Fenwick Willan is an international law firm advising businesses engaged in all aspects of international commerce. With offices in Asia-Pacific, the Middle East, Europe and South America, the firm has a built a reputation worldwide for excellence and innovation and has focused the development of its capabilities in the following core sectors: Aviation; Construction, Engineering & Infrastructure; Commodities; Energy; Financial Institutions; Insurance & Reinsurance; Logistics; Mining; Ports & Terminals; Real Estate: Shipping; Space; Superyachts and Travel, Cruse and Leisure . We have over 125 years experience of working with other law firms in jurisdictions throughout the world. Established in 1978, our Hong Kong office has been serving international and domestic clients in China and the Asia region for 34 years.

Contact details Paul Hatzer, Holman Fenwick Willan LLP 15th Floor, Tower One, Lippo Centre, 89 Queensway, Admiralty, Hong Kong Tel: +852 3983 7788 Email: paul.hatzer@hfw.com

IPP Wealth Advisers Ltd

Founded in 1983, IPP originates from Singapore where it is the oldest and most established financial advisory, with client Assets Under Advice of around $2 Billion, making us one of the largest in Asia.

Already with an office in Kowloon, this year IPP has expanded with a new office in Central, offering dedicated expat and international financial advice. With a subsidiary registered with PIBA and another approved by the SFC (Type 1 and Type 4), IPP is uniquely placed to offer our clients a full range of services.

Contact details IPP Wealth Advisers Ltd Tel: +852 3713 7188 Email: expat@ippfa.com.hk Website: www.ippfa.com/eag or www.ippfa.com.hk Contact person: Ian Pryor

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hong kong Law Awards

Lewis Sanders Legal Recruitment

Lewis Sanders is a specialist legal recruitment consultancy offering a full range of recruitment solutions. Using our extensive market knowledge, and expertise we place lawyers at all levels with international law firms, global financial institutions and multi-national companies across Asia. We provide detailed marketspecific knowledge and up to date information on job opportunities, salaries and market trends. Lewis Sanders has built its reputation on its core values of integrity, trust and professionalism. This approach has enabled us to establish and maintain long standing relationships with candidates and clients and has positioned us as one of Hong Kong’s leading legal recruiters.

Contact details Lindsey Sanders, Managing Director +852 2537 7409 lsanders@lewissanders.com Emily Lewis, Managing Director +852 2537 7408 elewis@lewissanders.com 2001, Winway Building, 50 Wellington Street, Central, Hong Kong Tel: +852 2537 7410 Fax: +852 2537 7412 Email: recruit@lewissanders.com

Paul, Weiss

Paul, Weiss is an international law firm with one of the world’s leading Communications and Technology practices. In Asia, our team consistently wins Asia’s top “IT/Telecommunications Law Firm of the Year” awards in recognition of our M&A, private equity and regulatory efforts in the telecommunications and IT sectors. The firm represents a wide variety of providers and users of communication goods and services, as well as other entities with interests in communications and technology businesses and regulatory decision making.

Contact details Jeanette K. Chan, Partner, Paul, Weiss, Rifkind, Wharton & Garrison Hong Kong Club Building, 12th Floor, 3A Chater Road, Central, Hong Kong Tel: +852 2846 0300 Email: jchan@paulweiss.com

Pinsent Masons

Pinsent Masons is a full service global law firm with over 1500 lawyers worldwide. It provides a full range of legal services to major international corporations, institutions and public bodies. The firm specialises in providing legal advice to the Infrastructure, Energy & Natural Resources, Advanced Manufacturing & Technology Services, and Financial Services Sectors.

Pinsent Masons has been active in Asia for 30 years and has offices in Hong Kong, Shanghai, Beijing, Singapore, Doha, Dubai, Munich and throughout the UK. Contact details Pinsent Masons, 50/F Central Plaza 18 Harbour Road Hong Kong Tel: +852 2521 5621 Vincent Connor, Head of Hong Kong Office: vincent.connor@pinsentmasons.com Brian Scott, Business Development Executive: brian.scott@pinsentmasons.com

ASIAN LEGAL BUSINESS august 2012

Thomson Reuters

Thomson Reuters is the world’s leading source of intelligent information for businesses and professionals. We combine industry expertise with innovative technology to deliver critical information to leading decision makers in the legal, tax and accounting, financial, science and media markets powered by the world’s most trusted news organization. Thomson Reuters employs more than 55,000 people in over 100 countries worldwide.

Sweet & Maxwell

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Withers now has a top ranking for Private Client/Wealth Management in Chambers Asia and won the Asian Legal Business Matrimonial Law Firm of the Year award in 2011.

Today, the firm has ten offices in Asia, US and Europe.

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ASIAN LEGAL BUSINESS august 2012

SPONSORED UPDATE: CHINA China Encourages Private Investment in Telecommunications Industry

CHINA

On June 27, 2012, the Ministry of Industry and Information Technology of China (“MIIT”) issued the Implementing Opinions to Encourage and Guide Further Investment of Private Capital in the Telecommunications Industry (“Opinions”).

The Opinions are in line with a package of favorable policies in relation to investments to be made by private capital issued by the State Council in 2010. The principle is to further open up the China telecommunications industry to private companies and broaden their investment channels. Private companies are encouraged to engage in the following activities:

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•

Malaysia

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•

•

•

SPONSORED REGIONAL UPDATES

To hold non-controlling shareholdings in basic telecommunications (“BT”) enterprises. BT enterprises are encouraged to be listed on domestic stock exchanges to attract private investment by reducing the proportion of state-owned shares or subscribing increased capital of listed companies by private capital.

To engage in mobile telecommunications’ resale businesses, network access services (on a trial basis), customer premises network services (on a trial basis) and network hosting businesses.

These services are defined as a type of BT business.

To engage in value-added telecommunications businesses. In particular, the MIIT will clarify policies to open internet data center businesses and internet access businesses to private capital. The MIIT ceased to accept any application for internet data center permit and internet access service permit in 2009.

To participate in the investment, construction, operation and maintenance of base stations and communications towers.

The most significant of these Opinions is to open up the BT business to private capital. To date, the BT businesses remain dominated by the largest state-owned carriers. It is expected that private capital will become more involved in basic telecommunications services in the future and this increased competition will be good for both the market and the consumers.

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The timeline to issue specific rules to implement the Opinions is unclear. Further, the Opinions are silent on the involvement of foreign investment in these areas. Although China committed to open up BT businesses to foreign investment after joining WTO, in practice the MIIT does not currently accept applications from foreign investors to operate a BT business in China and this position is unlikely to change in the near future.

Even if private enterprises engage in BT businesses in the future, concerns over state security and information security make it questionable whether variable interest structures could be adopted in the BT industry as they have been in the value-added telecommunications industry.

Written by Jeanette Chan, Partner Sean Li, China law consultant Paul, Weiss, Rifkind, Wharton & Garrison Hong Kong Club Building, 12th Floor 3A Chater Road, Central Hong Kong E: jchan@paulweiss.com T: +852 2846 0300

Sponsored REGIONAL UPDATES

SPONSORED UPDATE: SINGAPORE

SGX PROPOSES STRINGENT NEW MAINBOARD RULES FOR MINERAL, OIL AND GAS COMPANIES Following the introduction of listing of early stage mineral, oil and gas (“MOG”) companies on Catalist from 1 February 2011, Singapore Exchange Securities Trading Limited (“SGX”) released a consultation paper on 20 June 2012, which sets out the proposed amendments to both the initial listing rules and continuing listing obligations for MOG companies on the Mainboard. This movement is responsive to the global market demand and aims at strengthening SGX’s position as a leading commodity trading hub.

Instead of easing its listing rules, “The new MOG rules are additional to current listing standards, and are equivalent to standards internationally.” said Mr. Mohamed Nasser Ismail, Head of Issuer Regulation in his reply to Straits Times emphasising that SGX rules remain of high standards.

The main proposals in the consultation paper are stated as follows: • MOC companies must be able to establish the existence of adequate resources substantiated by an independent qualified person’s report and the report must be prepared and presented in accordance with a well recognised standard such as, among others, the “JORC Code”. The resources must be at least “indicated resource” for minerals and “contingent resource” for oil and gas whereas “prospective resources” are excluded; • MOC companies who cannot meet the quantitative criteria and profit test set out in the existing listing rules, may still apply to be listed on Mainboard provided they have a minimum market capitalization of at least S$300 million based on the issue price and post-invitation issued share capital. Furthermore, they are required to disclose its plans and milestones with relative capital expenditure involved up to the production stage and such plans must be substantiated by the opinion of an independent qualified expert; • Due to the long gestation period before reaching production and the substantial exploration costs involved with the actual production, MOC companies are required to have sufficient working capital to meet their present requirements and for at least 18 months following listing. The working

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capital includes general, administrative and operating costs, property holding costs and any proposed exploration costs; SGX also proposes MOC companies to have at least one independent director with appropriate expertise and appoint an auditing firm with international name and relevant industry experience because of the highly technical nature of the industry; and After being listed, MOC companies are required to make immediate announcement whenever there are any material changes to the reserves or resources or there has been any change in the standard adopted since the time of listing. Additionally, quarterly disclosure on the use of funds by MOC companies, including a projection on the use of funds for the next immediate quarter is required to achieve transparency.

MOC companies will face a more robust regulatory framework if the proposed amendments are substantially accepted. For more information about the details of the proposals, please refer to SGX’S website at www.sgx.com.

Written by Ms Amy Han Mr Gerald Cheong Ms Amy Han Corporate Finance Executive Tel: (65) 6322 2285 Fax: (65) 6534 0833 E-mail: amyhan@loopartners.com.sg Mr Gerald Cheong Senior Corporate Finance Manager Tel: (65) 6322 2221 Fax: (65) 6534 0833 E-mail: geraldcheong@loopartners. com.sg Loo & Partners LLP 16 Gemmill Lane Singapore 069254 www.loopartners.com.sg

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SPONSORED UPDATE: MALAYSIA

SOCIAL MEDIA USERS, BEWARE!

The legal and online community has recently been abuzz over the latest amendments to the Malaysian Evidence Act 1950. The Evidence (Amendment) (No. 2) Act 2012, which is not yet in force, provides for a new Section 114A regarding the presumption of fact in publications; inter alia, that a person may be held accountable for offending material that is either published depicting the person as the owner, published from the person’s network or computer unless he proves to the contrary. Consequently, a person may now be found guilty for publishing anything deemed offensive although it was in fact posted by someone else.

Many have criticized this amendment as being one that is absurd, unfair and oppressive citing examples such as victims of hackers being put behind bars, Facebook users being found guilty for posts on their Facebook wall by third parties and operators of eateries offering free WiFi services getting into serious trouble. Such criticism is not baseless as the wording of Section 114A is broad enough to cover all the hypothetical scenarios described above. Nonetheless, the true test of whether the amendment proves to be onerous and unreasonable would depend on the actual application of the provision and judicial interpretation by the courts of Malaysia.

It is a possibility that the amendment would result in users being more cautious and responsible as they now bear the onus of proving they did not in fact post or create the offending material. Users would likely begin to be more responsible and ensure that effective safety measures are in place such as the use of appropriate passwords, anti-virus and antispam ware to ensure that they are not put in a compromising position whereby the operation of the amendment would presume them to be guilty for offending material which in fact they are not responsible for. Social media users would also now be more cautious as to who they allow to post content on their pages and would be more concerned about moderating third party content on their pages, blogs or sites.

This article is for information purposes only. The contents do not constitute legal advice and should not be regarded as a substitute for detailed advice in

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

Written by Chew Kherk Ying Chen Hong Sze Chew Kherk Ying Partner Tel: (603) 2298 7933 E-mail: kherk.ying.chew@ wongpartners.com Chen Hong Sze Associate Tel: (603) 2298 7918 E-mail: hong.sze.chen@ wongpartners.com Wong & Partners Level 21, The Gardens South Tower Mid Valley City, Lingkaran Syed Putra 59200 Kuala Lumpur, Malaysia Fax: (603) 2282 2669

ASIAN LEGAL BUSINESS august 2012

SPONSORED UPDATE: PHILIPPINES REVISED GUIDELINES ON FREE AND PRIOR INFORMED CONSENT The National Commission on Indigenous Peoples (“NCIP”) recently promulgated the Revised Guidelines on the Exercise of Free and Prior Informed Consent (“FPIC”) and Related Processes (“Revised Guidelines”) [NCIP Administrative Order No. 3, series of 2012], which repealed The Free and Prior Informed Consent Guidelines of 2006.

It is the policy of the State that no concession, license, permit or lease, production-sharing agreement, or other undertaking affecting ancestral domains shall be granted or renewed without going through the process laid down by law and the Revised Guidelines. For plans, project, programs or activities requiring a FPIC, an application for a Certification Precondition (“CP”), the certificate issued by the NCIP attesting to the grant of FPIC, shall be endorsed by the appropriate regulatory agency or unit of government to the relevant NCIP Regional Office.

The Field-Based Investigation (“FBI”) Team conducts the FBI. Should it be apparent from the FBI that an ancestral domain (“AD”) will be affected by the proposed project, the FPIC Team will be mobilized. When the area is patently and publicly known to be outside any AD, or the activity is determined after FBI not to affect an AD, a Certificate of Non-Overlap shall be issued.

The Revised Guidelines lists down the type of plans, projects, programs and activities which are considered large scale/extractive/ intrusive, and should thereby undergo a FPIC process involving 2 community assemblies and a consensus-building period. If the Indigenous Cultural Communities/Indigenous Peoples (“ICC/IP”) consensus is favorable to the proponent, the parties shall negotiate and enter into a memorandum of agreement (“MOA”). If the consensus is not favorable, the Resolution of Non-consent (“RNC”) shall be given.

The FPIC process for plans, projects, programs and activities that are considered nonextractive/small-scale involves negotiation between the community and the applicant, facilitated by the FPIC Team. If the consensus is against the project, a RNC shall be issued.

If the consensus is favorable, a CP shall be issued.

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Note that the Revised Guidelines provides that, unless specifically stated in the MOA, there shall be a separate exercise of the right to FPIC for each major phase of the proposed activity, such as exploration, operation or development, contraction of operator, and the like.

CHINA

The consent of the ICC/IP to a particular proposal is not transferable, except in case of merger, reorganization, transfer of rights, acquisition by another entity, or joint venture, to any other party.

Written by Marie Corinne T. Balbido

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PHILIPPINES Malaysia

Marie Corinne T. Balbido Senior Associate

SINGAPORE

SyCip Salazar Hernandez & Gatmaitan 3/F SyCipLaw Center 105 Paseo de Roxas, Legaspi Village 1226 Makati City, Metro Manila Philippines Tel: (632) 982-3500, 982-3600, 982-3700 Fax: (632) 817-3145, 817-3896 http://www.syciplaw.com

FOLLOW US ON TWITTER! @ALB_Magazine With its portfolio of leading titles, online services, Law Awards and In-House Legal Summits, ALB provides authoritative and unbiased insights, and unmatched networking and business development opportunities, to legal professionals throughout Asia Pacific and the Middle East.

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SPONSORED UPDATE

SPONSORED UPDATE

EMERGING MARKETS

international tax

STREAMLINED PROCEDURE FOR VIETNAM STATE COMMERCIAL BANKS TO OBTAIN FOREIGN LOANS

UK - Money laundering procedural breaches will remain criminal - and AML Update

P

T

rior to Circular No. 18/2011/TT-NHNN (“Circular 18”) issued by the State Bank of Vietnam (“SBV”) on 23 August 2011, State commercial banks (“Banks”) had to comply with and were restricted by various regulations in taking out medium and long term foreign loans (“Foreign Loans”). From the effective date of 15 October 2011, however, the Banks can comply with regulations based on consolidated legislation whenever they take out Foreign Loans.

The purview of Circular 18, though, is only restricted to the principles, sequence and procedures for the assessment and implementation of Foreign Loans without any government guarantees. Loans with government guarantees are still regulated by current regulations on the provision and management of Vietnamese government guarantees.

AzureTax Ltd

Under Circular 18, a borrowing Bank must submit an application to obtain prior written approval from the SBV, before entering into an agreement to obtain a Foreign Loan. The SBV will consider and approve the Foreign Loan based on, inter alia, the Bank’s compliance with current regulations on prudential ratios and whether the total value of the Foreign Loan falls within the national limit on foreign debt approved annually by the Prime Minister. Upon the Bank’s submission of a valid application, the SBV is given 15 working days to respond by approving or rejecting the Foreign Loan. If the Foreign Loan is rejected, then the SBV must provide a written explanation to clarify its grounds for rejection. If the Bank must incur any expenses or pay any fees for the Foreign Loan before signing the relevant loan agreement, then prior approval must likewise be obtained from the SBV.

Suite 1010 10/F 89 Queensway

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Within 30 days from the signing of the relevant loan agreement and before the first drawdown, the Bank must register the signed loan agreement with the SBV for its certification. The SBV has a period of 5 working days (counted from the date of receipt of a complete application) within which to accept the registration of a Foreign Loan.

Without such certification by the SBV, the Bank is prohibited from making any drawdown or any repayment of the principal and interest in respect of the Foreign Loan.

Lippo Centre Hong Kong

If there is any amendment to the loan agreement which is not contrary to current laws and/or which retains or reduces the loan facility, then the Bank must sign an amendment agreement and register such amendment with the SBV in accordance with the procedures stipulated

by Circular No. 09/2004/TT-NHNN. The said circular, issued by the SBV on 21 December 2004, governs the management and repayment of foreign loans taken out by enterprises. However, if the amendment seeks to increase the registered loan facility, then fresh approval must be sought from the SBV before the borrowing Bank can proceed to make such amendment, and after which the amendment should be registered with the SBV. Tower Two

The workings and ambit of Circular 18 are expected to become clearer in the course of the year as more Banks apply to take out Foreign Loans in the remainder of 2012.

HUYNH BA THUONG Kelvin Chia Partnership, Ho Chi Minh City T: +848 3822 4986 E: thuong.huynh@kcpartnership.com.vn

he UK Government has decided to retain criminal sanctions for technical breaches of anti-money laundering (AML) regulations.

Consultation on the existing UK Money Laundering Regulations 2007 - based on the Third European Money Laundering Directive or 3ML - has been taking place since 2009.

Originally the UK Treasury indicated it was minded to adopt some of these suggestions, in particular that purely formal lapses in applying AML controls should no longer be a criminal offence. There have, in fact, only been two such prosecutions since the 2007 regulations were enacted.

However, in its final response to the consultation, the UK Government has rejected decriminalisation. It said that even a partial removal of criminal sanctions would ‘risk sending mixed signals’ on the importance of money laundering regulations. At the same time it stressed that the Crown Prosecution Services regards it as not in the public interest to prosecute employees for ‘minor, procedural or accidental’ regulatory failures.

The UK Government also decided against introducing a general de minimis rule to exempt very small firms from the AML regime. Its reasoning - supported by several commentators - is that the risk of money laundering and terrorist finance is not related to the size of a business, and there is significant evidence that criminals often operate through smaller businesses. Criminals might also respond by ‘smurfing’, i.e. splitting their businesses into smaller outfits to fall within the exemption threshold.

On the positive side, the government confirmed that law firms that merely hold wills and other client documents will not be bound by the AML regulations. Thus, solicitors who store documents for clients will not have to be supervised by the Financial Services Authority.

Another highly sensitive issue is that of checking beneficial ownership.

The current UK Customer Due Diligence regulations only require practitioners to verify their clients’identities, not the identities of the beneficial owners of the assets being handled. This, says the UK Treasury, has led some to believe that beneficial owner identification is optional which, it says, falls short of the EU Directive’s requirements.

So the government intends to amend the regulations to clarify that the beneficial owner’s identity must be checked as well as the client’s.

However, it is temporarily shelving this amendment until the European Commission has completed its drafting of a Fourth Money Laundering Directive to replace 3ML, some-time in 2013.

This delay suits some commentators who had pointed out that client confidentiality prevents law firms from informing banks about funds held in client accounts, without explicit consent from the clients. The problem will have to be discussed again at national level if it is not resolved during the European 4ML negotiations.

10

TH ANNIVERSARY 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.

Investment & Compliance Forum Emerging Markets

Agenda Highlights • A session on the scope and trajectory of economic growth and business investment opportunities in BRICS. • A panel discussion on market-entry challenges to business investment opportunities in emerging markets and how successful companies are managing these challenges.

• A discussion on some of the ethics and compliance issues implicated by foreign investment transactions in emerging markets with special attention to the domestic laws of China and Brazil, and the material parallels and divergences between these regimes and the Foreign Corrupt Practices Act. • A session on the risk and compliance issues presented by joint venture partnerships and strategic alliances in emerging markets.

• A session on the compliance demands posed by capital controls in select emerging market economies and how these controls impact business transactions in these markets.

• A session on the distinct investment potentials and risks associated with transactions in MENA and other frontier markets.

September 19 – 20, 2012

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ASIAN LEGAL BUSINESS august 2012

Country / Regional editors

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

China

Malaysia

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

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

The Philippines

Singapore

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

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

Vietnam

Shanghai

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

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

fUIJIAN Sphere Logic Partners is a mid-sized business law firm known for its offering of value, sophisticated legal solutions in a leaner approach across a range of practice areas, critical to the success of clients. We maintain an established global network with numerous law firms and relevant service providers. Our seasoned and cultureready 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.

PRACTICE AREA AND INDUSTRY EDITORS

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

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

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

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

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

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

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

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

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A special platform for the frank exchange of views, sharing of best practices and formulation of strategies to deal with opportunities in 2012 and beyond.

Topics include Fraud and Insolvency- Partners in Crime; The Impact of the Introduction and Recent Revisions to the Competition Ordinance; Intellectual Property Updates; Dispute Resolution and the Risks of Investing In China; The Strengthening of the Business Legal Environment in Cambodia and much more. Interact with some of the most active and influential lawyers from around Asia.

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41 Roosdiono & Partners 4 Ropes & Gray 19-25 Rouse 4 Shin & Kim 41 Shook Lin & Bok 10 Simpson Thacher & Bartlett Skadden, Arps, Slate, Meagher & Flom 4, 10 10 Sullivan & Cromwell SyCip Salazar Hernandez & Gatmaitan 70-71 7 TNT Express Asia-Pacific 11 Troutman Sanders 4 Weil, Gotshal & Manges 11, 13-17, 34-39 White & Case 70 Wong & Partners 4 Yulchon

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SUNDRIES

ASIAN LEGAL BUSINESS august 2012 Compiled by RANAJIT DAM

‘INDECENT’ KATY PERRY

REUTERS/Steve Marcus

Pop star Katy Perry is the subject of a public interest lawsuit currently being heard in India’s Madras High Court over her dancing at the glitz-filled opening event of the Indian Premier League cricket tournament back in April. The court is acting on a public interest complaint filed by a lawyer, K. Jebakumar, who alleges that not only was the event “obscene and lascivious, appealing to prurient interest,” it also distracted students who were writing exams at the time.

Perry does not have to appear, however, since she has not been formally charged. Reigning pop goddess she might be, but in the eyes of one lawyer at least, Perry can do wrong.

THE RACE TO SEOUL ROPES & GRAY

SHEPPARD MULLIN RICHTER & HAMPTON

CLIFFORD CHANCE

Following the free-trade agreements signed by South Korea last year, these three Western law firms became the first to receive approval to open offices in that country. And more are waiting in the wings.

Source: The Wall Street Journal

QUOTE OF THE MONTH

“AS A CITIZEN, I SUSPECT, DO I LIVE IN A THEATRE OF ABSURDITY?” Pakistani barrister Zafarullah Khan argues before the country’s Supreme Court on the Contempt of Court Act 2012. A five-member bench is hearing 27 petitions against the recently introduced contempt legislation in Pakistan.

SHOULD THE INDIAN LEGAL MARKET BE LIBERALISED? YES, say the vast majority of respondents in India to a recent Allen & Overy-YouGov survey.

THE U.S. DOLLAR VALUE OF THE LAWSUIT FILED

BY CHURCHILL MINING AGAINST INDONESIAN PRESIDENT SUSILO BAMBANG YUDHOYONO OVER THE REVOCATION OF THE FOUR MINING LICENCES THAT COMPRISE THE EAST KUTAI COAL PROJECT.

IT SHOULD BE COMPLETELY LIBERALISED

IT SHOULD BE PARTIALLY LIBERALISED

IT SHOULD NOT BE LIBERALISED AT ALL

Respondents included 100 C-suite executives and 100 general counsel, all from large publicly listed or equivalent private companies in India, in addition to 51 partners and 50 associates from 50 large legal practices in India.

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REGIONAL COMPLIANCE MANAGER, INVESTMENTS DESCRIPTION Of ROLE We are seeking a bright and energetic individual with good interpersonal skills for the role of Regional Compliance Manager to support our Investments business in Asia. Located in Hong Kong, this role will report to Mercer’s Chief Compliance Officer for Asia and will be attractive to someone who thrives in the intellectually challenging and stimulating atmosphere of a leading global consulting firm and who desires to have a regional role that covers the Asian region.

JOb DESCRIPTION Provide compliance oversight for the Investments business in Asia Implement a compliance program to comply with the securities laws in the countries in which the investments business operates Assess the adequacy of the compliance program on a continuous basis and conduct periodic monitoring as required to confirm compliance with regulatory and internal requirements Manage regulatory matters, including relationships and correspondence with regulators, regulatory examinations, implementation of new regulations, licensing and regulatory filings Work with business leaders to maintain policies and procedures and promote awareness and responsibility through training and regular communication l l l

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REquIREMENTS Degree in Law from a top university with a minimum of 4-6 years’ experience in compliance in the fund management, investment management or related industry Extensive knowledge and experience of investment advisory and discretionary investment management services, distribution of foreign domiciled funds in Hong Kong and other major financial centres in Asia a must; knowledge or understanding of securities laws and regulations of other Asian countries advantageous Excellent written and spoken English required; proficiency in other Asian languages a plus High levels of “Eq” & good communication skills; Must be a team player l l

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To apply for this position, please contact Julia Lee or Jasmine Sim at JLegal quoting Ref No: JXS-IHK-1186. Any direct or third-party applications will be forwarded to JLegal.

Email: julia@jlegal.com or jasmine@jlegal.com | Telephone: +65 6818 9701 AbOuT MERCER Mercer is a leading global provider of consulting, outsourcing and investment services, with more than 25,000 clients worldwide. Mercer consultants help clients maximize the effectiveness of their benefit programs and optimize workforce performance. The firm is also a leader in benefit outsourcing solutions. Mercer’s investment services include investment consulting, retirement plan design and governance, and multi-manager investment management. Mercer’s 20,000 employees are based in more than 40 countries worldwide. for more information, visit www.mercer.com

1/8/12 12:01 PM