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O f f s h o r e Fo c u s : T h e s e c r e t t o B V I ’ s p o p u l a r it y

p.1 8

may2012

NORTH ASIA EDITION

Cambodia Share trading launch marks new era PAGE 12

Halfway measures

Confidence undimmed

INSIDE

The rise of CDR in India

China’s slowing growth worries few

n Deals SPOTLIGHT

04

n THE BIG STORY

05

n LEAGUE TABLES

09

n SUNDRIES

60

PAGE 28

PAGE 32


CONTENTS

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

“From a law firm’s point of view, those who have been able to do well in the equity markets in China now need to figure out how they can put the right resources to work across a range of cross border debt products.”

1

47

Eugene Gregor, Davis Polk & Wardwell

18 COVER STORY

NEWS 46

Growing appetite The last two years have witnessed a swift and dramatic rise in the dim sum bond market, with hungry investors capitalising on an appreciating yuan. As corporations increasingly enter the market to finance their China operations, the appetite for dim sums is going global, finds Kanishk Verghese

FEATURES Cambodian promise

Kicking off its stock exchange with the country’s first IPO, investor interest surges in Cambodia. Throw in a new civil code, friendly business environment and the rise of well-regarded local firms, and the country is quickly developing, finds Seher Hussain

A different kind of offshore

The British Virgin Islands thrives on its liberal business laws to be the favourite offshore joint venture destination. These include ignoring the basic principles of corporate governance by legally permitting the directors to disregard companies’ interests, reports Raghavendra Verma

12

18

CDR on the rise

28

With India’s growth rate slowing, bad loans have started stacking up in the country. Not helping matters much are repeated interest rate rises and rocketing commodity prices. As a result, India is seeing a wave of high-profile applications for corporate debt restructuring (CDR), finds Ranajit Dam

Countering the slowdown

32

Recent economic growth data show that China’s economy is growing at its slowest since the global financial crisis. But the prospect of a hard economic landing has not diminished lawyers’ confidence in China as a market, thanks to the profession’s countercyclical characteristics, writes Liu Zhen

Japan Law Awards The finalists revealed

DEALS

04

BRIEFS

05

LEAGUE TABLES

09

APPOINTMENTS

10

INDEX

58

SPONSORED Regional Updates — China Paul, Weiss — Singapore Loo & Partners — Malaysia Wong & Partners — Philippines Sycip Salazar Hernandez & Gatmaitan

SPONSORED UPDATES

36

52 53 54 54

— Emerging Markets Kelvin Chia Partnership — International Tax AzureTax

56

SUNDRIES

60

56


ASIAN LEGAL BUSINESS may 2012

2

MANAGING DIRECTOR Andrew Goldner andrew.goldner@thomsonreuters.com

ON THE COVER

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

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

ASIAN LEGAL BUSINESS is available by subscription. Please call +852 3762 3269 (Hong Kong), +65 6775 5088 (Singapore) for details or visit www.legalbusinessonline.com Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as ALB can accept no responsibility for loss. THOMSON REUTERS 10/F, Cityplaza 3, Taikoo Shing, Hong Kong T (852) 3762 3269 | F (852) 2154 6425 www.thomsonreuters.com


EDITORIAL

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

3

Age of ASEAN With Myanmar currently dominating discussions, hogging headlines and – if anecdotal evidence is to be believed – packing out flights and hotel rooms as investors head to the country in hordes, it might have been easy to ignore the fact that Cambodia began trading its first stock in the third week of April. That’s right, it was only the one stock – that of the Phnom Penh Water Supply Authority (PPWSA) – although two other State-run companies, Telecom Cambodia and Sihanoukville Autonomous Port are reportedly getting ready to sell shares too. Given the long wait for the first shares on the Cambodian bourse – the exchange officially opened in July 2011 – the PPWSA’s IPO was an unsurprising success: the stock jumped 48 percent to 9,300 riel ($2.33) with volume of 879,426 shares on its debut, up from 6,300 riel in the IPO. Foreign investors, until now fairly wary of Cambodia and its regime, have begun offering their support, with media sources citing funds like Samsung Asset as being interested in investing in the country’s market. However, it is no coincidence that this interest has come at a time when the ASEAN region as a whole has begun to appear on the global economic radar. Laos (which opened its own stock market in January 2011), Vietnam and the abovementioned Myanmar are receiving increasing investor attention, albeit in varying degrees, while countries like Indonesia make for fascinating stories any day of the week. For many, ASEAN becomes the “one” in their “China plus one” strategy of hedging their bets, for others, ASEAN represents a feasible alternative to the saturated markets of the Far East. While our report in this issue on Cambodia talks more specifically on the commencement of trading of the country’s first shares, the fact remains that for the ASEAN region as a whole, its time has most certainly arrived. The rest of the issue is equally power-packed: our India story discusses the rise of corporate debt restructuring in the country as its economic growth slows, while our story on BVI as an offshore ALB_210x87mm_bleed10mm.pdf 1 2011-8-12 11:04:50

destination discovers that it owes much of its popularity to laws that ignore the basic principles of corporate governance by legally permitting the directors to disregard companies’ interests. Finally, our double China feature proves that, despite the appearance of a number of pretenders across the region, few are yet to come even close to challenging its economic crown. Dim sum bonds are beginning to truly go global, as one of the articles explores. With the appreciation of the yuan, it’s natural for these instruments to be a solid bet for returns, but now companies are turning to dim sum bonds to fund their ventures on the mainland. Reporter Kanishk Verghese discovers that increasingly the market is focusing on creditworthiness and the strength of covenant packages. Dim sum bond launches are being planned by three Chinese policy banks on the London Stock Exchange – all part of China’s efforts to further internationalise its currency. In the China report, we learn that despite the country’s weak economic forecast for 2012, lawyers are not feeling the pinch. The profession’s countercyclical characteristics show that in a slowdown, the workflow simply shifts to areas such as insolvency, litigation and M&As. For those firms that are struggling, these are times ripe for mergers. As partner Michael Qi of Fangda partners said to ALB: “The strongest survive, with the weak dying out and being swallowed up. The pace of industrial consolidation goes up in the chilly winter.”

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


4

DEALS spotlights

ASIAN LEGAL BUSINESS may 2012 n your month at a glance

$926 million

Deal name

Jurisdiction

Value ($ mln)

China, Mongolia, Hong Kong

926

M&A/ Equity

Hong Kong, Canada

641

M&A

Hong Kong

635

Debt

Hong Kong

1440

Equity

Hong Kong

400

Debt

Mongolia

580

Debt

Deal type

Clifford Chance

M&A, Equity ALUMINUM CORPORATION OF CHINA’S (CHALCO) TAKEOVER BID • Purchase of a stake in Mongolian coal miner SouthGobi Resources by CHALCO from Canada’s Ivanhoe Mines, which owns 57.6 percent of SouthGobi. Ivanhoe Mines agrees to sell all its shares to CHALCO. • Ivanhoe to invest in its copper and gold venture, the $6 billion Oyu Tolgoi mine in Mongolia, with capital raised from the SouthGobi sale to CHALCO.

Firm

Aluminum Corporation of China’s (CHALCO) takeover bid

Jincheng, Tongda & Neal Fasken Martineau

Metropolitan Light Company’s acquisition of assets from City Telecom

Clifford Chance

Latham & Watkins

Herbert Smith

$1.44 billion

Export-Import Bank of China’s bond issuance in Hong Kong Linklaters

Equity china minsheng bank’s hong kong share sale • Sale of 1.65 billion new Hong Konglisted shares by China Minsheng Bank for HK $6.79 each ($0.87). • Healthy demand for the issue, which was five times covered and priced at a 5 percent discount.

Clifford Chance China Minsheng Bank’s Hong Kong share sale

Freshfields Bruckhaus Deringer Skadden, Arps, Slate, Meagher & Flom

$580 million

Zoomlion’s issuance of notes

Fixed Income DEVELOPMENT BANK OF MONGOLIA’S BONDS ISSUE • Senior guaranteed bonds worth $580 million have full backing of Mongolian Ministry of Finance. • Mayer Brown JSM has worked with the Development Bank of Mongolia before, advising the bank on the launch of its $600 million Euro Medium-Term Note Programme in December, 2011.

Simpson Thacher & Bartlett Fangda Partners Mayer Brown JSM

Development Bank of Mongolia’s bonds issue

ARLEX Consulting Services Allen & Overy GTs Advocates

China Cinda’s equity sale

Sullivan & Cromwell

China

1640

Equity

ORIX Corporation’s notes offering

Simpson Thacher & Bartlett

Japan

500

Debt


BRIEFS

05.2012

05

FORUM What comes next for the sales tax in Japan? “The Japanese government needs to cut some expenditure, and at the same time increase tax rates. Considering the current situation, a 10 percent sales tax is fair. But in the future, a further increase could be necessary.” Tsuyoshi Ito

Nishimura & Asahi

Pedestrians cross a street at Tokyo’s Ginza shopping district. REUTERS/Yuriko Nakao

the big story

Japan sales tax deadlock By Kanishk Verghese

H

aving run through six prime ministers in five years, Japan is a tough political battleground. Prime Minister Yoshihiko Noda’s job may be on the line with a controversial plan he submitted to parliament in March to double the country’s sales tax by 2015. The bill proposes raising the sales tax, known as consumption tax in Japan, from 5 percent to 8 percent in April 2014, and subsequently to 10 percent in October 2015. Through these moves, Noda hopes to generate revenue to fund rising social security costs for a country that expects 40 percent of its population to be 65 or older by 2060. But he has found it hard to win backing from the opposition, which intends to use its control of the upper house of parliament to block the bill. Moreover, there is resistance among ruling party members who could vote against the plan. Although the cabinet approved the framework of the bill in February, the ruling party has spent considerable time amending the legislations to sway opinion in favour of the plan. But what are the alternatives? Many experts believe that instead of rushing to increase taxes, the government should increase

“Public opinion seems to be changing. Until last year, many people objected to the higher sales tax rate. But this year, many people are starting to understand the necessity of having a higher rate to reduce the country’s debts.” Atsushi Oishi

Mori Hamada & Matsumoto

efforts to cut expenditure, says Koichi Inoue, a Tokyo-based tax partner at Jones Day. Nishimura & Asahi tax partner Tsuyoshi Ito believes that while cutting expenditure is crucial, raising other taxes could be beneficial. “An alternative could be to increase the individual income tax and corporate income tax.” However, any increase in the individual income tax rate may have a negative impact on the Japanese economy, states Atsushi Oishi, a tax partner at Mori Hamada & Matsumoto. “Japanese corporations are requesting to lower the corporate tax rate. So I think the government has no choice but to increase consumption tax,” says Ito. Nonetheless, Ito believes the government is proceeding in the right direction. “An increase in the consumption tax would be indispensable due to the Japanese government’s current national condition,” he adds. Noda has voiced his determination to pass the bill during the ongoing parliament session, which ends in June. But in a country that accrues more than the combined gross domestic product of Greece and Portugal in debt each year, delays caused by the political deadlock could threaten the prime minister’s career and push Japan’s economy to the brink.

“A sales tax of 10 percent is not sufficient. But for political reasons, it is practically impossible for the rate to be increased to more than that in a short time period. Many European countries have the value added tax rate at around 20 percent, so we should go there eventually. I think there should be some amicable negotiations between the Liberal Democratic Party and the Democratic Party of Japan. There must be some negotiations and concessions in the near future.” Koichi Inoue Jones Day


6

BRIEFS

ASIAN LEGAL BUSINESS may 2012

ASIA’S GROWTH AND INFLATION FORECASTS - ADB 10

xxx

Growth - percent

Developing Asia

8 6 4 2 0 20

Forecasts

2008

2009

2010

2011

2012

2013

Developing Asia

Inflation - percent

15 10

KEY

5

Central Asia South East Asia South Asia East Asia

0 -5

Forecasts

2008

2009

2010

2011

2012

2013

Source: Asian Development Bank

Stable Growth

GC INTERVIEW

Wilfred Ong Managing Corporate Counsel, Asia-Pacific Avaya

Growth rates of the four regions in Asia are predicted to increase, according to the Asian Development Bank’s 2012 outlook report released in April this year. While the growth rate in East Asia is predicted to decelerate to 7.4 percent this year from 8 percent in 2011, Southeast Asia will see its GDP grow to 5.2 percent in 2012 from just 4.6 percent in 2011. South Asia will maintain a growth of 6.6 percent in 2012 before accelerating to 7.1 percent in 2013 on the back of a strong projected Indian economy. Inflation is stabilising, but the unpredictability of food and oil prices remains a constant threat.

‘You need to read people well’ ALB: How would you say your role is different from other in-house counsel? ONG: Most in-house counsel will consider themselves as being legal professionals first and foremost. However in my role, being a legal professional is just as important as managing my team, implementing processes that simplify how we do business, watching my expense line, fostering collegiality with my international colleagues, and collaborating with my commercial sales leadership in achieving our business goals for Avaya globally, and in particular, in the APAC region. ALB: What can in-house counsel do to make themselves an indispensable part of the organisation? ONG: No one, in my view, is “indispensable” to an organisation. But we can focus on certain areas to add value to the company. In Asia in particular, you need to establish a good track record for getting

things done effectively. Once you’ve built on that reputation, you need to maintain it. With that, half the battle is won. Truly, actions speak louder than words while marketing yourself. Then, you can’t hole yourself up in your ivory tower, dispensing legal advice in the abstract. You need to get off the fence, roll up your sleeves and understand exactly where the company wants to go, appreciate the real risks involved, take a position, and chart an uncomplicated course in order to achieve those goals. Therefore, understanding business goals, models and trade-offs is very important. Providing solutions in simple language that your clients can understand quickly is key. Finally, you can’t possibly spread yourself too thin. So, you need to be selective in providing the right amount of support at the right time to the right constituents. Pick your battles well. If not, you will burn out. Work smart. Managing

perceptions is important. ALB: What are the most important qualities someone in your role must possess? ONG: First, a good sense of balance – you need to know when you start worrying, and when you shouldn’t; you need to know when to give up a war in order to win the battle; you need to know when to work hard, and when to work smart; when to be granular and when to take a macro view of issues. Then, you need to read people well – be it people you are recruiting, customers you are negotiating with on the other side, your constituents, or your bosses. Additionally, integrity and walking the talk are very important. Always see things in perspective and do not let your emotions get the better of you. Finally, bring out the best in your team, and never be afraid of letting them shine. When they shine, you shine. ALB: How would you describe your


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strategy for the legal team? ONG: Always be seen to be adding value to the business, and never be perceived as a legal roadblock. As a timely exchange of information is key, the legal team needs to position itself as a “trusted adviser” to our clients so we can pre-empt problems before they arise.

protect workers’ rights. In this regard, I see legal teams having to partner closely with HR and labour negotiators to protect the companies’ interests. Protection of intellectual property will continue to be an issue at the forefront of many Western companies operating in China.

In the very competitive and unpredictable IT industry, the team needs to be adaptable and evolve with the company as it shifts its goals, as different leaders come and go, as the performance of the company shifts in cycles, and as new paradigm shifts take place with the introduction of new technology.

In India, with concerns over security after the Mumbai terror attacks, it’s natural that the bureaucracy will introduce measures ostensibly to protect and enhance the security of India. This will have a spillover effect in terms of new rules and regulations that companies in data networking, communication solutions and service providers will have to address.

ALB: In relation to the work that you are doing, what are the main trends you expect to see over the next 12 months? ONG: In China, I see an uptick in the activities of the major umbrella unions, like the ACFTU, to push companies’ labour unions to be more engaged to

As new markets open, like Myanmar, and as Indonesia attracts more investments, legal teams of U.S. MNCs will have to map out ways to help the company do business in these “emerging” markets, taking into account the various laws

in place in the U.S. that govern ethics and compliance, export controls, IP protection, etc. ALB: What is the best advice you have ever received? ONG: Someone once repeated to me the adage that “the grass is always greener on the other side.” If we keep comparing, we’ll never be satisfied. It is only natural that younger in-house counsels tend to move quite quickly from one job to another – to get better experience, exposure, more money to support their young families, etc. But we must not lose sight of the intangible benefits that our current jobs may sometimes bring – fair and supportive bosses who walk the talk and whom we can respect; the sense of belonging and collegiality in our organisation; and the hard-earned respect and recognition our organisation has earned with the company. These are equally important.


8

BRIEFS

ASIAN LEGAL BUSINESS may 2012

IN CASE YOU MISSED IT

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

REUTERS/Jose Manuel Ribeiro

HOGAN LOVELLS IN INDONESIA TIE-UP

Hogan Lovells has entered Indonesia following a tie-up with local law firm Hermawan Juniarto, as it seeks to tap into legal work generated by multibillion dollar projects in the country’s mining, natural resources, and oil and gas sectors. The fivepartner Hermawan Juniarto has advised on the corporatisation of the Jakarta Bus Rapid Transit (BRT) services, the establishment of the Indonesian Infrastructure Fund, and the issuance of the first municipal bonds in Indonesia.

DICKINSON WRIGHT ENTERS ARRANGEMENT WITH MACAU FIRM

U.S. firm Dickinson Wright has formed an alliance with full-service Macau firm MdME. The arrangement gives Dickinson Wright access to the world’s largest gambling market; Reuters reported that casino revenue hit about 268 billion patacas ($33.5 billion) in 2011. The two firms are also expected to refer work to each other, and split the resulting generated revenue. Dickinson Wright has similar alliances with WH Partners in Malta, and Varela & Fonseca Abogados in Peru.

REUTERS/Amit Dave

SQUIRE SANDERS OPENS IN SINGAPORE

Cleveland-headquartered international firm Squire Sanders has opened an office in Singapore, comprising partner Ignatius Hwang and three other lawyers. Hwang, who was hired away from Bryan Cave recently, will head an office that is expected to represent multinational corporations, governments and banks on infrastructure projects including public-private partnership projects, cross-border transactions, international arbitration, financing arrangements and corporate restructurings in Singapore, Asia and the Middle East.

INDIA COURT REJECTS APPEALS IN TELECOM LICENCE DISPUTE

India’s Supreme Court last month rejected appeals to overturn an order cancelling telecom licences awarded in 2008, dealing a blow to the companies affected. The court in February had ordered cancellation of 122 telecoms licences held by eight operators because of alleged irregularities in the way they were awarded in 2008. A state auditor estimated New Delhi may have lost as much as $34 billion as the permits were given out at “unbelievably low” prices.

Linklaters Closes State Grid’s Portuguese Acquisition

Linklaters has advised State Grid International Development of China (SGID) on its €387.15 million ($506.5 million) takeover of a quarter of Portugal’s Redes Energéticas Nacionais’ (REN’s) shares. This is the first Chinese acquisition of a European national power grid. According to the agreement made by the State Grid Europe Limited (SGEL), a wholly owned SGID subsidiary, and Participacoes Publicas SGPS SA, SGID purchased REN’s 133,500,000 class B shares representing a 25 percent stake in the share capital at a price of € 2.90 per share, Reuters reported.

REUTERS/Beawiharta Beawiharta

INDONESIA IN AVIATION FOCUS AFTER AIRBUS, GARUDA sign $2.5 BLN DEAL

Indonesia’s Garuda purchased 11 A330 jets worth $2.54 billion from Europe’s Airbus last month, a deal, another sign that the country is a key battleground for dominant jetmakers Airbus and Boeing. Garuda has also bought regional jets from Canada’s Bombardier and Lion Air has ordered European ATR turbo-props to operate short links. Indonesian passenger numbers are growing on average by 21 percent each year, according to budget carrier Lion Air.


LEAGUE TABLES

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

CHINA Announced M&A Legal Rankings

HONG KONG Announced M&A Legal Rankings

Allen & Overy

2,570.9

DEALS: 5 RANK

Allen & Overy

4,089.4

VALUE ($mln)

DEALS: 5

MARKET SHARE: 5.6

LEGAL ADVISOR

VALUE ($MLN)

9

DEALS

MARKET SHARE

RANK

VALUE ($mln)

MARKET SHARE: 21.6

LEGAL ADVISOR

VALUE ($MLN)

DEALS

MARKET SHARE

2

Slaughter and May

2,531.4

1

5.5

2

Slaughter and May

2,531.4

1

13.4

3*

Fulbright & Jaworski

2,500.0

1

5.4

3

Sullivan & Cromwell

1,936.4

1

10.2

3*

Vinson & Elkins

2,500.0

1

5.4

4

Freshfields Bruckhaus Deringer

1,275.1

1

6.7

5

King & Wood Mallesons

2,264.7

5

4.9

5

Clifford Chance

843.3

5

4.5

6

Paul, Weiss

1,940.3

2

4.2

6

Linklaters

533.5

2

2.8

7

Skadden

1,859.5

6

4.1

7*

Rajah & Tann

494.0

1

2.6

8

Jingtian & Gongcheng

1,797.3

5

3.9

7*

Machado Meyer Sendacz & Opice

494.0

1

2.6

9

Sullivan & Cromwell

1,640.3

1

3.6

9

Paul, Weiss

300.0

1

1.6

10

Baker & McKenzie

1,580.6

5

3.4

10

Baker & McKenzie

260.6

3

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)

JAPAN Announced M&A Legal Rankings

SOUTH KOREA Announced M&A Legal Rankings

Jipyong & Jisung

Nagashima Ohno & Tsunematsu

9,235.6

DEALS: 22 RANK

3,526.1

VALUE ($mln)

MARKET SHARE: 22.1

LEGAL ADVISOR

VALUE ($MLN)

DEALS

DEALS: 2 MARKET SHARE

RANK

VALUE ($mln)

MARKET SHARE: 28.2

LEGAL ADVISOR

VALUE ($MLN)

DEALS

MARKET SHARE

2

Nishimura & Asahi

6,110.2

21

14.6

2

Latham & Watkins

3,309.1

1

26.5

3

Hogan Lovells

4,255.2

5

10.2

3

Kim & Chang

1,296.2

11

10.4

4

Sullivan & Cromwell

3,751.0

4

9.0

4

Lee & Ko

714.7

13

5.7

5

Bennett Jones

3,347.2

3

8.0

5

Bae Kim & Lee

658.6

4

5.3

6

Burnet Duckworth & Palmer

2,912.2

2

7.0

6

Allen & Overy

429.9

1

3.4

7

Mori Hamada & Matsumoto

2,672.2

39

6.4

7

Baker & McKenzie

353.5

2

2.8 2.6

8

Morrison & Foerster

2,638.5

6

6.3

8*

Ashurst

329.0

1

9*

Dewey & LeBoeuf

2,630.0

1

6.3

8*

Minter Ellison

329.0

1

2.6

9*

Mintz Levin Cohn Ferris Glovsky & Popeo

2,630.0

1

6.3

10*

DLA Piper

308.0

1

2.5

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

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

160 140 120 100

Series1

80

64.0 63.0

60

114.6 103.4

94.5

94.0 72.8 54.5

143.7

130.3

Series2

104.9

99.8

92.2

70.3

61.7

130.2 112.2 101.9 81.9

76.1

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

137.0 128.1 84.1

1,500

54.2

1,000 500

40 20

0 1Q 05

3Q 05

1Q 06

3Q 06

1Q 07

3Q 07

1Q 08

3Q 08

1Q 09

3Q 09

1Q 10

3Q 10

1Q 11

3Q 11

NOTES: League tables, quarterly trend, and deal list are based on the nation of either the target, acquiror, target ultimate parent, or acquiror ultimate parent at the time of the transaction. Announced M&A transactions excludes withdrawn deals. Deals with undisclosed dollar values are rank eligible but with no corresponding Rank Value. Non-US dollar denominated transactions are converted to the US dollar equivalent at the time of announcement of terms. North Asia includes China, Hong Kong, Taiwan, South Korea, Japan. Data accurate as of April 25, 2012

No. of Transactions

Rank Value US$ Billion

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


10

APPOINTMENTS

ASIAN LEGAL BUSINESS may 2012

LATERAL HIRES NAME

Leaving

GOING TO

PRACTICE

LOCATION

Ying White

Akin Gump Strauss Hauer & Feld

Clifford Chance

Corporate

Beijing

Christopher Betts

Paul Hastings

Skadden , Arps, Slate, Meagher & Flom

Corporate

Hong Kong

White & Case

Capital markets

Tokyo

Wilson Sonsini Goodrich & Rosati

Corporate

Shanghai

Norifusa Hashimoto

Zhan Chen

Allen & Overy

Davis Polk & Wardwell

PROMOTIONS NAME

FIRM

PROMOTION

PRACTICE

LOCATION

Charles Ching

Freshfields Bruckhaus Deringer

Partner

Corporate

Hong Kong

Edward Freeman

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12

cambodia

ASIAN LEGAL BUSINESS may 2012

CAMBODIA

KICKS OFF ALL EYES ARE ON CAMBODIA AS IT KICKS OFF ITS FIRST STOCK EXCHANGE IN APRIL. THE NATION’S FIRST IPO ALSO LAUNCHES AMIDST HEAVY INVESTOR INTEREST. THROW IN A NEW CIVIL CODE, AN INVESTOR-FRIENDLY BUSINESS ENVIRONMENT AND THE RISE OF WELL-REGARDED LOCAL FIRMS, AND IT IS CLEAR THAT THE COUNTRY HAS TAKEN FIRM STEPS ON THE ROAD TO ECONOMIC DEVELOPMENT, FINDS SEHER HUSSAIN

D

espite some of the worst flooding in the country’s history, the Asian Development Bank forecast a robust GDP growth rate for Cambodia, hovering at about 6.5 percent for 2012 and edging up to 7 percent for 2013. The major factors underlying the prediction are strong exports and a buoyant tourism industry. But the hottest new development is undeniably the Cambodia Stock Exchange.

Embracing capitalism The first stocks are set to trade on April 19 when state-owned enterprise Phnom Penh Water Supply Authority floats its initial public offering (IPO). The latest numbers at the time of print, supplied by the Phnom Penh Post, indicate that the IPO is 17 times oversubscribed, and is expected to generate as much as $20 million. “It is a very positive development,” says Marae Ciantar, partner at Allens Arthur Robinson. “It provides a stable regulatory framework for raising funds from the public, and that is the one activity that

“IT’S A VERY POSITIVE DEVELOPMENT AND IT PROVIDES A STABLE REGULATORY FRAMEWORK FOR RAISING FUNDS FROM THE PUBLIC, AND THAT IS THE ONE ACTIVITY THAT COMPANIES IN CAMBODIA HAVE NOT BEEN ABLE TO DO AT THIS POINT.” MARAE CIANTAR, Allens Arthur Robinson

companies in Cambodia have not been able to do at this point. So that is really the key to having a stock market, letting you access a broader market, and raise funds.” Financing in Cambodia has generally been limited to private investment and/or financing from banks and issues with liquidity abound as the amount of money available to be lent within the country has been limited. The stock exchange is predicted to change that significantly. State-owned company Phnom Penh Water Supply generated an unprecedented amount of investor interest during its subscription phase. Brett Sciaroni, senior partner at Sciaroni & Associates, says that “the broker could not have anticipated the response that this IPO got from the public; it has gotten a tremendous response. You would not think that a water company would have that kind of play. But the prospectus is very professionally done, so this augurs well for the future of the stock market; it is a good start. We can anticipate the day that the private companies will also list.” Set to follow are the IPOs of two other state-owned enterprises, Telecom Cambodia and Sihanoukville Autonomous Port. Private companies are standing by however, as Bun Youdy, managing partner at Bun & Associates, affirms that “there are a lot of good candidates in the private sector, such as banks and telecoms companies, that will


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cambodia

13

Deputy Prime Minister and Minister of Economy and Finance, Keat Chhon rings a bell during the opening ceremony at the Cambodia Securities Exchange (CSX), in Phnom Penh. REUTERS/Stringer

wait to see how the listings go before making a decision.” From a legal perspective, this bodes well for the marketplace. Besides working on the actual processes of the IPOs themselves, Bun expects “there will be more work on due diligence and acquisitions.” Once the process gets underway, lawyers expect to see a significant amount of restructuring, auditing and accounting-related work, getting companies ready for public scrutiny. Investor-friendly nation Jean Loi, partner at VDB Loi, says: “The stock exchange will definitely draw foreign direct investment. This is a good step for the govern-

ment, and they have provided a strong incentive for investors to come.” Sciaroni agrees, saying: “Absolutely. There are foreign investors that came here with the specific understanding that we will have the stock market up and running. So it has taken longer than anticipated (five years). But I give the government credit for not rushing; it is important to get it right than to get it done fast.” Beating Cambodia to the punch was its neighbour Laos, which launched its stock exchange in January 2011 amid a high level of international interest. The first two state-owned companies to list on the stock exchange gathered a flurry of global attention, but were ultimately unsustainable and the financial infrastructure remains relatively undeveloped right now. Sources remain confident, however, that a very different story is about to unfold in Cambodia. Sciaroni says: “We have a far more open, free market economy than most in Southeast Asia and the ease of doing business is better than in Vietnam, Laos, and other places. This will


14

cambodia

ASIAN LEGAL BUSINESS may 2012

Staff of Cambodia Securities Exchange test the computer system during a mock trading session in Phnom Penh. REUTERS/Samrang Pring

not mirror the Laotian stock market and Cambodia will have a robust stock market in a number of years. There is an insatiable demand for capital that is growing by leaps and bounds, and soon a lot of local companies will want to be listed.” In comparison, Cambodia has a more diverse economy than Laos, which is generally mining-based. It also offers investors low listing requirements and fewer restrictions on foreign ownership. Bun affirms that “it’s difficult to predict but we can say that the Cambodian stock market has taken more time in preparation than Laos to launch. The delay has likely, however, given them more time to be better prepared. The government has looked at all the different angles seriously and has the advantage of observing what happened in Laos before launching.” Leaving aside the stock exchange, legal practitioners affirm that conducting business in Cambodia is an efficient process. “It is an investor friendly environment compared to its neighbours,” affirms Ciantar. “The government is pro-investment and companies can proceed economically, not artificially.” Sources also note that the amount of red tape is significantly less

in Cambodia, and the government is flexible. “As part of this process, it is possible for investors to get access to very senior levels of government quickly. It does not take years and years,” says Ciantar. Minor hiccups, however, do remain. Corruption is an issue for international investors as well as certain gaps in the legal framework. Certain industries such as telecom and oil lack overarching laws. Draft laws are in place, but it remains to be seen when the government will solidify these. Additionally, undeveloped infrastructure is a sticky point. But the marketplace is aware of these issues, and is working towards resolving them. “From the business side, one of the reasons that Cambodia is not on the radar is because of the size of the market,” says Bun. “It


cambodia

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15

“SPECIFICALLY, THE QUALITY OF THE INVESTORS HAS CHANGED. THEY ARE NOT SPECULATORS, THEY ARE SERIOUS. THEY PAY ATTENTION TO THE QUALITY OF LEGAL WORK AND THAT HAS AN IMPACT ON THE LOCAL BUSINESS CULTURE AS WELL. WE HAVE SEEN MORE CAMBODIAN BUSINESSES TRYING TO BECOME FAMILIARIsED WITH THE REQUIREMENTS OF FOREIGN INVESTORS.” BUN YOUDY, Bun & Associates

is a country of 14 million, so it is very difficult for a certain type of industry to fully commit to Cambodia as a hub. But that problem is being solved. We are working on that because in 2015, you will be able to distribute a product throughout ASEAN without a tariff.” Trends Alongside the stock exchange, several other developments have affected the legal marketplace. One key event in this regard has been the issue of a new civil code, containing more than 1000 articles that cover a vast range of civil legal arrangements. Sciaroni reveals that “it is going to take lawyers a while to get on top of all of these provisions. Now we will have to assess the impact of the new civil code and what effect it has on structures and practices that have been previously established. There is definitely going to be a period of uncertainty while lawyers come to grips with those provisions.” Banking and project finance transactions also remain plentiful, bringing in high amounts of foreign investment. This in turn, has had an effect on the local marketplace. Bun says: “Generally speaking, legal work has expanded because more investors have come into the country. But specifically, the quality of the investors has changed. They are not speculators, they are serious. They pay attention to the quality of legal work and that has an impact on the local business culture as well. We have seen more Cambodian businesses trying to become familiarised with the requirements of foreign investors.”Sources predict this trend to only grow as more international money pours in. While Cambodian companies are getting up-to-speed with international standards, local law firms are also keeping pace. Ciantar

says: “There has been a rise in the number of well-established local law firms that are getting good roles and good client feedback from international investors and clients. This is a very positive development.” Law firms in Cambodia are recognising the need to combine the best of international and local talent, and are regularly hiring expatriate lawyers, resulting in a broader pool of legal choices for clients. Ciantar continues, “There have certainly been rumours of some of the larger international firms setting up associations here as well.” In terms of the overall marketplace, legal work chugs along steadily with “M&A activity and commercial work increasing,” says Loi. “Another sector where we have seen a lot of activity is agricultural projects where the government provides concessions to investors. Property also remains hot with a steady stream of Chinese, Korean and Japanese investors.” Competition heats up Headlines about Myanmar have run rampant over the last year as the country opens up for business. What will this mean for Cambodia? Local media sources have confidently proclaimed that their neighbour’s economic promise is no threat to Cambodia. Legal practitioners, however, have a more balanced view. Bun says: “The Myanmar market size is very big compared to Cambodia and also close, geographically speaking, to China and India. It’s also rich in natural resources and has the heritage of a British colony. As soon as the country opens, investors will find opportunity there. So it depends on how fast they can organise their democracy and make economic progress. It will, however, take time for them to be fully liberal. So by that time, Cambodia will already have reached a different stage of development and the current key obstacles to foreign investments will be mostly solved.” “In the short term, Myanmar is a very frontier risk environment and going into a country at this stage, it can go really well or you can have real issues with projects because of the whole uncertainty of the political environment. In contrast, Cambodia is very economically and politically stable; it is a known environment. You have had the same ministers in key positions for years. Maybe in two or three years, the impact will be felt. But it is too early now,” says Ciantar. Overall, the Southeast Asian nation is sitting pretty in 2012 as its economy grows, the legal framework develops, and international investors continue to flock to it. The amount of positive indicators ensures that Cambodia will remain one to watch for in the foreseeable future.


16

SPONSORED PROFILE

ASIAN LEGAL BUSINESS MAY 2012

KELVIN CHIA PARTNERSHIP

SOLUTIONS FOR A COMPLEX NEIGHBOURHOOD Kelvin Chia Partnership has been providing legal and commercial solutions for our international clientele in Indochina for over 20 years. We are a commercial law firm, headquartered in Singapore, with offices and a presence throughout the Southeast Asian region, including in Hanoi and Ho Chi Minh City, Yangon, Phnom Penh and Bangkok. Additionally, Kelvin Chia Partnership works with Martia & Anggraini Partnership for its growing Indonesia practice and also has strong affiliations with law firms in the Philippines, Malaysia and Laos, and can provide legal and commercial solutions in those jurisdictions as well. Our regional practice groups understand the complex business, legal and regulatory environment faced by investors in Indochina. To provide turnkey solutions for our clients, our team of lawyers work seamlessly across jurisdictions to provide integrated legal and business solutions to support our clients’ growth in the region. Our international team of lawyers possess extensive experience in both cross-border and local transactions, and are qualified in Singapore, Vietnam, Thailand, Australia, United States, Japan, Philippines, Indonesia, Malaysia, England, Cambodia, the People’s Republic of China and Myanmar. We provide brief details of some of our regional practice groups below. Vietnam We have more than 20 years of experience advising clients on doing business and undertaking investments in Vietnam. Our two offices in Hanoi and Ho Chi Minh City, established in 1993, actively advise a diverse client base consisting of multinationals, government-linked and local companies and from industries ranging from construction, engineering, logistics, telecommunications, real estate to healthcare. Our team of local and foreign lawyers possess the necessary expertise to advise on complex areas of setting up businesses and structuring investments, from investing in green-field projects, compliance with labour and employment laws to advising on acquisitions of foreign or locally invested enterprises, securities laws and real estate transactions. Our Managing Partner, Kelvin Chia has been instrumental in growing our Vietnam practice and jointly heads our Vietnam offices with Partner and Country Manager Le Thi Hoa as well as Partner Lee Ying Ying. Together, these partners have over 40 years of combined experience advising on and carrying out Vietnamese transactions. Myanmar Our Myanmar office, Kelvin Chia Yangon Ltd. (“KCY”), is a full service foreign legal consultancy firm established in Yangon in 1995. It is the oldest foreign legal consultancy firm in Myanmar with years of experience assisting clients and investors in various corporate and commercial matters. One of its unique strengths is that it brings together the expertise of local Myanmar-qualified lawyers and foreign consulting attorneys, in order to meet the needs of clients from multiple jurisdictions, particularly in complex local and cross-border transactions. KCY also has significant expertise and extensive experience in assisting foreign clients in investing in Myanmar, including structuring and setting up investments, and assisting with dealings with authorities and applications

for permits and licenses; advising on business transactions and preparing/reviewing commercial agreements; conducting legal due diligence and assisting in acquisition exercises; and advising on a full range of legal issues. In particular, KCY is familiar with the energy/oil and gas, natural resources and mining, real estate, banking and agricultural sectors in Myanmar. Our Myanmar practice is managed by Cheah Swee Gim, KCY Director and head of KCP Singapore’s Corporate Department, and key members of the team include U Than Maung, a senior member of the Myanmar bar, and Marlon Wui, a Foreign Consulting Attorney at KCY and a Partner at KCP Singapore. Kelvin Chia also actively assists our clients in identifying and structuring investment opportunities in Myanmar. Cambodia Our experience in navigating the Cambodian legal environment since 2005 has provided our clients with a full range of corporate work, from the incorporation of companies, restructuring of investments to advising on partnership agreements and regulatory compliance. Beyond legal solutions, our team of locally qualified lawyers are also experienced in identifying investment opportunities and local business partners for clients. Furthermore, KCP Cambodia also possesses specific experience in real estate and property related transactions, with in-depth knowledge dealing with land ownership structures, land registration system and other related agreements. KCP Cambodia is headed by Jay Cohen. Jay is called to the California Bar and is also fluent in Khmer and Mandarin Chinese. Bangkok Our office in Bangkok has rendered investment advisory services for a wide range of corporate transactions, from incorporating new investments to the establishment of joint ventures between foreign investors and local companies. We continue to support clients throughout the duration of their investment by providing corporate secretarial services, and advising on governmental licenses and permits, labour matters and commercial contracts, as well as acting on behalf of clients in civil and commercial litigation. In addition to inward bound Thai investments, we have also developed a special focus on assisting Thai and other multi-national businesses as they venture into investments in Indochina from Bangkok. Our Bangkok office is headed by Angie Wachira, a Thai qualified lawyer with nearly 15 years of commercial and IP experience.


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18

offshore

ASIAN LEGAL BUSINESS MAY 2012


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A

ccording to Section 120(4) of the British Virgin Islands (BVI) Business Companies Act, 2004, “A director of a (joint venture) company... (may) act in a manner which he believes is in the best interests of a shareholder... even though it may not be in the best interests of the company”. COMMERCIAL REALITY By including this special provision in the company law, the BVI authorities have essentially accepted the commercial reality that in international joint ventures, the directors seldom move against the wishes of the shareholders who appoint them. Mostly, these directors are senior employees of the holding company and, therefore, their loyalties remain with the parent company. Stuart Baldwin, a senior associate at Walkers who has been practising BVI law for the past 30 years in Singapore, has been involved in two transactions where the companies decided to set up a joint venture in the BVI solely because of this provision. According to him, there is no other offshore jurisdiction that has anything similar to this, with New Zealand being the only onshore exception after it introduced it a few years before the BVI. “Whenever I get a joint venture proposal, I never forget to mention this special provision,” he says.

offshore

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In a 50-50 joint venture, this provision enables the appointees of the two shareholders – usually two directors each – to protect their respective interests without worrying about the breach of fiduciary duties. “Though an actual conflict issue does not arise often, (but) it gives the directors extra comfort,” says Baldwin. Presenting an example, Robert Briant, partner and head of Conyers Dill & Pearman’s BVI office, says that if there is a good investment opportunity for the company, its directors are duty-bound to approve it. However, if for some reason, one of the shareholders opposes it and his nominee directors do not approve it, that director runs the personal risk of being sued by the other side for the breach of his fiduciary duty. “Though in such an eventuality, the shareholders are likely to indemnify their directors”, he says. Another situation that could, for instance, arise is when a private equity company and a high-end casino chain come together to start a new joint-venture company that caters to the lower end of the market. If this venture succeeds and there is a profitable proposition to expand the business into the higher end of the market, the nominee directors of the parent casino chain may oppose it because such a move could threaten its own market position. According to Simon Bushell, London-based partner at Herbert Smith who leads its corporate fraud and asset training practice, the provision was probably intended to reduce the number of disputes and controversies for BVI directors who were following shareholder instructions. According to him, foreign companies often appoint local administrators as directors of the BVI-based joint ventures on the understanding that they will follow instructions given by non-resident shareholders. Even though there are no indications that such a provision would ever be adopted in other jurisdictions, lawyers can find its applicability across the world, even in rigid regulatory frameworks such as India. Speaking on the topic, Essaji Vahanvati, Mumbai-based partner at

A DIFFERENT KIND OF OFFSHORE THE BRITISH VIRGIN ISLANDS THRIVES ON ITS LIBERAL BUSINESS LAWS TO BE THE FAVOURITE OFFSHORE JOINT VENTURE DESTINATION. THESE INCLUDE IGNORING THE BASIC PRINCIPLES OF CORPORATE GOVERNANCE BY LEGALLY PERMITTING THE DIRECTORS TO DISREGARD COMPANIES’ INTERESTS. IT MAY SOUND UNREAL, BUT THE FACT OF THE MATTER IS THAT LAWYERS CONSIDER SUCH A PROVISION AS MODERN AND PRAGMATIC. RAGHAVENDRA VERMA REPORTS


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ASIAN LEGAL BUSINESS may 2012

AZB & Partners, says: “Very often, we face challenges (in India) when companies’ promoters want a particular thing, but directors have to decide independently.” “So to have a choice would be good, but only in limited circumstances like 50-50 joint ventures where the decisions are based on the two principal shareholders.” MINORITY INTERESTS Usually, in large public corporations, a typical promoter stake is much smaller and the minority shareholders rely upon the corporate governance structures to protect their investments. For this reason, Vahanvati says that in such companies, it is better to have the conventional system where the fiduciary duty of the directors requires them to act in the interest of the company. “It is a tried and tested principle, which is based on common law and upheld in various court decisions in India and abroad,” he says. The effect of this provision on the interest of the minority shareholders is an issue even in a BVI-based joint venture. According to Bushell, at least in theory, the protection to minority shareholders would still be available, but it will inevitably be harder to secure that while applying this provision. “If the majority shareholder(s) wanted to purchase some assets of the company and the agreed price is not found to be appropriate by the minority shareholder, then what protection is there for the minority?” A problem could also arise when for some reason, one side in a joint venture does not fully appreciate the issues or perhaps the structure of the company changes in due course, says Bushell. “What if one of the 50 percent shareholders sells his interest to somebody else who does not have the same understanding, or if the stake is split and sold to two parties?” With such concerns still unresolved, lawyers do not take too many chances with the provision. Baldwin himself has rejected it in certain cases. “Recently, in a proposed joint venture deal, I advised my client to exclude this provision because he had a minority stake,” he says. Bushell is also uncomfortable with the fact that this provision removes the supervisory function of the board of directors and the independent nature of their duties. “This is the fundamental principle that we need to think about while considering whether this is a good thing or a bad thing,” he says. There are also other factors that restrict the lawyers and businesses from fully appreciating the benefits of the provision. In the

REUTERS/Yuriko Nakao

last eight years since this law came into effect in the BVI, it has not been tested even once in a court of law. “There is no case law on it, and sometimes companies do not want to venture into an unknown area,” says Briant. For providing extra protection to their clients’ interests in joint ventures, lawyers have other legal approaches to achieve nearly similar results. According to Bushell, one alternative could be to increase the number of issues that require the shareholders’ approval. “Such a step will effectively limit the areas where the directors have to exercise their duties,” he says. Adding to this, Bushell says: “We regularly modify directors’ duties by requiring certain issues to be referred to shareholders, or precluding shareholders from suing a director who follows the instructions of his appointing shareholder.” However, he says that the BVI provision removes many doubts about the exposure of a director. Even though it is not a widely publicised provision, Briant says: “When companies come to the BVI and lawyers explain them its benefits, more often than not, they choose to take advantage.” According to him, it is a “very important factor in making the BVI a total product for a competitive joint ventures jurisdiction.” INTERNATIONAL APPROACH There are 486,000 registered companies in this Caribbean Island territory of Great Britain, and many of them are large international joint ventures vehicles from United States, China and Russia. It is often compared with another British overseas territory and a popular offshore financial centre, the Cayman Islands, which according to Briant, is more popular for hedge funds and securitisation vehicles. However, he says that the BVI law is more international and has a very efficient insolvency act that is based on the English Act. It all started in the early 1980s when the BVI replicated the very liberal and successful business law model of the state of Delaware in the United States. “When the client asks, ‘can we do this?’, the answer is always yes,” says Baldwin. “After setting up the vehicle, the foreign joint venture partners have to only worry about paying tax in their home jurisdiction and the jurisdiction where they run their operations.” In the BVI, they only have to pay a fixed annual government fee of $350


22

Offshore

ASIAN LEGAL BUSINESS may 2012

“VERY OFTEN, WE FACE CHALLENGES (IN INDIA) WHEN COMPANIES’ PROMOTERS WANT A PARTICULAR THING, BUT DIRECTORS HAVE TO DECIDE INDEPENDENTLY. SO TO HAVE A CHOICE WOULD BE GOOD, BUT ONLY IN LIMITED CIRCUMSTANCES LIKE 50-50 JOINT VENTURES WHERE THE DECISIONS ARE BASED ON THE TWO PRINCIPAL SHAREHOLDERS.“ ESSAJI VAHANVATI, AZB & Partners

or $1,100 depending upon the number of shares they are authorised to issue. The results of adopting this regulatory system have been very positive. After Hong Kong, the BVI is the second-largest foreign investor in China. Attaining that position in the world’s second-largest economy and most populous country on the other side of the globe is quite exceptional for an island territory that has a population of just 25,000, and a gross domestic product of $1 billion. In addition to a modern legislation, the BVI also has reliable commercial courts and an ultimate court of appeal in the Privy Council of the United Kingdom, which provides an added comfort to foreign joint venture partners.

Furthermore, the repatriation of income and getting money in and out of the jurisdiction is also quite easy as there are no exchange controls, and the territory uses the United States dollar as its official currency. MONEY LAUNDERING The liberal regulations and minimum interference in business activities also makes the jurisdiction venerable to money laundering activities. In fact, the BVI has been on the radar of international anti-money laundering agencies for some time now. According to the 2008 assessment report of the Paris-based inter-governmental body Financial Action Task Force, though the BVI legal framework of combating money laundering and terrorism financing is comprehensive, the low number of money laundering prosecutions suggests a limited implementation of the legal framework. It also points out that insider trading and market manipulation are not specifically criminalised in the BVI.

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Offshore

ASIAN LEGAL BUSINESS may 2012

Regarding the money laundering relevance of the particular provision relating to directors’ responsibility, Baldwin says that it does not, in any way, make it easier for or encourage illegal activities. “When people are already committing a fraud or engaging in illegal activities, I do not think they are going to be worrying about directors’ fiduciary duties,” he says. Furthermore, Baldwin says that the BVI is as strict in combating the money laundering activities as any other jurisdiction. “All the lawyers and the registered agent(s) of (the) companies must know their clients,” he says. He adds to this: “We closely look at the substantial shareholders, all the directors, and then satisfy ourselves that the deal is legitimate.” However, he opines that in reality this has never come up as an issue. But not ever yone agrees. According to Jay Jhaveri, head of Asia at research agency World-Check in Singapore (now part of Governance, Risk and Compliance at Thomson Reuters), the BVI companies are perhaps more likely to be used as conduits for money laundering because the regulations

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26

Offshore

ASIAN LEGAL BUSINESS may 2012

“IF THE MAJORITY SHAREHOLDER(S) WANTED TO PURCHASE SOME ASSETS OF THE COMPANY AND THE AGREED PRICE IS NOT FOUND TO BE APPROPRIATE BY THE MINORITY SHAREHOLDER, THEN WHAT PROTECTION IS THERE FOR THE MINORITY?“ SIMON BUSHELL, Herbert Smith

in the jurisdiction make it easier to mask the ultimate beneficial owner of a company. “If the ultimate beneficiary shareholder is not an authorised signatory or a director or a shareholder, then the bank would not necessarily have all his details,” he says. “It is not always that the banks insist on knowing the ultimate beneficial owner; (and) he can also be masked.” Such masking, according to Jhaveri, is done by requesting the agent who is establishing the BVI company to also provide services of appointing nominee shareholders, directors, authorised signatories, company secretary – which is not obligatory for BVI companies – and an office address. “Once

these nominees are in place, then one can open a bank account for the company, albeit not always easily,” he says. Furthermore, the BVI companies are not even obligated to maintain accounts and it is extremely simple to set up a new company. “Person(s) need not go to the BVI, as a company can be established over the phone through an agent in less than 20 minutes,” says Jhaveri. The commercial secrecy maintained by the authorities could also be an issue. According to Jhaveri, it is not possible, even from the registrar of companies, to get any information about any company, its directors, its shareholders, and if they are nominees or not. The sheer scale of the operations and the nature of the vehicles are the other factors that make it easier for those who want to mask the ultimate beneficial ownership. The magnitude of the problem, says Jhaveri, can be gauged from the fact that “with half a million companies in existence, finding an unregistered name of a new company in the BVI is already a challenge”.


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news

27

REUTERS

Analysis: Low cost era over for China’s workshops to the world By Clare Jim and Jonathan Standing

Foxconn Technology’s agreement to improve the lot of its 1.2 million workers in China who make Apple Inc’s iPads and iPhones is a signal that China is losing its title as the world’s lowest-cost producer of everything. It is not a pure economic argument, but an ethical one too that is gaining momentum following Apple’s unprecedented decision to allow the largest investigation ever into a U.S. company’s operations abroad. After years of squeezing the profit margins of contract manufacturers making the gadgets beloved by consumers worldwide, the time is drawing nearer when big brand names may have to forego some of their profits to overcome criticism their products are built off the back of mistreated Chinese workers. “The time of low costs and cheap labour in China has come to an end,” said Jay Huang, chief financial officer of Taiwan’s Wintek, a maker of touch panels for Apple and other brands with annual revenues last year of about $3 billion. “People think the market should offer cheap products; in the past they came at the cost of cheap labour in China and workers’ rest time and welfare. But now we all agree that things have to improve, and as an ethical manufacturer, we must improve the welfare of employees.” Wintek has boosted amenities for its workers, including the installation of video conferencing to call their families. Another Apple contract manufacturer, Pegatron, has reorganised some workers away from singletask jobs into multiskilled teams.

of thousands of new workers, eliminate illegal overtime, improve safety protocols, and upgrade workers’ accommodation and other amenities. Apple is not the first big brand to respond to criticism over how its products are made. Nike Inc made sweeping changes in the 1990s after being rocked by similar criticism. China’s economics and policy direction now suggest workers are a more powerful force though. Labor shortages and double-digit wage inflation give workers more choice. They are more likely to jump to another job to secure higher pay. The government has pledged to lift migrant factory workers wages to ease wealth inequalities in the country. In response, many manufacturers are shifting to cheaper inland regions to keep costs down. “What makes it different this time is that there are more internal reasons,” said Zhigang Tao, professor in the Faculty of Business and Economics at the University of Hong Kong. “In the past, they were foreigners such as U.S. labour groups who flagged awareness of China’s labour rights; but now, the bigger driving force is from inside China - a rising yuan, social harmony and wealth redistribution.” China has to change from low-cost and pollutive production to further its development. “It’s a turning point for the whole country. It’s also part of the overall strategy to change to more domestic consumption and less exporting.”

LANDMARK AGREEMENT In a landmark agreement last week, Apple and Foxconn agreed to tackle violations of conditions among the Chinese workers assembling the iconic gadgets of the American firm. Taiwan’s Foxconn, which also makes products for other names, including Dell Inc, Hewlett-Packard and Sony Corp, agreed to the changes after the independent Free Labor Association surveyed three plants and 35,000 workers. Foxconn, whose subsidiary Hon Hai Precision Industry is the main assembler of Apple products in factories in China, will hire tens

WHO PAYS? It remains to be seen how much major brands will give up so that their contract manufacturers can afford to upgrade conditions for workers. Critics say there is often a gap between the rhetoric of high-flying corporate social responsibility and actual practices on the ground. “In the past, there has been a brief moment of expose and outrage around revelations and promises are made. Then everything goes back to business as usual,” said Thea Lee, deputy chief of staff for the U.S. AFL-CIO labor union group.

Hon Hai’s results show it produced a profit margin in 2011 of 2.94 percent, down from more than 9 percent in 2001. Analysts say the profit margin on Apple contracts is possibly as much as 4 percent. A teardown costing of Apple’s iPad 2 by electronics market research firm IHS iSuppli shows a version that retails for $600 may cost less than $300 in components and just under $10 for manufacturing, leaving Foxconn with less than 2 percent of the retail price. “Even though I don’t expect dramatic changes, the critique right now helps contract makers to improve working environment,” said Charles Lin, chief financial officer of Pegatron, which also supplies Taiwan’s Acer Inc and Japan’s Toshiba Corp. “It’s a social problem, so it shouldn’t be just the contract makers’ job to bear the burden. They have to have enough profit before they can make the improvements.” HP Chief Executive Meg Whitman, for one, recognises that Foxconn may have little room for maneuver on cost. “If Foxconn’s labour cost goes up ... that will be an industrywide phenomenon, and then we have to decide how much do we pass on to our customers versus how much cost do we absorb,” she told Reuters in February. Meanwhile, contract makers are looking for solutions. In two factories, Pegatron staff work in a group and rotate through multiple tasks rather than doing a repetitive task on a traditional conveyer line. “The pay is higher because of the multiple skills required in a worker, but then the productivity is also higher,” Lin said. Pegatron had revenues last year of almost $13 billion. As well as the video conferencing, Wintek has added new entertainment facilities in worker dormitories, including weight training machines, pool tables, table tennis and audio facilities. It has even increased food choices, for example Western style breakfasts.

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


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india restructuring

ASIAN LEGAL BUSINESS MAY 2012

CDR ON THE THE INDIAN ECONOMY, UNTIL RECENTLY RATTLING ALONG AT AN ENVIABLE PACE, HAS BEGUN TO FALTER. WITH THE GROWTH RATE SLIPPING BELOW 7 PERCENT, THE AMOUNT OF BAD LOANS IN THE COUNTRY HAS STARTED STACKING UP. AS A RESULT, INDIA IS SEEING A WAVE OF HIGH-PROFILE APPLICATIONS FOR CORPORATE DEBT RESTRUCTURING (CDR), FINDS RANAJIT DAM

I

t was not that long ago that Kingfisher Airlines was the poster child for the New India. Helmed by a flamboyant liquor baron with a penchant for showmanship, it was brash, innovative and ambitious. About a year ago, it operated more than 370 flights daily and owned more than 60 aircraft, and until late 2011, it had the second-largest share of the Indian aviation market. The swagger, however, could not conceal the fact that it had never turned in a profit since it commenced flights back in 2005. Now, this in itself was no grave problem; of India’s six major airlines, only one – the efficiently run budget carrier IndiGo – is profitable, and the country’s

flag carrier Air India is facing its own set of woes. But Kingfisher’s rapid descent from a symbol of the country’s progress to one of India Inc’s most high-profile basket cases has been more than a bit sobering. As of last month, it was operating 100 flights a day, and owned just 16 aircraft; its total outstanding debt stood at somewhere between 70 billion ($1.4 billion) and 80 billion rupees, and the company was desperately looking to foreign investors to bail it out. In January, the airline’s creditors, including the State Bank of India, IDBI Bank, the Bank of Baroda, Bank of India and ICICI Bank, announced they were considering classifying their exposures to Kingfisher as nonperforming assets, which would result in it being referred for corporate debt restructuring (CDR), according to the Economic Times. The interesting thing, however, is that the airlines had been referred for restructuring – seen as a halfway house between payment and default – once earlier in late 2010, but had been unable to turn a corner, instead


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india restructuring

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A Kingfisher Airlines’ aircraft takes off from Mumbai’s domestic airport REUTERS/Vivek Prakash

leaving its bankers with a raw deal in terms of the equity they received. With CDR cases rising to historic levels, the mechanism has come under scrutiny: while some deride it as a method of bailing out inefficient companies like Kingfisher, others justify it as a way for banks to recover some of their dues instead of nothing at all. What is hard to deny, though, is that it gives beleaguered Indian companies a lifeline in difficult times. CDR IN FOCUS Much like Kingfisher’s rise reflected a powerful India, its fall – albeit in exaggerated fashion – has put into focus the problems of Indian industry, which since the halcyon days of breakneck growth, has begun to stutter and slow down. The growth rate has dipped below 7 percent, and bad loans are on the rise. Credit rating firm CARE Ratings estimated in March that 17 public and private Indian banks had some $25.7 billion in bad loans at the end of last year, and that figure has certainly risen since then. Exacerbating things are continu-

ously rising commodity prices – India’s inflation rate was just under 7 percent in February – and the repeated interest rises to combat this inflation, which have severely hampered borrowers’ ability to repay their loans, and repay them on time. With neither borrower nor lender benefitting from a default, it is no surprise that CDRs are on the rise. A mechanism sanctioned by the Reserve Bank of India (RBI) in 2001, CDR reduces the debt burden on a struggling company, either by decreasing the interest rates it has to pay or by extending the repayment period of loans or both. As a compromise between payment and default, it helps the company increase its ability to meet the obligations. CDR is used to help companies banking with multiple institutions under consortium arrangements; the mechanism gives the multiple banks and financial institutions surety on repayment to a certain extent. Sometimes, the debt may be exchanged for an equity position in the company; in other occasions, a debt moratorium is an option. As India’s economy slows, borrowing companies have been seeking CDR in larger numbers than ever before. Approximately 762 billion rupees of debt was referred to the RBI’s CDR cell in the financial year ending March 31, 2012, and that number exceeded the combined debt referred to the cell over the past six years. In terms of case numbers, it was eight times the figure in 2008. Among the big names to have either sought approval from their company boards for corporate debt restructuring or to have already restructured their debt are Bharati Shipyard, GTL, Hindustan Construction, Air India, Electrotherm India,


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india restructuring

ASIAN LEGAL BUSINESS MAY 2012

Villagers sit outside the premises of a newly inaugurated solar farm at Gunthawada village REUTERS/Amit Dave

Jai Balaji, Hotel Leela, Moser Baer and, of course, Kingfisher Airlines. A research report by Barclays Capital that was published in the Financial Times has also highlighted more than two dozen highly leveraged large borrowers, including Adani Power, Essar Oil and Tata Communications, many of which may require future debt restructuring. “Recently, we have noticed a significant increase in the number of restructuring cases being reported for CDR to the CDR cell,” says Devidas Banerji, Mumbai-based partner at Khaitan & Co. “Sectors in which there have been a large number of CDRs include iron and steel, textiles, road and aviation.” Dina Wadia, partner at J Sagar Associates, says that the trend of CDR has really picked up in the last quarter of 2011, affecting a number of sectors. “We expect to see this continue over the next 12 to 18 months,” she adds. “Already, a lot more CDR applications are in the works, and we can expect to hear about these soon.” According to Banerji, this increasing trend can be attributed to a variety of factors, including the prolonged liquidity crunch on account of the economic downturn, dislocation of raw material supplies, falling demand, high interest-bearing domestic loans, external commercial borrowings becoming dearer on account of adverse currency rates, and the absence of equity infusions. “Looking at the stress in the sectors mentioned above and the increasing number of CDR cases, banks are treading carefully by closely monitoring defaulting borrowers and identifying the ailing borrowers in time so that a revival can be achieved before all is lost,” he says. “Therefore, the banks on one end are reeling under the fall in credit demand, and on the other hand, keeping a close vigil on the depreciating quality of the security

tended by existing borrowers.” A MORE CORDIAL PROCESS Both Wadia and Banerji are of the opinion that of the options open to companies in financial distress, CDR has a number of positives that make it worth recommending. “It is certainly a better alternative to going to court, or approaching the Board for Industrial and Financial Reconstruction (BIFR),” says Wadia. “For one, it is not adversarial in nature. Parties can sit down and work out a way of modifying the loan terms so as to give the borrower a better chance of repaying the debt.” Banerji says he believes that the CDR process, when compared to other restructuring and recovery options, aligns the interest of the company with that of the creditors, thereby making the process “more cordial” and, in turn, longstanding and effective. “Despite being a voluntary arrangement lacking statutory force, CDR cases have been far more successful than those referred to the BIFR, as banks devise schemes whereby they offer moratorium on the repayment of existing debt and when required, infuse additional funds to help the corporation retain its enterprise

“THE CDR MECHANISM, NO DOUBT, SUBJECTS THE DISTRESSED COMPANY TO STRINGENT CONTROL AND LACK OF FINANCIAL FLEXIBILITY. BUT IT ENSURES THAT THE OBJECTIVE AND ACTIONS OF THE LENDERS AND THE MANAGEMENT ARE IN TANDEM, AND ARE IN THE DIRECTION OF CREATING VALUE FOR EVERY STAKE HOLDER. NEARLY 85 PERCENT OF THE RESTRUCTURED LOANS ARE BEING SERVICED IN TIME.” DEVIDAS BANERJI, Khaitan & Co


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value,” he says. “The CDR mechanism, no doubt, subjects the distressed company to stringent control and lack of financial flexibility. But it ensures that the objective and actions of the lenders and the management are in tandem, and are in the direction of creating value for every stake holder. Nearly 85 percent of the restructured loans are being serviced in time. This speaks volumes of the success and efficacy of the process.” According to the statistics released by the CDR cell, the mechanism has had some success since its inception. Between 2001 and 2005, the cell restructured more than 120 cases involving an aggregate debt of over 700 billion rupees. Of these, 75 percent got out of CDR in due course, and in a few cases, bankers enforced a change of management. Wadia says that an important part of the CDR process is that banks conduct their due diligence, and ascertain that the company’s track record is indeed good enough for it to be referred for restructuring. “The banks need to scrutinise the balance sheet carefully to make sure the company is indeed worth saving,” she says. NOTICEABLE WORK According to Wadia, her firm has seen a noticeable amount of work coming in as a result of the increase in CDRs in India. “It was a trickle earlier, and while it is not a flood yet, there is definitely some amount of work coming through in this space,” she says. To meet this demand, J Sagar Associates have set up a specialised team called the Stressed Assets Group that handles this work. “These are still early days, but we want to be prepared,” says Wadia. “So it is not just the banking guys, but people in other practice areas like litigation, corporate and so on who have been sounded out about the potential work that we expect to come in.” Banerji says that an increase in CDR work provides a silver lining for what is a fairly gloomy time for the Indian legal sector at present. “Most credit rating companies have predicted reduced asset quality and earnings across the sector in 2012, and have predicted the credit growth to be registered at a rate much lower than last year,” he says. A reflection of these trends, in the form of reduced rupee loan and project finance transactions, is thus being witnessed by the law firms across sectors. However, these troubled times are not without a silver lining. Firms across the sector are now looking at an increasing number of CDR cases and at an increasing trend of additional credit being infused in the companies already undergoing the CDR process, thereby facilitating the process of CDR exit.

india restructuring

THE LEGAL BASIS OF CDR From: The Corporate Debt Restructuring website (www.cdrindia.org) The legal basis of the CDR System is provided by the DebtorCreditor Agreement (DCA) and the Inter-Creditor Agreement (ICA). All banks and financial institutions in the CDR system are required to enter into the legally binding ICA with necessary enforcement and penal provisions. The most important part of the CDR mechanism, which is the critical element of ICA, is the provision that if 75 percent of creditors (by value) agree to a debt restructuring package, the same would be binding on the remaining creditors. Similarly, debtors are required to execute the DCA, either at the time of reference to the CDR cell or at the time of original loan documentation (for future cases). The DCA has a legally enforceable “stand still” agreement binding for 90/180 days, whereby both the debtor and creditor(s) agree to “stand still” and commit themselves to not take recourse to any legal action during the period. This “stand still” is necessary for enabling the CDR system to undertake the necessary debt restructuring exercise without any outside intervention; judicial or otherwise. However, the “stand still” is applicable only to any civil action, either by the borrower or any lender against the other party, and does not cover any criminal action. Apart from this, the borrower needs to undertake that during the “stand-still” period, the documents will stand extended for the purpose of limitation and that he will not approach any other authority for any relief and the directors of the company will not resign from the Board of Directors during the “stand still” period. He adds that Indian law firms are witnessing a “phenomenal increase” in the number of transactions happening on the restructuring and refinancing front. “The law firms are active not only in preparing proper documentation for CDR, but also in advising on viability of CDR packages from a legal perspective,” says Banerji. “In addition, many law firms are busy representing their clients (who do not become part of the CDR) at appropriate forums.” Looking ahead, he sees financial stress in various sectors like power, road, aviation, and real estate. “We expect a lot of cases from these sectors to apply for restructuring, though some cooling off may be expected with a downward trend in the interest cycle.” READY TO FLY There is a possibility that Kingfisher Airlines will not avoid defaulting, even if it is sent to CDR again. Apart from its internal problems, it faces a number of challenges in the form of high fuel prices and cutthroat fare competition in a price-sensitive Indian market. If it were to become a non-performing asset NPA, it would confirm a lot of the apprehensions of CDR’s critics, some of whom see up to half of all CDR cases being unable to make it back into the black. Historically though, about 15 to 20 percent of restructured loans have become non-performing assets (NPAs), and banks are not unduly worried. With interest rates looking like they will ease going forward and the economy expected to gradually improve, many of these loans may get upgraded and are likely to become standard over the next few years. So while being sent to the CDR cell might make a company look like it is in dire straits, there is less of a chance it will be another Kingfisher, and more of a chance that it can take off again.

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32

China Country Report

ASIAN LEGAL BUSINESS may 2012

Countering the Recent economic growth data show that China’s economy is growing at its slowest since the global financial crisis. But the prospect of a hard economic landing has not diminished lawyers’ confidence in China as a market, thanks to the profession’s countercyclical characteristics, writes Liu zhen


China Country Report

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slowdown Hard Landing? Worries of a possible “hard landing” of the world’s second-largest economy have risen as China’s quarterly growth rate dropped to its slowest in three years. The National Bureau of Statistics on April 13 announced that the annual rate of GDP growth in the first quarter slowed to 8.1 percent from 8.9 percent in the previous three months, and a run rate below the official 7.5 percent 2012 target. Meanwhile, more doubts were cast upon the world’s number one exporter by the subpar trade figures. China has set a 10 percent growth rate for exports and imports in 2012, but both targets were missed in March, with imports expanding just 5.3 percent from a year ago while exports grew 8.9 percent. Worse still, the global demand for China’s exports may remain weak as its two biggest trading partners – the European Union and the United States remain wobbly and strained under concerns of unemployment. Some economists say Beijing is actively pursuing a slower growth strategy to create room for structural economic reforms without sparking a surge in inflation. The official forecast for 2012 GDP growth has been cut to 7.5 percent, an eight-year low. Businesses are making adjustments in anticipation of a slowdown, but for the legal industry in China, it is business as usual. “The business of providing legal services has the characteristics to counter the economic cycle,” Michael Qi, a partner at Fangda Partners, tells ALB. “Even the in best market environment there are money-losing firms; and in the worst market there are profit-making firms.”

REUTERS/Stringer Shanghai

Cooling off However, legal firms do feel the pinch as business from sectors hardest hit by the slowdown begins to trickle - for example real estate, which accounts for 13 percent of China’s GDP in 2011. Over the past two years, the government has applied strict policies to reduce rampant property speculation, which helped push up inflation. Chinese Premier Wen Jiabao recently said that restrictions to curb speculation in the real estate market will stay firmly in place, as


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China Country Report home prices, which have soared tenfold in the last decade, remained “far from returning to reasonable levels.” China’s average new home price fell 0.7 percent last month from a year earlier, the first decline in two years, according to a Reuters calculation. Investment in the sector grew 19.6 percent in March from a year earlier, down from 27.8 percent in the first two months of the year. “Real estate is an industry dependent on the international environment and domestic policies. The recent restricting policies have caused great difficulties for developers,” says Xue Yunhua, an executive partner of Guangda Law Firm, which has significant interest in the real estate sector. “The need for legal services in this sector has gone down, following the serious decrease in land acquisition, trade, house leasing, mortgage, financing, and so on.” Some lawyers say that the impact of the slowdown in the property sector could, to some extent, be compensated by heavy investment in infrastructure construction. A large part of China’s 4 trillion yuan ($635 billion) stimulus package, plus some 20 trillion yuan of funds from local government borrowings since 2009, has poured into public infrastructure projects such as the high-speed rail, city underground transportation, and water-diversion programmes. “The Chinese government is reputedly still the richest in the world,” says Tong Xin, a partner of Guanghe Law Firm. ”There is still business for us in government-backed construction projects.”

“The business of providing legal services has the characteristics to counter the economic cycle. Even in the best market environment there are money-losing firms; and in the worst market there are profit-making firms.” Michael Qi, Fangda Partners Countercyclical characteristics The capital and securities markets haven’t escaped the slowdown either. The tight monetary policy adopted to curb inflation has squeezed liquidity, leading to the suspension or cancellation of many initial public offerings (IPOs). But lawyers can make money in a sluggish market as much as in a prosperous one, says Qi, citing the examples from 2008 and 2009. Instead of IPOs, delistings have created business for attorneys, particularly by those Chinese companies that have been barely hanging onto the U.S. stock markets with hopelessly high costs and low share prices. Seven Chinese companies applied to delist from the U.S. stock exchanges in the first two months of 2012, in addition to six in 2011, notes Diane Frankle, a partner at Kaye Scholer. Other practices that have newly become lucrative for law firms include corporate restructuring and litigation, as well as mergers and acquisitions. “The strongest survive, with the weak dying out and being swallowed up. The pace of industrial consolidation goes up in the chilly winter,” says Qi. Similar phenomena are taking place also in the legal industry, adds David Fu, a partner at Global Law Office. He highlights the recent trend of mergers among law firms, in particular international ones, since the crisis broke out in 2008. “A firm has to be full service to survive different economic climates,” says Fu. “For instance, a firm relying too much on the capital markets practice would be badly hurt under the monetary contraction.” According to Fu, a firm should proactively expand its portfolio of

ASIAN LEGAL BUSINESS may 2012

practices to reach a “reasonable combination” either by self development or by merger with others. “We may also see more mergers among Chinese firms,” he says. Focusing on Beijing clients With state-owned enterprises relatively unscathed by the economic slowdown, law firms have set their sights on cultivating their SOE clientele. As such, many law firms have offices in Beijing to remain close to their clients, who also have their headquarters in the capital. “Other cities have their own advantages, like Shanghai is the location of the securities markets and Shenzhen boasts many private enterprises. But these industries have been affected by the crisis while the central SOEs remain strong and cash-rich,” says Fu. “Their decisions and transactions have to be made in Beijing and the payment to the lawyers takes place here.” In addition, the top government departments overseeing businesses are in Beijing, such as the banking, securities and insurance regulatory commissions, as well as the powerful central planning body, National Development and Reform Commission. “The client would think Beijing firms have the advantages as all the relevant government authorities are in Beijing,” says Xue. For a firm with a strong governance focus like Bingham McCutchen, Beijing is “the appropriate place to start,” says Jay Zimmerman, the firm’s global chairman. Bingham McCutchen recently opened an office in Beijing. By the end of 2008, Beijing had 18,635 lawyers working for 1,121 firms, and in Shanghai there were 10,071 lawyers and 889 firms. Moreover, 95 percent of the 188 foreign firms in China are registered in the two cities. As of 2009, Beijing had 74 and Shanghai had 104. Revenue-wise, however, Beijing firms earned twice as much as Shanghai-based firms in 2010, at 11.3 billion yuan ($1.79 billion) and 5.8 billion yuan ($0.92 billion). In comparison, another Chinese municipality, Tianjin had only 590 million yuan ($ 93.6 million) revenue, according to Westlaw China research. Investing abroad Aside from opportunities in the domestic market, firms can also leverage on China’s increasing overseas investments. “The Chinese government has made it clear that it is a matter of policy that they will be increasing foreign direct investment. They’ve also made it clear that they will be increasing a focus on tangible investment, for example,


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China Country Report

35

Vehicles move on the Guomao Bridge in Beijing. REUTERS/Jason Lee

government bonds. Furthermore, China’s continuing growing need for agriculturerelated products and services, for energy, for technology and communications, are all bound to produce increasing cross-border commerce,” Zimmerman tells ALB. The crisis has created a favourable environment as many overseas companies are in dire need of capital and offer plenty of undervalued high-quality assets. Large SOEs have made their mark in energy, petrol, minerals and other commodities investments across Africa, Latin America, and elsewhere. Most recently, State Grid International Development took a 25 percent stake in Redes Energéticas Nacionais, SGPS, S.A. of Portugal. “The timing is right for the Chinese companies to go out to the U.S., Europe, and to many other countries. The Chinese companies have the capability, financially and operationally, and have the willingness to do it,” adds Ye Xiaowei, Bingham’s Beijing co-head. Private enterprises have also increasingly taken part in this overseas investment rush, with more and more deals closed in manufacturing and consumer goods production, which is part of the “national strategy” in

order to accelerate the “industrial upgrading”, says Fu. He notes the example of privately-owned Geely Automobile, which took over Swedish premium brand Volvo from Ford Motor Co in 2010. However, not all overseas ventures have been successful. In 2004, China’s Legend Holdings acquired IBM’s PC business but has struggled on the world stage, especially in developed markets despite its Lenovo PC’s domination in the home market. “The manufacturing industries are getting smarter with time,” says Qi. “With the lessons learnt from the failed attempts of purchasing the production bases and retailing channels, now the Chinese companies cautiously buy only the technology, patents and brands, and keep the production and the market domestic.” The developed management experience and systems of the Western companies are attractive for the Chinese investors, according to Fu. Domestic competition is getting tough in times of crisis but many believe potential and opportunities exist in other continents. Meanwhile, Western investment in China would continue, as Zimmerman suggests, because the size and growth of the Chinese market are too large to be ignored by international corporations. But the preferential policies for foreign capital that had lasted for decades might only be reserved for high-tech, green, medical and high-end service industries, and a few other sectors, according to the 2011 version of the Guideline of Foreign Investment Industry List published by the National Development and Reform Commission. “The Chinese government has become picky towards foreign investment,” says Fu. “But even with the raised bar, a continued strong growth in cross-border mergers and acquisitions, both outbound and inbound, in the next years is very likely.”


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japan Law Awards

ASIAN LEGAL BUSINESS may 2012


japan Law Awards

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THE FINALISTS REVEALED Diners Club ALB Japan Law Awards 2012 recognises the excellence and outstanding achievements of Japan’s leading law firms and in-house legal teams, as well as the top deals and dealmakers of 2011. ALB congratulates all the finalists across 24 categories.

DEAL CATEGORIES Debt Market Deal of the Year FINALISTs • 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 • eAccess Refinancing with High-Yield Senior Notes Offering and Syndicated Loan Firms: Anderson Mori & Tomotsune; Clifford Chance; Davis Polk & Wardwell; Nishimura & Asahi; Shearman & Sterling; White & Case Banks: Aozora Bank; Crédit Agricole Corporate and Investment Bank; Goldman Sachs; ING Bank; Mizuho Bank; Société Générale; Sumitomo Mitsui Banking Corporation; UBS Accountant: KPMG AZSA & Co. • Japan Finance Corporation SEC-registered guaranteed global bonds offering Firms: Nagashima Ohno & Tsunematsu; Sullivan & Cromwell Banks: Bank of America Merrill Lynch; BNP Paribas; Daiwa Capital Markets; JP Morgan • KDDI Corporation issuance of Zero Coupon Convertible Bonds due 2015 Firms: Clifford Chance; Tokyo Aoyama Aoki Koma Law Office Banks: Daiwa Capital Markets; Mizuho International; Morgan Stanley MUFG Securities; Nomura​ Accountant: Kyoto Audit Corporation • Softbank Retail Offering of Corporate Hybrid Securities Firms: Linklaters Tokyo; Maples and Calder; Mori Hamada & Matsumoto; Morrison & Foerster Bank: Mizuho Securities • Sumitomo Mitsui Banking Corporation Concurrent Bond Offerings Firms: Davis Polk & Wardwell; Nagashima Ohno & Tsunematsu; Simpson Thacher & Bartlett Banks: Barclays Bank; Citigroup Global Markets; Deutsche Bank Group; Goldman Sachs; JP Morgan; Nikko Cordial Securities


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japan Law Awards

Equity Market Deal of the Year FINALISTs • Hutchison Port Holdings Trust IPO Firms: Allen & Gledhill; Allen & Overy; Anderson Mori & Tomotsune; Freshfields Bruckhaus Deringer; Jun He; King & Wood Mallesons; Nagashima Ohno & Tsunematsu • Nexon IPO Firms: Anderson Mori & Tomotsune; Ito & Mitomi; Morrison & Foerster; Sullivan & Cromwell Banks: Barclays Bank; Goldman Sachs; Morgan Stanley MUFG Securities; Nomura ​ Accountant: PricewaterhouseCoopers Aarata • Otsuka Holdings IPO Firm: Simpson Thacher & Bartlett Banks: Morgan Stanley MUFG Securities; Nomura; UBS • Resona Holdings Global Offering Firms: Anderson Mori & Tomotsune; Linklaters Tokyo; Nagashima Ohno & Tsunematsu; Simpson Thacher & Bartlett

Energy & Resources Deal of the Year

ASIAN LEGAL BUSINESS may 2012

FINALISTs • Caserones Copper and Molybdenum Mining Project Firms: Farris, Vaughan, Wills & Murphy; Jara del Favero; Loyens & Loeff; Milbank, Tweed, Hadley & McCloy; Morrison & Foerster; Nishimura & Asahi; Philippi, Yrarrázaval, Pulido & Brunner Banks: BTMU; HSBC; Japan Bank For International Cooperation; Mizuho Corporate Bank; SMBC​ Accountant: Ernst & Young Solutions • Japan-Korea Consortium Minority Investment in CBMM Firm: Simpson Thacher & Bartlett • Jurong Aromatics Petrochemical Project Firms: Latham & Watkins Gaikokuho Joint Enterprise; Milbank, Tweed, Hadley & McCloy Banks: Australia & New Zealand Bank; Australia and New Zealand Banking Group; BNP Paribas; DnB Nor Bank ASA; DZ Bank; ING Bank; Intesa Sanpaolo SpA; NATIXIS; Royal Bank of Scotland; Standard Chartered Bank • Sale of Landis+Gyr to Toshiba Firms: Bär & Karrer; Morrison & Foerster; Niederer, Kraft and Frey; Skadden, Arps, Slate, Magher & Flom Banks: Credit Suisse; Deutsche Bank Group; Goldman Sachs; JP Morgan; Lazard


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japan Law Awards

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

M&A Deal of the Year FINALISTs • Chuo Mitsui Trust Holdings and Sumitomo Trust & Banking Management Integration Firms: Davis Polk & Wardwell; Mori Hamada & Matsumoto; Morrison & Foerster; Nagashima Ohno & Tsunematsu; Shearman & Sterling; Simpson Thacher & Bartlett; Sullivan & Cromwell Banks: Daiwa Securities Capital Markets; JP Morgan; Nomura; UBS • Panasonic Corporation Acquisition of all shares of Panasonic Electric Works and SANYO Electric Firms: Kikkawa Law Offices; Mori Hamada & Matsumoto; Nagashima Ohno & Tsunematsu; Shearman & Sterling; Sullivan & Cromwell Bank: Morgan Stanley MUFG Securities • Sumitomo Mitsui Financial Group Tender Offer of Promise Co Firms: Davis Polk & Wardwell; Nagashima Ohno & Tsunematsu; Nishimura & Asahi; Simpson Thacher & Bartlett

ASIAN LEGAL BUSINESS may 2012

Bank: Sumitomo Mitsui Financial Group • Takeda Pharmaceutical Acquisition of Nycomed Firms: Allen & Overy; Freshfields Bruckhaus Deringer Banks: Credit Suisse; Deutsche Bank Group; Goldman Sachs; Moelis; Nomura

Real Estate Deal of the Year FINALISTs • CIC & GLP JV Acquisition of Modern Logistics Facilities in Japan Firms: Anderson Mori & Tomotsune; City Yuwa Partners; Milbank, Tweed, Hadley & McCloy; Morrison & Foerster; Nagashima Ohno & Tsunematsu; Walkers Bank: M3 Capital ​ Accountant: KPMG • FC Residential Investment Acquisition of Ichigo Real Estate Investment Firms: Mori Hamada & Matsumoto; Nijubashi Partners; Nishimura & Asahi; Sullivan & Cromwell Banks: Deutsche Bank Group; SMBC Nikko Securities • TMK (managed by a foreign equity investor) disposition of 12 Real Properties Firm: Atsumi & Sakai


japan Law Awards

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• United Urban Investment Corporation Global offering Firms: Ito & Mitomi; Morrison & Foerster; Nagashima Ohno & Tsunematsu; Nishimura & Asahi Banks: Citigroup Global Markets; Deutsche Securities; SMBC Nikko Securities

Structured Finance Deal of the Year FINALISTs • JAL Turnaround Financing Firms: Clifford Chance; Mori Hamada & Matsumoto; Okuno and Partners Banks: Development Bank of Japan; Japan Bank of International Cooperation • Korea Development Bank M&A financing Firms: McDermott, Will and Emery; Orrick, Herrington & Sutcliffe; Walkers Bank: Korea Development Bank • M&M Holdings Syndicated Loan for the Acquisition of Culture Convenience Club Firms: Nagashima Ohno & Tsunematsu; Nakamura, Tsunoda & Matsumoto; Nishimura & Asahi Banks: GCA Savvian Group Corporation; Mizuho Corporate Bank; Sumitomo Mitsui Banking Corporation • Refinancing of Intelligence Acquisition Firms: Clifford Chance; Maples and Calder; Matheson Ormsby Prentice; Mori Hamada & Matsumoto; Simpson Thacher & Bartlett Bank: Mizuho Corporate Bank​ Accountant: Deloitte Tohmatsu FAS • Restructuring and Enforcement over Tokyo Star Bank Firms: Anderson Mori & Tomotsune; Clifford Chance; Linklaters Tokyo; Mori Hamada & Matsumoto; Morrison & Foerster; Nishimura & Asahi; Uryu & Itoga; Vinson & Elkins; Walkers Banks: Bank of America Merrill Lynch; Bank of New York Mellon; Crédit Agricole Corporate & Investment Bank; Development Bank of Japan; Hudson Japan K.K.; Shinsei Bank Accountant: Deloitte Tohmatsu FAS

Technology, Media & Telecoms Deal of the Year FINALISTs • eAccess Refinancing with High-Yield Senior Notes Offering and Syndicated Loan Firms: Anderson Mori & Tomotsune; Clifford Chance; Davis Polk & Wardwell; Nishimura & Asahi; Shearman & Sterling; White & Case Banks: Aozora Bank; Crédit Agricole Corporate and Investment Bank; Goldman Sachs; ING Bank; Mizuho Bank; Société Générale; Sumitomo Mitsui Banking Corporation; UBS

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Accountant: KPMG AZSA & Co. • KDDI Corporation Tender offer to acquire all outstanding shares of common stock of WebMoney Corporation Firms: Nagashima Ohno & Tsunematsu; Nishimura & Asahi; TMI Banks: Daiwa Securities; Nomura; Pinnacle • KDDI Corporation Zero Coupon Convertible Bonds due 2015 Firms: Clifford Chance; Tokyo Aoyama Aoki Koma Law Office Banks: Daiwa Capital Markets; Mizuho International; Morgan Stanley MUFG Securities; Nomura​ Accountant: Kyoto Audit Corporation • Lenovo - NEC Joint Venture Firms: Clifford Chance; Freshfields Bruckhaus Deringer • Nexon IPO Firms: Anderson Mori & Tomotsune; Ito & Mitomi; Morrison & Foerster; Sullivan & Cromwell Banks: Barclays Bank; Goldman Sachs; Morgan Stanley MUFG Securities; Nomura ​ Accountant: PricewaterhouseCoopers Aarata

Diners Club Award Japan Deal of the Year Finalists to be announced

IN-HOUSE CATEGORIES the japan in-house counsel network award Banking & Financial Services In-House Team of the Year FINALISTs • Mitsubishi UFJ • Shinsei Bank • Sumitomo Mitsui Financial Group

Japanese Investment Bank In-House Team of the Year FINALISTs • Daiwa Securities Capital Markets • Mitsubishi UFJ Securities • Nomura • SMBC Nikko Securities

International Investment Bank In-House Team of the Year FINALISTs


42 • • • • • • •

japan Law Awards

Bank of America Merrill Lynch Citibank Deutsche Bank Group Goldman Sachs JP Morgan Morgan Stanley MUFG Securities UBS

Trading Company In-House Team of the Year FINALISTs • Itochu Corporation • Mitsui • Sumitomo Corporation • Toyota Tsusho Corporation

Diners Club Award Japan In-House Lawyer of the Year

ASIAN LEGAL BUSINESS may 2012

• Oh-Ebashi LPC & Partners

Employment Law Firm of the Year FINALISTs • Anderson Mori & Tomotsune • Freshfields Bruckhaus Deringer • Herbert Smith • Mori Hamada & Matsumoto

Insolvency Law Firm of the Year FINALISTs • Baker & McKenzie GJBJ • Bingham MuCutchen • Mori Hamada & Matsumoto • Nishimura & Asahi • Oh-Ebashi LPC & Partners

FINALISTs • Deutsche Bank Group - Tomohiko Kimura • JP Morgan - Tomohiko Oshikawa • Morgan Stanley MUFG Securities - William Bruinooge • Toyota Tsusho Corporation - Hueilee Shu • UBS - Aaron D. Eddington

Japan In-House Team of the Year Finalists to be announced

FIRM AWARDS International Deal Firm of the Year FINALISTs • Baker & McKenzie GJBJ • Davis Polk & Wardwell • Linklaters Tokyo • Morrison & Foerster • Simpson Thacher & Bartlett • Skadden Arps Slate Meagher & Flom • Sullivan & Cromwell

Japanese Deal Firm of the Year FINALISTs • Anderson Mori & Tomotsune • Mori Hamada & Matsumoto • Nagashima Ohno & Tsunamatsu • Nishimura & Asahi

For more information about the finalists of the Diners Club ALB Japan Law Awards 2012, please visit

www.albawards.com


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American chamber of commerce in japan award International Arbitration Law Firm of the Year FINALISTs • Herbert Smith • Morrison & Foerster • White & Case

IP Law Firm of the Year FINALISTs • Abe Ikubo & Katayama • Anderson Mori & Tomotsune • Milbank, Tweed, Hadley & McCloy • Momo-o, Matsuo & Namba • Mori Hamada & Matsumoto • Morrison & Foerster • Ropes & Gray • TMI

canadian chamber of commerce in japan award Litigation Specialist Law Firm of the Year FINALISTs • Iwata Godo • Matsuo & Kosugi • Mori Hamada & Matsumoto • Morrison & Foerster

Event Partner Diners Club International 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

japan Law Awards

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• Nishimura & Asahi • Oh-Ebashi LPC & Partners • Orrick, Herrington & Sutcliffe

Best China Practice of the Year FINALISTs • Anderson Mori & Tomotsune • Linklaters Tokyo • Mori Hamada & Matsumoto • Nishimura & Asahi • Oh-Ebashi LPC & Partners

Offshore Law Firm of the Year FINALISTs • Appleby • Conyers Dill & Pearman • Maples and Calder • Ogier • Walkers

Managing Partner of the Year FINALISTs • Baker & McKenzie - Yoshiaki Muto • Davis Polk & Wardwell - Theodore A. Paradise • Herbert Smith - Peter Godwin • Latham & Watkins Gaikokuho Joint Enterprise Joseph Bevash • Morrison & Foerster - Ken Siegel • Norton Rose - Michael Joyce

Supporting Organisations

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

THE MOST HIGH-PROFILE LEGAL EVENT OF THE YEAR The eighth annual Diners Club ALB Japan Law Awards 2012 will be held in Tokyo on Thursday 7 June 2012 at 6:30pm. This well established and reputable event recognises the excellence and outstanding achievements of Japan’s leading law firms and in-house legal teams as well as the top deals and dealmakers of the past year. Join this prestigious event as Japan’s best legal practitioners assemble to celebrate with all the finalists and winners. Table and seat reservations are now open and welcomed. Includes: cocktail reception, gourmet dinner, awards ceremony, fine wines

BOOK NOW! DON’T MISS DINERS CLUB ALB JAPAN LAW AWARDS 2012 Ritz-Carlton,Tokyo Yes! I want to attend Diners Club ALB Japan Law Awards 2012 dinner and presentation ceremony at 6:30pm on 7 June. Please reserve table(s) US$3,800 per table (for 10 seats) Please reserve US$420 per seat

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Please fax back to +65 6333 0900 For more information, please contact Lucinda at +65 6870 3305 or email lucinda.maguire@thomsonreuters.com If you do not wish your details to be used for ALB promotional purposes, please tick the box

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

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The long-established and highly reputed ALB Law Awards are an annual celebration attracting hundreds of the region’s top legal practitioners who assemble in a spirit of collegiality to acknowledge the best in the industry. Each ceremony marks the culmination of months of intensive research with nominees and winners determined by an external, independent and unbiased panel of judges drawn from the local legal community. With unparalleled networking opportunities, live entertainment, and a gourmet dinner, the ALB Law Awards have become the one night on the legal calendar not to be missed.

To be a part of this exciting series, please contact Tracy Li at +852 3762 3262 or e-mail tracy.li@thomsonreuters.com for more details WWW.ALBAWARDS.COM


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Debt Capital Markets

ASIAN LEGAL BUSINESS MAY 2012

Appetite For More REUTERS/Bobby Yip

The last two years have witnessed a swift and dramatic rise in the dim sum bond market, with hungry investors capitalising on an appreciating yuan. As corporations increasingly enter the market to finance their China operations, the appetite for dim sums is going global. What does the future hold for this warming market? Kanishk Verghese investigates

D

espite a mild case of indigestion late last year, the appetite for “dim sum” bonds – yuan-denominated debt instruments that are issued in Hong Kong – has come back stronger than ever. In Hong Kong, the bonds raised 151 billion yuan ($23.95 billion) in 2011, more than a fourfold increase from just 36 billion yuan in 2010. The surge is expected to continue. Gross issuance of yuan bonds could reach up to 310 billion yuan for 2012, says HSBC. But why are dim sum bonds exciting? Foreign-exchange investors had been betting on an appreciating yuan for the past year. But now companies too are seizing upon the yuandenominated bonds to finance their ventures in China. Moreover, as interest in dim sum bonds goes global, a shift in focus towards

creditworthiness and stronger covenant packages is bound to follow. The surge in issuances is also indicative of a broader trend: China’s drive to internationalise its currency. Enter the corporations One of the more noteworthy trends in the dim sum bond market is the growing presence of non-financial companies in a market that is dominated by financial institutions keen on reaping foreign exchange profits from an appreciating yuan. Fast food giant McDonalds kickstarted the movement in 2010, and may look towards a second dim sum bond offering this year to finance its aggressive expansion plans on the mainland. Volkswagen, Tesco, Unilever, Yum! Brands, Caterpillar and Ford are among the foreign corporations that have followed suit, tapping the bonds as a way to fund their own growth in China. American automaker Ford, which has a number of joint ventures in China, issued bonds worth one billion yuan in March 2012 for the first time. Just days earlier, U.S. heavy equipment manufacturer Caterpillar had issued its third round of


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dim sum bonds. “These are companies that can finance in any market. If others of this calibre continue to access the dim sum market, that will help it grow,” says Eugene Gregor, a Tokyo-based capital markets partner at Davis Polk & Wardwell. South Korean institutions are also exhibiting a keen interest. In July 2012, CJ CheilJedang, a prominent food manufacturer, became the first South Korean company to issue dim sum bonds, raising 1.1 billion yuan. Lotte Shopping, a leading department store business, is the other non-financial corporation that has issued dim sum bonds so far. Other South Korean issuers have been banks: Shinhan Bank, which raised 625 million yuan in bonds in March; Export-Import Bank of Korea (392 million yuan in August 2011); and Korea Development Bank. The five businesses issued a combined sum of 6.02 billion yuan, according to a report by the Korea Centre for International Finance. The Middle East has also joined the scene. In March, Dubai-based bank Emirates NBD became the first-ever Middle Eastern company to issue dim sum bonds, raising 750 million yuan. More markets are expected to get involved. Strong bilateral trade ties between China and Latin American nations have led market observers to believe that Brazilian and Mexican companies may be next in line for dim sum bond issuances. Mexican telecoms leader América Móvil already issued one billion yuan in bonds in February this year, the first Latin American company to do so. Multinationals are attracted to dim sum bonds because they can use the capital raised from issuances without Chinese regulatory approval. Furthermore, the proceeds can also come in handy when settling cross border transactions. Growing Chinese appetite The hype has not been restricted to foreign undertakings. A swelling number of Chinese issuers are entering the market — not only the large privately owned names, but also the higher graded state-owned enterprises (SOEs). In February 2012, Chinese state-owned steel manufacturer Baosteel Group issued 2.9 billion yuan in dim sum bonds to fund its wholly owned subsidiary, Baosteel Resources International. This was the company’s second offering since issuing 3.6 billion yuan in bonds in November 2011. “The next one to two years will see a lot of SOEs coming out to issue bonds,” states Connie Heng, a partner at Clifford Chance in Hong Kong. In October 2011, the People’s Bank of China and the Ministry of Commerce issued new rules on foreign investment into China using yuan funds, which allow a new route for them to flow back into the country. This gradual relaxation of the Chinese regulatory scheme has led to bond deals with direct Chinese guarantees attached to them. “That was not the case six months ago,” says Gregor. “This is a very important development as it broadens the product portfolio the Chinese corporates can use to finance themselves.” Going global All signs indicate that the dim sum bond market is clearly up and running. “The big issue for everyone now is how quickly it will grow, and how interested issuers from outside Asia will be in the product,” says Gregor. Clearly, they are interested. The uptick of European, U.S. and even Middle Eastern issuers entering the dim sum bond market points towards that. In fact, the bond could now be re-evaluated to reflect

Debt Capital Markets

its growing global status. “Everyone talks about the so-called dim sum bond market, but I think we’ve reached the stage now where that term is not all that appropriate anymore, because these issues clearly have nothing to do with Hong Kong as such,” says Andrew Malcolm, partner and head of capital markets at Linklaters in Hong Kong. “These bonds are now no longer Hong Kong market instruments. They are Eurobonds; true international bonds that just happen to be issued in renminbi.” Indeed, China’s moves since the start of this year to make London an offshore yuan trading centre, underscores Malcolm’s statement. Three Chinese policy banks – the Agricultural Development Bank of China, Export-Import Bank of China and the China Development Bank – are set to pioneer dim sum bond issuances on the London Stock Exchange, targeting a European investor base. It is believed that multinational companies, including European-headquartered ones, are likely to follow with similar deals. “The European corporates who are coming into the market are, almost without exception, doing it with the expectation that they will transfer the proceeds onshore into China to finance their onshore businesses. That is

“From a law firm’s point of view, those who have been able to do well in the equity markets in China now need to figure out how they can put the right resources to work across a range of cross-border debt products.” Eugene Gregor, Davis Polk & Wardwell

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Debt Capital Markets

ASIAN LEGAL BUSINESS MAY 2012

the way the market is going to continue to develop,” says Malcolm. Better creditworthiness But as the dim sum bond market continues to evolve, so do the investors. They are paying less attention to the strength of the yuan, and focusing more on the creditworthiness of the products and covenant protection. Malcolm thinks this is a good thing: “We were in danger of getting into a situation where people somehow thought that the dim sum bonds were a special market, and that usual credit criteria and debt covenant packages did not really matter. “In the past, a significant proportion of dim sum bonds had included only the most basic of bond covenants. Industry experts are optimistic of the longterm development of the market, as issuers realise that enhancing covenant protection can increase the competitiveness of their bond offerings. The market is aligning itself with more standard bond documentation, as investors start to treat dim sum bonds like any other bond. Greater creditworthiness may further whet appetite from abroad, as China’s gradual and methodical relaxation of its foreign exchange controls increases the availability of the yuan in global trade, and helps promote the issuance and trading of dim sum bonds. In July 2009, China initiated a pilot scheme for five of its cities to settle their trade in yuan with Hong Kong, Macau and ASEAN countries, before making the programme nationwide in June 2010. A month later, several constraints on the offshore conversion, transfer and offer of yuan-denominated bonds in Hong Kong were lifted, causing yuan deposits to pour into its banks. The latter has been an integral part of internationalising the yuan, acting as a hub for investors to store the currency, thereby supporting liquid yuan offshore markets. The new relaxed regulations on foreign investment using yuan funds are anticipated to further stimulate the bond market. While China is internationalising the yuan mainly by trade settlement, the currently bondsfocused capital markets are developing alongside and bringing the currency back into China, creating a two-way flow of yuan. Malcolm believes that China’s promotion of this cross border movement is the country’s deep policy objective, which means a further easing of capital controls may help the yuan fully internationalise. What next? So how might the dim sum bond market develop? For a start, the weaker market performance of dim sum bonds towards the

“Everyone talks about the so-called dim sum bond market, but I think we’ve reached the stage now where that term isn’t all that appropriate anymore because these issues clearly have nothing to do with Hong Kong as such.” Andrew Malcolm, Linklaters


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Debt Capital Markets

REUTERS/Petar Kujundzic

end of 2011 suggests that the investor base is growing more selective, and prefers more creditworthiness. “The focus has become more on higher credit bonds. Towards the end of last year, people started becoming more careful over what they invested in,” says Clifford Chance’s Heng. Nonetheless, global interest in dim sum bonds is set to intensify. This is clear from the push into the market by European, Middle Eastern, U.S. and Latin American corporations. Moreover, the launch of London as a second offshore yuan trading hub may widen the pool of investors. These trends in time will make dim sum bonds less of a Hong Kong phenomenon, and more of a global norm. “Issuers are now routinely adding the

renminbi drawdown option to their Medium-Term Notes when they do their annual update,” says Malcolm. “There will be sales of the bonds in Hong Kong, but equally there is a growing investor base outside Hong Kong in Europe and elsewhere that is now able to buy these bonds in renminbi.” For his part, Gregor believes that the growth of dim sums and the number of corporations issuing yuan debt is aligned with a broader trend of China’s deliberate and systematic regulatory liberalisation. As part of this maturation, dim sum investors will likely see bondholder protections and covenant packages closely mimic those found in Asian U.S. dollar-denominated high-yield bonds. Now that Chinese companies have a broader debt portfolio to efficiently finance their ventures, Gregor stresses the need for law firms to reassess their operations: “From a law firm’s point of view, those who have been able to do well in the equity markets in China now need to figure out how they can put the right resources to work across a range of cross-border debt products.”

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Debt Capital Markets

ASIAN LEGAL BUSINESS MAY 2012

Japan’s Prime Minister Noda attends a meeting with China’s National People’s Congress Chairman Wu at the Great Hall of the People in Beijing. REUTERS/POOL New

China as creditor-in-chief? By Kanishk Verghese

T

he flourishing dim sum bond market and the increasing settlement of trade in yuan is indicative of China’s highly publicised ambitions to become what some have termed “creditor-in-chief”. It is no secret that China is ramping up efforts to internationalise its currency. During talks in December last year, Japan’s Prime Minister Yoshihiko Noda and China’s Premier Wen Jiabao disseminated the idea of a free trade agreement between their nations. Signs of progress emerged three months later in March 2012, when Japan was given the green light to buy 65 billion yuan ($10.3 billion) of Chinese government debt. The People’s Bank of China, China’s central bank, said on its website in March that the two countries are strengthening

bilateral financial market cooperation, and promoting the use of the yuan and the yen in trade between the two nations. Japan is the first of the world’s seven leading economies – which include the U.S., Canada, Britain, France, Germany and Italy – to buy Chinese debt. In efforts to further boost the use of its currency worldwide, China has also signed yuan trade agreements with countries like Malaysia, Belarus and Argentina. More than 9 percent of China’s total trade was settled in yuan in 2011, compared to just 0.7 percent in 2010, according to Reuters. The Chinese central bank released a figure of over two trillion yuan for international trade settlements in its currency last year, while foreign direct investment settled in yuan reached 110 billion yuan.

Such elevated figures led to China’s announcement of the China International Payment System in April, a new trading platform that is expected to enhance crossborder yuan payments and improve the convertibility of the currency. Expected to take up to two years to be implemented, the system will make yuan clearance safer and more efficient for cross-border trade in yuan. Achieving full convertibility of the yuan will not happen overnight, asserts Clifford Chance capital markets partner Connie Heng, as internationalisation of the yuan will require an easing of regulations by the Chinese government. “The other part of the puzzle to internationalisation is encouraging foreign governments to increase their holding of PRC sovereign bonds and yuan as reserves in their portfolio,” she says.


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Sponsored REGIONAL UPDATES

ASIAN LEGAL BUSINESS may 2012

SPONSORED UPDATE: CHINA New Requirements on Online Mapping Services in China

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On December 23, 2011, the National Administration of Surveying, Mapping and Geoinformation (“NASMG”) issued the “Circular on Further Strengthening the Administration of the Qualification for Online Mapping Services” (the “Circular”). Pursuant to the Circular, qualified online mapping services suppliers with foreign investment (the “Suppliers”) are required to apply for licenses in accordance with the “Interim Measures for the Administration of the Surveying and Mapping Conducted by Foreign Organizations or Individuals in China (2011 Amended) “(the “Measures”). Under the Measures, the maximum ownership a foreign investor is permitted to have in any online mapping services company is 50% and only if such company does not purport to provide other type of online mapping related services, such as real estate surveying. If such other services will be provided, then the Chinese partner must have majority ownership of the Chinese-foreign joint venture, even though such venture may be in the form of a cooperative joint venture. Prior to the Measures’ amendment in 2011, Chinese parties were required to be controlling shareholders, holding 51% or more of any joint venture that is involved in online mapping. Certain activities, however, are still prohibited to be engaged by foreign invested venture, such as geodesic surveying, aerial photography of surveying and mapping, administrative boundary surveying and mapping, marine surveying and mapping, etc. In addition to the above licensing requirement, the Circular imposes the following additional restrictions; First, to provide online mapping services, Suppliers must use the maps approved by NASMG or its provincial counterparts. Second, Suppliers are prohibited from providing links to offshore online mapping services. Third, Suppliers are only allowed to publish street view maps subject to the authority’s examination. Fourth, from February 1, 2012, Suppliers established before then and which have not applied for the license required by the Measures are prohibited from engaging in online mapping services. For Suppliers that have already submitted applications, any new content of online mapping services is also forbidden until a new license has been issued.


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Any Suppliers without a license and continues to provide online mapping services may find its operations suspended by NASMG or its local counterpart. In spite of these restrictions imposed by the Circular, the Circular is one-step towards the opening of this business to additional foreign investment and involvement.

Written by Jeanette Chan, partner Xupeng Han, 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

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SINGAPORE CODE ON TAKEOVERS AND MERGERS REVISED

Following five months after the public consultation conducted by the Security Industry Council (“SIC”), the Monetary Authority of Singapore (“MAS”) has introduced the changes to the Singapore Code on Takeovers and Mergers (“Code”), on the advice of the SIC. The revised Code has come into force on 9 April 2012. Among the key changes of the revised Code are as follows:1. Enforcement of the Code 1.1 Sanction for breaches – In extreme cases, the SIC now has recourse to take further actions against an offender in addition to depriving him of his ability to enjoy the facilities of the securities market; 1.2 Breaches by advisers – The Code has now explicitly provided that advisers who breach the Code may be required to abstain from the Code-related work for a stipulated time period; and 1.3 Compensation orders - The SIC can now direct compensation orders against offenders who breach the Code and this shall not be limited to Rules 10, 14, 15, 16.4(g), 16.4(h), 17, 18, 19, 20.4, 21 and 33.2 of the Code. 2. Real Estate Investment Trust (REITs) and Business Trusts (BTs) To keep up with the evolving business environment, the revised Code has now included newer investment structures such as REITs and BTs. The revised Code has clarified several uncertainties applicable in a REIT and BT case, and among the amendments are:2.1 Presumed concert parties - The revised Code has clarified that the definition of “Acting in Concert” in relation to a REIT case. The manager and the trustee of a REIT (including its directors) in its capacity as a trustee of a REIT will be considered as acting in concert with a REIT during an offer period;

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2.2 Manager and trustee as associates – The revised Code has now extended the definition of “Associates” to include the manager of the REIT and the trustee in its capacity as trustee of the REIT. The same applies in a case of a trustee-manager of a BT; 2.3 Frustration action restrictions – The revised Code now imposes the frustrating action restrictions of Rule 5 on the manager and the trustee of a REIT, as well as trustee-manager of a BT; and 2.4 Actions, voting rights and assets owned by a REIT or BT – It is now clarified under the revised Code that the actions, voting rights and assets owned, controlled or held by a REIT or business trust is deemed to be held by the manager and trustee of the REIT and BT. The revised Code has further introduced several new rules, inter alia, the collective shareholder action and the joint offerors under Rule 10. It is envisioned that the revised Code will provide greater clarity and flexibility to accord with the market development. For more details on the revised Code, please refer to the relevant website (http://www. mas.gov.sg/sic/press_release/SIC_Press_ Statement_23_March_2012.html) Written by Ms Elena Ng / Ms Serene Sia Ms Elena Ng Foreign Counsel Senior Legal Associate (Corporate Practice) Tel: (65) 6322 2206 Fax: (65) 6534 0833 E-mail: elenang@loopartners.com.sg Ms Serena Sia Foreign Counsel Senior Legal Associate (Corporate Practice) Tel: (65) 6322 2205 Fax: (65) 6534 0833 E-mail: serenesia@loopartners. com.sg Loo & Partners LLP 16 Gemmill Lane Singapore 069254 www.loopartners.com.sg


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SPONSORED UPDATE: MALAYSIA

CONFLICT OF INTEREST IN COMPANY LIQUIDATION – OOI WOON CHEE V DATO’ SEE TEOW CHUAN [2012] 3 CLJ 501 Qualified individuals from large audit and accounting firms are commonly appointed as liquidators of companies. It is generally accepted that the liquidator appointed must be independent. Therefore, it is important to determine whether the liquidator is in a position of conflict if a client of the firm at which the liquidator is a partner, director or associate, bids for the assets of the company under liquidation. This issue was raised by the contributories of the company in the case of Ooi Woon Chee & Anor v Dato’ See Teow Chuan [2012] 2 CLJ 501. There, the liquidators were partners of an international firm of accountants, KPMG Peat Marwick. It was alleged that because the sale of the shares of the company in an open public tender were awarded to a bidder, who, together with its parent company, were audit clients of that firm, the liquidators had put themselves in a conflict of interest situation and should not have considered or accepted the bid. The Federal Court reaffirmed that in exercising its duties as the liquidator of a company, the liquidator must act in the best interest of the company under liquidation. The guiding principle on the issue of conflict of interest is that the liquidator must be independent and be seen to be independent. In other words, there cannot be an actual or apparent conflict. The fact that the bidder in the sale of the company’s assets by the liquidator happens to be a client of the firm to which the liquidator is attached, does not give rise to an actual conflict of interest. To constitute an actual conflict there must be a real connection between the sale and the firm, such as would arise if the firm is also advising the bidder in the sale. As for apparent conflict, the question is whether the association between the liquidator and the sale gives rise to a reasonable apprehension of lack of impartiality on the liquidator’s part. In this context, the Federal Court held that to disqualify a liquidator merely because of an audit relationship would mean almost every large accounting firm would be disqualified from holding a tender exercise. Commercial reality dictated the existence of such relationship by itself should not disqualify liquidators or their audit clients.

Written by Elaine Yap / Mohd Arief Emran bin Arifin Elaine Yap Partner E-mail: elaine.yap@wongpartners.com Mohd Arief Emran bin Arifin Senior Associate E-mail: ariefemran.arifin@ wongpartners.com Wong & Partners Level 21, The Gardens South Tower Mid Valley City, Lingkaran Syed Putra 59200 Kuala Lumpur, Malaysia Tel: (603) 2298 7888 Fax: (603) 2282 2669

ASIAN LEGAL BUSINESS may 2012

SPONSORED UPDATE: PHILIPPINES COURT CASE SEEKS TO CLARIFY RULE ON MINIMUM PHILIPPINE OWNERSHIP OF UTILITY COMPANIES On June 28, 2011, the Philippine Supreme Court issued a landmark decision on a legal issue that has, in the words of the Court, “remained unresolved for over 75 years since the 1935 Constitution”. The Supreme Court en banc, voting 9-3 in the case of Gamboa v. Teves, G.R. No. 176579 (“Gamboa”), interpreted the term “capital” appearing in section 11, Article XII of the Constitution—“[n]o franchise…for the operation of a public utility shall be granted except…to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens”—as referring “only to shares of stock entitled to vote in the election of directors… and not to the total outstanding capital stock comprising both common and non-voting preferred shares.” Gamboa stemmed from a petition filed by a stockholder of the Philippine Long Distance Telephone Company (“PLDT”), the largest telecommunications company in the Philippines and holder of a congressional public utility franchise, to annul the sale of the Philippine government’s 46% interest in Philippine Telecommunications Investment Corporation (“PTIC”), which holds approximately 13.8% of the common stock of PLDT, to the First Pacific group, a foreign investor. According to the petitioner, the 60%40% Filipino/foreign ownership requirement the Constitution imposes on public utilities must be computed based only on a utility company’s voting stock and not on its entire outstanding capital stock. He theorized that the sale of the PTIC shares would result in an increase in total foreign common shareholdings in PLDT to 51.56%, which is over the 40% constitutional limit, and should be voided. The respondents argued, on the other hand, that petitioner’s theory ignores the plain language of section 11, which refers to “capital” without restriction or distinction as to type, and, if upheld by the Court, will have massive adverse consequences on the Philippines’ efforts to attract and keep foreign investments and on the Philippine capital market. The Supreme Court agreed with the petitioner, and held that “[t]o construe broadly the term “capital” as the total outstanding capital stock, including both common and nonvoting preferred shares, grossly contravenes the intent and letter of the Constitution that


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the ‘State shall develop a self-reliant and independent national economy effectively controlled by Filipinos.’ A broad definition unjustifiably disregards who owns the allimportant voting stock, which necessarily equates to control of the public utility.”

55

CHINA

The respondents have since moved for a reconsideration of the Decision, which is currently pending. PHILIPPINES Written by Joan A. De Venecia

Malaysia

Joan A. De Venecia Senior Associate Email: jadevenecia@syciplaw.com

SINGAPORE

SyCip Salazar Hernandez & Gatmaitan 3rd Floor SyCipLaw Center 105 Paseo de Roxas Makati City 1226 Philippines Tel: (632) 982-3500; (632) 982-3600; (632) 982-3700 Fax: (632) 817-3896 http://www.syciplaw.com

Asian Legal Business is Asia’s leading legal magazine. Published from three regional centres, each issue is packed with news, hard hitting analysis and investigative journalism. Regional editors provide up to the minute legal and regulatory updates, while a team of dedicated journalists provide in depth analysis of all the issues facing lawyers and in-house counsel throughout the region.

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56

SPONSORED UPDATES

ASIAN LEGAL BUSINESS may 2012 Sponsored Update

SPONSORED UPDATE

EMERGING MARKETS

International tax

THE NEW MINIMUM WAGES IN THAILAND 2012 AND ITS NEGATIVE IMPACT

Liechtenstein /Hong Kong Double Tax Treaty is attractive for Intellectual property owners

I

n November 2011, Prime Minister Yingluck’s government announced new minimum wages effective from 1 April 2012 for an initial seven provinces including Bangkok, and from 1 January 2013 for the remaining 70 provinces. The new wages would rise from THB159 – THB221 per day (depending on the policy of each province) to THB300 (or approximately US$10) per day if wages are paid daily, or approximately US$300 if wages are paid monthly. Meanwhile, the new minimum salary for fresh graduates would rise to THB15,000 per month (or approximately US$500). The announcement was postponed from 1 January 2012 to 1 April 2012, due to the flood crisis in Thailand. Nevertheless, this is the largest increase in minimum wages in Thailand’s history. Employers who fail to comply could face criminal sanctions, and up to THB600,000 in fines and/or 6 months’ imprisonment. This dramatic wage increase could result in an exodus of industries from Thailand, given the choices of neighbors with much lower wages. For example, Vietnam’s minimum wages are approximately US$83.50 per month, Cambodia’s minimum wages are approximately US$66 per month in the garment and footwear industry, with no other minimum wages fixed for other sectors; Laos’ minimum wages are approximately US$88.09 per month and Myanmar’s minimum wages are approximately US$33.42 per month. Moreover, this comes at a time when Myanmar is experiencing a political and economic renaissance of sorts, which could result in it becoming a more democratic country and the lifting of the various economic sanctions imposed on it. In light of these increases, various economists and analysts have predicted that up to 100,000 - 200,000 SMEs could close and/or move out of Thailand, resulting in massive unemployment numbers in Thailand. There are discussions that the current government may announce other policies to combat these increased costs and burdens on employers, such as a reduction of the corporate tax rate from 30% to 20%, social security fund contribution from 5% to 3% or 4% of wages, or to provide government subsidized loans. However, to date, no announcements have been made with respect to such other policies. Another impact seen from this wage increase is the steady rise of foreign non-skilled workers coming from places like Myanmar and Cambodia to work in Thailand, many of which do so illegally.

A

new tax law is applicable from 1 January 2011, whereby Liechtenstein introduced a new tax

provision on intellectual property rights. In order to make sure that the new Liechtenstein tax law is in line with the regulations on state aid set out in article 61 of the agreement on the European Economic Area (EEA), this regulation was submitted to the EFTA Supervisory Agency (ESA) and approved as compliant. According to the new Liechtenstein intellectual property scheme, 80% of the income derived from intellectual property rights created or acquired after 1 January 2011 is tax deductible. With an ordinary tax rate of 12.5% in Liechtenstein, income from intellectual property will only be taxed at 2.5%. Not only income from licence agreements or the sale of intellectual property rights qualifies for the intellectual property scheme, the deduction can also be made if the intellectual property rights are used by the company itself. In this case, the 80% deduction applies to the income arising from the intellectual property that would have been generated if the use had been assigned to a third party. The regulation is applicable for patents rights, trademarks, designs and utility models, provided that they are registered in Liechtenstein or abroad. Prior to making the 80% deduction, associated tax-relevant expenses including write-downs on intellectual property rights can be claimed. You will find further information regarding the new Liechtenstein tax law, including an English translation of the new Liechtenstein tax law, by clicking the below link of the Liechtenstein Tax Office: http://www.llv.li/amtsstellen/llv-stv-english_content.htm There is a Double Taxation Agreement with Hong Kong and a growing network of DTAs with other jurisdictions, which makes a Liechtenstein company an attractive location for the exploitation of intellectual property rights, used in conjunction with a Hong Kong company.

In light of these new wage policies, Thailand will need to quickly develop into a high-tech and service-based economy, which will require the development, education and training of highly skilled Thai workers. Otherwise, Thailand faces great difficulty to compete against its neighbors in non-skilled industries in light of the increased labour costs. ANGIE WACHIRA, Lawyer E: angie.wachira@kcpartnership.com

MONTIDA KOOMANVISAI, Lawyer E: montida.koomanvisai@kcpartnership.com

Kelvin Chia Partnership in association with Martia & Anggraini Partnership

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.


TrustLaw Looking for high impact pro bono opportunities? Or free legal assistance? TrustLaw is a global service by Thomson Reuters Foundation to make it simpler for lawyers to access pro bono projects and for social entrepreneurs and NGOs to get legal support.

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TrustLaw is also a one-stop shop for news and information on good governance, women’s rights and pro-bono.

trust.org/trustlaw Š 2012 Thomson Reuters Foundation

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58

INDEX

ASIAN LEGAL BUSINESS may 2012

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A-H Allen & Overy Allens Arthur Robinson Appleby Arlex Consulting Services Ashurst

Global Law Office GTs Advocates 4, 9 12, 13, 14, 15 10

Baker & McKenzie

9

Bennett Jones

9

Bingham McCutchen Bun & Associates Burnet Duckworth & Palmer Clifford Chance

34, 35 12, 14, 15 9 4, 9, 10, 47, 49

6 9

Guanghe Law Firm

34

Minter Ellison

Herbert Smith Hermawan Juniarto

I-P

9

4

MdME Mintaz Levin Cohn Ferris Glovsky & Popeo

9

Bae Kim & Lee

Mayer Brown JSM

34

Hogan Lovells

20

4

Guangda Law Firm

4

AZB & Partners

34, 35

J Sagar & Associates

4, 19, 20 6 6, 9

Mori Hamada & Matsumoto Morrison & Foerster Nagashima Ohno & Tsunematsu Nishimura & Asahi Paul Weiss

30, 31 4

Jingtian & Gongcheng

9

Rajah & Tann

Jipyong & Jisung

9

Simpson Thacher & Bartlett

5

Skadden Arps Slate Meagher & Flom

Conyers Dill & Pearman

19, 20

Kaye Scholer

34

Davis Polk & Wardwell

47, 49

Khaitan & Co

30, 31

6

Kim & Chang

9

Sullivan & Cromwell

9

King & Wood Mallesons

9

VDB Loi

9

Latham & Watkins

Dickinson Wright DLA Piper Dwey & LeBoeuf Fangda & Partners Fasken Martineau Freshfields Bruckhaus Deringer Fulbright & Jaworski

4, 33, 34, 35 4 4, 9, 10 9

Lee & Ko Lind Willie Wong & Chin Linklaters Machado Meyer Sendacz & Opice

4, 9 9 60 4, 6, 9, 47, 48, 49 9

9 9 5, 9 9

Q-Z

Jincheng Tongda & Neal

Jones Day

9 5, 9

Slaughter and May Squite Sanders

Vinson & Elkins Walkers White & Case Wilson Sonsini Goodrich & Rosati

9 4 4, 9, 10 9 6 4, 9 13 9 19, 20, 24 10 10


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59

Country / Regional editors

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

China

Malaysia

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

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

The Philippines

Singapore

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

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

Vietnam

Shanghai

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

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

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

Outbound Investment Update

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

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

PRACTICE AREA AND INDUSTRY EDITORS

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

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

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

International tax AzureTax Ltd provides transparent strategic and ethical tax advice. Through our professional corporate and International, tax advisory and trustee services your tax plan is comprehensively implemented. Our advice provides you with independent innovative and rigorous solutions which deliver results and long-term accountability. We are qualified UK, U.S., Hong Kong and PRC tax advisors and complete tax filings for UK, U.S. and Hong Kong tax returns.

Alliances

ALB enjoys alliances with the following organisations:

ACCJ

CCCJ

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

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

JICN

HKCCA

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

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

ssca

Corporate SCCA Singapore Counsel Association

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

IPBA 2012 New Delhi - India


60

SUNDRIES

ASIAN LEGAL BUSINESS may 2012 Compiled by SEHER HUSSAIN

18.3

bIL L I O N

The net worth of brothers Raymond and Thomas Kwok who were arrested in Hong Kong on suspicion of corruption by the Hong Kong Independent Commission Against Corruption. Together, the brothers chair Sun Hung Kai Properties, Asia’s largest developer by capital value, and also control the second-largest family fortune in Hong Kong.

The Long and the Short of It Stylish Indonesian women will soon be stopped short in their tracks as the country’s religious affairs minister has just declared a potential ban on miniskirts. Proclaiming that any skirts that end above the knee will be considered pornographic, the minister plans to enforce the ruling through a nationwide taskforce; that is if a series of new anti-porn laws end up going through. Jumping on the bandwagon was a politician from the ruling Democratic Party who added that female MPs and staff in the Parliament building should also be prohibited from wearing skimpy hemlines. “You know what men are like. Provocative clothing will make them do things,” he was quoted as saying. However, some believe the politician and his cronies are deflecting attention from growing dissent across the country through divertive measures like this. Politics, a dirty business? In Indonesia, perhaps it is a sartorial one as well.

QUOTE OF THE MONTH

“Duck chain… no longer in the Soup” The website AsiaOne’s headline for a story about Singapore roast duck chain Dian Xiao Er agreeing to buy out Soup Restaurant Group’s stake in the chain for S$7.9 million, thereby ending a pending lawsuit

ONE THAT GOT AWAY

‘NOW, I DEAL WITH HAPPY PEOPLE’ A former banking lawyer, Valentine Willie is now a celebrated curator and collector, running two renowned galleries in Singapore and Kuala Lumpur with associated outposts in Bali and Manila. Willie, who says he has no regrets about leaving the legal world behind, chats here with ALB about the pleasures of dealing with art buyers and how his trips as a lawyer helped serve as a launch pad for his business.

a day off from work to check out artists and galleries, so by the time I got into the business, I already knew everyone! If I was in any other profession, I would not have had that; it opened a lot more doors than if I was an engineer.

What inspired you to leave the profession of law? I had practiced for about 18 years, and was the managing partner of Lind, Willie, Wong & Chin, a large law firm in Sabah. I took a two-year sabbatical, but got bored after six months after which I decided to try starting a gallery in Kuala Lumpur. If it did not work out, I was planning to go back to law. But turns out I never had to go back.

What do you enjoy most about your career now? One of the things that I did when I was a lawyer was to help people in trouble; I would always see people in distress. Now it is very different and people come to me to buy art, so I am dealing with happy people. That makes a big difference.

Do you miss anything about being a lawyer? Nothing at all! I would, however, say that when I was a lawyer, I got to travel around the region, and during that process, I used to visit galleries across Southeast Asia. So I would not be that down on the profession of law because it afforded me that chance. I used to take

Does your experience in the legal world inform your career now at all? Oh yes! Being a lawyer certainly helps in terms of the legal issues. Even while negotiating, if you are a lawyer, you are always a lawyer. It gives you an inbuilt awareness of good faith, and you know there are always two sides to a story.


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