LOCAL ATTRACTION: WINE 10

RULE OF LAW:AFGHANISTAN BAR ASSOCIATION 11

PROFILE:FERNANDO PELÁEZ-PIER 9

W hen Jose-Miguel Vivancowalked into his hotelroom on September 19,the police were waiting for him. Theyhad entered his room while he wasout, packed up his luggage and, whenhe returned, promptly informed himthat he was in violation of the principleof non-interference in domestic affairs.Vivanco was expelled from the coun-try, returning to the Human RightsWatch offices in Washington, DC.

Vivanco, who is the HRW’s execu-tive director for the Americas, wasexpelled for his report on the state ofhuman rights in Venezuela. It was iron-ic, therefore, that the government tookjust a few hours to expel him, support-ing Vivanco’s conclusions on bothhuman rights and the freedom ofexpression in Hugo Chavez’s Venezuela.

Carlos Ayala told this story to anintimate gathering of media lawyersyesterday morning, expressing his dis-may at the government’s reaction.

Ayala, the President of the AndeanCommission in Caracas, said that acrossLatin America human rights are underthreat from elected governmentsthrough the suppression of information.“It is an undermining of freedom ofexpression by new means,” he said, alsoremarking that he often feels it neces-sary nowadays to distinguish betweendemocracies and elected governments.

But it’s not all bad. In fact, most ofthe first half of the session was con-

cerned with the landmark case of ClaudeReyes et al. v Chile, 2007. Aside from itsimportance for access to state informa-tion, the reason for focusing on this casewas the presence of Juan Pablo Olmedo,who represented the defendants inReyes. In fact, it was announced just lastweek that Olmedo will be a member ofthe four-person Transparency Councilthat has been set up by the Chilean gov-ernment in response to Reyes.

The decison was a “pathbreaker inmaking access to public information ahuman right,” said David Schulz, part-ner at Levine Sullivan Koch & Schulzand chair of the session.

Historically, it has been a strugglefor lawyers to get the ability of citizensto access state information enshrined asa fundamental human right. Even inEurope, the Court of Human Rightshas been reluctant to fully recognisethis ability. It was important, therefore,that in Reyes the Inter-American Courtreached its decision under the generalpriciple of a democracy’s responsibilityto be transparent.

The role of exemptions in Reyesdrew several questions from the audi-ence. If information can be kept secretif it is in the “national interest” or sim-ply something that would “affect thefunctioning of the government body”,how will anything be released to thepublic?

David McCraw, counsel at the NewYork Times Company, had an interest-

ing perspective on exemptions. Whenasked whether lawyers word theirrequests for information very specifical-ly in order to avoid these exemptions,McCraw agreed that they did, but thatinquiries from journalists tend in theopposite direction.

“The idea of legal discovery isseeping into journalists’ requests forinformation, which makes them rathertoo broad,” he said. “I saw onerecently that was sent to GovernorSarah Palin’s office in Alaska. It askedfor ‘any and all information pertainingto, connected to or in any other wayrelevant to’ the subject. Well, that’sgoing to be every piece of informationthe office has, and isn’t really going tohelp your enquiry.”

Elsewhere, Michael Smyth ofClifford Chance told the audience thatjournalists consider the UK Freedomof Information Act a big disappoint-ment. “It means there are fewerscoops. If a journalist follows up a leadand tries to get information from agovernment department, it will oftenjust put that information on its websiterather than giving it to the journalist.”

The impact of Reyes will reach farand wide. There has recently been anew law in Uruguay, Mexico is look-ing at something similar and it isexpected to affect the European Courtof Human Rights and the AfricanCourt on Human and Peoples’ Rightsin Tanzania.

But Olmedo revealedexclusively that the case is nowover. “I have not revealed thisbefore, but we have agreed toend the Reyes case and bringno more actions as long as thegovernment promotes the newlaw among the judiciary,” hesaid. “As there’s a journalist inthe room I’m sure this will bereported, so now it’s news.”

A couple spin effortlessly across the stage. A spiky heelhere, a glimse of leg there and you have what formany typifies Argentine culture: the tango. And as a packedroom of lawyers discovered yesterday over lunch, its historyis inextricably connected to the people of Buenos Aires.

Delegates were treated to an interwoven display of history,song and dance. As the show’s compere, Peter MacFarlane ofEl Querandi, said: “Just as the Beatles had to be born inLiverpool, the tango could only be born in Buenos Aires.”

Tango, as an art form, has had a long journey. “Immigrationis the basis of tango,” said MacFarlane. While the traditionaltango rhthym comes from central America and was influencedby the arrival of slaves, the Spanish contributed the guitar andGerman immigrants provided the squeezebox, or bandoneón.

A three-piece band demonstrated changing tango styleswith instrumentals from the past century, while singer Chechéshowed that tango is not just a dance or a piece of music, buta song as well. But the dancers were the highlight of the after-noon. Verónica Salmeron and Raphael Passaquay delighteddelegates with three dazzling displays. These illustrated thedevelopment of the dance from the long skirts and reservedleg movements of the late nineteenth century to now.

The latter entailed breathtaking acrobatics, as Salmeronwas thrown and twirled through the air, avoiding the musi-cians by millimetres. Rapturous applause greeted the feat.

The good, the badand Sarah Palin

IFLRinternational financial law review

B u e n o s A i r e s C o n f e r e n c e 2 0 0 8 Tu e s d a y , O c t o b e r 1 4

S p o n s o r e d b yP u b l i s h e d b y

“I have not revealedthis before, but wehave agreed to endthe Reyes case”Juan Pablo Olmedo

A taste of tango

I n a critical global address given in theGolden Horn room yesterday, Shell’sBeat Hess spoke about the legal challengesfor lawyers and fossil fuel companies thatresult from climate change. “There is no sil-ver bullet,” he said. “There is no oneanswer. If the world is to meet the solutionto the energy challenge it will require hardwork from everyone.”

Hess, also a member of the CorporateCounsel Forum Advisory Board, laid outtwo paths, the scramble and the blueprint,that the world could travel down. Thescramble plan involves international compe-tition, with companies and governmentsmaking deals with each other.

Those immediate answers will exhaustthe coal and oil supplies, creating furtherglobal climate change and drastic weatherevents. “The outcome will put pressure ongovernments and knee-jerk reactions,” hesaid. “All of this will give rise to global cli-mate change because the sensible solutionswill be ignored.”

The better solution is the blueprint. Hessjoked that this part of the speech would takeless time; partly because it was a better plan,and partly because he only had two moreslides left.

In it cross-border methods address solu-tions such as biofuels and cap-and-trade, tocreate a harmonised market. By 2050 it

could cut carbon-dioxide emissions by morethan 30%. “These cooperative efforts willcreate more success and less volitility in themarket,” said Hess.

Even in the blueprint plan, fossil fuelswill be needed to bridge the gap until infra-structure and industry can catch up. “Thenext five years are crucial, but we cannot doit without legislative cooperation, includingefficiency in the transport sector, crediblewind and solar targets and robust standardsfor holding carbon,” he said.

Guillermo Malm Green of Brons & Salas,from Buenos Aires, also went through threedistinctly different countries and their devel-opment of political strategies to deal withglobal climate change: Argentina, the USand Canada.

Green explained how the politcal strug-gle for power between local and federalgovernments is viewed through the coun-try’s environmental policies. In the westernprovinces of Argentina the federal govern-ment is attempting to impose standardsamong local businesses affecting pollution inthe river border with Uruguay.

The provincial governments allow thefederal government to impose minimumstandards, but the federal government is try-ing to extend that power in hopes ofstronger regulation.

“The pollution of the river triggered a

lot of action from the senate and this hadlocal industries arguing for a better balanceof power,” he said. “The provinces literallydestroyed bridges to get the government tostop overriding them.”

Here’s my blueprint for climate change

ENVIRONMENTAL LAWEDITORIALEditor: Simon CromptonE-mail: scrompton@iflr.comReporters: Rachel Evans, Elizabeth Fournier, Nicholas Pettifer, Kyle Siskey

PRODUCTIONProduction editor: Luca ErcolaniWeb designer: João Fernandes

ADVERTISINGBusiness manager: Krystle Fonyonga, Claudia TanTel: +44 20 7779 8251Fax: +44 20 7246 5329

Group publisher: Danny WilliamsDirector: Christopher Fordham

IBA Daily News is produced by International Financial Law Review, andpublished by Euromoney Institutional Investor Publications PLC,London. The copyright of all editorial matter appearing in this news-paper is reserved by the publisher. No matter contained herein may bereproduced, duplicated or copied by any means without the priorconsent of the holder of the copyright, requests for which should beaddressed to the publisher. No legal responsibility can be accepted byEuromoney Institutional Investor, IFLR or individual authors for thearticles which appear in this publication. Articles that appear in IBADaily News are not intended as legal advice and should not not berelied upon as a substitute for legal or other professional advice.

Directors: PM Fallon, chairman and editor-in-chief; The ViscountRothermere, joint president; Sir Patrick Sergeant, joint president; PR Ensor, managing director; D Alfano; JC Botts; SM Brady; CR Brown; MJ Carroll; DC Cohen; CHC Fordham; J Gonzalez; CR Jones; RT Lamont; G Mueller; NF Osborn; CJFS Sinclair; JP Williams

Opinions expressed in IBA Daily News do not necessarily representthose of the IBA or any of its members.

Printed in Buenos Aires by RR Donnelley

IFLR SUBSCRIPTIONSUK hotline tel: +44 20 7779 8999Fax: +44 20 7246 5200 US hotline tel: +1 212 224 3570Fax: +1 212 224 3671E-mail: hotline@euromoney.comCustomer services: +44 20 7779 8610

IFLRinternational financial law review

www.legalmediagroup.comIBA Daily News - Tuesday, October 14 20082

Lawyers that hire private investigatorscould face criminal charges if investigatoryregulations are breached.

Discussing UK privacy and surveillancelaws at yesterday’s Industrial Espionage andCompetitive Intelligence working group,financial fraud expert Brian Spiro of BCLBurton Copeland said that “simply saying‘please don’t break the law’ is not enough.”

In a presentation that focused on the legallimits when private investigators are used toestablish industrial espionage, Spiro made itclear that company owners were not the onlyones at risk if privacy laws were broken.

He also argued that, given their profession-al legal knowledge, lawyers should be moreaware of the risks and could find it more diffi-cult than a corporate CEO to argue theirignorance of any illegal activity.

According to Spiro, the days where com-panies could claim to be ignorant of privateinvestigators’ “you don’t want to know”methods are over, and that this was no longera valid means of protection or defence forthose employing the PIs.

Under the Regulation of InvestigatoryPowers Act (Ripa) passed in 2000 by the UKHome Office, surveillance measures such asphone tapping, call interception and computerhacking are classed as criminal acts unlessauthorised by the owner of either the infor-mation or the telecommunications system.

And whether the private investigator is act-ing with the prior knowledge of his employer

or not, if he is found to have broken the termsof Ripa in obtaining competitive intelligenceboth parties can be charged.

Responding to a question from StevenWilliams of Nabarro, who expressed concern

over his own use of private investigation firms,Spiro said that an explicit instruction to a PInot to break the law wouldn’t be enough toprotect a lawyer from prosecution, and couldactually incriminate them.

“Written into any request to remain withinthe law is an acknowledgement of the poten-tial for law breaking,” said Spiro, who wenton to urge lawyers to be “very precise aboutwhat you ask a private investigator to do”.

In a session that included speakers fromSwitzerland, the British Virgin Islands and IBAhosts Argentina, all made it clear that investi-gations into industrial or corporate espionagevary widely from country to country.

There was also agreement that such cases

were dominated by questions of jurisdiction,particularly with computer crime.

Discussing what he called “e-procurementfraud,” where a remote hacker accesses sensi-tive company information and sells it to the

highest bidder, Steven Williams said there waslittle hope for overlooked competitors toclaim compensation. Aside from the difficultyof locating an anonymous hacker, Williamssaid that such individuals had “no duty of careto an employer,” and therefore there was noobvious cause of action against them.

Session chair Charles-Henri De Pardieu ofDe Pardieu Brocas Maffei reiterated the threatthat computer crime poses when he said that“justice is competing with the internet andthere’s no way it can win; it’s just too slow.”

Williams’ civil law perspective implied thatonly in cases where an insider had providedthe intelligence could damages be sought, andeven then it would be the mole’s employer

who would be liable, not the competitor whohad used the information.

Local Argentine lawyer Roberto Durrieufrom Estudio Durrieu drew attention to thehistorical correlation between economic crisesand industrial espionage legislation changes,going as far back as 1929 when the concept ofcorporate crime was first introduced.

Durrieu charted the development of cor-porate corruption regulations throughout thecentury, up to the introduction of private cor-ruption legislation by the US government inDecember 2003 following the high-profileEnron and Parmalat cases.

He also spoke of the different legal process-es across countries, with particular reference toLatin America, where no system of criminalliability exists for corporations.

All speakers agreed that computer crimewas the single biggest challenge to preventingand contesting industrial espionage, withSteven Williams calling it “a new threat to theintegrity of all tender processes”.

Durrieu cited a hypothetical case where ahacker operating somewhere in Latin Americaaccesses information held at a US company’sheadquarters. In such a case, which jurisdic-tion has governance over the hacker’s actions,and can there be any potential for cross-borderlegal action for victims?

Perhaps this is a question that can beanswered by the presentation of the IBA LegalPractice Division’s task force on extraterritorialjurisdiction tomorrow morning.

If you use a detective you could go to jailCRIMINAL LAW

Steven Williams (far left) questions Brian Spiro (far right) about his use of private investigators

“There will be knee-jerk reactionsand global climatechange because thesensible solutionswill be ignored”Beat Hess, Shell

www.legalmediagroup.comIBA Daily News - Tuesday, October 14 2008 3

QUESTION:What did you enjoyabout the openingceremony?

Epiphany AzingeAzinge and AzingeNigeria

I thought the ceremony was a very wellorganised cultural display and the keynotespeaker was excellent. De Soto’s speech

was highly informative and delivered brilliantly. Buenos Airesitself has been a pleasant surprise too. It seems a highlydeveloped, well organised city and the people are veryfriendly.

Glenn P HendrixArnall Golden GregoryAtlanta, Georgia, US

Hernando de Soto’s speech was incredible.It had so much substance and provided afresh perspective on the issues that are at

the top of everyone’s mind. And he was an excellent speak-er. I could have listed to him for another 30 or 40 minutes.The rest of the entertainment was fun, and I enjoyed spend-ing time in the Tango Palace. Buenos Aires is a beautifulcity and I’m looking forward to seeing more of it, particularlythe Puerto Madero area.

Alum BatiWicklow Corporate ServicesBaku, Azerbaijan

I thought the speech from Hernando deSoto was very interesting. I didn’t agreewith everything he said – lawyers seldom

do – but I thought the whole concept that he was propos-ing is one that needs to be discussed.

Richard RodgerChartered Institute of ArbitratorsLondon, UK

The opening ceremony was fascinating. Itwas nice to see something of the local cul-ture and something that is very Argentine,

rather than just any old band. The speeches were also veryinteresting and relevant. The evening gave everyone anopportunity to network and meet familiar faces again.

Amira RasekhMena Associates, in association withAmerellerEgypt

The opening ceremony was lovely, particu-larly the Opera Pampa show. The music and

performers were excellent. The keynote speaker was alsovery interesting; it was great to hear from someone at oneof the world’s leading think tanks. This is my first IBA con-ference and my first time to Buenos Aires. I’m looking for-ward to going to some of the workshops on sub-prime andcapital markets.

Kenichi NakanoAnderson Mori & TomotsuneJapan

I attended the opening party and particular-ly enjoyed listening to the music. I found itinteresting because I thought tango was

the local dance but the music on display showed howdiverse music is around Argentina. I’m certainly going to tryand find some time to see the sights of Buenos Aires afterthe conference before I visit the Iguazú falls.

Beatrice Hamza BasseyHughes Hubbard & ReedNew York, US

I thought it was very well put together andthat the atmosphere was excellent. Thespeakers beforehand were wonderful, par-

ticularly Hernando de Soto who was very very good. I’mnow hoping to do a tour of the city. I’ve walked around a lit-tle and the riverside is beautiful. I’d like to explore somemore, sample some restuarants, and perhaps see a tangoshow.

Yongsuk YoonLee & KoKorea

The speeches at the opening ceremonywere great and I enjoyed it a lot. I just wishI could have a copy of De Soto’s speech so

I could read it again! [The speech will be available on theIBA website later this week] The music perfomers were alsoentertaining and I enjoyed listening to them. This is my firsttime in the city but I’m not sure how much time I will have tolook around.

VOXPOP: OPENING CEREMONY

T he rule of law worldwide is under less threat thanlast year according to a poll of IBA members. Butthere is a more pronounced concern about the legalsystems in Latin America.

The IBA Daily News polled members on this and othersubjects in an anonymous online survey ahead of this year’sconference. Last year, 57% of respondents felt that the rule oflaw was under threat in their jurisdiction compared to 51% thisyear. This marginal swing indicates that there are still a lot ofglobal concerns, although there has been a slight improvement.

Latin America concernsBut it was a new question that provided the most interestingresults. More than two-thirds of respondents believe that therule of law is under threat in Latin America specifically. Themost pressing concern by far was succinctly described by aGerman lawyer: “Pseudo-democratic dictatorships are on therise.”

A Brazilian counterpart agreed: “It concerns me thatthere is a progressive lack of independence among the exec-utive, legislative and judicial authorities in countries such asVenezuela, Ecuador and Peru. The constitutional principleof checks and balances cannot be duly exercised.”

Many of the comments left by members singled outVenezuelan president Hugo Chávez for particular criticism.But the overwhelming impression of respondents is thatthere is a “movement away from democracy towards pop-ulist dictators”.

Corruption within the judiciary and public authoritieswas also high on the list of members’ concerns, alongsideover-zealous censorship and the influence of drug cartels inthe region. A significant number of members also expressedconcern over property laws. The feeling is that they can be(and are) changed so frequently that it is nearly impossible tokeep track. The unfair expropriation of assets is a majorproblem too.

The combination of all of these aspects has undermined

public confidence in Latin American law. “People do notbelieve in justice or in the legal system,” said onePortuguese lawyer. “It takes too much time, effort andmoney – people prefer to solve their problems on their own,which leads to serious problems.”

Global problemsAlthough the percentage of members that feel the rule oflaw is under threat in their jurisdiction has fallen, the majori-ty is still worried.

As with the Latin American comments, corruption was amajor worry among lawyers worldwide. But there were alsosuggestions that judiciaries are often weak. One exasperatedMalaysian lawyer said that: “The selection of the judiciaryoften leads to judges who have no character to withstand thedirections of the executive.”

Similarly, a Pakistani lawyer revealed that he “has doubtsabout the independence of the judiciary due to the alarminginfluence of previous and existing governments on theappointments of judges in the superior courts”.

There are also problems in the Philippines: “Violent rev-olution, rampant criminality and corruption foster cynicismabout the legal process,” said one lawyer.

Core values threatenedElsewhere in the poll, there was a 10-point swing towards thebelief that the core values of the profession are under threat.Last year 55% said yes, but this year the figure is 65%. Thevast majority of comments referred to the fact that “attorney-client privilege appears to be getting chipped away bit by bit”.

One lawyer from the British Virgin Islands said: “In theUS, where I am also admitted to practice, efforts to erodeattorney-client privilege under the guise of homeland securi-ty are troubling.”

This was a common concern in many other jurisdictionstoo. From Bermuda to Ireland and from Nigeria to Turkey,respondents bemoaned the lack of enforcement of privilege.

Latin America needs to catch up

IBA POLL: RULE OF LAW

Nicholas Pettifer analyses the IBA Poll results and finds that while there isgood news for the rule of law, Latin America has its problems

Rule of law is under threat:■ AUSTRALIA: “Politicians are too willingto pander to powerful special interest groups”

■ CROATIA: “There is a selective application of laws by politicians and bigbusiness”

■ INDIA: “There is a lack of transparencyand accountability in judicial appointments”

■ JAPAN: “Antitrust laws and consumerprotection laws suffer in Japan”

■ MALAYSIA: “Judges are so corrupt andeasy to influence”

■ NIGERIA: “Rule of man is rearing itsugly head”

■ PAKISTAN: “There is no rule of lawbecause our 60 judges were suspended”

■ PHILIPPINES: “Violent revolution, rampant criminality and corruption fostercynicism about the legal process”

■ SOUTH AFRICA: “There are continuingattacks on the integrity of the judiciary”

■ UK: “Demands for the incorporation ofshariah law will undermine the UK”

■ US: “Bush eroded the rule of law with thetreatment of potential terrorists”

www.legalmediagroup.comIBA Daily News - Tuesday, October 14 20084

Private practioner 73%

Other 27%

No 49% Yes 51% No 30% Yes 70% No 35% Yes 65%

No 5%

Yes 95%

Please describe your role:

In your opinion, is the rule of law under threat in your jurisdiction?

Is the rule of law under threat in Latin America in particular?

Do you feel that the core values of the profession such as independence and attorney-client privilege are under threat?

Should training in legal ethics be a requirement to become a lawyer?

J efferson Miceli’s first year as superintendência jurídica forBanco Pine can best be described as trial by fire.Surging Brazilian equity markets and rising commodi-ties prices over the past few years have kept the country’sfinancial institutions racing to meet demand. Particularlyaffected are Brazil’s domestic banks, who look to service agrowing middle class while continuing their expansionthroughout Latin America and the Caribbean. For Miceli,this burgeoning middle market – often volatile and alwayscompetitive – is exactly where he wants to be.

Miceli’s legal career began in the offices of theBrazilian firm Tozzini Freire Teixeira e SilvaAdvogados as a junior associate. Rising through theranks of the corporate practice, he soon recognisedhis desire for a larger perspective on the financialmarkets. “When you work as an associate at a lawfirm, financial institutions look to your work in cer-tain situations and you don’t see where the client isprofiting; you don’t see the reasons for development in thetransactions. I wanted to understand that, the scenarios andthe ways of thinking in a financial institution,” Miceli says.

In 2002, he left Tozzini Freire for Banco Safra, a mid-mar-ket Brazilian bank. “I always had this interest in working infinancial markets and the opportunity at Safra gave me fouryears of experience,” said Miceli. After serving as a seniorlawyer for capital markets and investment funds work, Micelimoved again, this time to rival Banco Pine, in 2006. Stillserving as a senior lawyer, he arrived at the bank as it lookedto expand domestically and internationally. Within a year ofbeing hired he became the bank’s lead in-house counsel.

“When I was hired by Banco Pine, it was a completelydifferent institution than it is today,” Miceli says. As surgingequity markets brought fresh capital to companies through-out the country, many through IPOs, Miceli notes how theaverage deal size soared in Brazil. The scope of the bank’slending increased accordingly, bringing it to the middle mar-ket position it is in today.

In June 2007, Banco Pine and Miceli realised their deci-sion to become publicly traded on São Paulo’s stockexchange, Bovespa. Miceli describes the offering as a major

transformation for the company. “We were the first medi-um-sized bank in Brazil to go to the market. It was some-thing new here. We benefited from a market that was veryactive for investors, and we had a huge increase in capitalwhich allowed us to make several operations we were notable before,” says Miceli. In total, Banco Pine raised R$520million ($273 million) through its share offering.

Highlighted in its latest earnings report was the bank’sgrowing corporate portfolio. Miceli says the bank’s collec-tion of mid-market Brazilian companies as well as new, larg-er clients such as Petrobrás, Brazil’s state-owned oil compa-ny, have come as a result of the IPO. “After the IPO, we

started to be looked at a different way by rating agencies, byforeign investors, even by the local market ... I don’t see anynegative angle to us going public,” says Miceli. Withouthesitation he describes the public offering as the greatestlegal challenge he’s undertaken since joining the bank.

The transition after to the IPO, however, includedimportant changes for the general counsel position. Miceli’srole suddenly included serving as a conduit between thebank’s board of directors and its new shareholders, workingto condition the relationship. The IPO also helped to reval-uate the bank’s debt, facilitating several issuances of medi-um-term notes in the last year, the latest totalling $150 mil-lion in June 2008.

The establishment of the middle market in Brazilhas created two encouraging trends for banks likeBanco Pine. The number of deals originating inBrazil and of inter-Brazilian deals are both increasing.Fragile as it may be, the country’s middle market islaying the groundwork for a sophistication manyhave long awaited. The institutions servicing thismarket are only too happy to aid its growth.

But as this growth continues to run contrary to NorthAmerica’s financial markets, Miceli’s optimism is comingunder control, focusing on the banking sector’s near term.“We are worried with what is happening in the US,” hesays. “But the controlling shareholders [at Banco Pine]have more than 35 years of experience in the financialworld.” This tempered attitude applies to competitors aswell. “We have a lot of competition in the medium-sizedbank peer group,” says Miceli, “competition we alwaysface. It will always be a difficult market, but we have beenhere for 10 years now and aren’t planning any differentlyfor next year.”

Floating a bank in BrazilPROFILE: JEFFERSON MICELI, BANCO PINE

Conducting the first IPO for a Brazilian, mid-market bank marked a turningpoint in Jefferson Miceli’s career, says Ryan Pasquale

www.legalmediagroup.comIBA Daily News - Tuesday, October 14 2008 5

“When I was hired by Banco Pine, itwas a completely different institutionthan it is today”

“N ow that we have the space to do it, weneed to prove that we are ready”, saysEnrique Burchard, partner at the Honduranoffice of Aguilar Castillo Love.

Times have changed since law firms adopted a strategy ofregionalisation in central America in the late nineties. Thetrend of regionalisation among central American firms seemsto have reached its zenith. All the firms that have an inclina-tion to regionalise have already done so.

Since adjusting to their new roles as regional players,these firms have begun to rapidly grow and diversify inresponse to the overwhelming demand for legal servicesacross the area. The Guatemala office of Arias & Muñoz, afirm with offices across all five Central American jurisdic-tions, has doubled in size since 2006. In this region, wherefirms are still largely traditional and where lateral hires arerelatively rare, this expansion is unprecedented.

With the onset of globalisation and the ratification ofvarious trade agreements including the Central AmericanFree Trade Agreement (Cafta), the region has seen aninflux of foreign investment over the past 10 years.Companies are predominantly entering the region

through M&A activity or other financing opportunities,and firms have had to develop niche practice areas inorder to better serve these clients, many of them multi-national corporations.

Because the regional firms that cater to internationalclients are all rather equally matched in terms of quality, in-house counsel have been able to take advantage of the rela-tive parity and demand more competitive prices. In the rushto attract the growing number of international clients andgain more exposure, marketing departments, which used tobe non-existent at many of these firms, are quickly beingcreated and receiving attention and investment.

But in the past year, the slowdown in the Americaneconomy meant that foreign investment into the regionwas curtailed. Lawyers are optimistic that their practiceswill remain active, and that growth will continue, albeitat a slower rate. Lawyers like José Augusto Toledo Cruz,

a partner at the Guatemala office of Arias y Muñoz, thinkthat this downturn will not affect growth strategy for thelong term, largely because the economy has diversifiedbeyond the US, to include investors from Europe andAsia.

The effects of consolidationIn the early 2000s, the banking industry in central Americawas going through a period of consolidation. Large inter-national banks saw opportunity in the emerging marketsthere and began buying up local banks in rapid succession.In an effort to become more efficient after the acquisitions,many banks have delegated much of their legal work tooutside counsel. The banks that have begun operating incentral America in the past few years require not only alarger volume of legal work, especially on compliance, butthe work is more complex, and requires a deeper knowl-edge of specific areas.

Attorneys are in the process of accommodating the newneeds of their banking clients, both by increasing the num-ber of attorneys and familiarising themselves with the inter-national regulations that are now standard operating proce-dure at these institutions. The more bureaucracy and themore detailed the compliance regulations, the more indis-pensable the central American firms are making themselves.Banks are beginning to require answers to theoretical legalproblems, rather than procedural questions.

The smaller local banks that remain are also interestedin promoting efficiency to become more attractive acqui-sition targets. When the market was not deep or variedenough to require specialisations, general corporatelawyers advising on general matters were the norm. In theheadier times of the last 10 years firms found a need todevelop specialisations like labour law, banking andfinance. Firms are also anticipating an increase in workfor their litigation departments, as the parties to deals that

Expanding expectations Firms are growing, specialising and trying to do banks’ work for them in central America. Some think it will lead totakeovers by US firms, says Erin Kelechava

LEGAL MARKET: CENTRAL AMERICA

www.legalmediagroup.comIBA Daily News - Tuesday, October 14 20086

“Long-term growth will depend on the capacityof each firm to develop new services”Enrique Rodriguez Burchard, Aguilar Castillo Love

have fallen apart since the sub-prime crisis begin to weightheir options.

As José Augusto Toledo Cruz explains the trendtowards specialisation, “first a firm may work on one par-ticular M&A transaction, but then you have an opportuni-ty to keep the client, which would mean a lot of addition-al corporate and labour work, if you are on the buyer side.If you are representing the seller, you have the opportuni-ty to have the buyer recognise the value of its opposingcounsel, which could also result in more steady work.”The firms are gaining opportunities for sustained relation-ships with large companies in a way that they never havebefore.

Cafta changes the landscapeAnother major change to the legal landscape was Cafta’s rati-fication in 2006. Lawyers across central America are enthusi-astic about the number of cross-border transactions likely toemerge from Cafta’s implementation. In Costa Rica, forexample, the agreement is expected to open up former statemonopolies in telecommunications and insurance. Bothindustries are candidates for privatisation, and have thepotential to lead to a torrent of new work.

To meet these additional demands, firms have not onlyhad to grow, but have had to develop a more diversifiedpractice. For example, in Costa Rica, many firms have cre-ated more sophisticated real-estate departments. Firms likeConsortium, Arias y Muñoz, and BLP Abogados have capi-talised on the recent real-estate boom, and have had to growin order to do so.

BLP Abogados has adjusted to the new legal environmentby hiring more partners with expertise in industries withpotential for privatisation. Five years after the firm’s found-ing, it is growing at an amazing rate. Even though the firmdoes not have a regional presence, there is enough work tomake it competitive within Costa Rica.

Firms have taken it upon themselves to facilitate abetter understanding of the potential advantages to be

gained from Cafta, and the other trade agreements thatthe countries have with countries like Chile, Colombia,Mexico and Taiwan. There are many opportunities forentrepreneurs under these agreements, and of courselawyers familiar with the benefits and pitfalls are in highdemand.

Specific developmentsEach jurisdiction has had its own domestic developmentsthat have contributed to the growth of the legal market. Forexample, in Honduras over the last two years there wereacquisitions in almost all major industries. In the wake of thisconsolidation, newly acquired companies are beginning toadopt international regulations at the local level and arestarting to make changes to their internal governance andoversight. All these adjustments require legal counsel, and inorder to provide these legal services, firms have beenexpanding quickly.

According to Burchard at Aguilar Castillo Love,“long-term growth will depend on the capacity of eachfirm to evaluate new opportunities and its ability todevelop new services.” At Aguilar Castillo Love, they aretaking the idea of diversification seriously. The firm hasrecently developed a practice focusing exclusively ontrademarks, and is considering creating a new departmentdedicated to corporate compliance, to help clients withroutine matters, like maintaining the corporate books,drafting powers of attorney and proxies, and other mat-ters that are normally handled by lawyers working in-house. This practice makes sense given that many corpo-rations, in an effort to reduce costs, are reducing their

legal groups and outsourcing the work to corporate lawfirms.

Looking to the futureSome predict that in the next 10 years there will be interestfrom international law firms looking to establish a presence

in Latin America. Due to recent developments like Cafta,the US will continue to be the region’s biggest trading part-ner, and US firms will only have a greater interest in acquir-ing central American firms.

There is speculation on whether or not internationalfirms have designs on these regional players and whetherthey might be interested in making acquisitions in thecentral American legal market. Some are certainly of thisstrategy, noting that large international firms are morecomfortable with these regional firms assuming all theoverhead, and are not eager to compete with firms thathave long standing contacts and associations. According toJosé Augusto Toledo, “these international firms getresponsiveness and the same quality of service from theregional firms here, with the upside that others are makingthe investments.”

Perhaps Burchard best summed up the need for firms tocontinue the strategy of diversification: “Clients havealready seen that these regional firms can provide goodservice, but if the clients do not come you need to reimag-ine your business.” These firms will need to face the chal-lenges posed by economic developments around the worldin order to remain viable in an increasingly active andcompetitive market.

www.legalmediagroup.comIBA Daily News - Tuesday, October 14 2008 7

“A firm may work on one M&A transaction, butthen you have an opportunity to keep the client,which would mean a lot of additional work”José Augusto Toledo, Arias y Muñoz

www.legalmediagroup.comIBA Daily News - Tuesday, October 14 2008 9

What are you particularly looking forward toabout the conference this year?It’s a great opportunity to have our annual conference back inLatin America. It’s the third conference we have had in LatinAmerica, the first being in Argentina 20 years ago and theother was in Mexico in 2001. It’s a great opportunity for ourmembers to meet for a week and take part in all the differentsessions. Many of them will be analysing different fields ofinternational law and different forms of business transactions.

Are there any specific sessions you are look-ing forward to?There are many sessions that present the delegates with anexcellent opportunity to update their knowledge of the latesttrends in arbitration, M&A, litigation, intellectual propertyand contract negotiations.

We also have several important showcases that relate toextra-territorial jurisdiction and the importance of the inde-pendence of the judiciary. This is important for many of ourmembers in Latin America and around the world.

Is the principle of an independent judiciary com-ing under increasing threat in Latin America?In certain jurisdictions, yes.

Would this be in the countries withpopulist/nationalist governments?Yes, especially in Venezuela under Hugo Chavez; but also inBolivia, Nicaragua and Ecuador. In these countries there is aserious threat to the independence of the judiciary.

Are there any speakers who you think will beunmissable?I am very interested in hearing Julio Maria Sanguinetti, theformer president of Uruguay, speak at the rule of law sym-posium. I am also looking forward to hearing LeandroDespouy [Special Rapporteur on the Independence ofJudges and Lawyers to the Human Rights Council of theUnited Nations] speak about the independence of the judici-ary. I have been impressed by the articles of his I have read.

I believe that the prosecutor for the International CriminalCourt, Luis Moreno-Ocampo, will be present as well.

Am I right in thinking that you will be the nextpresident of the IBA?That’s correct.

What do you most hope to achieve in yourtenure as president?Firstly, for 12 years I have been involved in the restructuringof the IBA’s regional activities. I am the founder of the LatinAmerica Forum. This conference is an excellent opportunityfor a large number of delegates exposed to the region. Theseare very interesting times for Latin America. The continent’sjurisdictions are heading in different directions; it presents agreat challenge. Delegates can learn more about what is hap-pening in the region and the business climate. It’s an oppor-tunity to analyse the problem we are facing in the region,especially regarding the rule of law.

I have been very involved in the regional activities of theIBA. When I took the position of secretary general I wasentrusted by the former president to undertake the restruc-turing of the regional activities. First I worked with a taskforce; that’s finished and we’ve presented recommendationsto the management board. I have continued working with

the regional fora, trying to increase theirpresence in the IBA and deliver a betterservice for their members. I will contin-ue working towards this as president.

We have also been focusing on edu-cation in our regional and annual con-ferences. We launched the IBA diplomaseveral years ago and we recently intro-duced the LLM. I will continue giving apriority to education, emphasising thatour conference should improve the qual-ity of legal practice and discussing newareas of practice.

Since the IBA was restructured, we have formed the barissues commission which allows all the regional associationsto discuss the different situations affecting the legal profes-sion. I will continue supporting this.

We have also been organising regional conferences for barleaders for the Americas (from Canada to Argentina). I willmake sure that the IBA continues organising these regional con-ferences. We organised a special programme for Asian develop-ing powers in Singapore last year. This year we will have a spe-cial programme for developing powers in Latin America.

Are these the tworegions where you aremost looking to increasethe presence of the IBA?We launched the NorthAmerica forum two years ago.I am eager to continue givingthe necessary support toensure that the forum cancontinue its development.

I intend to focus on theAsia-Pacific forum because itcovers a large region withmultiple and complex jurisdic-tions. Next September we arehaving a regional conferencefor the forum in Hong Kong.We are planning new activitiesin the region for 2009-2010.

We have also been workingto relaunch the Arab forum.We recently opened our sec-ond office in the region inDubai. I hope to increase ourpresence and activities there. Ihave been contact with ourmembers in the African forumas well, to support them andcreate a presence in Africa.

I will continue supportingthe work and activities of thehuman rights institute.

Are there any otherparts of the worldwhere you feel the ruleof law or the independ-ence of the judiciary isunder threat?I am sure that the countries Imentioned in Latin America

are not the only ones where the rule oflaw is under threat. Not long ago Polandwas facing serious problems in terms ofthe independence of the judiciary beinginfluenced by the executive. I have alsoread many articles about this issue inRussia.

Is Buenos Aires a city you knowwell?I have made many visits to Buenos Airesfor both pleasure and business. I like itvery much.

What would you recommendfor first time visitors to thecity?

I think Buenos Aires offers a very interesting cultural life. Ithas great restaurants. Unfortunately the National Theatre isclosed, but they have excellent ballet performances. There’sa really wide range of activities. The tango is incredible, youcan spend several evenings learning to tango and watchingtango dancers.

Are there any social events outside the confer-ence hall that you are hoping to attend?I am obviously looking forward to the closing [party] whichis a tango evening. The Latin American lunch has alsobecome very popular.

Regional fora will be my priority

PROFILE: FERNANDO PELÁEZ-PIER

The leading Latin American lawyer and incoming president of theIBA is keen to increase the Association’s presence in regionalareas says Toby Marchant

O n wine lists you will encounterwhile entertaining clients inBuenos Aires, malbec, torrontesand other home-grown varieties will sitalongside clarets, riojas and burgundies.Once famed for its high-volume plonk,Argentine wines now win plaudits fromconnoisseurs. What’s more, the wine indus-try has a rich heritage. Since the odyssey ofa Spanish Priest in the 16th century,Argentina has risen to become the world’sfifth largest wine producer.

Argentine winemaking dates to the arrivalof Juan Cidrón in 1556. Amongst his belong-ings were vine stalks from his native Spainthat he cultivated in the fields of Santiago delEstero. Over the next two centuries wine-making remained a cottage industry. Aboveall, vineyards were prized by Catholic clergy-men as a source of communion wine.

After this sedate beginning, the industrydeveloped apace in the late 19th century. Asecond wave of European immigrationimported new varieties of grapes and moresophisticated production techniques. The rail-way line connecting Buenos Aires with grape-rich Mendoza province (opened in 1885)enhanced producers’ access to the thirsty capi-tal. Despite these innovations, Argentine winefailed to satisfy the affluent classes which hadtasted imports from France, Italy or Spain.

In the 20th century, Argentina becamemore of a wine-consuming country. At itszenith, popular consumption reached an esti-mated 90 litres per capita a year. The indus-try ignored international markets and dedi-cated itself to the tastes of domestic drinkers.The emphasis was decisively on quantity overquality. Argentine wine was characterised byits earthy, rough and quaffable properties.

This level of demand proved unsustain-able. In the eighties the native wine industryverged on the brink of collapse. Domesticconsumption halved from its peak.Furthermore, the country’s formerly strainedforeign relations and volatile currency were adisincentive for overseas investors. Perhaps asmany as a third of the country’s vineyardswere torn from the soil. Sprawling unkemptgrape fields and abandoned workers’ cottagesprovide a legacy of this era.

Argentine winemaking has long sincerecovered from this nadir. In the ninetiesdomestic producers, following their Chileancounterparts, compensated for weakeneddomestic demand by targeting overseas mar-kets. Simultaneously, Pernod Ricard, theLurton brothers and other internationalwineries bought vineyards in the country.They recognised its potential as a source offruity middle-market wines for drinkers innorthern Europe and the US.

Mendoza province, in the shadow of theAndes, remains the epicentre of the country’swine industry. Its harsh arid climate is seem-ingly ill-suited to winemaking. But the intri-cate network of irrigation channels (a relicfrom when Incas ruled the land) ensures thatvineyards are hydrated with meltwater frommountain glaciers. The wine is notable for thealtitude at which it is grown. White grapes areoften produced in excess of 1500 metres; thehighest vineyard is at 2,400 metres. Growingat height has the advantage of exploiting cool-er daytime temperatures. The intensity ofultra-violet rays at this level also causes grapesto develop thicker skins, producing wineswith richer tannins and deeper colour.

Mendoza is the source of malbec,Argentina’s signature red wine. The malbecgrape originates from south-west France,featuring in wines from the Cahors region.The grape is reputed to create spicy wineswith a rich aroma and exceptionally darkcomplexion. Although experts considerthem a weaker sibling, Argentine whitewines are also winning admirers. Torrontes,

a distant relative of Muscat, leads the pack.To complement these indigenous varieties,Argentina is also home to more ubiquitouschardonnays and cabernet sauvignons.

For those still unconvinced, earlier this yearArgentina’s wine industry won a major coup.

In a tasting sponsored by the influential WineAdvocate magazine, over 100 Argentine mal-becs scored more than 90 points out of 100;13 received an astronomical 96 points or high-er. Even the elite producers of France orCalifornia would cherish these scores.

Argentine winemakingcomes of age

LOCAL ATTRACTION: WINE

Over the past few years,Argentina has grown froma plonk destination to truevintage. Here are thegrapes to savour

www.legalmediagroup.comIBA Daily News - Tuesday, October 14 200810

“Perhaps as many as a thirdof the country’s vineyards

were torn from the soil”

J uly 30 2008 may prove a momentous date in the histo-ry of Afghanistan’s judicial reform. Or a day of incon-sequential legal wrangling. Over 400 lawyers bravedconsiderable danger to attend the inaugural General Assemblyof the Independent Afghan Bar Association (IABA). Theevent is the highlight of the IBA Human Rights Institute’s(IBAHRI) five-year engagement in Afghanistan. Due to itsculture, history and geography, the challenges of resurrectingthe rule of law in Afghanistan are incomparable with any-thing the organisation has faced in its short history.

Afghanistan’s complexity has made this a unique assign-ment for the IBAHRI. The mountainous landscape, primi-tive infrastructure and ambiguously drawn borders, whichcharacterise Afghanistan, have produced a profoundly decen-tralised society. Popular affiliations are more likely to bedefined by tribal loyalties or Islamic convictions than identi-fication with the Afghan state. These factors have stymiedthe emergence of a unitary system of justice. Successiverulers, since British imperialists in the 19th century, havebeen unable to assert their authority far beyond Kabul orKandahar; let alone across the whole of Afghanistan.

To exacerbate the IBAHRI’s challenge, to varying degreesAfghanistan has remained in a state of war since the Soviet inva-sion in 1979. The turmoil that raged throughout the Afghancivil war and Taliban rule ensured that, with Afghanistan, theIBAHRI has been dealing with a collapsed state.

The missionThe IBAHRI’s mission in Afghanistan has been to establishan independent sustainable Bar Association. It was felt this

would help regulate the country’s disparate legal profession.A further aim of the project is to enhance the fairness of thejustice system. Human rights organisations have expressedconcern about the absence of legal rights for the accused inAfghanistan. Under the Taliban the concept of free legalrepresentation for defendants was anathema.

In Afghanistan the work of the IBAHRI has been over-seen by Phillip Tahmindjis, a prominent Australian lawyerwho has worked extensively on human rights and anti-dis-crimination law. Describing his first impressions of the Afghan

legal system, he remarks: “It is very disparate because of thecountry’s history; there are remnants of civil law, aspects ofRussian law and a lot of alternative dispute resolution.”

Tahmindjis is referring to the prevalence of informal tri-bunals comprising of community elders to resolve local dis-putes. “The legal system became so endemically corrupt thatmost people wanted to avoid it as much as possible,” henotes.

The challengesThe project entailed obvious practical challenges for theIBAHRI. Since removing the Taliban, Nato forces have

struggled to supplant anarchywith order. Afghanistanremains a conflict zone.Fearing for the safety of theirpersonnel on the ground, theIBAHRI has restricted itsoperations to Kabul. Toexpand the scope of the mis-sion, the organisation hasdrawn on non-governmentorganisations (NGOs) work-ing in the provinces tospread awareness of theiractivities.

Tahmindjis candidlyadmits: “We have had amajor challenge with the lan-guage and getting ourselvesunderstood. Each member ofour team in Kabul started tolearn Dari but when you aredealing with legal conceptsyou need more than a con-versational ability.” TheIBAHRI has relied on inter-preters to convey their mes-sage to lawyers and theAfghan government. Even so,“there are some words thatdon’t translate easily intoother languages,” saysTahmindjis, “for instance, theword ‘lawyer’. In Dari thisimplies someone who actsmore as a go-between ormediator.”

So disparate was the sys-tem that “just identifyingwho the legitimate lawyerswere, let alone their level oftraining, was a challenge,”

Tahmindjis recalls. As the profession had remained largelyunregulated, there was no directory of lawyers to refer to.Furthermore, during the Taliban era Afghanis fled by thethousand to neighbouring countries, especially Pakistan.As they returned after the allied invasion, many claimed tobe qualified lawyers, having studied at overseas universi-ties. It was clear to the IBAHRI that many of thesedegrees were forged.

Tahmindjis characterises the IBAHRI’s work as winningthe hearts and minds of the Afghan government and lawyers.He was fortunate that certain crucial stakeholders, notablythe Ministry for Justice, were quick to appreciate merits ofthe project. The IABA became a legislative priority forPresident Karzai’s administration.

Naturally, he encountered scepticism: “There werelawyers who were convinced that a bar association wasjust another western idea that Afghanistan really didn’tneed.” To convince the doubters, it was vital to liaise withthe country’s lawyers; to inform them about the purposeof bar associations and address their concerns. “In particu-lar we emphasised that Islamic countries such as Malaysia,Egypt and Iran all have Bar associations,” notesTahmindjis.

The breakthrough came two years ago. A seminar washeld in Kabul for Afghan lawyers, government officialsand NGOs working in related fields. Following a series oflectures, the delegates were divided into eight workinggroups. Among other legal issues, these groups discussedthe ethics of the profession, human rights and member-ship criteria for a Bar association. Their findings werereported to the plenary. A position paper was later com-piled, which conveyed the consensus that emerged fromthe seminar.

According to Tahmindjis, “The seminar was very success-ful because it was among the first times that Afghans hadbeen asked what they wanted; rather than an overseas organ-isation telling them what was good for them.”

Surely it would be impossible to reconcile the values ofthe IBA with a country as patriarchal and unreformed asAfghanistan. Seemingly not. “I was pleasantly surprised thatlawyers were so firmly in favour of setting an ethical code

A Bar against the oddsRULE OF LAW: AFGHANISTAN

www.legalmediagroup.comIBA Daily News - Tuesday, October 14 2008 11

Though facing tough challenges, the IBA Human Rights Institute has seensuccess in Afghanistan, says Toby Marchant Background to Afghanistan

Establishing the rule of law in Afghanistan has been a priority for theinternational community since the US-led overthrow of the Taliban inOctober 2001. The Bonn agreement – the transitional frameworksigned in December 2001 to prepare the country for self-governance– decreed that judicial power was vested in an independent SupremeCourt of Afghanistan.

This agreement prescribed the creation of a Judicial Commissionto rebuild the justice system in accordance with Islamic law, interna-tional standards and Afghan legal traditions. Infighting caused theacrimonious closure of the first commission in May 2002. After theestablishment of a second commission in November that year thereform process gained momentum. The commission cited improvingthe structure of judicial institutions as a vital component of its mission.

Early in 2003, the commission issued a report outlining the fourareas of work it considered crucial to fulfilling its mission. The last ofthese was the Structure of Judicial Institutions. This section outlinedprojects to establish a Bar association and strengthen the provision oflegal aid.

Around the same time, Christian Åhlund, executive director of theStockholm-based International Legal Aid Consortium (ILAC), under-took a scoping mission to Kabul. His task was to uncover what oppor-tunities existed for the ILAC’s member organisations to engage in therebuilding of the country’s judicial system. He quickly realised thepotential of the IBA to assist the Judicial Commission with its objec-tive of creating a Bar association. These are the origins of theIBAHRI’s mission to Afghanistan.

The close links that the ILAC has with Sweden’s governmenthelped ensure that the IBA’s work in Afghanistan has been generous-ly funded by the Swedish foreign ministry.

“The IBAHRI has been dealing with a collapsedstate”

Continued on page 12

President Karzai signed theIndependent Afghan BarAssociation into existencein December 2007

for the profession and disciplining those who breachit,” says Tahmindjis. “Also, they strongly supported asystem of regulated entry into the profession andequality for women.”

Breakthrough and assemblyIn 2007 the Loya Jirga and Mascherano Jirga – the lowerand upper houses of the Afghan parliament – passedthe legislation required to bring the IABA into exis-tence. “That was quite a job,” Tahmindjis reflects.“With so much new legislation on the books we hadto push the bar association to the top of the heap.” Itreceived the approval of President Karzai inDecember. That only seven laws were established in2007 is a measure of the importance politicians haveattached to the project.

The way was then clear for the Afghan legal com-munity to hold a General Assembly to elect aPresident and Executive Council for the IABA. TheUnited Nations Office on Drugs and Crime volun-teered the $180,000 needed to cover expenses suchas venue hire, printing costs and accommodation.

This event was staged at the Intercontinental HotelBallroom in Kabul over four successive days at the end ofJuly. Over 400 lawyers attended, 150 of whom had trav-elled in from the provinces. For this latter group, theirjourneys to Kabul were made at considerable risk. “Someof the attendees who were bussed in left their registration

cards at home, fearing the consequences if they were iden-tified as lawyers at a Taliban road block,” explainsTahmindjis.

At its outset, the general assembly passed bylaws togovern the ethics, discipline and entry requirements forthe IABA. Especially noteworthy are the clauses that guar-

antee a minimum level of representation for femalelawyers on the Executive Council and ensure that atleast one of the (two) vice presidents is female. Thecode of conduct for the profession remains to befinalised.

The climax of the assembly was the election of the15-strong Executive Council on the final day. Thistook place in the presence of the Second VicePresident of Afghanistan, the Minister for Justice andhis two deputies and the Chief Justice of Afghanistan.The president of the IBA, Fernando Pompo, PhillipTahmindjis and Alex Wilks, the IBA’s legal specialistfor Afghanistan, also attended. Voting procedures weremonitored by local and international electoral experts.The results were announced shortly before dawn onJuly 30.

ExpectationsThe establishment of the IABA does not signal theend of the IBA’s work in Afghanistan. Quite theopposite. “Now perhaps our most difficult task isbeginning. That is physically setting up the Bar andmaking it self-sustaining,” Tahmindjis explains. “Ourgoal is to eliminate the need for the project’s supportteam in London.”

“It’s the stage we must not fail. Until now, if we’dfailed people would say ‘oh well, it was a great try;you worked hard but sadly didn’t quite make it’. Nowthat we have got there, there are great expectations ofthe Bar. A lot is riding on this. If it fails, it may set theprocess of establishing the rule of law back by manyyears.”

However, the fate of Afghanistan’s fledgling Bar isinexorably linked to the outcome of the conflict ragingbetween Nato forces and the resurgent Taliban. Were theunthinkable to happen, the progress the IBA hasachieved in its five-year Afghan mission could soon beshattered.

RULE OF LAW: AFGHANISTAN (CONTINUED)

www.legalmediagroup.comIBA Daily News - Tuesday, October 14 200812

“The establishment of theIABA does not signal theend of the IBA’s work inAfghanistan”

Continued from page 11

“I think it’s unfortunate but it has to happen,” saysone lawyer about US Treasury Secretary HenryPaulson’s Emergency Economic Stabilization Act,which will invest $700 billion in risky mortgages that causedthe downfall of some of the biggest investment banks.

“It’s called the Troubled Asset Relief Programme bysome, or Tarp, which seems rather appropriate. It’s a dark,waterproof cover that you can throw over things that youwant to forget.”

Most lawyers felt the same way, with 55% agreeing thebailout was unfortunate but necessary. Of the remainder,28% say it is unnecessary, 9% agree with it and 8% think it isa good idea, just too late. While this negative response does-n’t bode well for the bailout, most of those polled could notcome up with any better alternative for fixing the Americanmarket.

All the US lawyers polled understood the significance ofa plan that uses taxpayers’ money for uncertain investments.

“This is the most important decision the government willhave to make this decade and maybe this century,” says onelawyer. “If they do it correctly it will mean a bounce backof the economy, but if they do it incorrectly they’ll increasethe debt and reduce US credibility on a global scale. It reallyis a monumental decision.”

Unfortunate but necessaryThe sale of Bear Stearns to JP Morgan in March began aprocess that included the failure or adjustment in the statusof every major US investment bank. Lehman Brothers wasthe next to go when it filed for bankruptcy, followed byMerrill Lynch being sold to Bank of America and bothGoldman Sachs and Morgan Stanley becoming holdingbanks overnight.

Among those events were the government subsidisationof insurance giant AIG and most recently the sale of depositbanks Washington Mutual and Wachovia to JP Morgan andCitigroup respectively. With the collapse of major financialinstitutions beginning to surround him, Paulson was forcedto act with greater drama than he had before.

“He’s moved in little steps each time, which all provedto be wrong,” says one lawyer. “There has been a longtrack of failure and they are finally getting to the source ofthe problem.”

That source is the housing mortgage loans that institu-tions purchased and are defaulting across the country. As bil-

lions of dollars in payments failed to come in, the bankswere forced to find buyers or go under.

“The last few months have been a game of Whack-a-Mole for the federal government,” says one lawyer. “Nowthey are throwing a lot of money into the system to try andstop the problem. Hopefully that works.”

All of these events led to the Treasury Secretary’s plan toinvest $700 billion of state funds into the banks in order tostabilise the investment industry and raise credit ratings. The

plan also comes with “strong oversight” measures. After aninitial $250 billion is given to the Treasury Department forinvestment, additional $100 billion and $300 billion allot-ments must be approved by Congress.

“I still think it is a good move for the US overall,” saysone lawyer who agrees with the plan. “If it means helpingout a few individual banks than so be it, but we need tolook at what is best for America.”

Those who disagreeMost dissenters in the legal community question the amountof risk Paulson is putting upon the American taxpayer. Thephrase Main Street is bailing out Wall Street is tossed arounda lot while lawyers question the lack of specific investmentstrategy.

“If the government wanted to do this right they’d lookat the institutions that are never going to fail, and helpthem,” says one lawyer. “The groups that have failingstock will fail with or without the government’s help, andleave the taxpayer with the bill. But if we find out whocan support the economy with some help, then the pro-gramme will make sense, because the taxpayer may gettheir money back.”

On a simpler level the bailout may give investors a falsesense of security. It may suggest that Paulson will continueto help banks take chances with public funds.

“People are only prudent when they know the risks theyare taking,” says one partner. “If they think the governmentwill help them every time, they’ll start to take bigger risks.There needs to be a risk adjustment from the top down,from the highest bank lender to everyone holding themortgages.”

The European implicationsEuropean banks face the same potential failures if govern-ment doesn’t intervene. Already HBOS sought a buyer inLloyds and Bradford & Bingley was bailed out by the UKgovernment as the bank failure sweeps Europe. Fortis andWestLB also received government help.

While 50% of European lawyers thought the plan wasunfortunate but necessary, most did not think a similar planwould be implemented in Europe. UK lawyers expect thegovernment to remain hands off for political reasons, while

EU lawyers think a lack of cooperation between Europeannations and banks will ultimately prevent any sophisticatedbailout plan.

“It’s a tough question about the extent to which thestate needs to intervene,” said one lawyer. “If we were toface the issue in the EU, no member state could mount arescue, and the European Central Bank doesn’t have thepower.”

www.legalmediagroup.comIBA Daily News - Tuesday, October 14 2008 13

“The last few months have been a game of Whack-a-Mole forthe federal government”

What do you think of the US bailout?

POLL: US TREASURY BANK BAILOUT

This afternoon the Securities Law Section will discuss takeovers of financialinstitutions. Here, lawyers argue that the US Treasury’s own bailout of banksis unfortunate but necessary to stabilise the global economy. By Kyle Siskey

Good idea, badtiming - 8%

Goodidea - 9%

Bad idea - 28%

Bad idea but necessary

now - 55%

www.legalmediagroup.comIBA Daily News - Tuesday, October 14 200814

TODAY’S SCHEDULESESSION LOCATIONTuesday AM 0830 – 1000African Regional Forum Breakfast Dorado Room, The Marriott Plaza HotelABA Welcome Breakfast Fiestas Room, The Marriott Plaza HotelFamily Law Committee Breakfast Florida Rooms, The Marriott Plaza HotelTuesday AM 1000 – 1800CSR: a matter of principle(s), law(s) or both? CSR with a special focus on human rights in a legal perspective Gómez Losada (2nd Floor)Tuesday AM 1100 – 1800Committees on Insurance and Maritime and Transport Law joint lunch excursion Delta tour and Gato BlancoTuesday AM 1000 – 1300Abuse of dominance: the centre of controversies Libertador C (1st Floor)Exit strategies for public and private companies (including dual track) Retiro B (1st Floor)Criminalising corporate conduct Auditorium (Ground Floor)Court support for arbitration in the Americas and the role of public law Libertador B (1st Floor)Responsible lending in consumer credit agreements Retiro C (1st Floor)Mediation techniques workshop Libertador A (1st Floor)Tort reform: a solution to perceived defects of the traditional tort regime, or ‘tort deform’? Martín Fierro II (2nd Floor)How to allocate benefits derived from mining activities among all stakeholders Casona A, Meliá Buenos Aires HotelEnergy conflict management in Latin America Tirso De Molina B, Meliá Buenos Aires HotelThe law of sustainability Casona B, Meliá Buenos Aires HotelInternational river basins Tirso De Molina A, Meliá Buenos Aires HotelThe legal advantages and risks of global outsourcing and contracting out and best practices for drafting and implementing cross-border and secondment employment agreements La Pampa (1st Floor)Family relationships and immigration: traditional concepts at the crossroads Golden Horn (1st Floor)The intersection of the credit markets and insolvency Retiro A (1st Floor)Gazing into the future: What will the regulation of tomorrow look like? Catalinas (1st Floor)We know where you are: geopositioning and the law Ombú II (2nd Floor)Show me the money: representing athletes and sport franchises El Aguila (24th Floor)Global trends in direct taxation: part I Atalaya (24th Floor)Can Africa compete? The role of Public Private Partnerships, venture capital, sovereign wealth funds, multilateral and bilateral institutions for accelerated economic growth Tirso De Molina C, Meliá Buenos Aires HotelCost-effective ways to train and develop your lawyers Poncho (2nd Floor)Hot topics in legal ethics Ombú I (2nd Floor)Increase your value to current and future clients: the RAINBOW strategy San Telmo (Ground Floor)Tuesday AM 1000 – 1130The importance of bar associations having Young Lawyers’ committees Martín Fierro I (2nd Floor)Tuesday PM 1200 – 1400Gender equality in bar associations Martín Fierro I (2nd Floor)Tuesday PM 1300 – 1400Leisure Industries Section: Open business meeting El Aguila (24th Floor)Tuesday PM 1300 – 1500Discrimination Law: Committee business meeting La Pampa (1st Floor)Tuesday lunch 1300Asia Pacific Forum lunch Florida Rooms, The Marriott Plaza HotelLatin American Regional Forum lunch Fiestas Room, The Marriott Plaza HotelWomen Lawyers’ lunch Dorado Room, The Marriott Plaza HotelCommittees on Banking Law and Securities Law joint lunch Casa CruzTuesday lunch 1315 Mediation Committee lunch West BengalTuesday lunch 1330Antitrust Committee lunch Circulo MilitarTuesday PM 1500 – 1800Sales, soles, customs and pirates: a case study in international sales in the new millenium Golden Horn (1st Floor)Management equity: economic, cultural and fiduciary issues San Telmo (Ground Floor)Arbitral procedure: new developments and good practice Libertador B (1st Floor)Private international law workshop Retiro C (1st Floor)Hot topics in mediation Libertador A (1st Floor)Environmental protection versus industrial development – have we gone too far? Tirso De Molina B, Meliá Buenos Aires HotelThe host countries’ perspective towards mining investments Casona A, Meliá Buenos Aires HotelProperty-related investments Retiro B (1st Floor)Structuring takeovers of financial institutions Retiro A (1st Floor)Recent developments in discrimination laws: indigenous peoples’ rights and new remedies Río de la Plata (2nd Floor)Compliance with rules and regulations pertaining to cross-border transfer of personnel and business data and best global practices to protect valuable and confidential business relationships La Pampa (1st Floor)The emergence of the Third Screen: insights into the legal, regulatory and business issues around mobile television Catalinas (1st Floor)Thinking outside the box – creative defences to intellectual property infringement actions Libertador C (1st Floor)Franchising in Central and South America Ombú I (2nd Floor)Special purpose tours – can I please have a nose job with my resort? Auditorium (Ground Floor)Cross-border relocation of companies Tirso De Molina C, Meliá Buenos Aires HotelPromoting rule of law in Africa: the role of regional institutions Casona B, Meliá Buenos Aires HotelDistribution and licensing in Latin America and Asia Atalaya (24th Floor)Cross border M&A transactions: state’s interests versus European rules Martín Fierro II (2nd Floor)Global update on anti-corruption enforcement Ombú II (2nd Floor)Are lawyers laundering money? Poncho (2nd Floor)Privilege versus professional responsibility Martín Fierro I (2nd Floor)The independence of the legal profession Tirso De Molina A, Meliá Buenos Aires HotelManaging a modern law firm – is a corporate approach compatible with the core principles of the legal profession? El Aguila (24th Floor)Tuesday eveningTuesday PM 1830Newcomers’ reception Fiestas Room, The Marriott Plaza HotelLeisure Industries Section, Latin American Regional Forum, Media Law Committee and Young Lawyers’ Committee joint dinner and tour Boca Stadium (La Bombonera) and MuseumTuesday PM 2000Joint Senior Lawyers and Women Lawyers Tango dinner Dock TRES, Puerto MaderoTuesday PM 2030Anti-Corruption Committee dinner La CabanaCommittees on Communications Law and Space Law joint dinner Piegari Vittelo & DolceCorporate and M&A Law Committee dinner LolaInvestment Funds Committee dinner SottovoceTaxation Section dinner La Bourgogne at Alvear Palace Hotel BallroomTuesday PM 2130Section on Energy, Environment, Natural Resources and Infrastructure Law (SEERIL) dinner Subito

All locations in Sheraton Buenos Aires Hoteland Convention Center unless stated

V endor due diligence is becomingincreasingly common in LatinAmerican M&A, but a lack of professionalinsurance in the region means that relianceletters are even more important. At an over-crowded session yesterday morning, CarlosUrrutia of Brigard & Urrutia of Colombiaexplained the problem.

“Professional liability insurance is notwidely held in Latin America,” he said.“And if a firm does have insurance, then itis for a fraction of the value of Europeanlevels. Law firms therefore have to be verycareful. The reliance letters that they draftmust cover liability caps and have dis-claimers or the law firm could fold.”

Vendor due diligence is conducted by sell-ers who want to make it easy to generateinterest in an auction and do not want multi-ple bidders conducting their own diligence atthe same time. It is extremely beneficial to theinvestment banker running the auction too asit ensures that the first round of bids is basedon useful information and therefore shouldreflect a fair market value. To some extent, italso avoids price erosion and bidders droppingout in the second round, as they have alreadyhad a guided tour of the data room.

Earlier in the session, Jacques Buhartfrom Herbert Smith’s Paris office explainedhow a typical European process works. First,the lawyers conducting the vendor due dili-gence write a release letter to all the biddersto explain that they have no contractualrelationship with them. Even in this initial

letter, there are many disclaimers to preventthem being sued over misstatement, mis-leading statements and the like. The biddersare then shortlisted and eventually anacquirer is selected.

“This is when the law firm writes thereliance letter to confirm the report to theacquirer,” he said. “It indicates that there hasbeen no independent review of the vendordue diligence, it says that there may be moreinformation that is not covered in the reportand then it sets the liability cap.”

After joking that vendor due diligence isone of the only uncivilised things that the UKhas exported, Charles Martin of Macfarlanesin London agreed with Buhart that Europeanliability caps can be as much as £20 millionto £25 million ($35 million to $43 million).

This is the essence of the problem. LargeEuropean firms can afford to include largecaps in their reliance letters because they canafford to insure against such cost. This is notwidespread practice in Latin America, but asco-chair Jaime Carey of Carey y Cía half-jokingly warned: “If there is insurance,there is more incentive to sue!”

The solution therefore is to ensure thatLatin American lawyers draft affordable lia-bility caps into their reliance letters. Clarityof terminology is all important to ensurethat the letter is enforceable. That said,things are made difficult in many jurisdic-tions in the region where gross negligencecan be a criminal charge that overrides allliability caps. Insurance may be an inevitable

consequence if vendor due diligence contin-ues to grow in the region.

Later in the session, the panel’s discussionturned to material adverse change (Mac)clauses. These are added to contracts to pro-tect the buyer in the weeks between agree-ing to purchase and closing a transaction.Essentially, they are designed to ensure thatbuyers are not forced to purchase at theagreed price if a material adverse change(that typically affects the value of the target)occurs. Mac clauses can be as specific orgeneral as you like, although the latterwould lead to increased enforceability issues.Normal carve-outs to a Mac clause includegeneral economic issues, terrorism, changesin the law and other such provisions.

After describing Mac clauses to the audi-ence, Allen Miller of Chadbourne & Parke

in New York then set ahypothetical scenariofor the other panelliststo comment on. Heasked them if theythought it would beenforceable in theirjurisdictions.

“The majority ofLatin American juris-dictions do not havecase law on this yet,”said Jose Luiz Homemde Mello of PinheiroNeto Advogado in SãoPaulo. “But if the Mac

is clearly defined, then I think it would beenforceable.”

Urrutia from Bogotá agreed: “Therehaven’t been many, if any, court decisions inthe region. But if the clause is clear enough,the seller could walk away. However, theissue of good faith and fair dealing may arise.”

The UK perspective was less enthusiastic.Martin had strong doubts that the Mac clausecould be relied upon. It was at this point thatMiller revealed that the hypothetical situationwas actually IBP v Tyson Foods. In this case,the Delaware Court of Chancery found thatthe Mac clause could not be enforced.

This prompted Miller to declare: “Thereis no beef in the big Mac.” That may be thecase in the northern hemisphere, but in LatinAmerica, as with the abundance of steak, theopinion of lawyers is more positive.

L awyers must not underestimate theirrole in major crisis responses, andshould familiarise themselves with civil con-tingency plans sooner rather than later,according to an expert in civil emergenciesmanagement.

Speaking at the Water Law session onWater and Terrorism former policeman TomPine, now an adviser to the EU on justiceand home affairs, told those present that“when the day comes you need to be able tohit the ground running. During the crisis isnot the time to start reading the legislation”.

Pine insisted that lawyers have a uniquerole to play in preparing businesses forfuture civil emergencies, whether as a resultof terrorist acts or natural disasters.

This role first comes into play whencompanies are devising contingency plans; asituation where lawyers are likely to be theonly people able to act as “brokers”between competitors who might not other-wise liaise effectively.

When a crisis does occur, lawyers shouldalready have planned the correct legal action,and be present at every stage to generateideas and ensure due digilence is carried out.

But it is after an emergency that thework really starts for lawyers. Unless civiland business contingency plans are flawless,companies and governments may face mul-tiple cases relating to collateral costs, recrim-inations and compensation claims.

Pine also urged lawyers to hold firms

accountable for adhering to standards of ethics,human rights and rule of law. Operating dur-ing times of crisis, he said, was “not an excuseto throw away standards,” but to “deal withthese situations in a time-honoured way; bythinking our way out of them”.

To ignore such considerations whenplaced under pressure was “giving the ter-rorists exactly what they want”.

www.legalmediagroup.comIBA Daily News - Tuesday, October 14 2008 15

Ex-cop cautions lawyersWATER LAW

Do Argentine big Macs have enough beef?CORPORATE AND M&A LAW

“The crisis is not thetime to start readingthe legislation”Tom Pine

Allen Miller questions the benefit of Mac clauses