february 2014 e-bulletin conferences & events · february 2014 e-bulletin member news country...
TRANSCRIPT
►BAKER BOTTS Represents Underwriters in USD$1.5 Billion IPO of Rice Energy
►CAREY Acts for VTR in Liberty Global Reorganization of its Credit Pools
►CLAYTON UTZ Congratulates Greencross and Mammoth Pet on Merger
►DENTONS Advises E.ON on acquisition of Russian Company Noginsky Teplovoy Centerfrom AMG Industrial
►GIDE Acts as Bank Counsel in Two Parallel USD bond offerings by EDF (USD $4.7 Billion& USD $1.5 Billion)
►HOGAN LOVELLS Advises on US$128M Aerospace Sector Acquisition of APPH
►KING & WOOD MALLESONS Advises China Huarong on Huayuan 2014 CLOSecuritisation Trust Scheme-Phase 1
►McKENNA LONG & ALDRIDGE Secures Victory for Union Carbide in LivingMesothelioma Case
►NAUTADUTILH Advises Underwriters in Altice IPO
►RODYK Advises UTAC in USD$116.5 Million Acquisition of 3 Panasonic Subsidiaries
►SKRINE Acts in Landmark Conditional Block Exemption Order for Liner Operators
►TOZZINI FREIRE Acts for SBA Torres Brasil Acquisition of large wireless telecomcompany
PA
CIF
IC R
IM A
DV
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UN
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►ARIFA Elects Three Lawyers o Partnership►Baker Botts Adds High Profile White Collar Partner►Dentons Canada Adds 22 Partners and Counsel►Gide Promotes 19 Lawyers to Counsel►Hogan Lovells Continues Expansion in Los Angeles►McKenna Long & Aldridge 6 Lawyers Elected to
Partnership►Simpson Grierson Adds Leading Commercial
Partner►Skrine Promotes Two to Partnership
►ARGENTINA New Rules Applicable to Inflows ofDirect Investments ALLENDE BREA ►AUSTRALIA ACCC Goes Online: Scoopon Fined$1Million for Misleading Conduct CLAYTON UTZ ►BELGIUM Renewable Energy Financing SurveyNAUTA DUTILH ►BRAZIL Listed Companies Allowed to DiscloseRelevant Facts Thru Internet News Websites TOZZINI FREIRE ►CANADA Supreme Court of Canada DeliversLandmark Decisions on Summary Judgment Motions DENTONS CANADA LLP ►CHILE New Information Request for EnvironmentalApproval Resolution Holders CAREY ►CHINA Resale Price Maintenance under AMLKING & WOOD MALLESONS ►FRANCE European Commission Adopts New Ruleson Risk Finance Investments GIDE ►INDONESIA New Banking Regulations MinimumCapital Requirements and Multiple Licensing ABNR ►MALAYSIA Questioning the Royalty SKRINE►MEXICO Energy Reform in Oil & Gas SectorSANTAMARINA Y STETA ►NEW ZEALAND Interim Injunctions Potential Costof Winning the Battle but Losing the War SIMPSON GRIERSON ►SOUTH AFRICA Job Losses and Business Rescue“A Lost Opportunity” WERKSMANS ATTORNEYS ►TAIWAN Royalties Paid As from 2011 on ForeignPatents and Computer Programs May Be Tax Exempt LEE & LI ►UNITED STATES►Texas Supreme Court Issues Liability-CoverageDecision Favorable to the Construction Industry BAKER BOTTS ►Annual FCC CPNI Certification Due by March 3DAVIS WRIGHT TREMAINE ►Federal Judge Limits Antitrust Scrutiny of Pharma-ceutical Reverse Payments to Settlements Involving Monetary Transfers HOGAN LOVELLS ►Employer Mandate Delayed Again for SomeEmployers McKENNA LONG & ALDRIDGE
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January, 2014 -- Arias, Fabrega & Fabrega (ARIFA) is pleased to announce that three lawyers have been elected to the partnership effective January 1, 2014. As a group, they represent clients across the spectrum of practice areas and industry sectors for which the firm is renowned. Jorge Loaiza III has 24 years of experience with ARIFA. He has served as our resident attorney in ARIFA”s London office from 2000-2005. His extensive experience in maritime border financings has been recognized by law firm directories Chambers Global and Chambers Latin America, ranking him as a leading lawyer in Panama. Jorge was a member of the drafting committee, and contributor to, the 2009 Amendments to Law 8 of 1982 Maritime Judicial Procedure. He was also part of the joint commission of the government and maritime lawyers for complementary regulations to Law 57 of the 2008 Merchant Marine Administration. Recently, Jorge led the ARIFA shipping legal team on three global maritime financings that were each recognized as Deal of the Year by Marine Money Offshore. Rodrigo Cardoze is a member of ARIFA’s experienced team of financial lawyers since 2004. He has participated with dis-tinction in the firm’s key cross border transactions and has served as counsel in some of the largest and most important capital markets transactions in the country. For his vision creativity and pragmatism, Rodrigo is recognized as a leading lawyer by law firm directories IFLR1000 Panama, Chambers Global, and Chambers Latin America. Regional legal publica-tion Latin Lawyer lists him as a “rising star”. Rodrigo is Alternate Director of the Panama Stock Exchange, Latin Clear (central custody authorized in Panama), Fondo General de Inversiones, and Banco La Hipotecaria. Rodrigo is also admitted to practice in Florida. Juan Fernando Corro With 24 years of experience, Juan Fernando is an accomplished lawyer with skills in different disci-plines. He is especially recognized for his expertise in the area of civil an commercial contracts, as well as in handling civil, com-mercial and administrative processes with the participation of major clients in the petrochemical industry and real estate. For additional information visit www.arifa.com
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A R I F A E L E C T S T H R E E L A W Y E R S T O P A R T N E R S H I P
Renowned White-Collar Criminal Lawyer Andrew Lankler Joins Baker Botts as Partner in Firm’s New York Office
NEW YORK, 3 February, 2014 -- Andrew Lankler, a former prosecutor in the Manhattan District Attorney’s Office known for his representation of high-profile, white-collar criminal clients, joined Baker Botts today as a partner in the firm’s New York office. Lankler has represented a number of newsmakers, including television personality Greg Kelly and Bernard Madoff's audi-tor, David Friehling. "Behind the headlines of the many cases Andrew has been involved in over the years is a skilled, talented and well-respected trial lawyer, and we are fortunate he has decided to join our firm," said Baker Botts Managing Partner Andrew Baker. "Andrew is known for saying little outside the courtroom concerning his clients, but taking care to make certain they are well-represented on the often-times highly publicized issues they face." Lankler has tackled a number of criminal cases arising from the construction industry, including a racketeering case against a powerful carpenters' union leader, who was acquitted at trial, and a nearly three-month-long trial of a concrete testing laboratory and its executives charged with faking results for ground zero's signature skyscraper and other land-marks. Lankler is a second-generation presence on the New York legal scene. His father, Roderick C. Lankler, was a special prosecutor investigating corruption in the city's criminal justice system in the early 1980s and later worked under Robert Fiske, the original independent counsel for the Whitewater probe during the Clinton administration. Prior to joining Baker Botts, Lankler was the founding partner of Lankler, Carragher & Horwitz LLP. He spent six years in the 1990s working in the Manhattan District Attorney's office. He is a graduate of George Washington University and its law school. Lankler is a Fellow of the American College of Trial Lawyers. He recently served as a member of the New York State White Collar Task Force which prepared a report recommending amendments to the New York fraud and corruption statutes. For additional information visit www.bakerbotts.com
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13 February, 2014 - Dentons Canada LLP is pleased to announce that 22 partners and counsel have joined the firm’s offices in Montreal and Toronto.
“Dentons is recognized for the quality of our service and dedication to our clients’ business needs, here in Canada and around the world,” said Chris Pinnington, Dentons’ Canada Chief Executive Officer. “The combined practice and sector expertise of this highly talented group is perfectly aligned with our Canadian and global strategy. These lawyers will add tremendous value to our clients on a national and international scale.”
“We are delighted to welcome these accomplished lawyers to our global firm,” said Elliott Portnoy, Dentons’ Global Chief Executive Officer. “Our clients will benefit from the experience and insights they each bring to our team, further enhancing our firm’s strength in key areas of expertise and exceptional client service.”
The arriving lawyers are joining key practice areas at Dentons, complementing and building on the strength of the firm’s current groups. To date, 19 lawyers are joining Dentons’ Toronto office:
•Jay Duffield, Adam S. Goodman, Martha Harrison, Mike Hollinger, Paul Lalonde, James McVicar, Gavin Sinclair and Keith Stein (counsel) (Corporate);
•Michael Davies, Michael Henriques and Ryan Middleton (Financial Services);
•Norman Bacal (counsel), Ken Dhaliwal, Jim Russell, David Steinberg and Bob Tarantino (counsel) (Entertainment);
•Mark Jadd and Yves St-Cyr (Tax); and
•Scott Martyn (counsel) (Real Estate/Infrastructure).
In Montreal, Terrence Didus (counsel) joins Dentons’ Financial Services group, Ilan Dunsky joins the Infrastructure/PPP group and Michel Poirier (counsel) joins the Real Estate group, in addition to Chantal Sylvestre (Real Estate) and Joel Cabelli (Financial Services), whose arrival was announced earlier this month.
These lawyers come to Dentons Canada from Heenan Blaikie LLP. Dentons is also in discussions with a number of Heenan Blaikie associates. Since Dentons’ global combination became effective last March, Dentons Canada has engaged in a targeted strategic recruitment campaign to grow key practices and further enhance the firm’s client services. Before this announcement, 13 new partners and six new counsel joined Dentons Canada since its creation, including the recently announced arrival of the 20th Prime Minister of Canada, The Right Honourable Jean Chrétien. For additional information visit www.dentons.com
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D E N T O N S C A N A D A A D D S 2 2 P A R T N E R S A N D C O U N S E L
Gide is delighted to announce the promotion of 19 promising young lawyers to the status of Counsel in Algiers, Brussels and Paris, in nine practice areas.
The new status highlights an excellent career within Gide. Each candidate was unanimously backed by his or her practice group, received individual sponsorship, and was approved by a commission comprising four partners. The status has been conferred by the Management Committee for an initial period of three years.
Frédéric Nouel, member of the Management Committee, says: “In creating the status of Counsel, Gide wished to support the professional advancement of its most promising lawyers. In the name of all the partners, I warmly congratulate these 19 young lawyers and thank them for their commitment to Gide’s clients.”
The appointments are effective as of 1 January 2014.
For additional information visit www.gide.com
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G I D E P R O M O T E S 1 9 L A W Y E R S T O C O U N S E L
Mergers & Acquisitions Cira Veronica Caroscio Alexis Pailleret Annabelle Raguenet de Saint-Albin Rym Loucif Competition & International Trade Sophie Quesson Banking & Finance Thomas Binet Frédéric Daul Laetitia Lemercier Rima Maîtrehenry Chucri Serhal Dispute Resolution Audrey Kukulski Alexandra Munoz
Insurance, Industrial Risk & Transport Charles-Eric Delamare-Deboutteville Projects (Finance & Infrastructure) Marie Bouvet-Guiramand Pierre Wiehn Public & Administrative Law Etienne Amblard Sylvain Bergès Real Estate Nicolas Planchot Tax Bertrand Jouanneau
Healthcare Litigation Partner Michael Maddigan Joins Firm LOS ANGELES, 11 February 2014 – Hogan Lovells today announced the continued expansion of its Los Angeles office with the addition of Litigation partner Michael Maddigan. His arrival continues the firm’s string of strategic additions to the Los Angeles office in recent months. “Mike brings further strength to our existing class action capabilities in the Los Angeles office,” said Global Co-Head of Hogan Lovells’ Litigation and Arbitration Practice Stephen Immelt. “As we continue expanding our leading litigation practice, his arrival reinforces our reputation in this area.” Maddigan’s arrival complements the recent additions of corporate mergers and acquisitions partners Barry Dastin and Russ Cashdan, and media and entertainment partner Sheri Jeffrey. Maddigan joins Hogan Lovells from the Los Angeles office of O’Melveny & Myers. “As we continue expanding our California presence, including the Los Angeles office, Mike’s arrival reinforces our global Healthcare practice and Life Sciences industry group,” said Los Angeles office Managing Partner Barry Dastin. “His healthcare litigation practice matches perfectly with Hogan Lovells’ deep healthcare regulatory expertise.” Maddigan served as Co-Chair of his previous firm’s Health Care and Life Sciences practice, Co-Head of the Litigation Department Training Program, and has held the positions of President, Vice-President, Treasurer, and Secretary of the Association of Business Trial Lawyers. He has represented health plans, insurers, technology companies, entertainment entities, and emerging companies in complex class action, coverage, and business disputes involving health care, privacy, insurance, antitrust, and business issues. Maddigan has represented a number of health plans, with deep experience in health care and other class actions. He is also a co-author of “Health Care Reform: Law and Practice,” a publication that provides guidance on the Affordable Care Act's impact on health plans, employers, and individuals, along with a co-author and editor of “Medical Records Privacy Under HIPAA.” He received his B.S.F.S. cum laude from the Georgetown University School of Foreign Service and received his J.D. from the University of California at Berkeley where he was Articles Editor of the California Law Review. Maddigan is also active in the Los Angeles community, serving on the Board of Directors of the City Law Center along with the Board of Directors of the Los Angeles Legal Aid Foundation. “I am thrilled to join Hogan Lovells and have the highest regard for the firm and its lawyers,” said Maddigan. “I look forward to working closely with members of both the Litigation team and the Life Sciences group to provide clients with the highest-level of service.”
For additional information, visit www.hoganlovells.com
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H O G A N L O V E L L S C O N T I N U E S E X P A N S I O N I N L O S A N G E L E S
ATLANTA, 6 January, 2014 — The law firm of McKenna Long & Aldridge LLP (MLA) announces the election of six lawyers to the firm’s partnership, effective January 1, 2014. The new partners operate across a range of practice areas including corporate, government contracts, litigation and real estate.
“Based on their commitment to superior client service and significant contributions to the firm, we welcome these six attorneys to the partnership,” said MLA Chairman Jeff Haidet. “We look forward to their continued success as partners.”
The new partners are:
Clayton Coley is a member of the firm’s corporate practice and has extensive experience in a variety of transactions including representation of both strategic and financial buyers in merger and acquisition transactions, and related aspects of federal and state securities laws. He has worked on numerous private equity transactions, representing both investors and early-stage companies seeking financing.
Matthew Royko is a member of the firm’s real estate practice and focuses on real estate banking and finance matters, specifically the areas of secured and unsecured lending transactions and acquisition financings. His clients have included syndicate banks and agents in bi-lateral and syndicated acquisitions and working capital financings, master servicers in connection with assumptions and modifications of securitized loans and borrowers in the acquisition, development, leasing and disposition of a variety of real estate asset types.
Christopher Myers is a member of the firm’s government contracts practices focuses on all aspects of government contracts litigation and counseling, with an emphasis on claims and disputes, internal investigations, False Claims Act litigation and bid protests. His work also focuses on defense of fraud
David Schultz is a member of the firm’s litigation practice. He focuses on civil and appellate litigation. For over 20 years, he has litigated high exposure cases involving a wide variety of claims, including product liability, toxic torts, breach of warranty, motor vehicle negligence, business torts, premises liability, fraud, breach of contract, and insurance defense matters.
Gary Brucker is a member of the firm’s litigation practice. He represents businesses and individuals in a wide variety of civil, criminal, and regulatory matters.
Thomas Proctor is a member of the litigation group representing insurance companies in class action and bad faith litigation. He has represented his insurance clients in a vast array of first and third-party bad faith lawsuits. For additional information visit www.mckennalong.com
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M C K E N N A L O N G & A L D R I D G E E L E C T S 6 L A W Y E R S T O P A R T N E R S H I P
Simpson Grierson strengthens its Christchurch office with the appointment of Hugh Lindo to the partnership. Hugh's appointment is part of the planned growth of Simpson Grierson's Christchurch office. He is one of the city's leading commercial lawyers and brings a wealth of experience, as well as local knowledge, to the firm. Hugh is well-known in the Christchurch community. He holds a number of Board and governance appointments with the Canterbury Employers Chamber of Commerce (vice-President), The Court Theatre Foundation (Chair), Champion Canterbury Limited and College House. Hugh joins Simpson Grierson after a long and successful career with a large national law firm. On his move Hugh says: "I am thrilled to have joined Simpson Grierson. I look forward to supporting the work of the firm in Christchurch and growing the office in response to the needs of our clients here. Christchurch and Canterbury will experience the most significant transformation of any region in the country over the next 10 or more years. Simpson Grierson with its integrated national network and international connections is well placed to deliver excellent and pragmatic advice to its clients throughout this period and beyond." Kevin Jaffe, Simpson Grierson's Chairman says "We are delighted to have a lawyer of Hugh's calibre and reputation join the partnership. His appointment is a great step in the on-going development of our Christchurch office." Simpson Grierson has long worked in the Christchurch market. In June 2013 the firm moved to high quality new premises in the HSBC Tower on Worcester Boulevard. For additional information visit www.simpsongrierson.com
We are pleased to announce that Too Ji Voon and Jillian Chia have been admitted as Partners of the Firm with effect from 1 January 2014. Ji Voon is a member of our Corporate Division. She graduated with an LLB from the University of London in 2003. Her main areas of practice are banking and real estate.
Jillian Chia is a member of our Intellectual Property Division. She graduated with an LLB from the University of Nottingham in 2005. Her main areas of practice encompass information technology, telecommunications, intellectual property and personal data protection laws. These appointments will further enhance and strengthen our Firm’s capabilities in delivering premium legal services to our valued clients. For additional information visit us at www.skrine.com
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S I M P S O N G R I E R S O N S T R E N G T H E N S C H R I S T C H U R C H O F F I C E W I T H A D D I T I O N O F L E A D I N G C O M M E R C I A L L A W Y E R
S K R I N E P R O M O T E S T W O T O P A R T N E R S H I P
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D E N T O N S A D V I S E S E . O N O N A C Q U I S I T I O N O F R U S S I A N C O M P A N Y N O G I N S K Y T E P L O V O Y C E N T E R F R O M A M G I N D U S T R I A L
BERLIN/MOSCOW - Global law firm Dentons advised the electricity and gas provider E.ON Connecting Energies (ECT), a new international unit of E.ON Group, on the acquisition of the Russian company Noginsky Teplovoy Center (NTZ) from AMG Industrial Investment Corporation. NTZ provides heat and energy through a cogeneration plant to the Noginsk Industrial Park, located about 50 kilometers from Moscow. Tenants include leading companies such as the chemical and pharmaceutical group Bayer, the retail chain Metro and the Russian mobile service provider MegaFon. Closing of the transaction is conditional to obtaining Russian merger control approval and is scheduled to take place in spring 2014.
Additionally, ECT and DEGA, the Swiss parent company of AMG, entered into a long-term joint-venture agreement to build, own and operate on-site combined heat and power generation facilities for future similar industrial parks in Russia.
The Berlin and Moscow Dentons team led by partner Dr. Christof Kautzsch advised the buyer during the entire transaction – from due diligence to drafting and negotiating contracts (including contracts under Swiss law) and merger control approval in Russia. This demonstrates once again Dentons’ ability to provide seamless advice to cross-border clients.
Advisor E.ON Connecting Energies: Dentons (Berlin):Dr. Christof Kautzsch (Partner),Judith Aron (Senior Associate, both leading),Dr. Daniel Barth (Counsel), Dr. Dennis Azara (Associate, all corporate/M&A); Dentons (Moscow): Alexei Zakharko (Partner),Marat Mouradov (Partner), Nadezhda Gryazeyva (Of Counsel), Sergey Gurdzhian (Associate, all corporate), Artashes Oganov (Associate, real estate)
For additional information visit www.dentons.com
C L A Y T O N U T Z C O N G R A T U L A T E S G R E E N C R O S S L I M I T E D A N D M A M M O T H P E T O N T H E I R A $ 7 5 0 M I L L I O N M E R G E R
SYDNEY, 31 January 2014: Clayton Utz has provided strategic legal advice and support to leading Australian veterinary group Greencross Limited ("Greencross") on its merger with Mammoth Pet Holdings Pty Ltd ("Mammoth"), which owns the Petbarn pet products and supply business. The transaction, which was signed on 14 November 2013, achieved successful completion today, creating a group with a market capitalisation of A$750 million.
Clayton Utz corporate partner Simon Truskett led the firm's transaction team, which included fellow corporate partner John Elliott and senior associates, Richard Knott and Anna Haynes.
Under the terms of the transaction, Greencross acquired 100% of Mammoth Pet Holdings, in exchange for issuing approximately 52.6 million shares to Mammoth sharehold-ers. The merger has created Australasia’s largest integrated consumer facing pet care company, with 232 stores and veterinary clinics across Australia and New Zealand.
For additional information visit www.claytonutz.com
B A K E R B O T T S R E P R E S E N T S U N D E R W R I T E R S I N $ 1 . 0 5 B I L L I O N I P O O F R I C E E N E R G Y
HOUSTON, 31 January, 2014 -- On January 29, 2014, Rice Energy Inc. (NYSE: RICE) closed its $1.05 billion initial public offering of 50 million common shares at a price to the public of $21 per share. RICE offered 30 million shares, while the selling stockholder — NGP Holdings — offered 20 million shares. The company won't receive any proceeds from shares sold by NGP Holdings. Barclays, Citigroup, Goldman, Sachs & Co., Wells Fargo Securities, BMO Capital Markets, RBC Capital Markets, Comerica Securities, SunTrust Robinson Humphrey, Tudor, Pickering, Holt & Co., Capital One Securities, FBR, Scotiabank/Howard Weil, Johnson Rice & Company L.L.C. and Sterne Agee served as the underwriters in the offering. Baker Botts represented the underwriters in this transaction.
For additional information visit www.bakerbotts.com
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N A U T A D U T I L H A S S I S T S I N T H E I P O O F A L T I C E
04 February, 2014 With their longstanding capital market expertise, the Luxembourg and Dutch teams of NautaDutilh advised the underwriters, represented by Goldman Sachs International and Morgan Stanley & Co International plc, acting as global coordinators and joint bookrunners, in respect of the initial public offering (IPO) by Altice S.A.
Altice is a multinational Luxembourg-based cable and telecommunications company with a presence in Western Europe, Israel, and the French Overseas Territories. The company, founded by entrepreneur Patrick Drahi, delivers cable-based services (high quality pay television, fast broadband Internet and fixed line telephony) and, in certain countries, mobile telephony services, to residential and corporate customers.
Altice plans to raise about 750 million euros (USD 1 billion) to pay down debt and help support its growth strategy. About up to 25% of Altice's shares will be sold with the stock set to trade on Euronext in Amsterdam, the Netherlands.
The NautaDutilh team in Luxembourg was led by Banking & Finance partner Josée Weydert and consisted of Ann Blaton, Noemi Gemesi (Banking & Finance), Romain Sabatier, Elisa Faraldo (Corporate), Jean-Marc Groelly and Frank Heykes (Tax). The team in the Netherlands was led by Banking & Finance partner Petra Zijp and consisted of Mark Mouthaan, Joyce Trebus (Banking & Finance), Nico Blom and Saskia Bijl de Vroe (Tax). For additional information visit www.nautadutilh.com
G I D E A C T S A S B A N K C O U N S E L I N T W O P A R A L L E L U S D B O N D O F F E R I N G S B Y E D F ( U S D 4 . 7 B I L L I O N A N D U S D 1 . 5 B I L L I O N )
Gide advised the underwriting syndicates in the context of two U.S. dollar bond offerings by EDF in the form of private placements.
The first offering was a $4.7 billion senior bond issue in 5 tranches, including:
$750 million, at floating rate with a 3-year maturity; $1 billion, with a 3-year maturity and a fixed coupon of 1.15%; $1.25 billion, with a 5-year maturity and a fixed coupon of 2.15%; $1 billion, with a 30-year maturity and a fixed coupon of 4.875%; and $700 million, with a 100-year maturity and a fixed coupon of 6.00% The second offering was a $1.5 billion hybrid with a 10-year first call date.
The Gide team was led by Melinda Stege Arsouze, a U.S. law partner, assisted mainly by Scott Logan and Romain Querenet de Breville. For additional information visit www.gide.com
R O D Y K A D V I S E S U T A C I N U S D $ 1 1 6 . 5 M I L L I O N A C Q U I S I T I O N O F 3 P A N A S O N I C S U B S I D I A R I E S
Rodyk acted for Panasonic Corporation in connection with the sale and purchase agreement for the sale of three subsidiaries of Panasonic to UTAC Manufacturing Services Limited, a wholly-owned subsidiary of UTAC Holdings Ltd, a leading semiconductor testing and assembly services provider headquartered in Singapore. The three Panasonic subsidiaries being divested operate semiconductor testing and assembly facilities, and are strategically located in Singapore, Indonesia and Malaysia. The total transaction value for the acquisition by UTAC will be US$116.5 million, payable over five years, inclusive of certain transitional services agreements with Panasonic. Panasonic's sale of the three subsidiaries is part of the company's structural transformation of its semiconductor business. On completion of the transaction, Panasonic will continue to utilise the services of the three facilities sold to UTAC as contract manufacturers for semiconductor testing and assembly. Corporate partner Gerald Singham led the team. He is supported by corporate partner Terence Yeo, finance partner Dawn Tong and intellectual property & technology partner Catherine Lee. Corporate associate Mohamad Rizuan assisted. For additional information visit www.rodyk.com
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H O G A N L O V E L L S A D V I S E S O N U S $ 1 2 8 M A E R O S P A C E S E C T O R A C Q U I S I T I O N O F A P P H
LONDON, 7 February 2014 - A cross-practice, cross-border Hogan Lovells' team has advised Héroux-Devtek Inc. on the US$128 million acquisition of APPH Limited and APPH Wichita, Inc. (together APPH), subsidiaries of BBA Aviation Plc; announced this week. This marks the first time Hogan Lovells has advised this client in Europe. Héroux-Devtek is a leading Canadian manufacturer of aerospace products specialising in the design, development, manufacture and repair and overhaul of landing gear systems and components for the Aerospace market. It will acquire four plants from APPH, which specialises in the design, engineering, manufacturing and aftermarket support of landing gear and hydraulic systems and assemblies for fixed and rotary wing civil and military aircraft, both for original equipment manufacturer and aftermarket applications. The plants, three located in the United Kingdom and one in Wichita, Kansas, have a combined workforce of approximately 400 employees, including a design engineering department staffed with 40 professionals. APPH’s main design programs include landing gear systems for the Hawk, SAAB Gripen, AW101, C27J Spartan and EC175 aircraft. The Hogan Lovells team advising Héroux-Devtek was led by London corporate partner Richard Ufland, with senior associate Michael Stewart, and partner Stephen Propst and associate Les Reese in Washington D.C. They were supported by IP partner Mark Taylor and associate Matthew Sharkey; tax partner Philip Harle; environmental partner Christopher Norton and associate Helen Lamb; insurance partner Helen Chapman; and partner Paul Joukador and associate George Jenkins on export control matters (all in London) and by antitrust partner Joe Krauss; environmental partner Latane Montague; employment partner Carin Carithers; and aviation attorneys Kathy Miljanic and Brian Curran (all in Washington. Commenting on the acquisition, Richard said: "Héroux-Devtek is the third largest landing gear company worldwide and we are pleased to have advised them on this im-portant strategic acquisition, which is their first in Europe, permitting them to grow their geographical footprint, product content and customer base."
For additional information visit www.hoganlovells.com
SKRINE Corporate Partner, Faizah Jamaludin, and her team consisting of Associates, Tan Shi Wen and Syaida Abdul Majid, represented the liner operators in a landmark development in Malaysian Competition law when they obtained a conditional block exemption order for the liner operators, the first of its kind, granted by the Malaysian Competition Commission (MyCC) under the Malaysian Competition Act 2010.
Linked for your further reference are a news report, the draft block exemption order and the explanatory note in respect of the first block exemption granted by MyCC under the Competition Act 2010.
http://service.meltwaternews.com/mnews/redirect.html?docId=3185687020&userId=2339993&cId=602885&agentId=697493&type=2&s=3621&url=http%3A%2F%2Fwww.thestar.com.my%2FBusiness%2FBusiness-News%2F2013%2F12%2F20%2FMYCC-GRANTS-CONDITIONAL-BLOCK-EXEMPTION-FOR-LINER-SHIPPING-AGREEMENTS.aspx
http://www.mycc.gov.my/file/legislation/Competition%20(Block%20Exemption%20for%20Vessel%20Sharing%20Agreements%20and%20Voluntary%20Discussion%20Agreements%20%20in%20respect%20of%20Liner%20Shipping)%20Order%202013.pdf
http://www.mycc.gov.my/file/legislation/Explanatory%20Note%20for%20Competition%20(Block%20Exemption%20for%20Vessel%20Sharing%20Agreements%20and%20Voluntary%20Discussion%20Agreements%20in%20respect%20of%20Liner%20Shipping)%20Order%202013.pdf
For additional information visit www.skrine.com
S K R I N E A C T S I N L A N D M A R K C O N D I T I O N A L B L O C K E X E M P T I O N O R D E R F O R L I N E R O P E R A T O R S
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K I N G & W O O D M A L L E S O N S A D V I S E S C H I N A H U A R O N G O N H U A Y U A N 2 0 1 4 C L O S E C U R I T I S A T I O N T R U S T S C H E M E - P H A S E 1
In January 2014, King & Wood Mallesons advised on Huayuan 2014 Collateralized Loan Obligation (CLO) Securitisation Trust Scheme-Phase I originated by China Huarong Asset Management Co., Ltd. ("China Huarong"). The size of note issuance is approximately RMB 1.226 billion. This transaction was the first securitisation project that had been originated by an asset management company since securitisation market in mainland China re-launched in 2012, and the first CLO transaction in China that innovatively solved the issue of real property mortgage transfer.
China Huarong is a large state-owned non-bank financial company co-sponsored by the Ministry of Finance and the China Life Insurance (Group) Company. It has 32 subsidiaries across 30 provinces, autonomous regions, municipalities and HKSAR. China Huarong provides fully licensed, multi-functional, and comprehensive financial services, including asset management, banking, securities, trust, leasing, investment, funds, futures, and real estate. With the development of financial practice, China Huarong has contributed during the process of national banks reforming, SEOs' debts reduction and bail-out, resolving systematic financial risks, and acted as Security Wall and Stabilizer for stable running of our country's financial system.
King & Wood Mallesons served as the legal counsel to China Huarong. The project was led by partners Mr. Roy Zhang, Mr. Liu Zhigang and Mr. Zhou Jie.
For additional information visit www.kingandwood.com
TozziniFreire Advogados assisted SBA Torres Brasil in the acquisition of a company controlled by Telemar Norte Leste and Brt Serviços de Internet, which owns 2,007 wireless telecommunication sites and towers.
SBA Torres announced that it has entered into a definitive agreement with subsidiaries of Oi SA ("Oi"), one of Brazil's largest telecommunications service providers, and its affiliates, under which SBA will acquire 2,007 wireless sites in Brazil. Upon closing of the transaction, Oi will enter into a long-term lease with SBA, with monthly lease payments, for antenna space on each of these sites. The sites currently have 1.6 tenants per site (including Oi) and include leases with all of the major wireless carriers in Brazil.
The transaction, subject to customary closing conditions, is expected to close on or before March 31, 2014. This transaction follows SBA's previously announced acquisition of use rights to 2,113 sites from Oi, which transaction closed November 26, 2013. Upon consummating this transaction, SBA will own or have use rights with respect to over 5,000 sites in Brazil.
Fernando Cinci Avelino Silva, partner in the Mergers and Acquisitions practice group at TozziniFreire, was in charge of the transaction with assistance of associates Karen Dagan and Felipe Borges Lacerda Loiola.
For additional information visit www.tozzinifreire.com.br
T O Z Z I N I F R E I R E A C T S F O R S B A T O R R E S B R A S I L I N A C Q U I S I T I O N O F L A R G E W I R E L E S S T E L E C O M C O M P A N Y
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C A R E Y A C T S F O R V T R I N L I B E R T Y G L O B A L R E O R G A N I Z A T I O N I F I T S C R E D I T P O O L S
On January 24, 2014, Liberty Global plc (Liberty Global) completed a reorganization of its credit pools. VTR GlobalCom and VTR Wireless, which operate Liberty Global's broadband and wireless businesses in Chile and are each 80% owned by Liber-ty Global, were placed in a separate credit pool with their parent, VTR Finance, an indirect wholly-owned subsidiary of Liber-ty Global. In connection with the reorganization, VTR Parent was extracted from the UPC Holding credit pool and VTR Parent and certain of its subsidiaries entered into the following financing transactions:
a) The issuance by VTR Parent of USD1.4 billion principal amount of 6-7/8% senior secured notes due 2024 (the Notes) under Rule 144A and Reg S.
b) A USD200 million senior secured revolving credit facility entered into by VTR GlobalCom, VTR Wireless and VTR Banda Ancha (Chile), as borrowers and JPMorgan Chase Bank, BNP Paribas, Goldman Sachs Bank USA and Morgan Stanley Senior Funding as original lenders and JPMorgan Chase Bank as Facility and Security Agent.
Carey advised VTR through a team led by partners Pablo Iacobelli, Guillermo Acuña and Felipe Moro, and associates Patricia Silberman, Juan Pablo Navarrete, Jaime Carey A., Feliciano Tomarelli and Agustín Fracchia. For additional information visit www.carey.cl
7 February, 2014) — McKenna Long & Aldridge's California Litigation team led by Stephen M. Nichols successfully defended Union Carbide Corporation in the Multnomah County Portland, Ore. product liability and toxic tort trial that concluded on December 18. The claim alleged that direct exposure to raw calidria asbestos fibers caused mesothelioma.
Plaintiff Marc Robbins contended that on a daily basis for a six-month period, he handled raw asbestos fibers and asbestos containing joint compounds. Other than some limited work with automobile brakes, which all expert witnesses called in the case agreed was not substantial, Mr. Robbins did not have any other identified exposures to asbestos during his life.
After a full day of deliberation, the jury found that Union Carbide’s raw calidria asbestos that was sold to Georgia-Pacific was not unreasonably dangerous, that it was not liable for exposures to its calidria through other products because it had not substantially participated in the incorporation of its asbestos into those products and finally that Union Carbide was not negligent.
“This case presented a number of challenges that were unique both in the manner of exposure and in the complete lack of alternate asbestos exposures that are heavily relied on in asbestos cases for purposes of challenging causation and allocating fault,” Nichols said.
MLA partners Matt Ashby and Ryan Landis of the firm’s Los Angeles office handled discrete and critical aspects of the case’s defense. Other MLA attorneys who contributed to a string of five defense verdicts in mesothelioma cases during 2013 include Lisa Oberg, Chris Wood, Mary McKelvey and Frank Berfield.
For additional information visit www.mckennalong.com
M C K E N N A L O N G & A L D R I D G E S E C U R E S V I C T O R Y F O R U N I O N C A R B I D E I N L I V I N G M E S O T H E L I O M A C A S E
Page 14 P R A C M E M B E R N E W S
PRAC @ PDAC Toronto
March 4, 2014
PRAC 55th International Conference Taipei April 26-29, 2014
Hosted by
PRAC @ IPBA Vancouver 2014 May 8
PRAC @ INTA Hong Kong 2014 May 11
PRAC @ IBA Tokyo 2014 October 20
PRAC 56th International Conference
November 8-11, 2014
Hosted by
2 0 1 4 U P C O M I N G P R A C E V E N T S
PRAC e-Bulletin is published monthly.
Member Firms are encouraged to contribute
articles for future consideration.
Send to [email protected].
PRAC 54th International Conference Washington, D.C. 2013
September 28 - October 1
C O N F E R E N C E M A T E R I A L S
PRAC 53rd International Conference
Jakarta April 13 - 16, 2013
Conference Materials are available online
at PRAC Private Libraries (Member Firms Only)
Page 15 P R A C M E M B E R N E W S
www.prac.org
.
The Pacific Rim Advisory Council is an international law firm association with a unique strategic alliance within the global legal community providing for the exchange of professional information among its 32 top tier independent member law firms.
Since 1984, Pacific Rim Advisory Council (PRAC) member firms have provided their respective clients with the resources of our organization and their individual unparalleled expertise on the legal and business issues facing not only Asia but the broader Pacific Rim region.
With over 12,000 lawyers practicing in key business centers around the world, including Latin America, Middle East, Europe, Asia and North America, these prominent member firms provide independent legal representation and local market knowledge.
NEW RULES APPLICABLE TO THE INFLOWS OF DIRECT INVESTMENTS INTO ARGENTINA
On January 29, 2014, the Argentine Central Bank issued Communiqué “A” 5532, modifying the rules applicable to the inflows of direct investments into Argentina through the foreign exchange market.
Pursuant to foreign exchange regulations, as a general rule capital inflows
(i) must be exchanged for local currency in the Foreign Exchange Market and credited in a local bank account;
(ii) stay in Argentina for a minimum of 365 days starting on the day on which the foreign currency were exchanged for pesos on the foreign exchange market; and
(iii) are subject to a mandatory interest‐free withholding of 30% of the amount involved, for a period of 365 days beginning on the date on which the proceeds are converted into pesos, after which the funds are released to the Argentine resident in pesos after conversion at the applicable exchange rate. The most relevant exception for this rule is the case of capital contributions by foreign direct investors into local companies.
Prior to Communiqué “A” 5532, for this exception to apply, and for the local company to have free availability of 100% of the funds transferred by its foreign direct investors, the local company had to evidence the filing for the registration of the capital increase with the Office of Corporations, assuming the commitment to obtain this registration within 250 days as from such initial filing. The local bank could grant a 180 days extension period if the local company proved that it had not been responsible for the delay in the registration of the capitalization. If the extension period was not granted, the U.S. deposit had to be constituted within 10 days.
Communiqué “A” 5532 has modified this rule, by extending the term for the local company to evidence the definitive registration of the capitalization, from 250 days to 540 days as from the initiation of the capital increase registration procedure with the Office of Corporations. In case the corresponding documentation is not evidenced to the local bank when due, then the local bank shall notify the breach to the Argentine Central Bank within 5 days as from the date of expiry of the term for filing such documentation.
Additionally, this new rule set forth by the Argentine Central Bank establishes that all 30% mandatory deposits that are currently in place due to a delay in the registration of the capital increase shall be released within 10 business days from the entry into force of this rule (i.e., no later than February 12, 2014).
Allende & Brea Departamento de Derecho Bancario y Financiero ‐ Maipú 1300 – Piso 13 ‐ C1006ACT ‐ Buenos Aires, Argentina Contactar a: Carlos M. Melhem ‐ [email protected] ‐
Jorge I. Mayora ‐ [email protected]
Clayton Utz Insights
06 February 2014
ACCC goes online: Scoopon fined $1 million for misleading conductBy Bruce Lloyd, Matthew Battersby and Stephanie-Kate Bratton.
Key Points:
Online retailers have the same obligations as traditional retailers under the Australian Consumer Law.
Online trading and consumer protection were priorities for the ACCC in 2013, with the conduct of Australian online group buying website Scoopon put under the microscope.
On 3 July 2013, the ACCC commenced enforcement proceedings against Scoopon Pty Ltd alleging misleading or deceptive conduct in contravention of the Australian Consumer Law (ACL). Scoopon co-operated with the ACCC and on 17 December 2013 the Federal Court found Scoopon liable for several contraventions of the ACL and ordered Scoopon to pay a fine of $1 million: ACCC v Scoopon Pty Ltd (QUD 402 of 2013).
The Scoopon case is a reminder to businesses that:
• online retailing is an ACCC priority;• businesses operating on the internet have the same obligations under the ACL as traditional retailers;• penalties for non-compliance are significant; and• the ACL does not require the ACCC to prove intention or obtain evidence actual consumer harm before a
penalty can be imposed.
The Scoopon decision follows a number of other high-profile misleading or deceptive conduct cases in 2013, which included proceedings against Hewlett-Packard Australia, TPG Internet and a number of Harvey Norman franchisees.
Like the Hewlett-Packard Australia case, there was both a consumer and business element to the Scoopon case which was divided into three broad categories of contravening conduct:
1. False or misleading representations about consumer remedies;
2. False or misleading representations about the benefits of Scoopon's services; and
3. False or misleading representations about the price of goods.
Representations about Consumer Guarantees
The Federal Court held that Scoopon made false or misleading representations to consumers that they had no refund rights in circumstances where the consumer attempted to redeem a Scoopon voucher during its validity period but no service was available.
The remedies available under the ACL, where a good or service fails to meet the statutory consumer guarantees, cannot be excluded, restricted or modified and attempts to do so may constitute misleading or deceptive conduct.
Representations about the benefits of Scoopon's services
Scoopon was found to have made a number of representations to merchants regarding the benefits of Scoopon's service, including overstating the benefits of the service and understating the risks. For example:
• Scoopon made a misleading representation to a merchant that 30% of vouchers sold on the site would not beredeemed, resulting in a windfall for the merchant.
• Scoopon made misleading representations to merchants that there was no risk of a financial cost or loss inrunning a deal with Scoopon, when there was a real risk of additional cost.
Representations about the price of goods
Scoopon was also found to have made misleading representations in relation to the price of goods and services sold on its website. These representations were found to have been made in respect of three separate products and generally overstated the type or quantity of goods available at the advertised price.
For example, Scoopon advertised a three-piece set of luggage, stating "3 piece set" and "$155" without any qualifications. The Court held that this representation was misleading because only the smallest piece of the set was available, as a single item, for purchase at the price of $155. The entire three-piece set was available for purchase at the price of $499.
Penalties for Scoopon's misleading and deceptive representations
Scoopon was ordered to pay a pecuniary penalty of $1 million and restrained from making similar misleading representations for a period of two years.
The Court ordered Scoopon to pay a proportion of the ACCC's legal costs and further develop and enhance its existing compliance program.
In something of a departure from standard practice, the Court made a community service order that requires Scoopon (at its own expense):
• to prepare for and hold an educational seminar on ACL compliance for members of the Association for Data-driven Marketing and Advertising;
• to have the documents for this presentation settled by a lawyer with consumer law experience or a consumercompliance expert; and
• to make these resources available to the Association for Data-driven Marketing and Advertising for itsunrestricted use for a period of 12 months.
This type of non-monetary order differs from the more traditional compliance program and corrective advertising orders which courts have made in previous ACL cases, and reflects the ACCC's enforcement objectives of promoting awareness and compliance with the ACL.
Trends in enforcement: Settlements
The orders made by the court in ACCC v Scoopon were agreed by the parties in order to settle the dispute.
It appears that an increasing number of consumer protection matters are being resolved in this way. For example, Hewlett-Packard agreed to a settlement in November 2013, resulting in a $3 million penalty for making false or misleading representations. Luv-a-duck also settled with the ACCC in November 2013, admitting to false and misleading representations about the conditions in which its ducks were farmed.
Already this year, the ACCC, Euro Solar and Worldwide Energy and Manufacturing agreed by court order that they had contravened the ACL by displaying false testimonials on their websites and making false or misleading representations as to the country of origin of their goods.
Continuing priorities for 2014
Media statements issued by the ACCC following the Scoopon case indicate that its efforts to ensure that online retailers are complying with their obligations under the ACL will continue in 2014, with ACCC Chairman Rod Sims confirming that“[o]nline competition and consumer issues are a priority for the ACCC... The ACCC will continue to take further action in this area to improve business practices and protect small businesses and consumers.”
You might also be interested in...
• Advertising and the ACL: Fine print couldn't save TPG Internet in the High Court• ACCC using misleading conduct provisions to police consumer guarantees compliance
• ACCC's annual report 2012-2013: regulator follows through on stated consumer law priorities
DisclaimerClayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states or territories.
NautaDutilh's Fifth Bi-annual Energy Seminar
Renewable Energy Financing Survey
Methodology Renewable energy has been a hot topic for many years, and sustainable energy projects are constantly
being covered in the press, from the construction of an offshore wind farm to the installation of solar
panels on public buildings. However, such projects entail a number of challenges. The financing of sus-
tainable energy projects is a frequent topic of discussion, even more so in the wake of the collapse of the
largest Belgian player in the solar panels industry due, among other things, to lack of government sup-
port for renewable energy certificates.
Our bi-annual Energy Seminar has a tradition of inviting influential players from the sector such as Guido
Camps (the role of the energy regulator and grid tariffs), Jean-Pol Poncelet (the future of nuclear energy
in Belgium), Tom Van den Borre (the competitiveness of Belgium's energy policy) and Daniël Dobbeni
(the internal electricity market: myth or reality) to speak on hot topics. In keeping with this tradition, we
invited Erik Dralans, former CEO of ING Belgium and director of Equens SE and Euroclear Plc, to discuss
the viability of renewable energy and the need for public support to speak at our fifth annual Energy Sem-
inar in December 2013.
We were interested in the opinion of the 71 professionals in attendance, all of whom occupy important
positions in energy firms and banks. Therefore, we conducted an anonymous online survey, with seven
questions regarding the future of renewable energy in Belgium. The results (provided by twelve respond-
ents) were discussed by Erik Dralans during the seminar.
Current Situation for Belgium The European Commission has set a number of ambitious climate and energy targets for 2020. These
targets, known as the 20-20-20 targets, set three key objectives for 2020:
• A 20% reduction in EU greenhouse gas emissions from 1990 levels;
• Raising the share of EU energy consumption produced from renewable resources to 20%;
• A 20% improvement in the EU's energy efficiency
According to the latest feedback from the European Commission, Belgium is lagging behind in meeting
these targets, especially when it comes to raising the share of energy consumption produced from re-
newable resources and reducing greenhouse gas emissions
Results
1. Key findings regarding governmental measures to achieve
the EU targets
• Opinion was divided on this topic. According to respondents, governmental measures should be
based on both penalties (42%) and incentives (58%). As for incentives, one respondent suggested
that incentives also be provided for traditional power plants. Another stated that the government
does not have a budget for incentives.
• Penalties and incentives should mainly focus on the demand-side, eg consumers (67%) rather than
the supply-side, eg producers (33%).
2. Key findings regarding current subsidies for renewable energy
• Less than half (33%) of respondents are satisfied with the current level of subsidies. Half of re-
spondents (50%) consider the subsidies for renewable energy too high while only 17% find the cur-
rent subsidies too low.
3. Key findings regarding the efficiency of current renewable energy
subsidies • Remarkably, most respondents consider the subsidies for renewable energy not only too high but
also inefficient (83%).
• One respondent suggested that too many changes in the rules on subsidies for renewable energy
have created uncertainty and an unfavourable investment climate, resulting in the inappropriate dis-
tribution of subsidies.
4. Key findings regarding the future role of renewable energy
• Regardless of the European Commission's expectations, 92% of respondents do not see a sub-
stantial role for renewable energy in the future.
5. Key findings regarding the future role of nuclear energy • 67% of respondents believe that new investments in nuclear energy should be considered, which
reinforces the finding that there is no substantial role in the future for renewable energy.
6. Key findings regarding the evolution of electricity prices • Only 25% of respondents expect electricity prices to decrease (on average) in the medium term (3
to 5 years). Rather, prices are expected to rise (42%) or stay at current levels (33%).
• The expectation of a further increase can be explained by the planned closure of several power
plants which will result in more imports of electricity and price increases.
7. Key findings regarding incentive schemes for running projects • Almost all respondents (92%) do not believe the government should have the flexibility to modify at
will incentive schemes for running projects.
• This can be explained by the fact that regulatory stability is key to improving the investment climate
and regulatory risks prevent key renewable energy investors from making further investments.
Conclusion • Amongst professionals concerned with the financing of renewable energy, there is a perception
that the government's current sustainable energy subsidies policy is inefficient.
• Therefore, they do not believe in a future role for renewable energy.
• This means that investments in the more stable environment of nuclear energy are preferred, de-
spite the fact that the European Commission expects us to raise the share of EU energy con-
sumption produced from renewable resources.
• The only way to combat this negative perception of renewable energy financing is to provide a
stable regulatory environment, which eliminates the uncertainty that renders the investment cli-
mate unattractive.
NautaDutilh's Energy & Utilities Team NautaDutilh is an independent international law firm and one of the largest law firms in Europe, with over
400 lawyers, civil law notaries and tax advisers in offices in Amsterdam, Brussels, London, Luxembourg,
New York and Rotterdam. We are well known for our expertise in private equity, leveraged finance and
capital markets, amongst other areas, and also have an outstanding track record in tax, intellectual
property, competition, telecoms and media, commercial property, insurance and litigation. We often
work in teams, focusing on a particular sector and made up of specialists drawn from all relevant prac-
tice areas. We have dedicated sector teams for private equity, financial institutions, energy and utilities,
life sciences, real estate, professional services and consumer goods. Our independent thinking and crea-
tivity, coupled with our solution-driven approach, make the difference between mere competence and
true excellence. That’s what distinguishes NautaDutilh from the rest. Nothing more, nothing less.
NautaDutilh's Energy & Utilities team brings together corporate, finance, tax, administrative, regulatory,
litigation and EU law/competition specialists from our offices in Belgium and the Netherlands. This cross-
border cooperation reflects the increasing integration of the Belgian and Dutch energy markets.
Key Contacts Energy & Utilities
Patrick Peeters
T: +32 2 566 8346, M: +32 475 62 03 21
Francois Tulkens
T: +32 2 566 8352, M: +32 473 95 21 63
Patrick Geeraert
T: +32 2 566 8196, M: +32 497 72 05 17
Thibaut Willems
T: +32 2 566 8182, M: +32 476 20 72 21
Thomas Dreier
T: +32 2 566 8326, M: +32 499 69 84 57
Thomas Verstraeten
T: +32 2 566 8344, M: +32 473 63 15 66
Vincent Ost
T: +32 2 566 8354, M: +32 494 50 45 40
CORPORATE/M&A AND CAPITAL MARKETS
Brazil: Listed Companies Will be Allowed to Disclose Relevant Facts Through News Websites on the Internet
The Brazilian Securities Commission (CVM) issued a new rule allowing listed companies to publish “relevant facts” on news websites on the internet, rather than physical newspapers.
All Brazilian listed companies are required to immediately disclose to the market any relevant information that may affect the value of their securities. These are known as “relevant facts”.
Prior to the new CVM rule, which will become effective on March, 10, 2014, companies had to publish “relevant facts” in widely circulated newspapers. The costs of these publications often created a barrier for emerging or middle-size companies that wanted to become listed companies.
It is expected, therefore, that the exemption of publication in newspapers will have an immediate effect in reducing the maintenance costs of listed companies, thereby increasing the attractiveness of Brazilian capital markets as a financing alternative for different companies.
In order to take advantage of the new rule, listed companies will need to update their official policies of disclosure and communicate the changes through the old channels used for publication of “relevant facts”.
Brazil: Securities Commission Issues Decision on “Superpreferred” Shares
The Brazilian securities regulator (CVM) published this week an important decision of its Board of Commissioners concerning preferred shares issued by Brazilian listed companies.
In the course of the IPO registration process of Azul S.A., a Brazilian airline, the CVM’s technical department had refused to register the company. The refusal was motivated by a provision of Azul’s by-laws establishing that preferred shares are entitled to a dividend equivalent to 75 times the dividend payable to common shares. Pursuant to the CVM’s department that reviewed the application, such provision of the by-laws was not compatible with the Brazilian corporate law because it violated a general principle that economic rights should always be related to the political rights of shareholders.
But the CVM’s Board of Commissioners decided otherwise and confirmed that the by-laws of Azul are in accordance with the law.
Although such structure had been adopted before in by-laws of private companies, the CVM decision now means that investors will be able to take advantage of different capital structures to match their particular needs and then move on to an IPO. Along this line of thought, the CVM decision mentioned that such type of capital structure is attractive to companies that are funded by private equity investments, because it enables the alignment of the distinct interests of controlling shareholders and private equity investors.
We believe that this decision will facilitate the structuring of new attractive alternatives for private equity and other investments in the Brazilian market.
February 10, 2014
"Trials have become increasingly expensive and protracted." [...] "“Increasingly, there is recognition that a culture shift is required in order to create an environment promoting timely and affordable access to the civil justice system. […] The balance between procedure and access struck by our justice system must come to reflect modern reality and recognize that new models of adjudication can be fair and just.”
“Summary Judgment motions provide one such opportunity.”
OverviewOn January 23, 2014, the Supreme Court of Canada released its reasons for decision in Hryniak v. Mauldin1 (“Mauldin”) and Bruno Appliance and Furniture, Inc. v. Hryniak2 (“Bruno Appliance”); two appeals that arose under the new summary judgment Rule 20 of Ontario’s Rules of Civil Procedure.3
The effect of these decisions is a fundamentally altered outlook on summary judgments. The Supreme Court rejected the “full appreciation test” adopted by the Court of Appeal for Ontario in favour of a less rigid and more pragmatic analysis.
In theory, at least, the spirit of the 2007 Civil Justice Reform Project, commissioned by former Ontario Associate Chief Justice Coulter Osborne, Q.C., appears to have been embraced with the result that litigants should now be able to “have their day in court” sooner, albeit not always in a traditional trial setting.
The New Approach to a Motion for Summary JudgmentIn Mauldin, the Supreme Court established the following new approach to summary judgment under Rule 20.04:
1. Without employing his or her fact-finding powers (Rule 20.04(2.1)) or exercising his or her discretion to hear oral evidence (Rule 20.04(2.2)), the judge must first determine if there is a genuine issue requiring a trial. No genuine issue exists if the summary judgment process provides the judge with the evidence necessary to fairly and justly determine the dispute and if summary judgment is a timely, affordable, and proportionate
procedure.4
2. If there appears to be a genuine issue requiring a trial, the judge must determine if the need for a trial can be avoided by hearing oral evidence or using his or her fact-finding powers. These powers are presumptively available to be exercised unless their use is contrary to the interests of justice; that is, the powers may be used “if they will lead to a fair and just result and serve the goals of timeliness, affordability and proportionality in
light of the litigation as a whole.”5
3. Although the decision to use the powers conferred by Rules 20.04(2.1) and 20.04(2.2) is discretionary and attracts deference on appeal, summary judgment is mandatory where there is no genuine issue requiring a
trial.6
The Court held that there will be no genuine issue requiring a trial when “the judge is able to reach a fair and just determination on the merits on a motion for summary judgment.”7 A fair and just determination is only possible when the process “(1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.” 8
Significantly, consideration of the fair and just adjudication of the parties’ dispute is no longer assessed through the lens of a full trial procedure (although comparison of the cost and speed of both procedures and comparison of the evidence that will likely be available at trial and the evidence heard on the motion is invited). Instead, on a Rule 20 motion, the judge must determine whether he or she “can find the necessary facts and apply the relevant legal principles so as to resolve the dispute.”9
A motion judge should hear oral evidence under Rule 20.04(2.2) when:
1. It can be obtained from a small number of witnesses and gathered in a manageable period of time;
2. The issue addressed by the oral evidence is likely to have a significant impact on the dispute; and
3. The issue raised by the oral evidence is narrow and discrete.10
Mike (Michael) D. SchaflerPartner, TorontoD +1 416 863 4457M +1 647 299 4457
Ara BasmadjianAssociate, TorontoD +1 416 863 4647
Jeremy C. MillardAssociate, TorontoD +1 416 863 4642
Tiffany SoucyAssociate, TorontoD +1 416 863 4362
Key contacts
Supreme Court of Canada delivers landmark decisions on summary judgment motions
However, the Supreme Court warned that there are no absolutes with respect to the hearing of oral evidence; instead, the power to hear oral evidence “should be employed when it allows the judge to reach a fair and just adjudication on the merits and it is the proportionate course of action.”11
Counsel seeking to lead oral evidence should demonstrate “why such evidence would assist the motion judge in weighing the evidence, assessing credibility, or drawing inferences […]” and may be required to provide a “will say” or some other description of the proposed evidence before it is heard by the judge.”12
To help guard against summary judgment motions becoming costly additions to an already expensive system of dispute resolution, the Supreme Court supported the early judicial management of a matter. For example, a judge may provide directions in respect of the appropriate timelines and procedures in order to control the scope of a summary judgment motion.13 In the event of a failed or partially successful summary judgment motion, a judge may “use the insight […] gained from hearing the summary judgment to craft a trial procedure that will resolve the dispute in a way that is sensitive to the complexity and importance of the issue, the amount involved in the case, and the effort expended on the failed motion.”14
Overall, the Supreme Court’s analytical framework was guided by the view that summary judgment motions provide an opportunity for the fair, just, and proportionate adjudication of disputes:
“[…] a culture shift is required in order to create an environment promoting timely and affordable access to the civil justice system. This shift entails simplifying pre-trial procedures and moving the emphasis away from the conventional trial in favour of proportional procedures tailored to the needs of the particular case. The balance between procedure and access struck by our justice system must come to reflect modern reality and
recognize that new models of adjudication can be fair and just.”15
Application to the FactsMauldin and Bruno Appliance involved allegations of civil fraud against the same defendant, Robert Hryniak (“Hryniak”), by different plaintiffs. In both cases, the Supreme Court dismissed the appeal, upholding the Court of Appeal’s decision to grant summary judgment in Mauldin but not in Bruno Appliance.
In 2001, a group of American investors, known as the Mauldin Group, met with Hryniak, Robert Cranston (“Cranston”), and Gregory Peebles (“Peebles”) at the law offices of Cassels Brock & Blackwell LLP (“Cassels Brock”) in Toronto. Hryniak was the principal of Tropos Capital, a company that traded in bonds and debt instruments. Cranston was the principal of Frontline Investments Inc., a Panamanian company. Peebles was a corporate-commercial lawyer and senior partner at Cassels Brock.
Persuaded by a supposed investment opportunity, the Mauldin Group wired $1.2 million to Peebles’ trust account at Cassels Brock, which was transferred to Tropos Capital. The Mauldin Group lost their investment as Hryniak claimed that the funds were stolen.
In 2002, Albert Bruno (“Bruno”), the principal of Bruno Appliance and Furniture, Inc., met with Cranston and Peebles at Cassels Brock. Hryniak did not attend this meeting. Bruno Appliance eventually wired $1 million to Cassels Brock for investment. The funds were assigned to an account associated with Tropos Capital and were lost.
In Mauldin, the Supreme Court determined that there was no genuine issue requiring a trial. Hryniak was a clear perpetrator of civil fraud against the Mauldin Group and no credible evidence supported his claim to be a legitimate trader. In other words, the outcome of the case against Hryniak was clear. The interest of justice did not preclude the use of the motion judge’s fact-finding powers as “[t]he record was sufficient to make a fair and just determination and a timely resolution of the matter was called for.”16
In Bruno Appliance, however, the Supreme Court held that there was a genuine issue requiring a trial because the evidence was not sufficient to establish that Hryniak perpetrated civil fraud against Bruno Appliance. Hryniak was not in attendance during the 2002 meeting between Bruno, Cranston, and Peebles. The tort of civil fraud requires, among other things, a misrepresentation which induced the innocent party to act. The motion judge failed to identify a necessary element of civil fraud. According to the Supreme Court, although “the evidence clearly demonstrates that Hryniak was aware of the fraud, and may in fact have benefited from the fraud, whether Hryniak perpetrated the fraud by inducing Bruno Appliance to contribute $ 1 million to a non-existent investment scheme is a genuine issue requiring a trial.”17
CommentThe Supreme Court has expanded the scope of summary judgment motions, holding that “summary judgment rules must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims.”18
There can be little doubt that the Supreme Court has recalibrated the test to be applied on a motion for summary judgment. The impact of these decisions remains to be seen; however, an increase in the number of summary judgment motions should ensue. The new regime is best understood by comparing the outcomes in the two cases on appeal. Traditionally, allegations of fraud, as they typically involve matters of credibility, were left to be dealt with by trial judges. Both cases on appeal involved fraud allegations. In Mauldin, summary judgment was granted against the defendant because the evidence sufficiently implicated him. That nexus was missing in Bruno Appliance, with the result that the matter was sent to trial. One might question why oral evidence or a mini-trial were not chosen as the most appropriate remedy. However, since the action against the other defendants was proceeding to trial, in any event, the Supreme Court concluded that hearing the remaining actions together "is the most proportionate, timely and cost effective approach.”19
While Rule 20 of Ontario’s Rules of Civil Procedure were in issue, the decisions have an important impact on all Canadian jurisdictions with similar mechanisms. The summary judgment motion is now seen as a “significant alternative model of adjudication” which is no longer limited to a straightforward and document-driven case.20
References
1 Hryniak v. Mauldin, 2014 SCC 7 [Mauldin].
2 Bruno Appliance and Furniture, Inc. v. Hryniak, 2014 SCC 8 [Bruno Appliance].
3 Rules of Civil Procedure, RRO 1990, Reg 194.
4 Mauldin, supra, note 1 at para 66.
5 Ibid.
6 Ibid at para 68.
7 Ibid at para 49.
8 Ibid at para 49.
9 Ibid at para 50.
10 Ibid at para 62.
11 Ibid at para 63.
12 Ibid at para 64.
13 Ibid at paras 69-70.
14 Ibid at para. 77.
15 Ibid at para 2.
16 Ibid at para 94.
17 Bruno Appliance, supra, note 2 at para 29 [emphasis in original].
18 Mauldin, supra, note 1 at para 5.
19 Bruno Appliance, supra, note 2 at para 31.
20 Ibid at para 45.
© 2014 Dentons. All rights reserved.
Superintendency of the Environment:New Information Request to EAR Holders
On January 6, 2014, the Superintendency of the Environment ("SMA") published in the Official Gazette the Exempt Resolution No. 1518, that Establishes the Consoli-dated, Coordinated and Systematic Text of the Exempt Resolution No. 574 of 2012, which requests deliver and / or update information to all holders of an Environmen-tal Approval Resolution ("EAR").
For those holders who do not submit and / or update the information required, the SMA will have as updated the information that appears in their registry, without prejudice the possibility of initiating sanctions proceedings against them.1
1. Required information. The EAR holders must submit, within the time andform the following information:
a) Holder´s name, RUT, address and phone numberb) Legal representative´s name, address, email and phone numberc) Regarding the EAR granted:
d) Responses to any consultation related to the obligation of entering to the Environ- mental Impact Assessment System of a project, or its modification, noting:
e) State or implementation phase of the project with EAR;f) Minimum work, act or task that starts the execution of the project or activity,
and must indicate the recital of the EAR containing it;3
NEWSALERT January, 2014
Rafael VergaraPartner+56 2 2928 [email protected]
Juan Francisco MackennaPartner+56 2 2928 [email protected]
Felipe MenesesAssociate+56 2 2928 [email protected]
NEWS ALERT 1
The individualization of the EAR (number and year of the exempt resolu-tion);The way of entry to the Environmental Impact Assessment System (Declaration or Environmental Impact Study);The administrative authority that issued the EAR; The region/regions and boroughs where the project or activity is located; Geographic location (UTM coordinates system WGS 84 Datum);Typology of the project or activity;Purpose of the project or activity;
The number of the resolution, letter or other instrument that contains it; The date of issue; The administrative authority that issued it.2
1 According to Article 36 No. 2 Letter f) of Law No. 20,417, non-compliance with the instructions, requirements and urgent measures issued by the SMA is considered a serious infringement, which is punishable with fines up to 5,000 Units Annual Tax (UTA), the closure of a project or even revocation of the EAR.2 Documents of reply to the requirements referred to in point d) and g) must be loaded in PDF format. 3 According to the provisions of Article 16, point D.5 of Article 60 and Article 4 transitional of the Supreme Decree No. 40/2012, of the Ministry of the Environment that sets the current Regulation of the Environmental Impact Assessment System.
If you have any questions regarding the matters discussed in this memorandum, please contact the following attorneys or call your regular Carey contact.
This memorandum is provided by Carey y Cía. Ltda. for educational and informational purposes only and is not intended and should not be construed as legal advice.
Carey y Cía. Ltda.Isidora Goyenechea 2800, 43rd Floor Las Condes, Santiago, Chile.www.carey.cl
g) Any amendments to the EAR.
2. Delivery term of the required information. Delivery information must bemade within the following deadlines:a) Holders of favorable EAR granted before February 28, 2014, must load the
required information within 15 business days from that date, i.e., until March21, 2014.
b) Holders of favorable EAR granted since February 28, 2014, must load therequired information within 15 business days from the date of notification ofthe respective EAR.
3. Way of information delivery. The required information must be entered in theelectronic form available on the website of the SMA (http://www.sma.gob.cl).
NEWSALERT January, 2014
NEWS ALERT 2
Still Unclear Path Forward – Resale Price Maintenance under the AML and Recommendations for CompaniesBy Liu Cheng*, Swita Gan** and Yu Zhenzhen***
China Bulletin Dec 2013
KING & WOOD 1
Since the Anti-monopoly Law of the People’s Republic of China1 (“AML”) came into effect, there
has been much debate about the circumstances in which minimum resale price maintenance
(“RPM”) will constitute a vertical monopolistic agreement prohibited by Article 14 of the AML. In
the debate, the most contentious issue is whether RPM should be regarded as per se illegal or
if the “rule of reason” doctrine2 should be adopted to assess on a case-by-case basis, whether
the RPM is illegal.
In reviewing the AML, it can be seen that RPM is one kind of vertical monopolistic agreement,
as categorized by Article 14 of the AML. Article 13 of the AML defines monopolistic agreements
as “agreements, decisions or other concerted practices that eliminate or restrict competition”.
This definition apparently covers vertical monopolistic agreements listed in Article 14. However,
opinions differ when it comes to assessing the illegality of RPM. The different opinions can be
simplified into two distinct lines of thought: (i) whether the act of RPM is a monopolistic
agreement that eliminates or restricts competition definitely with no need to further decide its
effect on competition (i.e. to adopt the per se illegal rule) or (ii) whether the act of RPM itself
should not be deemed as illegal and a rule of reason approach should be adopted to
comprehensively evaluate its effect on market competition, to determine whether or not it
constitutes an illegal monopolistic agreement.
I. Application of Rule of Reason to RPM in Judicial System
Despite the debate, the tendency of applying the rule of reason doctrine to determine the
legality of RPM appears to be clear on the judicial side. On August 1, 2013, being the AML’s fifth
anniversary since it came into effect, the Shanghai Municipal High People’s Court (“High Court”) made its second-trial judgment on the case Rainbow Technology and Trading Co., Ltd (“Rainbow”) v. Johnson & Johnson (Shanghai) Medical Devices Co., Ltd and Johnson & Johnson (China) Medical Devices Co., Ltd (collectively “Johnson & Johnson”) (the “Johnson Case”), in which the High Court clarified that the effect of eliminating or restricting competition
must be proved to determine RPM constitutes a vertical monopolistic agreement. It further
summarized several factors used in analyzing the anti-competitive effect of RPM (these are
outlined below). This judgment confirmed the view that RPM should be analyzed with respect to
the rule of reason principle in China. Based on our knowledge, the High Court has taken the
advice from China’s Supreme People’s Court (“Supreme Court”) regarding certain key issues
in the Johnson Case. Therefore, it is very likely that the High Court’s Judgment reflects the
KING & WOOD 2
opinions of the Supreme Court on the key legal issues in the case and will be important
references for other local courts dealing with similar cases in the future.
Indeed, the first-trial court of the Johnson Case expressed the opinion that determining whether
a monopolistic agreement was prohibited by Article 14 of the AML should not merely be based
on the fact that a company concludes an agreement for fixing or maintaining resale prices with
trading counterparties. Determining instead, the effect of eliminating or restricting competition
should be considered for such a determination.3
In the second trial of the Johnson Case, the High Court stated that the anti-competitive effect
should be considered to determine whether RPM constitutes a monopolistic agreement as
prohibited by Article 14 of the AML. The following factors should therefore be comprehensively
assessed for such a determination: 1) whether competition in the relevant market is sufficient, 2)
whether the company conducting RPM has a strong market position, 3) whether the company
has a motive to restrict competition, and 4) whether the conduct has an adverse impact on
competition in the market.
1. The Competition Status in the Relevant Market
The High Court considered that insufficient competition in the relevant market is the first and
foremost condition to determining whether RPM is a relevant violation.
In a fully competitive market, customers must have plenty of choices when purchasing products.
With such a scenario in mind, a company engaging in RPM may affect customers who buy its
products. However, it will not hinder customers who choose to buy substitute products from
other companies. Accordingly, the consumer welfare and social and economic efficiency is
unlikely to be harmed by one company engaging in RPM in a fully competitive market. Further,
RPM may otherwise force distributors to promote sales services. In respect of this, the
efficiency brought by RPM can, in most cases, offset and surpass its adverse impact on
competition.
In contrast, in a market with insufficient competition with a lack of adequate alternative products,
customers normally rely on one brand or a few brands. In such cases, maintaining the resale
price of one brand will not only weaken the intra-brand price competition, but will facilitate tacit
understandings between producers of different brands on pricing, or make them lose their
motive for price competition. This may lead to increasing of prices or the maintenance of prices
at relatively high levels which, in turn, may damage customers’ interests and economic
efficiency.
2. The Market Position of the Company Conducting the RPM
The High Court’s judgment also made it clear that a company’s market position is another factor
to be considered when assessing the illegality of RPM.
KING & WOOD 3
The High Court ruled: a company’s power in a market is the basis for its pricing activities affecting market competition. If a company has no advantage in respect of market share, the
supply of raw materials, key techniques, distribution channels or brand influence, this company
cannot be regarded as having the power to affect market competition. Consequently, RPM
behavior by the company is unlikely to affect market competition, or it may have some adverse
influence in a short period and within a limited scope but the competition status will be adjusted
by the market itself within a short time.
The High Court adopted the “strong market position” criterion for the determination of illegal
RPM. It is ambiguous whether this criterion is the same as or different to the “dominant market
position” standard. However, in general, we consider this criterion will be easier to meet than the
“dominant market position” criterion under the AML because “strong” seems to imply a lower
threshold than “dominant”. According to the AML, a company having a dominant market
position normally means that that company has a market share of no less than 50%. While the
High Court concluded that if a company has relatively strong pricing power in the market, has an
absolute advantage over purchasers in price negotiations and is able to not follow the market
price, that company can be regarded as having a sufficiently strong market position to enable it
to affect competition. Adopting that rationale, a company with a market share of less than 50%
may be found to have a strong market position.
3. The Motive for Restricting Competition
The third factor to be considered is the motive for restricting competition. The High Court
explained that, when a company has a strong market position, the motive for restricting
competition is another significant factor in determining whether RPM has anti-competitive
effects. This is because, as mentioned by the High Court, a company with a strong market
position normally has advantages in respect of finance, technology or information, and usually
has strong power to control the upstream or downstream industries. If such a company
conducts RPM for the purpose of eliminating or restricting competition, it is highly likely that its
conduct will adversely impact competition.
4. The Adverse Impact on Competition in the Market
The fourth factor for the determination of RPM constituting a violation is whether it has an
adverse impact on market competition. Based on the rule of reason principle, the High Court
held that RPM has both pro-competitive and anti-competitive effects. With regard to the
anti-competitive effects, some of them can be quickly adjusted by the market itself, while others
can be off-set by pro-competitive effects. The High Court therefore concluded that it is only
when the anti-competitive effects generated from RPM are difficult to be adjusted by the market
or off-set by pro-competitive effects that RPM should be deemed as an illegal monopolistic
agreement.
It is the first time that the High Court’s decision clarified the anti-competitive and pro-competitive
effects of RPM. Anti-competitive effects include effects of restricting intra-brand price
competition, restricting the freedom of distributors to set their prices and facilitating price cartels,
KING & WOOD 4
resulting in excessive advertisement and services, etc. The first and second effects, the latter of
which may facilitate price cartels that limit inter-brand price competition, are the key elements in
determining whether competition in the market is materially impacted.
The pro-competitive effects of RPM include the prevention of distributor “free-riding”, facilitating
new brands or products entering the market, promoting the competition of product quality,
safeguarding goodwill, providing unified price information to customers, improving the
development of distributors and building distribution channels and protecting against discount
sales of competitors, etc. Among these effects, the first, second and third ones are the key
elements for determining the pro-competitive effects of RPM, as concluded by the High Court.
II. NDRC’s Attitude on RPM
On the other hand, in contrast to the clear interpretation by the High Court on the judicial side,
the attitude of the National Development and Reform Commission (“NDRC”) 4 , the
administrative enforcement agency against price-related monopolistic behaviors, is still vague
on which doctrine (i.e. per se illegal or rule of reason) shall be used to assess RPM.
Early 2013, NDRC’s local counterparts in Sichuan Province (“SDRC”) and Guizhou Province
respectively announced their decisions to impose fine on two famous Chinese liquor companies,
Maotai and Wuliangye, for RPM. SDRC announced in its decision that Wuliangye had set the
minimum price for distributors reselling its brands of alcohol to customers by taking advantage
of its strong market position. Such actions had the effect of eliminating and restricting
competition in the relevant market, harming customers’ interests and thus constituted a
violation of Article 14 of the AML. Although the reasoning is relatively brief, it reflects SDRC’s
consideration of Wuliangye’s strong market position as a factor in determining the violation by
Wuliangye. Instead of directly determining Wuliangye’s RPM as per se illegal, SDRC analyzed
the impact of Wuliangye’s activity on market competition, and found the violation after
considering the strong market power of Wuliangye and the anti-competitive facts of its conduct.
This seems to indicate that a rule of reason approach will also be adopted when NDRC
(including its authorized agencies) determine the illegality of RPM.
However, the public information available about the more recent investigation by NDRC of
Beingmate, Dumex and other milk powder companies (the “Milk Powder Case”), do not include
the NDRC’s detailed reasoning for the penalty decision (i.e. the publically available information
does not include analysis of the effects on competition of milk powder companies’ illegal
activities, or estimates of their market shares in China, their market positions or their ability to
control their distributors, etc.). It is unclear to us, based on the publically available information,
whether NDRC had adopted the similar rule of reason approach in this case.
However, the Milk Powder Case involved a number of milk powder companies, and from an
ordinary consumer’s perspective, it seems that not each of those companies has a “market
position” that enables them to affect competition in the market. If a rule of reason assessment
were to be applied to every single company punished in the Milk Powder Case, it is
questionable whether they would have engaged in a violation.
KING & WOOD 5
If we follow this logic, it seems that NDRC may not have adopted a rule of reason approach to
determine the illegality of every single company in the Milk Powder Case and, instead, adopted
an approach which is more like regulating the pricing conduct across the whole industry. Of
course, this is just conjecture on our part, based on information available on the public record.
We see benefit in the AML enforcement agencies providing further clarity about how they intend
to interpret the legal rules during future investigations, so that companies may better participate
in market competition while taking steps to ensure they comply with the Law.
III. Comments and Recommendations
Given the potential different principles between judicial interpretation and NDRC’s enforcement
practices in relation to when RPM will be illegal, companies, especially those with a relatively
large presence in markets in China, may wish to adopt a relatively conservative approach to
reduce the risk of violations of Article 14 of the AML.
In general, under the current regime, we recommend that a company avoid engaging in RPM.
RPM is not limited to explicitly agreeing minimum resale prices in distribution agreements or
dealings with distributors, and also includes fixing or restricting the amount of profit the
manufacturers/suppliers can gain from the sale, agreeing the formula for calculation of resale
prices, limiting discounts offered by distributors or charging distributors fees which are higher
than the average amount.
Some large manufacturers/suppliers include a “suggested retail price” clause in their
distribution agreements, including to protect the value of their brand, and at the same time,
impose “penalties” on distributors who do not apply the “suggested retail price.” The “penalties”
may include reducing commissions, suspending supply or threatening to cease co-operating
with the distributor in question. All these activities may be deemed to be resale price
maintenance under Article 14 of the AML, especially where the activities amount to “industry
practice.”
Considering the High Court’s decision in the Johnson Case, the following factors may be
available to companies as defenses when being investigated for RPM:
a) The relevant market is fully competitive, as evidenced by 1) a relatively large numbers of
suppliers of the product and fierce competition between them; 2) the distribution market is fully
competitive, i.e. there is an adequate number of distributors for suppliers to access and the
distributor management systems designed by suppliers will not hinder free competition between
distributors; and 3) clients or customers can alter or choose different brands or distributors
freely.
b) The company does not have a strong market position in the relevant market. Although the
High Court has not clarified the method for deciding whether a company has a strong market
position, we believe there is a high possibility that a company may be found to have such a
market position if that company ranks No.1 or No.2 in the relevant market or industry in terms of
KING & WOOD 6
its market share, has strong controlling or bargaining power over distributors, has a relative
wide brand influence and customers who have a high degree of reliance on its products.
c) The activity is not engaged in for an anti-competitive purpose. It is suggested that a
company should be clear on the purpose of its RPM activity before implementing RPM. The
purpose should be legitimate with regard to legal and commercial considerations and not
directed at hindering competition. It would be more persuasive if the company can prove that
the purpose of maintaining minimum resale prices is to facilitate product or technology
innovation, promote operational efficiency, save energy or protect the environment.
d) The RPM has pro-competitive effects and is good for consumer welfare. According to the
judgment of the High Court, these effects may include the prevention of distributor “free-riding”,
facilitating new brands or products entering the market, providing unified price information to
customers, improving the development of distributors and building distribution channels and
protecting against discount sales of competitors, etc.
It should be noted that conclusive guidance is not available at this point in time as to whether the
rule of reason doctrine will be applied to determine the legality of RPM by the NDRC in its
enforcement actions. If a company is investigated by NDRC for suspected RPM, especially
when similar RPM practices are prevalent across the company’s industry, the above defenses
may not be able to save the company from an investigation and being fined by the NDRC for
having violated Article 14 of the AML.
We recommend that companies create appropriate competition compliance policies and
undertake periodic audits of compliance with the policies. The compliance policies should set
out the frequency with which employees should receive training (preferably, on an annual basis
as well as on an as-needs basis), identify those employees who should receive the training
(especially management and sales and marketing teams as well as anyone involved in pricing
decisions), prescribe regulations and codes of conduct to make all officers and employees of
the company aware of their responsibilities under the AML and the company’s protocols and be
endorsed by senior representatives of the company, such as the Chairman and Chief Executive
Officer, so that compliance is truly “top down.” In addition, companies should conduct periodic
audits of their contracts and communications with distributors from time to time. If they are
aware of any suspicious clauses or behaviors, they should not hesitate to contact their legal
counsels for advice to control and minimize the potential risks.
(This article was originally written in Chinese, the English version is a translation.)
* Liu Cheng is a partner in King & Wood Mallesons’ M&A Group, Beijing Office.
** Swita Gan is an associate in King & Wood Mallesons’ M&A Group, Beijing Office.
*** Yu Zhenzhen is an associate in King & Wood Mallesons’ M&A Group, Beijing Office.
KING & WOOD 7
1 Order of the Chairman of the People’s Republic of China, No. 68, enacted on August 30, 2007 and became effective as of August 1, 2008. 2 The Rule of Reason is a doctrine developed by the United States Supreme Court in its interpretation of the Sherman Act, which generally means that only combinations and contracts unreasonably restraining trade are subject to actions under the anti-trust laws. Possession of monopoly power is not in itself illegal. 3 Please refer to the article Resale Price Maintenance – Not Per Se Illegal Under the AML for more details, http://www.kingandwood.com/article.aspx?id=china-bulletin-2012-06-02&language=zh-cn, China Bulletin, author: Liu Cheng, Martyn Huckerby and Yu Zhenzhen. 4 Under the current AML enforcement regime, NDRC and its authorized counterparts at the provincial level are the administrative enforcement agencies against price-related monopolistic behaviors including monopolistic agreements and abuse of dominant market position.
Migration processes in 2014Thu, 01/02/2014 - 11:14NewsFlash: 221
Immigration
Changes in Immigration Processes
• Changes in visa processesBased upon Article 2 of Decree 0834, 2013, which determines National Government’s discretional power, the Ministry of Foreign Affairs determined that those Foreign Nationals who are TP-4 beneficiaries (Temporary Work Visa) cannot change their beneficiary status to actual TP-4 visa holders. This determination has been taken as an internal labor protection measure, thus limiting visa holder status to the only member in the family who holds a sponsorship from a duly constituted Colombian Company.
The Ministry of Foreign Affairs voided the need for signature notarization on the “Contract Summary” also known as “DP-FO-102 Form,” document constituting part of the necessary documentation for TP-4 visa applications. This measure, in line with anti-bureaucracy laws, has been taken with the purpose of improving processing time as well as reducing costs and motivating currently available online tools for visa processing procedures.
• New countries join in Mercosur Visa
Based on reciprocity criteria, nationals from the following countries are now eligible for Mercosur visas: Argentina, Brazil, Bolivia, Peru, Chile, Ecuador, Uruguay, and Paraguay.
The Mercosur Immigration Agreement enables foreign nationals from the above named countries to reside in Colombia for a period of 2 years with working and/or studying permission during their stay.
• Foreign identification cards issuance for minors and deadline forrenewing identification cards for resident visa holders
Based on Article 33 from 834 Decree, 2013, starting January 2014 Migracion Colombia (Immigration Authorities) will issue foreign ID cards to minors between the ages of 7 and 17. Therefore, all minors who already have a visa or are beneficiaries of visa holders will have to go to Migracion Colombia premises to obtain their Foreign ID cards.
BThis is the proper procedure in order to obtain a foreign ID:
• Present Original Passport along with a valid visa
• Fill out and submit the Processing Form or complete the Online Registry Code, along with the following documents:
1. Foreigner’s passport bio page copy.
2. Copy of foreigner’s Passport page where the last entry was stamped.
3. Copy of Passport page where the visa has been stamped.
4. One (1) Passport size picture (3x4 cms) White background.
5. Any document showing blood type.
Prior to registration a deposit must be made at Banco de Occiedte acct. # 263-05464-5 to Unidad Administrativa Especial de Migración Colombia – banking code 101 for the amount of COP $153,300 (USD $80.00).
The deadline established on Article 75 from 834 Decree, 2013 for all resident visa holders Foreign ID cards’ renewal is April 24th, 2015. It is necessary that all resident visa holders who have not renewed or changed their foreign ID cards to do so before the stated deadline by going to Migracion Colombia premises and requesting the new ID card, thus complying with the new Immigration Law regulations.
For more information please contact to
Connie Núñez Vélez
Omar Hernandez Huseein
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client alert COMPETITION | EU REGULATORY | FINANCE JANUARY 2014
European Commission adopts new rules on risk finance investments
e d i t o r i a l Benoît Le Bret
As part of the European Commission's State Aid Modernisation strategy, which aims at fostering
growth in the Single Market, the Commission adopted on 15 January 2014 new guidelines on
State aid to promote risk finance investments (“the new Guidelines”).
These new rules provide a useful revision of the state aid framework and of the compatibility
assessment which will apply to national measures falling outside of the scope of the General Block
Exemption Regulation (“GBER”). The ultimate objective of the reform is to promote a more
efficient and effective access to various forms of risk finance to a larger category of European
SMEs.
The new Guidelines include several important changes compared with the current legal framework,
since they aim to resolve the issues identified in the implementation of the current Guidelines which
were adopted in 2006 and amended in December 2010.
The new Guidelines will apply in conjunction with the relevant risk finance provisions in the
forthcoming GBER. The latter, currently subject to a public consultation, will exempt from the
notification requirement national measures which fulfil specific conditions. It should also integrate
the improvements and changes reflected in the new Guidelines.
“These new rules will help bridge this funding gap by encouraging Member States to put in place well-designed aid measures
Such measures can give private investors the right incentives to invest more into SMEs and midcaps, enhancing their capacity
to grow and create jobs.”
Joaquín Almunia Commission Vice-President in charge of competition policy
.
COMPETITION | EU REGULATORY | FINANCE JANUARY 2014
IMPROVEMENTS TO THE CURRENT FRAMEWORK
A wider scope
As for the new Guidelines, their scope is broader than the scope of the 2006 Risk Capital
Guidelines. The new Guidelines thus provide a wider definition of eligible undertakings, so as to
include not only start‐ups but also small and medium‐sized enterprises (SMEs), small midcaps, and
innovative midcaps.
Higher compatibility threshold
In addition, the threshold for presuming the compatibility of aid, i.e. aid which may be considered a
priori compatible with the EU rules, has been significantly increased: set today at EUR 2.5 million per
year and per company, it has been raised to EUR 15 million per company. The new amount agreed
upon by the European Commission clearly demonstrates that the EU is aware of ‐and takes into
account‐ the needs of the venture capital market in Europe, notably as compared with the USA, as well
as the financing issues currently faced by SMEs.
“The market failure in access to finance, which has been exacerbated by
the crisis, affects European companies in their development, from the start‐up stage onwards.”
Joaquín Almunia
Private investors’ participation
The new Guidelines also introduce additional flexibility regarding the condition of the minimum
private investor participation ratio, in order to better reflect the high risks faced by SMEs during their
first stages of development. Minimum private investor participation, currently set at 50%, will now
range from 10% to 60% depending on the age and level of risk of the company.
Admissible financial instruments
The condition related to the type of financial instruments which must be used by the risk
finance measure (in the current Guidelines, at least 70% must take the form of equity or quasi‐ equity
investment instruments into SMEs) has been removed altogether, in order to better reflect
market practices and the diversity of financial instruments.
Transparency
Last, the transparency requirements are adapted in order to better protect SMEs. A new
exemption has been introduced with respect to SMEs which have not carried out any commercial
sale in any market, and for investments below EUR 200,000 into a final beneficiary undertaking. This
provision avoids making public sensitive information such as the identity of the beneficiaries
supported under the measure, the type of undertaking, the principal economic sector in which the
undertaking is active and the form and amount of investment.
| 2
COMPETITION | EU REGULATORY | FINANCE JANUARY 2014
ENTRY INTO FORCE OF THE NEW RULES
Concretely, the new Guidelines also include a prolongation of the current Risk Capital Guidelines,
which will apply until 30 June 2014; the new provisions will enter into force only then and will
apply until 31 December 2020.
GIDE CONTRIBUTION
Gide participated in the public consultations and was directly involved in the discussions leading
to the adoption of the new Guidelines, representing in particular the interests of the French and
European private equity and venture capital industry during direct negotiations with DG Competition,
in Brussels.
Most of the suggestions made by the industry were heard by the European Commission and clearly
taken into account in the drafting of the new Guidelines. The resulting changes made to the legal
framework should help further reinforce the important contribution made by the venture capital
industry to the financing of the real economy and innovation in Europe.
CONTACTS
ANN BAKER
BENOIT LE BRET
STEPHANE PUEL
ROMAIN RARD
You can also find this legal update on our website in the News & Insights section: gide.com
This newsletter is a free, periodical electronic publication edited by the law firm Gide Loyrette Nouel (the "Law Firm"), and published for Gide’s clients and business associates. The newsletter is strictly limited to personal use by its addressees and is intended to provide non‐exhaustive, general legal information. The newsletter is not intended to be and should not be construed as providing legal advice. The addressee is solely liable for any use of the information contained herein and the Law Firm shall not be held responsible for any damages, direct, indirect or otherwise, arising from the use of the information by the addressee. In accordance with the French Data Protection Act, you may request access to, rectification of, or deletion of your personal data processed by our Communications department ([email protected]).
GIDE LOYRETTE NOUEL A.A.R.P.I.
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14/11/2013
BI REGULATIONS ON BANK'S MINIMUM CAPITAL REQUIREMENTS AND MULTIPLE LICENSING
The Indonesian central bank, Bank Indonesia, recently issued two regulations which will change the way banks in this country
do their business. These two regulations regulate the business activities of a bank on the basis of the bank’s capital. As a result,
commercial banks which in the past had more freedom in their operation thanks to Law No. 7/1992 regarding Banking (as
amended) are now only allowed to conduct business transactions which are in line with their capital strength.
The two new regulations are: (i) Bank Indonesia Regulation No. 14/26/PBI/2012 regarding Banks’ Business Activities and Core Capital
Based Office Network, dated 27 September 2012 (“BIR 14/26”), and (ii) Bank Indonesia Regulation No. 14/18/PBI/2012 regarding
Minimum Capital Adequacy Requirement For Commercial Banks, dated 28 November 2012 (“BIR 14/18”).
It is clear that with BIR 14/26 and BIR 14/18 Bank Indonesia wants on the one hand to ensure that banks in Indonesia run their
business in accordance with their capital strength and on the other hand that these banks boost their capital up to international
level while being more resilient to risks faced in light of changes in the global financial system.
Capital Requirement
BIR 14/18 follows the international practice of linking a bank’s capital with its risk profile. It requires that the capital of a bank is in
line with the bank’s risk profile.
The minimum capital requirement for local banks is calculated by using the Minimum Capital Adequacy Requirement ratio.
BIR 14/18 stipulates the following minimum capital requirements for the various risk profiles:[1]
i. 8% (eight percent) of the Risk Weighted Assets (ATMR) for banks with a rating 1 (one) risk profile;
ii. 9% (nine percent) to less than 10% (ten percent) of the ATMR for banks with rating 2 (two) risk profile;
iii. 10% (ten percent) to less than 11% (eleven percent) of ATMR for Banks with a rating 3 (three) risk
profile;
iv. 11% (eleven percent) to 14% (fourteen percent) of ATMR for Banks with a rating 4
(four) or rating 5 (five) risk profile.
For banks with subsidiary companies, the above minimum capital adequacy requirements apply to the banks individually as well as
in consolidation with their subsidiaries. To further ensure compliance with the requirement, BIR 14/18 prohibits a bank from
distributing its profit if the profit distribution results in the bank’s capital requirement inadequacy.
Local Banks
BIR 14/18 futher regulates banks’ capital based on the banks’ residency status or where the bank is established.
For banks with a head office in Indonesia, the capital consists of: (i) core
capital (tier 1); (ii) supplementary capital (tier 2); and (iii) additional supplementary capital
(tier 3).
Core Capital
The structure of a local bank’s core capital is determined by taking into consideration the
following deduction factors:[2]
a. Goodwill;
b. Other intangible assets; and/or
c. Other core capital deduction factor, such as:[3]
i. the bank’s equity participation, which covers the bank’s participation in its
subsidiaries, excluding temporary equity participations in credit restructuring and
entire equity participations in an insurance company;
ii. shortfall from completing the minimum solvability ratio level (Risk Based
Capital/RBC minimum) of the insurance company owned and controlled by the
bank; and
iii. securitization exposure.
The above deduction is deducted by as much as 50% (fifty percent) from the core capital and
50% (fifty percent) from the supplementary capital. The entire capital deduction factors shall
not be taken into consideration in the ATMR for Credit Risk.
Supplementary capital
Supplementary capital (tier 2) which consist of supplementary capital upper level (upper tier
2); and supplementary capital lower level (lower tier 2) can only be taken into consideration at
the highest as 100% (one hundred percent) from the core capital.[4] Whilst Supplementary
capital lower level (lower tier 2) can only be taken into consideration, the highest at 50% (fifty
percent) from the core capital.[5]
Upper level supplementary capital (upper tier 2) consists of:[6]
i. capital instrument in the stock form or other capital instruments that fulfill the
requirements as referred to in Article 16;
ii. parts of innovative capital that cannot be taken into consideration in the core capital;
iii. fixed asset revaluation which covers: the difference in value of fixed assets
revaluation which were classified into profit balance, as much as 45% (forty five
percent); and the increasing in value of fixed assets were unrealized which have
previously been classified into profit balance, as much as 45 % (forty five percent);
iv. general reserves of PPA over productive assets which obliged to be formed with the
highest amount at 1.25% (one point twenty five percent) from ATMR for Credit
Risk; and
v. Other comprehensive earnings, the highest at 45% (forty five percent), which is the
unrealized profit that arises from the increasing in fixed value inclusion that classified
in the available for sale category.
Lower level supplementary capital (lower tier 2) consists, among others, of preferred shares
that can be withdrawn after a certain period of time (redeemable preferred shares) and/or
subordinated loan or subordinated obligation.
Additional supplementary capital
To be qualified as additional supplementary capital (tier 3), the capital must fulfill the
following conditions and requirements:[7]
i. It is used only for measuring the Market Risk;
ii. It is not more than 250% (two hundred and fifty percent) of the bank’s core capital
which being allocated to calculate the Market Risk; and
iii. Together with the supplementary capital, it does not total to more than 100%
(one hundred percent) of the core capital.
Included in this tier 3 capital are the following:
i. Short term subordinated loans or subordinated bonds;
ii. Supplementary capital which is not allocated to cover capital charges of Credit Risk
and/or capital charges of Operational Risk, but which fulfill the requirements for
supplementary capital (unused but eligible tier 2); and
iii. The rest of the lower level supplementary capital (lower tier 2) in excess of the lower
level supplementary capital limit.
Supplementary capitals (upper tier 2 and lower tier 2 as well as tier 3) which are in the form of
capital instruments must fulfill, among others, the following requirements:[8]
i. They are issued and fully paid up;
ii. For upper tier 2: they are not restricted by a payment time limit and requirement (for
upper tier 2), and the validity period of the agreement is at least 5 years. For tier 3,
the validity period of the agreement is at least 2 (two) years and the
settlement requires the approval of Bank Indonesia (for lower tier 3) .
iii. They are able to absorb losses where the amount of the bank’s losses exceeds
the profit retained and deposits which include core capital although the bank is
not in liquidation and is subordinated, which facts are clearly declared in the
publishing documentation/agreement;
iv. The principal payment and / or earning yield is being suspended and accumulated in
between period (cumulative) if the referred payment can cause the ratio of KPMM,
whether individually as well as consolidated, to fall short of the requirements
stipulated by BRI 14/18.
v. They are not protected or not guaranteed by the Bank or Subsidiary Company;
Supplementary capitals of upper tier 2 and lower tier 2 and tier 3 which bear “call option”
features are required to fulfill the certain conditions imposed by BIR 14/18 before the call
options can be exercised.
Foreign banks
Foreign banks are subject to CEMA.
Unlike banks with a headquarter in Indonesia which are subject to the above mentioned
capital requirement, branches of foreign banks operating in Indonesia (currently limited to 10
foreign banks) are subject to the Capital Equivalency Maintained Assets (CEMA)
requirement. BIR 14/18 stipulates that the capital of these branch offices consists of:[9]
i. business funds;
ii. profit retained and last year's profit after excluding certain factors such as deferred
tax; the difference in value of fixed assets revaluation; the increase in value of fixed
assets; and profit on sale of assets in the transaction of securities (gain on sale)
iii. 50% (fifty percent) of current year profit after excluding certain influence factors
such as those mention earlier in ii;
iv. general capital reserves;
v. reserve capital purpose;
vi. fixed asset revaluation with certain coverage and calculation; and
vii. general reserves for provision for write off of asset losses over productive assets using
certain calculation.
Banks are required to determine the financial assets for inclusion in the CEMA to meet the
minimum CEMA. Once made, the determination cannot be changed until the next period of
CEMA fulfillment. The following are assets that may be included and calculated as CEMA:
i. Securities issued by the government of the Republic of Indonesia and held until their
maturity;
ii. Investment grade debt securities issued by banks with Indonesian legal entity
and/or Indonesian legal entities and are issued not for trading purpose by the issuing
banks; and/or
iii. “A” rated debt securities issued by Indonesian legal entities. The value of the
corporate debt securities is limited to 20% (twenty percent) of the total
minimum CEMA required of the bank.
Multiple Licensings
To improve the resiliency, competitiveness and efficiency of Indonesian banks, the central
bank imposes rules on banks’ eligibility to enter into different types of business transactions
on the basis of the banks’ capital strength. As a result, in the future banks in Indonesia will be
categorized in accordance with their core capitalization into four categories or “BUKUs” (as
BIR 14/26 calls them) with BUKU I being the lowest rank and BUKU IV being the highest
rank. The provisions of BIR 14/26 will only take effect on banks in 2016, except that for
regional/provincial government owned banks it will take effect only in 2018.[10]
In relation to the categorization of banks into BUKUs, BIR 14/26 stipulates the following core
capital amounts for the BUKUs:[11]
a. BUKU 1 : Banks with Core Capital of up to less than Rp.1.000.000.000.000,00 (one
trillion Rupiah or equivalent to around USD 90 million);
b. BUKU 2 : Banks with minimum Core Capital of Rp.1.000.000.000.000,00 (one
trillion Rupiah or equivalent to around USD 90 million) up to less than
Rp5.000.000.000.000,00 (five trillion Rupiah or equivalent to around USD 450
million);
c. BUKU 3 : Banks with minimum Core Capital of Rp.5.000.000.000.000,00 (five trillion
Rupiah or equivalent to around USD 450 million) up to less than
Rp.30.000.000.000.000,00 (thirty trillion Rupiah or equivalent to around USD 2600
million); and
d. BUKU 4 : Banks with minimum Core Capital of Rp30.000.000.000.000,00 (thirty
trillion Rupiah or equivalent to around USD 2600 million).
The categorization of banks into BUKUs will not only affect banks in terms of how they will
conduct their businesses and serve their customers (BUKU I banks will not have the same
ability to enter into businesses as BUKU IV banks [12]), but will also affect them in terms of
their ability to enter into capital investment/participation and to channel loans (BUKU I banks
will not be able to channel as many loans compared to BUKU IV banks). Regarding capital
investment, BIR 14/26 stipulates the following maximum limits:[13]
a. BUKU 2 : 15% (fifteen percent) of the Bank's capital;
b. BUKU 3 : 25% (twenty five percent) of the Bank's capital; and
c. BUKU 4, at 35% (thirty five percent) of the Bank's capital.
BIR 14/26 also determines banks’ obligation to channel loans or financing facilities to
productive businesses in line with their BUKU categories, as follows:[14]
a. minimum 55% (fifty five percent) of the total loan or financing, for BUKU 1;
b. minimum 60% (sixty percent) of the total loan or financing, for BUKU 2;
c. minimum 65% (sixty five percent) of the total loan or financing, for BUKU 3; and
d. minimum 70% (seventy percent) of the total loan or financing, for BUKU 4.
A banks’ BUKU category also determines its branching ability. The opening of an office
network overseas, for instance, may only be conducted by banks of BUKU 3 and BUKU 4
categories with further restriction for BUKU 3 banks. BUKU 3 banks may only open office
networks in Asia whereas BUKU 4 may open office networks in all territories
overseas/worldwide.[15]
[1] Article 2 section 3 of BIR 14/18
[2] Article 14 of BIR 14/18
[3] Article 21 of BIR 14/18
[4] Article 15 of BIR 14/18
[5] Article 18 of BIR 14/18
[6] Article 17 of BIR 14/18
[7] Article 22 of BIR 14/18
© ABNR 2008 - 2014
QUESTIONING THE ROYALTY
A commentary on the Federal Court case of Nike Malaysia v Jabatan Kastam Diraja Malaysia by
Maniam Kuppusamy and Mariam Munang
On 29 May 2013, the Federal Court handed down a decision on the question as to whether royalty
costs should form part of the value of imported goods to be assessed for purposes of customs duty.
This question revolved around the interpretation of Regulations 4 and 5 of the Customs (Rules of
Valuation) Regulations 1999.
BACKGROUND FACTS
Nike Sales Malaysia Sdn Bhd (“Nike Malaysia”) is an importer of the popular brand of footwear,
apparel, sports equipment and accessories. Between January 2000 and February 2003, Jabatan
Kastam Diraja Malaysia (“KDRM”) conducted an audit on the declared value of the goods imported
by Nike Malaysia. The audit revealed that Nike Malaysia had not included royalty costs as part of
the price paid, or payable, for the goods.
KDRM was of the opinion that royalty paid to a foreign brand owner was a “transaction condition”
for the imported goods for the purpose of customs valuation. KDRM alleged that Nike Malaysia had
underpaid customs duty on the goods and demanded unpaid duties from Nike Malaysia amounting
to RM2,675,344.19.
Nike Malaysia lodged an appeal to the Director-General of KDRM, which was dismissed. Nike
Malaysia then appealed the decision to the High Court.
THE BUSINESS TRANSACTION
The import of goods by Nike Malaysia into Malaysia involved several legal entities, namely the
brand owner, Nike International Limited (“Nike International”), the exporters who were unrelated
third party manufacturers and the buying agents, Nike Inc (“Nike USA”) and Nissho Iwai America
Corporation (“Nissho”).
Nike Malaysia would place purchase orders with Nike USA, which would then pass the purchase
orders to unrelated third party manufacturers. The manufacturers would then export the goods to
Nike Malaysia. Invoices were issued by and payments were made through Nissho. Nike Malaysia
paid royalty directly to Nike International on the basis of invoiced sales in Malaysia.
This business transaction was governed by three inter-related agreements:
(a) a Purchase Commission Agreement between Nike Malaysia and Nike USA (“Purchase
Agreement”);
(b) a Buying Agency and Logistics Services Agreement between Nike Malaysia and Nissho; and
(c) an Intellectual Property Licence and Exclusive Distribution Agreement between Nike
Malaysia and Nike International (“IP Agreement”).
Royalty was payable by Nike Malaysia to Nike International under the IP Agreement at the rate of
6% of net invoiced sales revenue of all licensed goods sold in Malaysia. Crucially, the IP
Agreement expressly provided that non-payment of royalty shall not prevent or impede the sale.
Clause 13.1 reads:
“... in the event of non-payment of the royalty ... the licensor [Nike International] shall not prevent
or impede such supplier from selling to licensee [Nike Malaysia] licensed goods ...”
THE CUSTOMS LAW FRAMEWORK
The customs value of imported goods is assessed based on the Customs Act 1967, read together
with the Customs (Rules of Valuation) Regulations 1999.
Regulation 4(1) states that the customs value of imported goods “shall be their transaction value,
that is, the price paid or payable for the goods when sold for export to Malaysia, adjusted in
accordance with Regulation 5.”
Regulation 5(1)(a)(iv) then provides that in determining the transaction value, the price paid or
payable for the goods shall be adjusted by adding “royalties and licence fees ... that the buyer must
pay, directly or indirectly, as a condition of the sale of the goods for export to Malaysia.”
The issue in this case is therefore whether, on the basis of the business transaction described above,
royalty should be added to the value of the goods imported by Nike Malaysia for purposes of
determining the customs duty payable on those goods.
THE HIGH COURT’S DECISION
Nike Malaysia took the position that royalties should not be added to the price of the goods paid as
it was not a condition of the sale of goods for export to Malaysia. The sale contract and the royalties
contract were separate agreements made between different parties.
On the other hand, KDRM was of the view that royalty costs must be included because the royalties
were, directly or indirectly, a condition of the sale of the goods for export to Malaysia.
Mohamad Ariff JC (as he then was) agreed with Nike Malaysia. According to the learned Judicial
Commissioner, the test to determine whether the royalty paid was a transaction condition was this:
“The overriding test is whether the buyer or importer has, or has not, the obligation to pay the
royalty in order to purchase or import the goods. If the obligation arises from a separate agreement
that is unrelated to the sale or importation of the goods, it cannot be regarded as a condition of the
sale of the goods.”
By applying this test, the learned Judicial Commissioner concluded that the IP Agreement and the
Purchase Agreement did not comprise a single transaction and that the royalty payable by Nike
Malaysia to Nike International under the IP Agreement could not properly be taken as a “condition
of the sale of the goods for export to Malaysia.”
THE COURT OF APPEAL’S DECISION
On appeal, the Court of Appeal reversed the High Court’s decision. It held that royalty is to be
regarded as an item to be included for adjustment of the price to be paid or payable, irrespective of
whether the payment of royalty is expressly stated as a condition.
The Court of Appeal found that “... it would be legally wrong not to make an adjustment for the
price paid or payable merely because it was not expressed that the respondent must pay the said
royalty as a condition of the sale of goods for export to Malaysia. Such a proposition appears to be
an ingenious attempt to evade the proper customs duty on the imported goods by the respondent.”
THE FEDERAL COURT
The Federal Court considered these two questions:
Question 1: “Whether the royalty paid by the applicant/appellant to Nike International Ltd could be
considered as a condition of sale for the goods to be exported to Malaysia and as an item for the
adjustment in accordance with Regulation 4 of the Customs (Rules of Valuation) Regulations 1999
read together with Regulation 5(1)(a)(iv) of the said Regulations?”
Question 2: “Whether the royalty is an indirect consideration by the applicant/appellant as a
condition of sale for the entry of the goods to be exported into Malaysia?”
“CONDITION” FOR SALE: TWO ALTERNATIVE DEFINITIONS
Regulation 5(1)(a)(iv) was adopted from the Agreement on Implementation of Article VII of the
General Agreement on Tariffs and Trade 1994 (“WTO Valuation Agreement”), to which Malaysia
and many other countries are signatories. The Federal Court considered two leading authorities on
condition for sale for purposes of imposing custom duty, namely Deputy Minister of National
Revenue v Mattel Canada Inc. [2001] 199 D.L.R. (4th) 598 (“Mattel Canada”) and Chief Executive
of New Zealand Customs Service v Nike New Zealand [2004] 1 NZLR 238 (“Nike New Zealand”).
In Mattel Canada, the Canadian Supreme Court adopted the legal definition of “condition” as used
in the law of contract. It adopted the definition provided by P.S. Atiyah in The Sale of Goods (8th
Edition), that a condition is a term that is “of such vital importance that it goes to the root of the
transaction”.
The Court of Appeal of New Zealand in Nike New Zealand considered Mattel Canada but disagreed
with the Canadian Supreme Court that “condition” was a legal term. Rather, the New Zealand
Court of Appeal regarded it as a term used in its ordinary and common sense way to mean a
prerequisite or requirement for the export of the goods. In its view, for royalty to be a condition,
there had to be a combination of two features. First, the royalty had to be payable to the
manufacturer or to another person as a consequence of the export of the goods. Second, the party to
whom the royalty was payable must have control of the situation that goes beyond the ordinary
rights of a licensor that gives it the ability to determine whether the export to the country in
question could or could not occur.
Thus Mattel Canada and Nike New Zealand presented the Federal Court with different definitions of
a “condition” of sale.
OPINION OF THE WTO TECHNICAL COMMITTEE
The Federal Court also considered Advisory Opinion 4.13 (“Advisory Opinion”) of the Technical
Committee on Customs Valuation (“TCCV”) established under the WTO Valuation Agreement.
The Advisory Opinion was consistent with the approach adopted by the Canadian Supreme Court in
Mattel Canada. According to the TCCV, where the requirement to pay royalty results from a
separate agreement unrelated to the sale for export of the goods, royalty is not a condition of the
sale of the goods. Therefore, it should not be added to the price actually paid or payable as an
adjustment for the purpose of assessment of customs duty.
In answering the questions on appeal, the Federal Court stated that the interpretation of Regulations
4 and 5 cannot be an isolated and domestic exercise. Mindful of Malaysia’s obligations under the
WTO Agreement, the Federal Court gave due regard to the Advisory Opinion issued by the TCCV.
It observed that Mattel Canada was not only consistent with the Advisory Opinion but also with the
approach in the United Kingdom, Australia, India and Singapore, all of which are WTO member
countries. In this respect, Nike New Zealand was viewed as inconsistent with the international
approach and as such, an exception.
The Federal Court stressed the principle of strict interpretation in relation to revenue or taxing
statutes. It referred to the Supreme Court case of National Land Finance Co-operative Society Ltd v
Director-General of Inland Revenue [1994] 1 MLJ 99 which held that in taxation matters, courts
would refuse to adopt a construction which would impose liability where doubt exists.
In view of Clause 13.1 of the IP Agreement, the Federal Court stated that the obligation to pay
royalty arose from a separate agreement that was unrelated to the sale for export of the goods to
Malaysia. Accordingly, it took the view that royalties paid by Nike Malaysia under the IP
Agreement should not be included for duty purposes as it did not have to pay royalty in order to
purchase the goods from the supplier. The Federal Court then answered both the questions posed in
the negative and set aside the orders of the Court of Appeal and reinstated the High Court orders.
PUSHING THE ENVELOPE
A year after Mattel Canada was decided, the Federal Court of Appeal of Canada in Reebok Canada
v Deputy Minister of National Revenue, Customs and Excise [2002] F.C.J. No. 518 extended the
principles laid down in Mattel Canada by holding that royalty payment will not necessarily be a
transaction condition even in a case where both the sale contract and royalty contract are made
between the same parties.
According to the Court in Reebok Canada, the outcome will depend on the wording of the
agreements. In this case, the Court held that the royalty payment was not a transaction condition
even though the royalty contract and the sale contract were made between the same parties as the
agreements did not contain provisions which entitled the seller to be relieved of his obligation to sell
the goods if the buyer did not make the royalty payment.
ANALYSIS
The decision of the Federal Court in Nike Malaysia is a landmark decision. It authoritatively
determines that for the purposes of determining the customs duty payable on goods, royalty paid is
not to be included in the price paid, or payable, for the goods in the following circumstances:
(1) the royalty is payable to a party who is not the exporter of the goods;
(2) the royalty is payable under an agreement that is separate and distinct from the agreement for
the sale of goods; and
(3) the payment of the royalty is not a condition for the sale and export of the goods.
The decision by Mohamad Ariff JC which was approved by the Federal Court was followed in
Colgate-Palmolive Marketing Sdn Bhd v Ketua Pengarah Kastam [2011] 1 LNS 1878 and Levi
Strauss (Malaysia) Sdn Bhd v Ketua Pengarah Kastam, Malaysia [2011] 1 LNS 1581 (both decided
by Mohd Zawawi Salleh J) where the royalty and the purchase price of the products were separate
and independent transactions between different parties. These High Court decisions have very
recently been upheld by the Court of Appeal.
In August 2013, the decision of the Federal Court was followed in the unreported cases of EMI
(Malaysia) Sdn Bhd v Ketua Pengarah Kastam (Suit No: R-25-517-2010) and Persatuan Industri
Rakaman Malaysia v Ketua Pengarah Kastam (Suit No: R-25-516-2010).
The decisions of the High Court and the Federal Court in Nike Malaysia are to be commended as
they adopt the Advisory Opinion of the TCCV and align the determination of customs duty with the
practices in other WTO member countries, such as the United Kingdom, Australia, India and
Singapore.
It will be interesting to see whether the Malaysian Courts will adopt the principles laid down in
Reebok Canada in a situation where the facts are substantially similar to that case.
Writers’ e-mail: [email protected] & [email protected]
SUBJECT MATTER: REVENUE LAW – CUSTOMS
WRITERS' NAMES: MANIAM KUPPUSAMY (L) & MARIAM NELLY MUNANG (R)
WRITERS' PROFILES:
Maniam is a Partner in the Dispute Resolution Division of Skrine. His main practice areas are
customs law and general litigation.
Mariam graduated from the University of Birmingham in June 2011. She was called to the Malaysia
Bar on 13 September 2013 and will commence practice as an advocate and solicitor with Skrine
shortly.
Energy reform in the oil and gas sector
Introduction
The decree reforming various provisions of articles 25, 27 and 28 of the Political Constitution ofthe United Mexican States in relation to energy (the “Reform”), issued by the Executive Branch on December 20, 2013, sets up profound changes in the oil and gas sector of the country bycompletely reorganizing the manner in which the industry is managed, changing it from a sectorcontrolled almost entirely by the Federal Government (primarily through Petróleos Mexicanosand its subsidiaries), to a sector open to private investment, with the Federal Government assupervisor and regulator.
In this regard, although the specifics of the Reform are pending and must be fleshed out in theimplementing legislation, the following aspects regarding oil and gas can be discussed now:
Types of contracts
As set forth in the transitory articles of the Reform, various contractual models are contemplatedfor oil and gas exploration and exploitation activities, accepting private investment.
The contractual models contemplated are (i) production sharing contracts, (ii) profit sharingcontracts, (iii) licenses, and (iv) services contracts, with the idea that the private sector joinPemex in the production chain activities of the oil and gas industry.
While the implementing legislation will have to better define the scope of each of the contractualmodels, international experience shows that these types of contracts, as flexible and equitablemodels, are used with positive results for all parties. The implementing legislation must alsocome up with an adequate model for payment of fees for carrying out certain activities.
In this way it is hoped to offer to the private sector the opportunity to participate in the oil andgas sector under a modern regulatory framework that is secure and predictable.
Support for relevant industries in the sector
The Reform opens the door to the development of new niches in the industry, such as theexploration and exploitation of deep water oil and gas fields, as well as lutite fields, includingshale gas and shale oil. In relation to the latter, the potential for exploitation is significant. It isconsidered that Mexico is fourth worldwide in shale gas reserves, with fields practicallyeverywhere in Mexican territory.
2
Currently, Pemex does not have the technology or sufficient resources to develop this sub-industry adequately. Similarly, the worrisome lack of infrastructure in the country makes itdifficult to properly engage in many of the activities related to these oil and gas resources.
It is hoped that the private sector will invest in shale gas and shale oil exploration andexploitation activities and, in addition, develop the infrastructure necessary for its transportation,storage, distribution and marketing.
In countries like the United States and Canada there is already a robust shale gas and shale oilindustry, and therefore it can be expected that that experience can be taken advantage of inMexico, creating a productive and efficient sub-sector, with investment opportunities in variousareas of the chain of activities, generating value at different levels.
Lack of funding impedes Pemex from exploring deep water oil and gas fields effectively. It ishoped that allowing private sector participation will result in companies with greater resourcesand experience in this area investing through the new contractual models.
Activities regulated by the Energy Regulatory Commission Comision Reguladora de EnergaCRE
The current regulation permits private sector participation in different aspects of thetransportation, distribution and storage of natural gas and liquid petroleum gas.
As a result of the reform, the CRE may grant permits for a new range of activities including thestorage, transportation and distribution by pipeline of oil and other oil products, as well asethanol, propane, butane and naphthas; in this regard, the private sector can participate in newniches of the industry under a scheme similar to the one used today for activities alreadyregulated.
To implement the regulation of such activities, it is expected that technical and economicregulatory instruments will be issued, to be translated into Official Mexican Standards, and intotariff methodologies and model contracts for providing the services in question. In this way anew regulatory framework will be generated that provides certainty to the private partiesparticipating in the oil and gas sector, promoting investment and the growth of the industry.
The Reform undertaken in the area of oil and gas intends to replicate private investment modelsthat have proven successful in other countries. It is hoped that with this array of activities,Mexico can achieve relevant and necessary goals, including in the area of energy security,strengthening the infrastructure and the growth of the industrial activity in the sector.
In case of requiring additional information please contact the partner in charge of your matters or one of the attorneys mentioned as follows.
Mexico Office: Juan Carlos Machorro [email protected] (Partner) Tel: (+52 55) 5279-5400
Monterrey Office: Jorge Barrero S. [email protected] (Partner) Tel: (+52 81) 8133-6000
Tijuana Office: Aarón Levet V., [email protected] (Partner) Tel: (+52 664) 633-7070
February 2014
01
At an interim injunction hearing a Court has to make a decision
on necessarily limited evidence. The circumstances are often
urgent. The Judge does not hear or see the witnesses as
evidence is presented in affidavit form. At trial, once all the
evidence is available and tested by cross examination, it is
conceivable that the Court’s initial view is reversed. What does
this mean for the parties?
There are a number of pointers for New Zealand litigants in a
recent UK judgment which explored just this question. The
judgment underscores litigation risk at the interim injunction
stage. There are two reasons:
• The Court advocated a “liberal assessment” to compensation
for a defendant who has been injuncted at the interim stage
- in other words a generous approach.
• In limited circumstances, there is even the potential for
stripping profit from the successful applicant for interim
relief which adds a new dimension.1
This decision is a good primer. It provides real and much
needed insight into what a Court finds persuasive. It also
provides a firm reminder of the potential implications of
seeking an interim injunction.
Interim Injunctions and IP
A classic example of using interim junctions in the IP
environment is when an IP owner wants an interim injunction
to stop a potential infringer entering the market. The argument
usually made is that damage to the IP owner’s goodwill and
market share would not be adequately compensated for in
money. If infringement is seriously arguable, the “balance of
COMMERCIAL LITIGATION INTELLECTUAL PROPERTYINTERIM INJUNCTIONS - THE POTENTIAL COST OF WINNING THE BATTLE BUT LOSING THE WAROne of the most effective litigation remedies is the interim injunction preserving the current status pending trial. Viewed as a first strike weapon, it can make or break a case. A vexed question is what should happen where a defendant is prevented by injunction from entering the marketplace but is later vindicated in the litigation.
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1 The New Zealand High Court Rules state that an undertaking as to damages is an undertaking to compensate the other party for any damage sustained. At first blush this language suggests that looking to the profit of the applicant could be a difficult argument to make.
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convenience” favours the IP owner and the overall justice requires it, a Court will grant an interim injunction. In plain language, “balance of convenience” means whether the risk of injustice to the IP owner outweighs the risk of injustice to the alleged infringer. One of the considerations in this assessment is relative merits of the case, in so far as merits can be ascertained at such an early stage.
The “quid pro quo” for an interim injunction is an undertaking to pay any damages sustained by a defendant who is ultimately vindicated in the litigation.
Undertakings as to damages
Here, the undertaking as to damages (or cross-undertaking) required of every applicant for an interim injunction comes into play. It is the “quid pro quo” - an enforceable promise to pay damages sustained by the other party through the granting of the interim injunction in whatever sum the Court decides the applicant ought to pay.2
An example from the English High Court
Given that the financial stakes in IP litigation are so high, it is not surprising that the most useful guidance is a recent English High Court judgment in a pharmaceutical patent dispute.3 The guidance is not specific to patent or even IP litigation but has wider application to all commercial litigation, including litigation in the New Zealand Courts.
The case was about a patent for a proton pump inhibitor (PPI) branded NEXIUM, used to treat a range of gastric conditions. The patent holder applied for an interim injunction to prevent launch of a branded generic product called EMOZUL. The manufacturer of EMOZUL claimed that it had side-stepped the patent so there was no infringement.
To get the injunction, the patent holder provided a cross undertaking as to damages. Nine months later, before the case reached trial, another generic company successfully demonstrated to a Court non-infringement of the patent. As a result, the patent holder applied to discharge the interim injunction, recognising that it would not succeed at trial against EMOZUL either.
This meant the defendants were free to launch EMOZUL. By then, the commercial market had fundamentally changed. The defendants had lost “first mover advantage” and had to compete with other generic companies. This included the patent holder which launched its own generic product within two days of its litigation loss (reflecting perhaps a lack of confidence in the scope of the monopoly and ability to stop new entrants).
To assess compensation for the defendants, the Court compared the extent to which they actually succeeded in penetrating the market with the relevant counter-factual, namely the extent to which they would have penetrated the market but for the injunction.
2 If the applicant for an injunction is not New Zealand based, this undertaking must generally be supported by acceptable security to avoid difficulties in enforcement.
3 AstraZeneca AB & Anor v KRKA, dd Novo Mesto & Anor [2014] EWHC 84 (Pat).
4 Also known as secondary patent in contrast to an original patent covering a new compound.
The Court pointed out that:
• Compensation drives the approach and the object is not topunish the patent holder.
• The assessment must be flexible. Justice might requirestripping the patent holder of the profits it obtained throughstopping the competitor’s launch. For instance, a cynicalinterference with a defendant’s right to enter a market with a generic drug by relying on a second generation patent.4 Ifthat attempt is a mere try-on, it might justify redistributingthe patent holder’s profits if they outstrip the loss to the newentrant.
• It should not over-scrutinise the evidence of loss put up bythe defendants. Rather, damages should be liberally assessed.After all, the patent holder had to successfully argue at the
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Specialist legal advice should be sought in particular matters. © Copyright Simpson Grierson 2013.
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interim injunction stage that the defendants’ losses would be easy to calculate while their own losses were not so easy to calculate. The patent holder could not now argue the converse; that the defendants’ asserted losses were too speculative.
The assessment exercise in this case had some unique factors because of a sophisticated and regulated pharmaceutical market which the Court carefully analysed. It focused on the principal levers which would influence switch over to the new entrant and the relevant purchasing decision makers. It found compelling the evidence of a representative cross-section of those decision makers particularly as there was a broad consensus among them, enhancing their credibility.
Another influential factor in the decision was the patent holder’s failure to give detailed evidence on a critical dimension of the dispute, namely whether it would have dropped its price for NEXIUM in response to inroads into its market share. What emerged from the evidence was that dropping the price would have a knock-on effect in other European markets so it was by no means clear that this was the likely response. The patent holder did not expand on this in its evidence. The Court considered it was therefore entitled
to draw an adverse inference against the patent holder. It therefore assumed for its purposes that the incumbent would not have dropped the price to compete.
In each of the markets for PPIs, the Court assessed the predicted level of uptake by the end of the first year (substantial in a cost sensitive market) and then reduced this by 20% to take into account market uncertainties. The final amount was to be determined by the parties’ accounting experts based on the formula established by the Court but looks to be much closer to the GBP32M claimed by the defendants than the GBP6M submitted by the patent holder.
Lessons
Although the Court stressed that the measure of relief for the vindicated defendants is compensatory and not punitive, the Court was obviously alive to the commercial benefits an applicant obtains when it succeeds in an interim injunction. The quality and nature of the evidence and witnesses is key despite the statement that an over-analysis is to be avoided. Having the right number of relevant and most representative witnesses, in proportion to the significance of the issue, ensures recovery for the delay in getting to market.
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BUSINESS RESCUE
INSOVENCYEBULLETIN12 February 2014
JOB LOSSES AND BUSINESS RESCUE “A LOST OPPORTUNITY”by Eric Levenstein (Director)
The continuation and extent of job losses is of huge concern to all South Africans and high unemployment rates will continue to have an effect on the economy, the Rand and, most importantly, the continued viability of companies in every sector of the economy.
Business Day of 11 February 2014 reports that “retrenchments are at a 10 year high as the economy continues to shed jobs”. As reported, 36 290 jobs have been lost in companies in South Africa in the month of January 2014. Clearly these companies continue to struggle in the current economic downturn, with many of them reaching a point of “financial distress” or being forced to close due to an inability to continue to trade successfully.
As of December 2013, liquidations in South Africa had decreased by 26.3% year on year, and when compared with the same period in 2012. If this is so, then one must question why South Africa is seeing such high numbers of job losses, noticeably in the manufacturing and construction sectors?
One of the troubling factors is that South Africa has a developed business rescue process which has been in place for almost three years now (since May 2011) and where there is every opportunity to save or rescue companies that are financially distressed and which prevents company closures and consequent job losses.
Business rescue provides opportunities for companies to place the business of the company into the hands of a practitioner for a short period of time, allowing the company’s debt to be restructured, its management to be improved and most importantly, to assess the possibility of saving the jobs of employees.
Unlike in a liquidation, business rescue allows the majority of employees to retain their jobs on the same terms and conditions as were in place prior to the commencement of business rescue proceedings. It provides a company with a breathing space, an opportunity to consider the reasonable prospect of the company continuing to trade into the future and with the least possible disruption to the company’s work force. Of course, a practitioner might have to consider retrenchments and the termination of jobs in the ordinary course of attrition and as a consequence of the company’s dire financial position. However, the assessment of job retention or possible retrenchments is done in a controlled manner and without the threat of creditors applying to court to liquidate the company on account of such company being unable to pay its debts.
Further, trade unions can apply to court for the imposition of a business rescue of a company where such trade unions are concerned about the ability of the company continuing to trade, and where the possible loss of jobs appears to be imminent. The Companies Act allows trade unions, through the Companies and Intellectual Property Commission (“CIPC") to be given access to a company’s financial statements for the purposes of initiating business rescue proceedings.
This opportunity has not, to date, been used by trade unions and which would allow them to, through a properly qualified practitioner, consider the retention of jobs within a business rescue framework and where liquidation is
ERIC LEVENSTEIN Director
Johannesburg
+27 11 535 8237
+27 11 535 8737
MEET THE AUTHOR
averted. The Act provides that while the company is subject to a business rescue proceeding, employees that continue to provide services to the company are paid as super-priority creditors throughout the period of business rescue.
One has to wonder as to how many of the thousands of jobs that were lost in January 2014, could have been saved by a properly considered and timely imposition of a business rescue process in those companies that were forced to shed employees or to close down.
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理律法律事務所
Royalties paid in 2011 and thereafter for foreign patents and computer programs may be exempt from Taiwan income tax
02/06/2014
Royalties paid in 2011 and thereafter for foreign patents and computer programs may be exempt from Taiwan income tax
The Ministry of Finance (MOF) and the Ministry of Economic Affairs (MOEA) jointly issued a directive on 29 January 2014 stating the amendments to the Rules Governing the Applications for Exemption from Income Tax on Royalties and Technical Service Fees Collected by Foreign Profit-Seeking Enterprises from the Manufacturing Industry, Technical Services Industry and Power-Generating Industry ("Rules"). These amendments took effect retroactively on 1 January 2011.
Under the amended Rules, royalties paid for foreign patents and computer programs are exempt from income tax provided that the criteria prescribed under the Rules are met. With respect to technical service fees for technical know-how, they are no longer exempt from income tax under the amended Rules.
According to the Income Tax Act, the royalties and technical service fees received by a foreign entity for providing its patents, trademarks and technical know-how to a Taiwan entity are, in general, subject to 20% income tax which the Taiwan entity should withhold upon making the payment, unless tax exemption approval is obtained pursuant to the Rules.
Before the Rules were amended, the royalties paid for patents that were eligible for tax exemption were limited to those for patent rights approved by the Taiwan Intellectual Property Office. As a result, foreign entities may include their income tax cost in the royalties for their foreign patents, which meant an increase in cost to Taiwan entities.
Under the amended Rules, if the patent rights licensed are within their valid period and are licensed to a Taiwan entity (in any of the 20 industries listed below) for its use by way of technical cooperation, tax exemption could be granted. However, the amended Rules prescribe additional criteria for tax exemption, i.e., a patent is subject to the MOEA's special approval and confirmation that the underlying technology is indeed critical to the Taiwan entity but unavailable in Taiwan, or the technology available in Taiwan is not compatible with the Taiwan entity's
Newsletter
product specifications. With such additional criteria, the actual economic benefit of the amendments remains to be seen.
1. Precision machineries and intellectual automation industry2. Motor vehicles industry3. High-value metal materials industry4. Wind-power generating industry5. Solar-energy industry6. New generation telecommunications and smart handheld gadgets
industry7. Smart electronics and parts industry8. Displayer industry9. LED lighting industry10. Smart living industry11. Cloud computing industry12. High-value petrochemical industry13. High-value textile industry14. Photoelectric chemical materials industry15. Health-care food industry16. High technology industry17. Resource recycling industry18. Water-recycling and utilization industry19. Information services industry20. Design industry
In addition, the royalties paid to a foreign entity by a Taiwan entity in the manufacturing or technical service industry for the latter's use of the former's computer programs by way of technical cooperation are exempt from income tax, provided that the jurisdiction where the foreign entity is incorporated affords copyright protection to the works of Taiwan individuals and entities, the copyright of the computer program is within the valid period, and the MOEA's confirmation has been obtained.
With the cancelation of the tax exemption on technical service fees, such fees are subject to 20% income tax rate. Hence it is worth considering applying for the tax authorities' approval to impose tax at a lower rate (3%) so as to reduce tax cost.
If you have any questions or require any further information, please feel free to contact us.
For more information, please contact:
William Kroger+1.713.229.1736
Brooke Geren McNabb+1.713.229.1541
Tina Nguyen+1.713.229.1304
LITIGATION: REAL ESTATE UPDATE - JANUARY 30, 2014
The Texas Supreme Court Issues a Liability-Coverage Decision Favorable to the Construction Industry
On January 17, 2014, the Texas Supreme Court resolved a long-debated controversy as to the scope of a contractual liability insurance exclusion in Ewing Construction Co. v. Amerisure Insurance Co. A contractual liability exclusion, a common clause, allows an insurance company to exclude liability for damages the insured assumes by contract or agreement unless another exception brings the claim back into coverage. The exclusion has the potential to extinguish coverage for construction defect suits—to the detriment of the construction industry.
In Ewing, Ewing Construction Company, Inc. (“Ewing”) contracted to construct tennis courts for Tuluso-Midway Independent School District in a good and workmanlike manner. The school district sued Ewing complaining that the courts were poorly constructed. Ewing tendered the lawsuit to its insurance company, Amerisure Insurance Company (“Amerisure”), under its commercial general liability insurance policy, but Amerisure denied coverage based on the contractual liability exclusion. Ewing sued Amerisure in Texas federal court seeking a declaration that Amerisure had a duty to defend and indemnify. The court held that the policy’s contractual liability exclusion precluded coverage by Amerisure. On appeal, the Fifth Circuit initially agreed that the exclusion applied but later, following a flurry of news articles and amici petitions for rehearing, withdrew its opinion and submitted certified questions to the Texas Supreme Court.
The Texas Supreme Court held that the contractual liability exclusion does not preclude coverage when a general contractor agrees to perform in a good and workmanlike manner. Specifically, the Court held that the contractual liability exclusion only applies if the insured assumes liability for damages that exceed the liability it would otherwise have under the general common law. The Court concluded that Ewing was covered as its agreement to perform in a good and workmanlike manner was substantively similar to Ewing’s duty to exercise ordinary care under common law.
A copy of the opinion can be found here.
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ABU DHABI AUSTIN BEIJING BRUSSELS DALLAS DUBAI HONG KONG HOUSTON LONDON MOSCOW NEW YORK PALO ALTO RIO DE JANEIRO RIYADH WASHINGTON
Annual FCC CPNI Certification Due by March 3, 2014
02.07.14By James M. Smith and Paul B. Hudson
This is to remind our clients that the Federal Communications Commission (FCC)requires every telecommunications and interconnected VoIP service provider (including wireless, cable telephony, and even paging and calling card providers) to execute and file an annual officer certification that it is in compliance with the FCC's Customer Proprietary Network Information (CPNI) regulations. The annual certification for calendar year 2013 must be filed with the FCC by March 3, 2014. A new FCC Enforcement Advisory on the subject, issued on Feb. 5, 2014, can be found here.
The FCC has issued periodic reminders that service providers that failure to comply with the CPNI rules and to file the required annual certification on time could subject violators to penalties of up to $1.5 million. This is no empty threat: the FCC has taken action against thousands of providers, and the mere failure to file an annual certification hasresulted in penalties of up to $100,000. In addition, AT&T paid $200,000 to settle an FCC action arising from deficiencies in its CPNI “opt-out” mechanisms (i.e, the methods through which customers can inform the service provider that it may not use their subscriber records for marketing purposes). We would be happy to provide details or assist you with a review of your opt-out procedures to assure compliance.
As a refresher, following is a brief overview of key elements of the FCC's CPNI annualcertification requirements. Note that all of this information must pertain to the past calendar year (2013): An officer of the company must sign the compliance certificate; The officer must affirmatively state in the certification that s/he has personal
knowledge that the company has established operating procedures that are adequateto ensure compliance with the CPNI rules;
The company must provide a written statement accompanying the certificationexplaining in detail how its operating procedures ensure that it is in compliance withthe CPNI rules;
The company must include a clear explanation of any actions taken against data
brokers; The company must include a summary of all consumer complaints received in the
prior year concerning unauthorized release of CPNI, or a clear statement that therewere no such complaints; and
The company must report any information in its possession regarding the processesthat "pretexters" are using to attempt to gain access to CPNI, and what steps it istaking to safeguard customers' CPNI.
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Importantly, in order to truthfully certify to these matters and provide the required information, a service provider must actually have an effective CPNI compliance program in operation. We have assisted many clients in the creation and implementation of CPNI compliance programs and employee training materials. We have also successfully defended clients against FCC enforcement actions, in many cases obtaining “no fault” settlements involving payments at a small fraction of the original FCC proposal, and in others obtaining outright withdrawal of FCC allegations of rule violations.
We would be happy to assist you in preparing and filing this annual FCC certification, crafting or revising your CPNI compliance program, reviewing your opt-out procedures, or to answer any questions you may have.
Hogan Lovells
Antitrust, Competition and Economic Regulation Alert7 February 2014
See note below about Hogan Lovells
Federal judge limits antitrust scrutiny ofpharmaceutical reverse payments tosettlements involving monetary transfersRecently, a federal judge in the U.S. District Court for the District of NewJersey held that only patent settlements involving a reverse monetarypayment will be subject to antitrust scrutiny under the frameworkarticulated by the Supreme Court last year in FTC v. Actavis. Inaffirming its earlier ruling dismissing the direct purchaser complaint, thecourt held that nothing in Actavis altered the conclusion it had reachedpreviously under the U.S. Court of Appeals for the Third Circuit’s rulingin In re K-Dur Antitrust Litigation that the settlement did not, in fact,contain a reverse “payment” because there was no transfer of moneybetween the parties. This most recent development in the ongoingdebate regarding these agreements is significant not only because it isthe latest effort by the courts to clarify and develop the framework put inplace under Actavis but also because it constitutes a departure fromother recent district court rulings that have suggested that Actavis mayapply to non-monetary forms of compensation.
Background
The agreements at issue in the case settled patent litigation betweenGlaxoSmithKline (GSK) and Teva Pharmaceuticals (Teva) related toGSK’s drug, Lamictal, which is used to treat epilepsy and bipolardisorder and is available in chewable and tablet forms. Under the termsof the agreement, Teva was permitted to sell generic chewablesapproximately 37 months prior to expiration of the relevant patent andgeneric tablets approximately six months prior to patent expiration. GSKalso granted Teva an exclusive license to the relevant Lamictal patent,which was exclusive even as to GSK during Teva’s first-filer exclusivityperiod. The result of this provision was that GSK would not competewith Teva through marketing of an Authorized Generic version ofLamictal in either chewable or tablet formulations during that period oftime.
The opinion
In the ruling, Judge William H. Walls held that Actavis articulated whatwas effectively a three-part test — “two steps to determine when toapply the rule of reason, followed by an application of the rule ofreason” to the particular circumstances. First, the court must determinewhether there is a reverse payment. Second, the court must determinewhether that reverse payment is large and unjustified. Third, the courtmust apply the rule of reason, guided by the five considerations set forthby the Supreme Court in Actavis.
Contacts
Robert F. LeibenluftPartner, Washington, [email protected]+1 202 637 5789
Lauren BattagliaAssociate, Washington, [email protected]+1 202 637 5761
For the latest antitrust,competition, and healthcareregulatory developmentsplease visit us at Focus onRegulation
According to Judge Walls, the first step of the analysis — whether an agreement involves a reverse payment —“hinges on what the parties exchanged in the settlement and must include money.” Although stopping short ofarguing that the ruling in Actavis explicitly decided the issue, Judge Walls identified numerous portions of themajority opinion referencing monetary payments and stated that “[b]oth the majority and dissenting opinions reekwith discussion of payment of money.” The opinion mentions, in particular, Chief Justice John Roberts’ dissent inActavis, which Judge Walls characterized as including a critique of “the majority precisely because it drew a linebetween monetary and non-monetary payments.” Thus, according to Judge Walls, even Chief Justice Roberts indissent read the majority opinion as only addressing monetary reverse payments.
Interestingly, Judge Walls also relied upon the reasonableness of the agreement at issue — in particular, the factthat Teva was allowed early entry, that there was no monetary payment, and the brief duration of the exclusivelicense as to GSK — as further evidence that it was “not of the sort that requires Actavis scrutiny.” Thus, theparticular factual circumstances presented in the settlement agreement at issue in Lamictal may have alsoplayed a role in Judge Walls’ view as to the need for antitrust scrutiny of settlements involving non-monetaryforms of compensation.
Other recent decisions
In the opinion, Judge Walls also addresses other recent rulings regarding pharmaceutical patent settlements,specifically In re Lipitor and In re Nexium, which have suggested other interpretations of Actavis. In Lipitor,another federal district court in New Jersey granted plaintiffs leave to amend their complaint in light of Actavis toinclude allegations of non-monetary forms of payment. In allowing the amendments, Judge Peter G. Sheridandeclined to decide the substantive question as to the scope of Actavis, but noted that “nothing in Actavis strictlyrequires that the payment be in the form of money … .” According to Judge Walls, this was unpersuasivebecause the ruling did not in fact decide the issue and thus was “more like a request for further briefing than adecision.”
Judge Walls also distinguished as dictum a case from federal district court in Massachusetts, Nexium, whereJudge William G. Young, similar to Judge Sheridan, held that “[n]owhere in Actavis did the Supreme Courtexplicitly require some sort of monetary payment … to constitute a reverse payment.” Moreover, according toJudge Young, “[a]dopting a broader interpretation of the word ‘payment’… serves the purpose of aligning the lawwith modern-day realities.” In addition to being dicta because a cash payment was also alleged in the case,Judge Walls noted that in Nexium the court had also found that scrutiny was appropriate because each of thesettlements was “either ‘outsize’ or ‘entirely disconnected’ from the dispute over the Nexium patents,” which wasnot the case in Lamictal.
Conclusion
We are still in the early days of trial courts answering the Supreme Court’s call in Actavis for them to tailor thespecific rule of reason analysis “so as to avoid, on the one hand, the use of antitrust theories too abbreviated topermit proper antitrust analysis, and, on the other, consideration of every possible fact or theory irrespective ofthe minimal light it may shed.” The split reflected in these cases confirms that not only is this is not the last wordon the issue of the definition of “reverse payment” but also more broadly serves to highlight that debate regardingthis and other key threshold issues in this space remains fierce and subject to rapid developments.
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Employer Services Advisory FEBRUARY 11, 2014
Employer Mandate Delayed Again for Some Employers
The Obama administration yesterday announced significant changes tothe employer shared responsibility requirements known as the “employer mandate” or “pay or play” (the “Mandate”), primarily intended to delay its full impact for yet another year. The US Treasury also simultaneouslyissued a Fact Sheet and Final Regulations providing much needed detailon the requirements. The over 200 pages of guidance issued yesterdayaddress many requirements under the Mandate that we will analyze anddiscuss in future alerts. For now, the highlights of the final regulationsare:
Employers With Less than 100 FTEs – If you have less than 100full-time equivalent employees (“FTEs”), you do not have tocomply with the Mandate until 2016. You will need to file certainreports on your workers and coverage in 2015, but no penaltywill be imposed for not providing coverage.
Employers With 100 or More FTEs – If you have 100 or morefull-time equivalent employees, you must still comply with theMandate beginning in 2015, but:
o you only need to offer coverage to 70% of your full-timeemployees in 2015,
o you only need to offer coverage to 95% of your full-timeemployees in 2016 (and, under current rules, lateryears),
o if you have a non-calendar year group health plan, youmay delay your compliance with the Mandate until thestart of your first plan year beginning in 2015,
o you do not have to offer coverage to dependents during 2015 if you can show you aretaking steps to arrange for such coverage to begin in 2016, and
o with respect to certain 12-month stability periods in 2015, you may use a shorter 6-monthlookback period to determine full-time employees.
Contacts
For additional information,please contact:
Stacey [email protected]
Lorie [email protected]
Ellen [email protected]
Simon Seung Min [email protected]
You must begin filing certain reports on your workers and coverage in 2015.
Determining Employer Size - For 2015, you can determine your size using a 6-month lookback period rather than the normal calendar year. The same definitions of full-time equivalent will continue to apply. You must still combine all employees of your related entities (controlled group and affiliated service group members) in determining if you are a large employer. Governmental employers and churches continue to be permitted to apply a reasonable good faith interpretation of these aggregation requirements. Note that while all related entities must be combined in determining your employer size, they will still be assessed separately for purposes of actual imposition of penalties for failure to comply with the Mandate. If you were not previously large enough to be subject to the Mandate and did not previously cover an employee, special transition rules will allow you to delay your initial offer of coverage to the employee until April 1 of the first calendar year in which you become an applicable large employer.
Union and MEWA Coverage – If you contribute to multiemployer plans or single employer Taft-Hartley plans, or to a MEWA, you will be allowed to take credit for that coverage offered on your behalf.
PEO and Staffing Company Coverage – Under a special rule, if certain requirements are met, you will be able to take credit for coverage offered on your behalf under a plan established or maintained by the staffing firm, but only if you will incur an additional fee if the employee enrolls in such coverage (over and above the normal fee you would pay to the staffing company if the employee does not enroll). This special rule only applies if the worker is your common law employee, not the common law employee of the PEO or staffing company.
Offers of Coverage – The regulations make clear that there are no specific requirements that you obtain signed declinations of coverage from your employees, but rather the general substantiation requirements that apply to other benefits requirements will govern the level of “proof” that you need to retain. In addition, while offers can be made electronically, you should be careful to make sure you comply with the safe harbors for use of electronic media (which we will address in a future alert).
Volunteers – Hours contributed by bona fide volunteers for governmental or tax-exempt entities, such as volunteer firefighters, will not cause them to be considered full-time employees.
Educational Workers - Teachers and other educational employees can not be treated as part-time just because they do not work during the summer.
Adjunct Faculty – Hours for adjunct faculty may be calculated based on a method that is reasonable under the circumstances and consistent with the Mandate, but employers who use a formula crediting 2 ¼ hours of service per week for each hour spent teaching or in the classroom will be deemed to comply.
Student Work-Study Programs – Hours worked by students under federal or state-sponsored work-study programs will not be counted in determining whether they are full-time employees.
Seasonal Employees – There are two different rules that refer to “seasonal employees” under the Mandate. First, in determining employer size, seasonal employees may generally be excluded if they cause you to exceed the FTE threshhold on less than 120 days during the calendar year. For purposes of this rule, the Treasury declined to broaden the definition of “seasonal worker” beyond the original proposed definition that generally included agricultural workers, retail workers employed exclusively during holiday seasons, and other reasonable good faith interpretations. The second use of seasonal employees is in the rules that generally allow you to count the hours of employees who are not full-time employees (known as variable hour employees) and seasonal employees. For this purpose, a seasonal worker must have customary annual employment with you of less than 6 months and should begin each calendar year in approximately the same part of the year (such as summer or winter). Certain exceptions may apply, such as where ski instructors are asked to work longer in a year with a heavy snow season.
If you are unsure of your number of FTEs, you should work quickly with the knowledgeable help of yourlegal advisors to determine whether you will be subject to the Mandate in 2015, or whether you will haveadditional time to bring your programs into compliance.
For your convenience, a copy of the final regulations is available here.
With a team of attorneys who are highly experienced in the employee benefits field, MLA can provide answers to questions and assistance in complying with these ERISA requirements. For assistance, please contact partners Ann Murray (404-527-4940) or Sam Choy (404-527-8561), or any of our MLA benefits attorneys.
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