nature of law - chinagoabroad · 2021. 1. 12. · 2011 edition 2 money laundering: hanging dirty...

NATURE OF LAW

201

1Ed

itio

n 2

Money laundering: hanging dirty money

out to dry – p.28Bullying tactics:

the introduction of margin squeeze into South African

competition law – p.54

chairman’sletter

Globalization and internationalisation are not just current buzz words. they genuinely describe the circumstances in which the world operates today. Bowman Gilfillan is no exception. A large international client base and strong relationships with the international investment banks and the major global and international law firms are hallmarks of our firm. We regularly attend international conferences and frequently meet with investment banks and international law firms in the major cities of the world. From these interactions, South Africa’s relatively good position in the global economy is evident. South Africa is of business and commercial interest to foreigners and for inward investment. Bowman Gilfillan’s international connections and relationships have ensured that we have played a significant role in providing legal services related to these activities and investments.

While one must not be complacent in the current global economic climate, it looks like foreign interest and investment in South Africa will continue. However, all law firms around the world, South African law firms included, are experiencing demands from clients for increased efficiency and cost effectiveness and while Bowman Gilfillan has always striven to provide excellent quality and first rate service in the most efficient and cost-effective way, we are redoubling our efforts to be as cost-effective as possible without compromising quality and service.

in this edition of the nature of Law there are, once again, articles on a wide range of subjects. in particular:

We introduce you to three Employee Benefits specialists who joined our existing team on 1 october 2011 and who are now part of our very strong financial and fiduciary practice area

the Practice Area Focuses are on our tax, Litigation and our Competition practice areas.

our ever-increasing involvement in the rest of the African continent is evident from the articles relating to Kenya and namibia.

on our pro bono and community service page, we feature the Smile Foundation, the organization we selected to support this year in lieu of client gifts.

i take this opportunity to thank our clients and our other associates for their support and look forward to these relationships continuing and strengthening in the new year. on behalf of all of us at Bowman Gilfillan, i wish you a happy, healthy, peaceful and prosperous 2012.

JONATHAN SCHLOSBERGChairman

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Environmental tips

Employee share schemes

Registration of business names in terms of the Consumer Protection Act

Reform of Kenyan company law

The increasing use of direct agreements in project finance transactions

The dangers and feasability of a paperless environment

Anyone “Amying” to “wine” about cyber squatting

Practice area in focus: Competition54 Bullying tactics: the introduction of margin squeeze into South African competition law56 the benefits of a competition law compliance program

Knowing your vices

Coming to the rescue: developments in salvage law

Silicon Savannah: information technology and outsourcing in Kenya and beyond

Lawyer profiles

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Chairman’s letter

New appointments, achievers,& online services

Notable deals & Dispute resolution

Practice area in focus: Tax10 the draft tLAB, 2011 - Retrospective legislation?12 Recent developments in tax: Hybrid equity instruments and third party backed shares - sections 8E and 8EA14 Export controls in South Africa

Bowman Gilfillan partners with employee benefits specialist

The new Kenyan merger control laws - Class 101

Introduction to the Oil and Gas practice

SA legislation for Shale Gas Projects needed

The Namibian scramble: A new petroleum exploration destination

Practice area in focus: Litigation28 Money laundering - hanging dirty money out to dry31 Execution of judgement debts against immovable property: a balance between adequate housing and access to courts

CSI

contents

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BowmanGilfillan

John Syekei (Partner, Coulson

Harney) spoke at the annual

intellectual Property seminar by

PiPRA, USPto and WiPo on SME’s

in Kenya.

Randall van Voore (Partner,

Employment, Cape Town) has

been appointed an acting Judge

in the Labour Court.

Carl Stein (Partner, Corporate,

Sandton) authored the book

‘the new Companies Act

Unlocked’ along with UCt

academic Geoff Everingham.

John Brand (Partner,

Employment, Sandton)

co-authored the updated work

‘Labour dispute Resolution’ along

with tembeka ngcukaitobi.

Associate, Employment, Sandton)

have been invited to lead

seminars at the University of

Witwatersrand’s LLM Pension

Law course throughout 2011.

Rob Morson (Partner, Corporate,

Sandton), Shane Voigt (Partner,

Dispute Resolution, Sandton)

and Junaid Banoobhai (Partner,

Dispute Resolution, Sandton)

have been invited to lecture in

the Construction Law component

of the Construction and Project

Management Master’s degree

course at the University of

Witwatersrand.

Talita Laubscher

(Partner, Employment, Sandton)

has been elected to the SASLAW

committee.

Ezra Davids (Partner, Corporate,

Sandton) has been nominated

vice-chair Africa South of the

African Regional Forum of the

international Bar Association.

Darren Olivier (Partner,

Intellectual Property,Sandton)

was appointed to oxford

University’s editorial board for

their Journal of intellectual

Property Law and Practice.

Lizel Oberholzer (Partner, Oil

& Gas, Cape Town) was recently

elected as secretary for the

newly launched onPASA (on-

shore Petroleum Association of

South Africa).

Unathi Kondile,

Corporate, Sandton

Lithemba Velleman,

Corporate, Sandton

Alistair Collins,

Banking & Finance, Sandton

Taryn Harris,

Real Estate & Conveyancing,

Sandton

Johan Esterhuizen,

Employee Benefits, Sandton

Rosemary Hunter,

Employee Benefits, Sandton

Tashia Jithoo,

Employee Benefits, Cape Town

Njeri Olweny,

Senior Lawyer, Nairobi

David Geral (Partner,

Employment, Sandton) has

been appointed to the board

of trustees of the African

Leadership Academy.

david along with Graham

Damant (Partner, Employment,

Sandton), Fransisco Khoza

(Partner, Corporate, Sandton),

and Michelle David (Senior

achieversnewappointments: partners

newappointments: seniorassociates

newappointments: CoulsonHarney

new appointments, achievers & online services

32

Kgabo Maitisa (candidate

attorney).

UniCredit Global Leasing

Export: Advised UniCredit in

arresting a luxury commercial

jet, leased by Unicredit

to Al-Farida Investments

Company and operated by

Prestige-Jet. UniCredit was

enforcing its rights under an

“international interest” over

the lease registered under the

Convention on International

Interests in Mobile Equipment

Specific to Aircraft Equipment,

which Convention South Africa

had recently become a party to.

Deal value: US$25 – 30 million.

Lawyers: Claire van Zuylen

(partner), James McKinnell

(partner), Sizwe Msimang

(senior associate).

Eaton Towers: Advised Eaton

Towers with regard to securing

equity funding of $150m to

enable Eaton Towers to buy

additional tower portfolios

and build new towers on which

it will sell facilities to mobile

operators.

Team: Partner – david Anderson,

Livia dyer. Senior associate –

dana Serchuk, Lulama Hene.

Candidate attorney – Misty

McGillewie.

Northam: Advised Northam and

its wholly-owned subsidiaries

Micawber 278 and Khumama

Platinum on the disposition

to Aquarius Platinum of the

mineral rights attached to the

southern portion of Booysendal

to AQPSA.

CORPORATE M&A

McDonald’s Corporation:

Advised McDonald’s

Corporation in connection

with its grant of a 20 year

master franchise to Shanduka

Restaurants Company. The

transaction includes the

acquisition of McDonald’s SA.

Deal value: Undisclosed.

Team: Partners – Jonathan Lang,

ineke Brink, Khurshid Fazel, Roger

Burman, tamara dini, Wally

Horak, Barry Garven, Paul Stelling,

Aneria Bouwer, daniel Pretorius,

Shahid Sulaiman, Paul Hart-

davies, Shelley Wilson, Bobby

Bertrand, Graham damant, david

Geral, Bob von Witt, Selemeng

Mokose, darren olivier, Eugene

Honey, Adam Harris. Senior

associates – taryn Harris, Mike

Wilter, nadisha Singh, Joshua

Janks, Paula Youens, Michelle

david. Associates – Alison Mellon,

Emma Hendrie, Ronel Straughan,

Kate thorrington, natasha Rech,

Soodheshni Govender, naticia

Chetty.

Pearson Plc: Advised Pearson

in the purchase by one of its

subsidiaries, Longman Group of

75% of the share capital in CTI

Education Group.

Deal value: ZAR345 million.

Team: Partners – ineke Brink,

Jonathan Lang, Shelley Wilson,

Wally Horak, Aneria Bouwer, Craig

Kennedy, tamara dini. Senior

associates – Luke Harber, Mike

Wilter, Janine thomas, nadisha

Singh. Associates – Emma Hendrie,

Kate thorrington, Umaymah

Salasa, Schweta Batohi, Alexis

Marsh Inc.: Advised Marsh on

the acquisition of the insurance

broking and risk services

business of Alexander Forbes

in South Africa, Namibia and

Botswana, and the insurance

broking investments of Afrinet

in Sub-Saharan Africa.

Deal value: ZAR1.1 billion.

Team: Partners – Ashleigh Hale,

Francisco Khoza, Alan Keep, Barry

Garven, david Geral, Eva Mudely,

Charles Young, darren olivier,

Karen Fulton, Jean Meijer, Charles

Valkin, iona dhladhla, Frans van

Hoogstraten, Matthew Purchase,

Khurshid Faizel. Senior associates

– Paula Youens, Berna oluka,

Lusanda Raphulu, david Hansson,

Wandisile Mandlana, Michelle

david, diyashen Pillay, Manisha

Bugwandeen, Kerry Christie, taryn

Harris. Associates – Lauren van

der Westhuizen, Gaby Sher, Robert

Hare, Schweta Batohi, Lorato

Aphiri. Candidate attorneys – Kelly

Pretorius, Sharne Zimri, Simone

Gregor, Bhavna Ramji, Craig

Robinson, Misty McGillewie.

VeriFone Systems, Inc: Advised

VeriFone on the aquisition of the

entire outstanding share capital

of Destiny Electronic Commerce

from Business Connexion and

various minority shareholders.

The deal initiates the expansion

of VeriFone’s footprint in South

Africa and Africa.

Deal Value: ZAR325 million.

Lawyers: Ezra davids (partner),

Charles Young (partner), Ryan

Wessels (senior associate), Jonathan

Wolff (associate), Simone Gregor

(candidate attorney), Eva Mudely

(partner), Kerry Christie (associate).

Fiat S.p.A.: Advised Fiat on the

acquisition of Chrysler equity

from Canada and the U.S

Department of the Treasury.

Deal value: US$700 million.

Team: tamara dini (partner),

nadisha Singh (senior associate),

Schweta Batohi (associate), Elisa

Mugabo (candidate attorney).

UCS Group: Advised UCS in

relation to the acquisition by

Business Connexion of certain

of the subsidiaries of UCS

Group.

Deal Value: R706.3 million.

Lawyers: Barry Garven (partner),

Soodheshni Govender (associate).

UCS Group: Advised UCS in

relation to the de-listing of

UCS Group Limited.

Deal value: Approx.

ZAR162 million.

Lawyers: Barry Garven (partner),

Soodheshni Govender (associate).

Trans Hex: Advised Trans

Hex on the aquisition by its

50% held associate, Emerald

Panther Investments 78, of the

assets and liabilities relating to

Namaqualand Mines, from De

Beers.


Team: Lance Fleiser (partner).

Logicalis: Advised Logicalis, a

subsidiary of Datatec Limited,

on the acquisition of Inca

Software from its parent

company, Avisen.

Deal value: Approx.

GBP 7.3 million.

Team: Heather duffey (partner),

Ross McKay (senior associate),

notable deals

Levor, Alison Mellon.

Chrysler Group LLC: Advised

Chrysler and its subsidiaries,

on agreements with various

Lenders in relation to the

financing of certain loans

originally advanced to Chrysler

by the U.S Treasury.

Deal value: US$4,3 billion.

Lawyers: Claire van Zuylen

(partner), Sizwe Msimang (senior

associate), Asmita Parshotam

(candidate attorney).

Goldman Sachs: Advised

Goldman Sachs on the

transaction which entails

the combination of Exxaro’s

mineral sands operations with

the businesses of Tronox under

a newly-formed Australian

holding company.

Deal value: The total estimated

deal value of New Tronox is

ZAR27.8 billion. This values

the Exxaro’s Mineral Sands

Operations at ZAR10.7 billion.

Team: Partners – Lionel Shawe,

Ulrike naumann, talita Laubscher,

david Geral, Miles Carter, tim

Gordon-Grant, Roger Burman,

Alan Keep, Johan Kotze, Claire

tucker, darren olivier. Senior

associates – Joanne Pretorius,

Qaqamba Vellem, Michelle

david, donna Gewer, taryn

Harris, Janine thomas, Ann

Boniwell. Associates – ngisana

Mngomezulu, Monique Jefferson,

Jacqueline Lafleur, Samir Ellary,

Sibusiso Sibisi. Candidate

attorney – Amanda Lea, nerisha

Ramgoolam, Mkhululi Stubbs,

Claudia Azzarito, Kagiso

Mahlangu, thato Minyuku.


Team: Rob Cohen (partner), Lance

Fleiser (partner).

BANKING & FINANCE

McDonald’s Corporation:

Advised Rand Merchant Bank

and Standard Bank on the

financing of the acquisition by

Shanduka Restaurants Company

of McDonald’s SA.


Team: Lionel Shawe (partner),

Ulrike naumann (partner), Lindani

Mthembu (senior associate), At

van der Merwe (associate), Amit

Parekh (associate).

Sappi: Advised Sappi and

Nedbank on the update of

Sappi’s Note Programme and

the issue of Notes.

Deal value: ZAR5 billion.

Team: Casper van Heerden

(partner), ngisana Mngomezulu

(associate), Craig Robinson


Barloworld Limited: Advised

Barloworld and Rand Merchant

Bank on the issue of Notes

under the Barloworld Domestic

Medium Term Note and

Commercial Paper Programme.


Lawyers: Casper van Heerden




Basil Read: Advised Basil Read

and Nedbank with the issue of

Notes under the Basil Read Note

Programme.


54

Freedom Under Law: Acted

for Freedom Under Law in an

application for review of a

decision taken by the JSC in

2009 dismissing a complaint of

gross misconduct against the

Judge President of the Western

Cape High Court. The Supreme

Court of Appeal upheld the

appeal.

Team: Partners – Andrew Smith,

daniel Pretorius. Candidate

attorneys – Mkhululi Stubbs,

Bhavna Ramji.

Nationwide Airlines: Acted for

the Liquidators of Nationwide

Airlines in the appeal brought

by South African Airways.

Team: Lucinda Verster (senior

associate).

South African Breweries:

Acted for SAB in having

certain anti-competitive claims

dismissed against it in the

Competition Tribunal. This is

a very significant case in SA

competition law, and is the first

time the Tribunal has had to

follow the new jurisprudence

recently flowing from the

Supreme Court of Appeal and

the Competition Appeal Court.

Team: Partners - Claire Reidy,

Rob Legh, Veronica Cadman.

Senior associates – Ann Boniwell,

Lucinda Verster.

St Gobain Isover: Acted for St

Gobain Isover in arbitration

proceedings against NUS

Energy Consulting.

Team: Jason Smit (partner),

Perusha Pillay (senior associate),

taryn van deventer (associate),

Lenja Jansen (candidate attorney).

Microsoft South Africa:

Acted for Microsoft SA in the

prosecution of a Port Elizabeth

based technologies company

for selling counterfeit and

unlicensed copies of Microsoft

software, securing a criminal

conviction and compensation

being paid.

Team: Renée Luus (consultant),

Charl Potgieter (senior associate),

Jan-Harm Swanepoel (associate).

Government Employees Pension

Fund: Acted for the GEPF in an

application brought against

it in the Cape High Court. The

applicant sought to have the

rules of the fund and the fund’s

empowering statute declared

unconstitutional for failing to

allow the divorced spouse of a

member of the fund to access

a part of the member’s benefits

at the time of divorce.

Team: david Geral (partner),

Michelle david (senior associate).

Eskom: Acted for Eskom in a

protracted arbitration between

Eskom and EB Steam which

resulted in an award in favour

of Eskom in an amount of

approximately ZAR275million.

Team: tim Gordon-Grant

(partner), donna Gewer (senior

associate), Jackie Lafleur

(associate).

disputeresolution



(associate).

Calgro M3 Developments:

Advised Calgro M3

Developments and Nedbank

Capital on the issue of

Notes under the Calgro M3

Developments Debt Programme.




(associate).

Toyota Financial Services:

Advised Toyota Financial

Services and Standard Bank on

the issue of Notes under the

Issuer’s Domestic Medium Term

Note Programme.




(associate).

Goldman Sachs International,

Credit Suisse Securities (Europe),

Standard Chartered Bank and

Rand Merchant Bank: Advised

Goldman Sachs, Credit Suisse

Securities, Standard Chartered

Bank and Rand Merchant Bank

in connection with the issue of

notes on the Regulated Market

of the London Stock Exchange

PLC under the African Bank

Limited Euro Medium Note

Programme.

Deal Value: US$300 million.



(associate), At van der Merwe



Redefine Properties, Rand

Merchant Bank and Absa

Capital: Advised Redefine

Properties, Rand Merchant

Bank and Absa Capital on the

establishment of the Redefine

Properties Domestic Medium

Term Note Programme and

the issue of Notes under the

Programme.

Deal value: Programme: ZAR5

billion. Issue: ZAR250 million.


(partner), Ulrike naumann

(partner), Lerato Morwe

(associate), Amanda Lea


Imperial Holdings: Advised

Imperial Holdings and its South

African subsidiaries on the

acquisition of all of the shares in

Lehnkering Holding from Lukas

Sweden and management.


Team: Ulrike naumann (partner),

Casper van Heerden (partner).

Goldman Sachs International:

Advised Goldman Sachs with the

inward listing of the Goldman

Sachs International Programme,

for the Issuance of Warrants,

Notes and Certificates, on

the JSE and Senior Unsecured

Floating Rate Notes guaranteed

by The Goldman Sachs Group.

Deal value: ZAR1,25 bilion.


(partner), Lauren tunstall

(senior associate), Lerato Morwe

(associate), Mkhululi Stubbs


Letshego Holdings: Advised

Letshego Holdings and

Renaissance BJM Securities

in connection with the

establishment of the Issuer’s

Note Programme and it’s listing

on the Interest Rate Market of

the JSE.

Deal value: ZAR2.5 billion

BWP2.5 billion.



(associate), Lerato Morwe


(candidate attorney), Asanda

Chuma (candidate attorney).


Rand Merchant Bank and The

Nitro Securitisation 4 Issuer

Trust in connection with the

securitisation of auto loan

receivables for Wesbank.

This is the first auto loans

securitisation in the South

African market since 2009 and

is significant in both complexity

and size of transaction.

Deal value: ZAR4 billion.

Team: Lionel Shawe (partner),

Anthony Colegrave (partner),

Mogola Makola (partner),

Lauren tunstall (senior associate).


for Rand Merchant Bank on the

stand-alone bond issue by First

Strut.


Team: Partners – Lionel Shawe,

Ulrike naumann, Casper van

Heerden. Senior associate – Amit

Parekh, Lauren tunstall. Associates

– At van der Merwe. Candidate

attorneys – ngisana Mngomezulu,

Mkhululi Stubbs.

Eaton: Advised Eaton Electric on

its acquisition of CHI Control,

Meissner Interruptible Power

and Norsa Electronics from

ACTOM.


Team: Partners – Charles douglas,

Charles Young, Chris Green,

derek Lotter, tamara dini, Roger

Burman, david Geral, talita

Laubscher, Claire tucker, Barry

Garven, Betsie Strydom. Senior

associates – Julie oppenheim,

daniella Mariotti, Ann Boniwell,

taryn Harris, Vanashree david ,

Qaqamba Vellem, Sandra Gore,

Renee Luus. Associates – Franci

Heunis, diyashen Pillay. Candiate

attorney – duncan McMeekin.

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Practice area in focus:

TAX

1 Aneria Bouwer

2 Betsie Strydom

3 Johan Kotze

4 Mogola Makola

5 Virusha Subban

(absent)Alan Keep, Barry Garven,

Lionel Shawe & Wally Horak

15

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98

to the rule of law is the principle of legality which requires that law must be certain, clear and stable. Legislative enactments are intended to ‘give fair warning of their effect and permit individuals to rely on their meaning until explicitly changed’.

it is generally accepted that legislation may obtain retrospectivity in the following circumstances:

Where the retrospective operation of a statute is provided for either expressly or by necessary implication or where the statute deals with past matters and events;

Where the retrospective legislation confirms the existing law or is intended to clarify and settle legislation which is unclear and thus subject to doubt;

Where the enactment benefits the subject, but only if all persons subject to the provisions of such legislation would benefit from the retrospective application thereof.

The Interpretation Act

the interpretation Act 33 of 1957 (“the interpretation Act”) is of application where a statute is retrospectively repealed. Section 12(2) provides as follows:

“Where a law repeals any other law, then unless the contrary intention appears, the repeal shall not-

(a) revive anything not in force or existing at the time at which the repeal takes effect; or

(b) affect the previous operation of any law so repealed or anything duly done or suffered under the law so repealed; or

(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any law so repealed; or

(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any law so repealed; or

(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, forfeiture

or punishment as is in this subsection mentioned, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed, as if the repealing law had not been passed.”

the interpretation Act makes it clear that any right or liability arising from a law before its repeal is not affected by such repeal, but it does not explicitly deal with a right or obligation arising under a statute prior to its amendment by an amendment act. the general presumption against retrospective operation of statutes and the restrictive interpretation of retrospective statutes would support extending this provision to also provide that where a law is amended, such amendment does not affect any right or liability accrued or incurred under the law so amended or directly arising as a result of the law so amended.

The Constitution

the presumption against retrospectivity has been amplified by the provisions of the Constitution of the Republic of South Africa, 1996 (“the Constitution”), in particular, the confirmation in section 1 of the rule of law as one of the founding values of the Republic.

the presumption against retrospectivity and the requirement that it can be rebutted only by express terms or clear implication is based on elementary considerations of fairness which dictates that individuals should have an opportunity to know what the law is and to conform their conduct accordingly.

in the case of Robertson v City of Cape town; truman-Baker v City of Cape town, the court made the following comments with regards to the relationship between the principle of the rule of law and retrospective legislation:

“Retrospective legislation undoubtedly poses difficulties for the rule of law, one of the foundational values of our Constitution......It appears that retrospective legislation may contravene the rule of law where it

unreasonably or unfairly impairs the ability of those bound by the law to regulate their conduct in accordance therewith.”

there is a general presumption in our law, confirmed by the Constitution and the interpretation Act, against a statute being construed as having retroactive or retrospective effect; ordinarily, in the absence of a contrary intention appearing from its provisions, a statute is regarded as legislating for the future and not for the past.

However, this is merely a presumption and this does not prevent Parliament from explicitly changing the law retrospectively to a date in the past.

nevertheless, in the light of the presumption, retrospective statutes are narrowly interpreted by our courts. therefore, even where a statutory provision is expressly stated to be retrospective in its operation, the courts have been reluctant, in the absence of a clear contrary intention appearing from the statute, to apply the law to affect acts or transactions which have been completed or which will shortly be completed or in respect of which an action has been launched in reliance on the provisions of the repealed law. in the present instance, the retrospective amendment of the itA is inequitable and unjust as this imposes a tax burden on the participants to a transaction that was not present at the time the transaction was entered into.

in accordance with the restrictive manner in which retrospective legislation has been interpreted by our courts, we submit that any amendment to the itA which impacts negatively on the rights of a taxpayer, created under a transaction structured in terms of the provisions of the itA which applied at the time, which transaction was either completed or in the process of being completed, would be rejected by our courts.

By Wally Horak

The draft TLAB, 2011 - Retrospective legislation?

Impact of certain of the proposed provisions

the draft taxation Laws Amendment Bill, 2011 (“tLAB”), which was released for public comment on 2 June 2011, contains several provisions which may impact on transactions which were concluded or undertaken prior to the announcement. For example, a transaction concluded (prior to the release of the tLAB) for the acquisition of shares in a holding company contains a condition that the assets of the subsidiaries will be consolidated into one operating company (“new opco”), which will raise debt funding from a financial institution to finance the transfer of the assets to new opco. the transfer of the assets would have qualified for tax roll-over relief in terms of section 45 of the income tax Act (“itA”), which would be suspended with effect from 2 June 2011 if the tLAB became law. Since the sale of the assets would not have been completed by the proposed effective date of the suspension, the eventual transfer would trigger capital gains tax (“CGt”) for the selling subsidiaries. Another example is the proposed amendment to section 8E of the itA to amend the definition of a hybrid equity instrument by extending the three year period, within which a holder may not have a right of disposal, to a 10 year period. the proposed amendment would apply in respect of dividends or foreign dividends declared on or after 1 April 2012, thus applying to shares issued for a three year period prior to the date of the amendment.

this raises the question whether such legislation would survive the presumption against retrospective legislation, embedded in our common law and in our constitution.

Presumption against retrospective legislation

A statute is said to be retrospective if it enacts that “as at a past date the law shall be taken to have been that which it was not”, so as to invalidate what was previously valid, or vice versa. it is a rule of interpretation that a statute (including a particular provision in a statute) should not be interpreted as having retrospective effect unless there is an express provision to that effect or that result is implied by the language used. A statute is retrospective in its effect if it takes away or impairs a vested right acquired under existing laws or creates a new obligation or imposes a new duty or attaches a new disability in regard to events already past. As such, it has been held that there is a strong presumption against retrospectivity of a statute and that its operation should be construed as prospective only unless the Legislature clearly expressed a contrary intention.

However, this is merely a presumption and there is nothing to prevent Parliament from explicitly changing the law retrospectively to a date in the past.

Approach by our courts

Because of this presumption, even where the presumption is rebutted by expressly stating that the legislation will apply retrospectively,

the effect of this is narrowly constructed by the courts.

in the case of national director of Public Prosecutions SA v Carolus and others5, the court made the following remarks with respect to the application of the presumption:

“Consistent with the underlying rationale of the presumption and the requirement that it can be rebutted only by express terms or clear implication, is the rule that if the court is left in doubt as to the operation of the statute, the law as existing before the enactment must be applied.”

Even where a statutory provision is expressly stated to be retrospective in its operation it is an accepted rule that, in the absence of contrary intention appearing from the statute, it is not treated as affecting acts or transactions which are completed or which will shortly be completed or in respect of which an action has been launched but not yet decided in reliance on the provisions of the repealed law.

the Constitutional Court held as follows in Veldman v director of Public Prosecutions, Witwatersrand Local division:

“Generally, legislation is not to be interpreted to extinguish existing rights and obligations. This is so unless the statute provides otherwise or its language clearly shows such a meaning. That legislation will affect only future matters and not take away existing rights is basic to notions of fairness and justice which are integral to the rule of law, a foundational principle of our Constitution. Also central

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operating company or as a tool for black economic empowerment transactions. When used in this fashion, it seeks merely to preserve tax neutrality and not to create tax losses.

in addition, treasury proposes to extend the application of section 8E to shares which entitle their holder to dividends that are calculated with reference to a specified interest rate or the amount of capital subscribed for the share and which are derived mainly from interest as defined in section 24J of the Act. this proposal is intended to target preference shares which entitle their holder to dividends derived from interest bearing instruments/notes.

Section 8EA targets third party backed shares and will treat dividends in respect of those shares as ordinary income. in terms of the original proposal,

the section would apply in the following circumstances:

where the holder of the share has a put option in respect of that share, exercisable against a third party;

where a third party has an obligation to acquire that share from the holder;

where the holder of the share has the right to require a third party to procure, facilitate or assist with (a) the acquisition of that share; (b) providing indemnification against any loss in the market value of that share; or (c) the repayment of any capital subscribed for that share;

where the holder of the share has a right in terms of a guarantee provided by a third party or is entitled to funding from a third party, in respect of any payment attributable to that share; or

where the credit risk in respect of the share is determined by

reference to any put option, obligation, guarantee, or similar arrangement or funding contemplated in the preceding paragraphs.

treasury has modified its proposal with regard to section 8EA. in its modified form, section 8EA will also apply in respect foreign dividends and will treat both domestic and foreign dividends received in respect third party backed shares as ordinary income. treasury also seeks to amend the definition of third party backed shares. the consequence of the proposal is that section 8EA will apply in more limited circumstances and in particular, where as a result of the lack of a dividend:

the holder of the share or a connected person in relation to the holder has a put option in respect of the share against a third party;

a third party has undertaken to make any payment in respect of the share;

a third party has undertaken to procure, facilitate or assist with the exercise of the put option or the making of any payment referred to above.

Section 8EA will not apply where the issuer applies the subscription amount paid for the shares to fund the acquisition of shares in a South African resident company (“target Company”) and the rights or obligations referred to above are against the target Company or any company which forms part of the same group of companies as the target Company or the issuer. the reason provided for this exception is that the use of preference shares to fund share acquisitions is commonly used to fund black economic empowerment and is generally neutral to the fiscus.

By Mogola Makola

When the Draft Taxation Laws Amendment Bill of 2011 (“Draft Bill”) was released on 3 June, it contained proposed amendments to section 8E of the Income Tax Act (“the Act”) and also contained a proposal to introduce section 8EA into the Act.

one of the proposed amendments was intended to increase the redemption period central to the application of section 8E from 3 years to 10 years. if the proposal became law, it would have meant that in order to avoid the application of section 8E, an investor would have had to hold

a share for at least 10 years and a day before redemption which usually would not be feasible. Another proposal relating to section 8E was intended to extend the application of section 8E to foreign dividends, with the consequence that both domestic and foreign dividends received or accrued in respect of a hybrid equity instrument would be deemed to be interest in relation to their recipient. the reaction to the proposal to increase the redemption period was that it would place many funding structures at risk.

treasury has now withdrawn the proposal to increase the redemption period from 3 years to 10 years. therefore, the minimum redemption period for the purposes of section 8E will remain at three years and a day. the reason given for the revised proposal is that preference share funding is often used to acquire controlling share interests in an

Recent developments in tax: Hybrid equity instruments

and third party backed shares - sections 8E and 8EA

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the use of non-renewable natural resources in their production, and their life-cycle impact on the natural environment; or

any other classification methods determined by the Minister.

A permit issued by itAC may, with regard to the goods in question, prescribe:

the quantity or value of goods which may be imported or exported;

the price at which the goods may be imported or exported;

the period during which the goods may be imported or exported;

the port through or from which the goods may be imported or exported;

the country or territory from or to which the goods may be imported or exported;

the manner in which the goods may be imported or exported;

conditions relating to the possession, ownership or disposal of the goods after they have been imported, or the use to which they may be put; or

any other related conditions.

the authority granted to itAC and the Minister of trade and industry is, therefore, quite wide ranging. the Export Control Regulation 672 of 2008 issued by itAC in terms of the itA Act prescribes a list of items that will require itAC export permits prior to export from South Africa.

in order to be able to export any commercial goods from South Africa, it is a prerequisite that an entity must be registered as a customs client with, and thereafter obtain an export licence from SARS. the response time is generally 10 working days after an application

as required has been submitted. there is no fee payable to apply for and to obtain such a licence. once granted, the licences should be renewed annually.

in the issuing of licences, SARS is governed by the Customs Act. the export licence is a single approval which must be renewed annually. the draft Bills provide that the licences will be valid for a period of three years. Supporting documentation such as certified copies of directors’ identity books or passports and proof of registration with the Registrar will be required. the Customs Act prescribes that in order to obtain such a licence, an entity must have a presence in South Africa. the application forms to register as an importer also require that proof of registration with the South African Registrar of Companies (“Registrar”) be submitted to support the application process. For this reason, unless the specified entity is registered with the Registrar, it will not be able to obtain an exporter’s licence in South Africa.

An exporter’s code and registration with SARS will not be required where an individual will be exporting goods for personal use.

South Africa’s control over dual use goods

South Africa became a signatory to the Wassenaar Arrangement in 2006. At present the only government department that is enforcing the Wassennaar Arrangement in South Africa is the department of defence. the Wassenaar Arrangement has, as a result, been incorporated into the national Conventional Arms Control Act, no. 41 of 2002 to enforce controls over the export of arms and ammunition in South Africa.

South Africa is therefore applying the Wassenaar Arrangement insofar as it relates to non-proliferation, disarmament and arms control with respect to weapons of mass destruction and the proliferation of

conventional weapons. our experience with regard to the extent to which itAC applies the Wassennnaar Arrangement on the export of dual-use technology items from South Africa is that itAC does not impose control over the export of dual use technology items.

South Africa’s controls over nuclear related material

South Africa imposes controls over nuclear related material. the department of Energy issues permits to enable the import and export of nuclear related material and equipment.

South Africa’s controls over weapons of mass destruction

A permit issued by the South African Council for the non-Proliferation of Weapons of Mass destruction is required before one imports or exports certain controlled goods such as ballistic missiles and items that could be used for chemical or biological attacks.

ITAC permits

Goods should not be shipped for export to South Africa unless the importer is in possession of an appropriate valid import permit issued in terms of section 6 of the itA Act and in which such goods are specifically described. the same applies to goods that are to be exported in that an export permit must be obtained before the goods are cleared for export from South Africa.

the itA Act does not prescribe how itAC’s discretion should be applied, neither is the discretion limited by a specified list of legislated requirements that need to be met. the itA Act provides that itAC must evaluate the merits of each application that is presented to it. in considering and deliberating over an application itAC will apply the provisions of the itA Act read with itAC’s own policy and guidelines that are issued from time to time.

By Virusha Subban

South Africa is a key member of the oldest customs union in the world known as the Southern African Customs Union (“SACU”). SACU is a customs union that is in force between South Africa, Botswana, Lesotho, Namibia and Swaziland. In terms of the SACU agreement, goods are traded free of duty between SACU members.

With its roots as far back as 1889 with the Customs Union Convention of the British Colony of Cape of Good Hope and the orange Free Boer Republic the SACU Agreement was eventually signed in June 1910. it marked its 101 year existence this year. the primary goal with the formation of this customs union was the promotion of economic development through regional integration and co-ordination of trade. the African continent is therefore proudly a leader in trade liberalisation.

the South African Customs laws are contained in the Customs and Excise Act no. 91 of 1964 (“the Customs Act”), together with the Rules to the Customs Act. Another important legislation that impacts on the movement of goods in SACU is the international trade Administration Act no. 71 of 2002 (“the itA Act”). the itA Act must be read together with policy documents and guidelines issued by the international trade Administration Commission of South Africa (“itAC”).

the Customs Act is in the process of being re-written and will eventually be replaced by a completely new set of legislation which is still in a draft phase. the draft Bills that have been issued for comment by the treasury department contain extensive regulation of exports and imports and provide the Commissioner for the South African Revenue Service (“SARS”) with even more regulatory power and authority than is the case with the current Customs Act.

South Africa is a contracting party to the General Agreement on tariffs and trade and is a member of the World trade organisation. South Africa is a signatory to the Wassennaar Arrangement on Export Controls for Conventional Arms and dual- Use Goods and technologies (“the Wassenaar Arrangement”).

the movement of goods into and out of South Africa is policed by the SARS Customs division. the basic function that SARS performs at the points of entry and exit into and out of South Africa is to detect and detain. SARS polices the contraventions of the tax legislation in South Africa, as well as other legislation such as the health and medicines control legislation and environmental legislation, to name a few. the authority for SARS to police, detect and detain and to impose and collect import duties in South Africa is granted by the Customs Act.

the control over the import and export of goods in South Africa lies with itAC. itAC is a division within the department of trade and industry in South Africa. the governing legislation for itAC is the itA Act. the object of this Act is to foster economic growth and development in order to raise incomes and promote investment and employment in South Africa and within SACU by establishing an efficient and effective system for the administration of international trade subject to the itA Act and the SACU agreement.

the Customs Act and the itA Act, together with their respective rules and regulations are, therefore, the two principal pieces of legislation that govern the movement of goods in South Africa.

the itA Act provides the Minister of trade and industry with the following authority:

the authority to declare by notice in the government gazette that no goods of a specific kind may be imported into South Africa, or

that no goods may be imported into South Africa except under the authority of and in accordance with the conditions stated in a permit issued by itAC; and

the authority to make regulations regarding the proceedings and functions of itAC; to give effect to the objects of the itA Act; and on any matter that may or must be prescribed in terms of the itA Act.

the itA Act provides in section 6 that the Minister of trade and industry may, by notice in the Government Gazette, prescribe that no goods of a specified class or kind, or no goods other than goods of a specified class or kind, may be:

imported into the Republic;

imported into the Republic, except under the authority of and in accordance with the conditions stated in a permit issued by the Commission;

exported from the Republic; or

exported from the Republic, except under the authority of and in accordance with the conditions stated in a permit issued by the Commission.

For this purpose goods may be classified according to:

their source or origin;

their intermediate or final destination;

the channels along which they are transported;

the manner in which they are imported or exported;

the purposes for which they are intended to be used;

the methods or processes by which they are produced;

EXPORT CONTROLS IN SOUTH AFRICA

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has drafted legislation and is a well-known speaker and facilitator at conferences held by members of the employee benefits industry.

Rose is a senior lecturer at the University of the Witwatersrand and teaches pensions law there on a part-time basis. She is also a published writer on pensions law and is the principal author of Hunter Law’s textbook the Pension Funds Act: A Commentary which is a detailed commentary on the Pension Funds Act.

Special interests & expertise

Advising on policy formulation and strategies to be adopted in:

the transformation of employee benefit arrangements and assisting in the implementation of those strategies;

analysing, commenting on and drafting agreements between retirement funds and providers of services and products to them including consultancy, administration, asset management (including scrip lending and transition management), project management, home loan and related agreements;

drafting fund documentation including rules, policy documents, mandates and submissions to the regulator;

research and writing detailed legal opinions on all aspects of employee benefits law;

drafting clauses relating to employment and employee benefit issues in commercial agreements such as agreements for the sale of businesses and the assignment of the contracts of employment of affected employees; and

commenting on and drafting legislation.

Awards

Rosemary was awarded the 2009 imbasa Yegolide ‘industry Personality of the Year’ award by Global Pensions and the Principal officers Association.

TASHIA JITHOO

Background

tashia has a BA (Hons) LLB (natal), an LLM (University of Michigan) and a PG dip in Employment Law (UCt).

After completing her studies she worked as a researcher for Judge Goldstone when he was a member of the Constitutional

Court and served in London as an intern at the Centre for Advice on individual Rights in Europe. After completing her articles of clerkship at attorneys Bowman Gilfillan inc she was admitted to practice as an attorney in 2003 and was appointed as an associate specialising in employment and employee benefits law.

in 2004 tashia was appointed as an assistant adjudicator in the office of the Pension Funds Adjudicator. in 2005 she joined the employee benefits team of Edward nathan in its Cape town office and in August 2006 she joined Hunter Law in its Cape town office where she has remained since. She is a past national president of the Pension Lawyers Association, and currently serves on the Pension Funds Advisory Committee to which she was appointed by the Minister of Finance.

She has written and co-written numerous published articles and is a co-author of Hunter Law’s textbook the Pension Funds Act: A Commentary. tashia has also been a speaker at several conferences and seminars on employee benefits law. She is a trained and accredited mediator who is passionate about resolving disputes through the process of mediation.

tashia also serves as an independent trustee on several boards of retirement funds as well as on a leading beneficiary fund

and death benefit trust. She is an experienced trainer in pension law and provides training to members of the boards of retirement funds, principal officers and administration staff.

Special interests

detailed legal research and opinion-writing on all aspects of employee benefits law but, in particular, those that entail aspects of constitutional law, administrative law, employment law and family law;

advising funds on governance principles and policies and on the management of the legal risks that they face;

drafting the rules of retirement funds and rule amendments and procuring their registration by the registrar of pension funds;

designing beneficiary funds and drafting beneficiary fund rules;

providing strategic advice to various clients including retirement funds, employers and service providers;

training principal officers, members of retirement fund boards of management, administration staff and service providers;

memberships of retirement funds boards of management; and

resolution of disputes through mediation.

Employee benefits specialists join Bowman Gilfillan

Rosemary Hunter, Johan Esterhuizen and tashia Jithoo, the directors of Hunter Law, a Johannesburg-based practice specialising in employee benefits and financial services, joined Bowman Gilfillan on 1st october 2011. Bowman Gilfillan now has the largest practice area in South Africa in financial and fiduciary law including:

Employee benefits;

Retirement funds;

Medical schemes; and

the provision of financial services to institutional investors.

this will result in enormous benefits for the clients of both firms, as there are substantial synergies between the respective practice areas. Clients will be exposed to a range of professional expertise in both practices, rapid turnaround time and an African footprint.

Rose Hunter says her firm, Hunter Law, achieved extraordinary successes since it started six years ago. the firm was the winner of the Principal officers Association/Global Pensions imbasa Yegolide “Law firm of the year” award for 2009, 2010 and 2011. in March 2010 it published the Pension Funds Act: A Commentary, the only academic-standard textbook on pension law in South Africa, and which was written by Rose Hunter, Johan Esterhuizen, tashia Jithoo and their former colleague,

Sandile Khumalo. it is the standard reference work for Wits students of pension law and will be used in the pension law course to be offered by Johan Esterhuizen on behalf of the University of Johannesburg from 2012.

JOHAN ESTERHUIZEN

Background

Johan Esterhuizen obtained a BA, LLB, LLM, along with a Hdip (tax) from Rand Afrikaans University (now the University of Johannesburg) and was engaged for many years as an attorney in general legal practice before he joined the Edward nathan employee benefits team in 2002. He left Edward nathan in december 2005 to join Hunter Law as a founder member.

Johan has a wide range of experience in general litigation, insolvency, labour law, tax and regulatory work. He engages in legal research on complex issues

and provides a wide range of clients with detailed legal opinions on which they rely when making strategic decisions. Johan has also given pensions law advice to SABC tV viewers and “Radio Sonder Grense” listeners. Johan is also a co-author of Hunter Law’s textbook the Pension Funds Act: A Commentary.

He is the chairperson of 14 tribunals appointed by the registrar of pension funds to apportion actuarial surpluses in retirement funds. He is also an approved liquidator of retirement funds.

Special interests & expertise

All aspects of litigation work in the employee benefits field including the representation of clients before the pension funds adjudicator, the appeal board and the enforcement committee established in terms of the Financial Services Board Act, the high court and the supreme court of appeal;

research and writing detailed legal opinions on all aspects of employee benefits law but especially tax and employment law aspects;

chairing and managing the work of tribunals appointed by the registrar of pension funds to apportion actuarial surpluses of pension funds; and

training principal officers and members of fund boards of management.

ROSEMARy HUNTER

Background

Rosemary Hunter BA, LLB and LLM (Wits) was the first attorney in South Africa to have a full-time specialist employee benefits practice. She started the practice at Edward nathan in 1993 and built it into a formidable team of six full-time employee benefits specialists - half based in Cape town and half in Johannesburg before she left the firm in 2005 to start Hunter Law.

Rose has consulted to numerous retirement funds of all types (including large industry-based funds, union funds, and large employer-based funds), employers (including state-owned enterprises and large local authorities) and employers’ associations, bargaining councils, unions, fund administrators, actuaries, insurers and professional advisors. She has also been consulted by the Financial Services Board and national treasury on policy issues,

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By Kenneth Njuguna

a party in the proposed merger), acquiring a dominant position in a market or strengthening a dominant position in a market. Also the Authority must check the effect of a merger on a particular industrial sector or region, employment, the ability of small undertakings to gain access to or to be competitive in any market and the ability of national industries to compete in international markets. the Minister of Finance, in consultation with the Authority, is empowered to make rules generally for the better carrying into effect of the provisions of the Act. Any applications and investigations that were before the now defunct Monopolies and Prices Commission have been taken over by the Authority.

to conclude, stakeholders will be keen to see how this piece of legislation is implemented and how the market will react to it. Also of interest will be how the Authority utilises its newly ‘acquired’ teeth as it seeks to enforce compliance with the Act.

The new Kenyan merger control laws - Class 101

The anticipation for up to date antitrust laws in Kenya is over. The recently promulgated Competition Act (the Act) came into effect on 1 August 2011 and replaces the Restrictive Trade Practices Monopolies and Price Control Act (the RTPA). On the whole, it aims to promote and safeguard competition in the national economy, protect consumers from unfair and misleading market conduct and provide for the establishment, powers and functions of the Competition Authority (the Authority) and the Competition Tribunal (the Tribunal). The Authority is the oversight body which is mandated to implement the Act while the Tribunal is the first point of reference for aggrieved persons with competition concerns.

As would be expected, a huge chunk of the Act seeks to regulate mergers. Going forward, approval of mergers and take-overs shall be the responsibility of the Authority only, not the Minister of Finance as was the case under the RtPA.

A merger is deemed to have occurred when one or more undertakings directly or indirectly acquire or establish direct or indirect control over the whole or part of the business of another undertaking. Mergers may be achieved by a purchase or lease of shares, acquisition of an interest, or purchase of assets (where an asset is any real or personal property, whether tangible or intangible, intellectual property, goodwill, choice in action, right, licence, cause of action or claim and any other asset having a commercial value) of an entity, exchange of shares between or among undertakings which results in a substantial change in ownership structure through whatever strategy or means adopted by the concerned undertakings or even through amalgamations and vertical integration. the acquisition of a controlling interest in a section of the business of an undertaking capable of itself being operated independently shall also be deemed to be a merger whether or not the business in question is carried on by a company.

the Act is now clear on multi-jurisdictional transactions that involve entities that are not within Kenya. to this effect, any acquisition of an undertaking under receivership by another undertaking either situated inside or outside Kenya or an acquisition by whatever means of the controlling interest in a foreign undertaking that has a controlling interest in a subsidiary in Kenya, will constitute a merger. Where conglomerate undertakings are concerned, acquiring the controlling

interest of another undertaking or a section of the undertaking that is capable of being operated independently also falls under the definition of a merger.

do we then have thresholds through which the above forms of mergers are qualified? no. there is currently a lacuna in implementation of the Act despite already being in effect. there is no jurisdictional or substantive measure explaining which transactions would fall under the realm of mergers based on factors like market share, turnover or asset base. one would therefore be correct in assuming that all mergers, small, intermediate or large fall under mergers as defined in the Act. it is expected, however, that regulations will be published to address this issue.

Mandatory approval for a merger is required if a transaction falls within the scope of the Act. An application should be made at any time prior to the consummation of the merger or takeover – this is understood to mean before completion or closing of the deal takes place. it is possible that the filing and the grant of the merger or takeover approval be included as a condition precedent to completion or closing of the transaction. the Authority is bound, subject to certain exceptions, to make a determination on a merger application within sixty days of receipt of the notification by the Authority.

no merger carried out in the absence of an authorising order by the Authority, has any legal effect, and no obligation imposed on the participating parties by any agreement in respect of the merger is enforceable in legal proceedings. in fact, failure to observe this requirement could lead to imprisonment for a term not exceeding five years or to a fine not exceeding ten million shillings, or both. in addition to these penalties, the Authority may impose a financial penalty in an amount not exceeding ten percent of the preceding year’s gross annual turnover in Kenya of the undertaking or undertakings in question. it is not clear which entity would be penalised though.

the Authority takes into account several factors when considering an application to merge. these range from the extent to which the proposed merger would be likely to prevent or lessen competition, the likelihood of any undertaking (including one not involved as a party to the proposed merger) acquiring a dominant position in a market or strengthening a dominant position in a market, the extent to which the proposed merger would benefit the public which outweighs any detriment which would be likely to result from any undertaking (including one not involved as

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By Lizel Oberholzer

21

Shale gas and its extraction via hydraulic fracturing is a relatively recent and highly controversial entrant to the South African mining canvas.

indeed, until public consultations commenced as required by the Mineral and Petroleum Resources development Act (MPRdA) some 12 months ago, few South Africans knew of the implications of applying this process to extract natural gas from shale.

Since then, however, South Africa’s newspapers have regularly and dramatically carried the oft heated debates over the merits and demerits of what has come to be known as “fracking”, much of which has focused on whether or not the South African regulatory framework is able to deal with the challenges unique to shale gas projects.

the first indication that government acknowledged the unique challenges of shale gas projects was on 20 April 2011, when South Africa’s cabinet endorsed the decision by the department of Minerals to place a moratorium on exploration licenses in the country’s semi-arid Karoo region, where fracking was being contemplated.

the next day, a Government Communications statement announced:

“….The Department of Mineral Resources will lead a multi disciplinary team including the Departments of Trade & Industry, Science and Technology, amongst others, to fully research the full implications of the proposed fracking…”

on 18 August 2011, Minister Shabangu announced that the moratorium on prospecting for shale gas will be extended for a further 6 months to allow for public consultation.

in order to establish what the challenges unique to shale gas projects are, it is important to note the findings of the Energy and Climate Change Committee of the UK’s House of Commons, published on 23 May 2011. the Committee

identified and warned the UK legislature of three such challenges. it stated that shale gas projects:

require a combination of hydraulic fracturing and horizontal drilling at multiple wells;

need large volumes of water which contain chemicals; and

require the management and disposal of large volumes of waste water.

intriguingly, the report did not propose the enactment of specific laws or regulations governing shale gas projects.

in the context of the first of the identified challenges, the MPRdA will be applicable to South Africa. the Act distinguishes between minerals and petroleum and defines shale gas as petroleum. it also provides for the grant of rights permitting and regulating activities which are applicable to the extraction of minerals and petroleum.

those wishing to conduct an activity relating to shale gas must apply for a technical co-operation permit, an exploration right or a production right as the case may be. Permit and right holders must also submit a work programme, to be approved by the Minister of Mineral Resources, setting out the planned activities for the duration of the right or permit.

Although the permit or right holder must comply with the Mine Health and Safety Act (MHSA), neither the MPRdA nor the MHSA provides guidelines specific to hydraulic fracturing.

instructively, on 8 July 2011, the new York State department of Environmental Conservation (dEC) released a preliminary revised draft supplemental generic environmental impact statement, which allows for high volume hydraulic fracturing in prescribed circumstances, Appendix 10 of which provides for applicable permit conditions. these conditions are highly technical and prescribe

inter alia that all fracturing products must be approved by the authorities and that a prescribed process be followed during high volume hydraulic fracturing.

the second and third challenges identified by the UK’s Energy and Climate Change Committee deal with environmental issues, in which context the MPRdA provides that the rights holders must have in place an approved environmental management programme. they must also provide an environmental management guarantee to cater for the management of potential environmental negative impacts.

South Africa boasts one of the world’s best environmental regulatory frameworks. thus holders of permits and rights granted in terms of the MPRdA have to comply with the MPRdA, the national Environmental Management Act, the Water Act and related environmental legislation.

Be that as it may, the South African legislature has yet to address the first challenge, which is unique to shale gas projects and which relates to the method used for the extraction of the gas.

if the moratorium is lifted it is imperative that the legislature puts in place regulations similar to those published in Appendix 10 of America’s dEC. not only will this provide the permit and right holders with certainty as to the framework in which they must work; it will also help ensure that they comply with South Africa’s environmental laws.

it is my understanding that most work programmes associated with Karoo Basin exploration rights applications provide that hydraulic fracturing may only be undertaken at the end of the second year, allowing the legislature adequate time within which to frame relevant regulations that serve the public interest.

SA Legislation for Shale Gas Projects needed

Introduction to the Oil and Gas practice

the Bowman Gilfillan oil and Gas department has been involved in the development of exciting oil and gas projects throughout Africa and was presented with the 2010 oil and Gas deal of the Year award by African investor.

on the local front the oil and gas team are advising front runners such as an Australian oil and gas company acquiring petroleum rights to explore for coalbed methane in South Africa. this company successfully listed on the Australian Stock Exchange (“AXS”) to raise funds for the project. to the best of our knowledge this is groundbreaking in South Africa as it is the first time in our history that an Australian company listed on the AXS to raise funds for a South African coalbed methane project. the team assisted an international oil and gas company in its application for a production right to produce natural gas. the granting of this production right is imminent and once granted it will be the first of its kind in South Africa.

the controversial shale gas subject and extraction method, hydraulic fracturing, is on the team’s radar in that we assisted various applicants in the application process of obtaining petroleum rights to explore for shale gas in South Africa. Lizel oberholzer, a director of Bowman Gilfillan, addressed a shale conference held in Johannesburg on the need for legislation covering the technical aspects of hydraulic fracturing to guide right holders in compliance with South Africa’s rigorous environmental legislation.

the onshore Petroleum Association of South Africa, an initiative of the oil and gas team, was launched on 20 July 2011 at the offices of Bowman Gilfillan. the Association provides a forum for practical co-operation and discussion with the State on specific onshore oil and gas issues. the founder members of the Association are Lizel oberholzer, a director of Bowman Gilfillan and Megan Rodgers, an associate of Bowman Gilfillan. the Association will seek to co-operate with the State and all stakeholders in promoting health, safety and sound environmental practices as well as to promote an efficient and competitive oil and gas exploration and production industry in South Africa. the Association received a formal nod of approval from Mr Mthozami Xiphu, the Chief Executive officer of the Petroleum Agency of South Africa (Pty) Ltd, who attended the Association’s launch.

the recent developments in namibia have also encouraged South African investors. We recently assisted a 100% black owned and controlled South African oil and gas company with its application for a petroleum exploration licence in namibia. We are proud be part of a growing movement of home-grown oil and gas companies across the borders of South Africa into Africa.

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For political reasons, further exploration and appraisal work was halted until 1988 when the state oil company, national Petroleum Corporation of namibia (“namcor”), drilled a series of appraisal wells. namcor’s main tasks up to this stage had been the acquisition of data and the promotion of namibia’s petroleum potential. Further exploration did not resume again until after namibia achieved independence. the first of three bidding rounds was opened in 1991 with the second and the third taking place in 1994 and 1998 respectively. At the end of the third bidding round the namibian government invited oil companies to apply for petroleum exploration licences under an open licencing system. this is the system currently in place.

it is not only the implementation of the open licencing system but also the well designed legal

framework which makes namibia deserving of “investor friendly” status, as a testament to its success. the legal framework governing exploration, development and production of petroleum in namibia is set out in the Petroleum (Exploration and Production) Act, 1991 (the “Act”) and the Petroleum (taxation) Act, 1991. the application process is streamlined by the Act and the fact that the country is divided into licencing blocks, thus eliminating the need for land surveyor diagrammes. Also, environmental impact assessment studies are not prescribed at the application stage. these studies are conducted prior to the shooting of seismic and prior to commencement of drilling. the main considerations which influence the success of an application include:

the technical and financial capabilities of the applicant;

the applicant’s willingness to perform a complete evaluation of the petroleum potential in the licence area within an agreed time frame (the initial period of the petroleum exploration licence is four years); and

the economic terms offered by the applicant.

on completion of the evaluation of an application, the potentially successful applicant is invited to namibia to present the application and negotiate the terms of the model form petroleum agreement with the inter-Ministerial Government negotiating team (“Gnt”) which is chaired by the Ministry. the model form petroleum agreement aims to satisfy local content requirements by obliging the use of local goods and services which are competitive in international terms. optional participation by namcor, which is likely to be a carried participating interest, is also negotiable. Licence

holders are furthermore required to appoint a technically competent and sufficiently experienced Manager or deputy Manager resident in namibia. in my experience applications are settled by the Ministry within one to three months from date of receipt.

due to increased interest in the namibian petroleum sector it is anticipated that the Ministry will soon replace the open licensing system with a bidding round and pre-qualification system. We expect the entry of significant role players to result in significant investment for our previously understated neighbour. this, in my view, will accelerate the scramble to namibia.

By Megan Rodgers

The Namibian scramble: A new petroleum exploration destination

In the last decade or so, significant strides have been made in establishing petroleum potential or in the least indications of such potential in Africa. While the global focus has to a large extent been on North and West African countries, Namibia has managed to slip under the radar in the most regal manner. The country may not be a unique entrant to the African petroleum arena but the interest it has generated arguably renders it a contender for the title “a new petroleum exploration destination”.

the namibian Ministry of Mines and Energy (“Ministry”) is currently preparing for a rigorous and rather impressive host of drilling campaigns scheduled to commence by november 2011. the Ministry reports that six to eight wells are to be drilled in the next 18 months. this is set to be the biggest exploration venture in the history of namibia. in summary, it is reported that Enigma oil and Gas (“Enigma”), a company owned by UK listed Chariot oil and Gas, has identified five prospects in its northern blocks after acquiring 3d seismic data last year. Enigma has contracted with a service provider to design its first well and is currently securing a deepwater rig to drill this well during the fourth quarter of 2011. Enigma has also concluded a Farm-out Agreement with international conglomerate Petroleum Geo-Services ASA assigning a 10% interest in its

central blocks. in its southern block Enigma and its partner Petrobras has identified 11 prospects with the largest of these being the nimrod Prospect. Enigma recently entered into a Farm-out Agreement with BP in terms of which BP acquires a 50% interest in Enigma’s interest in this block. Significantly BP’s return to namibia is a mere 17 months after its withdrawal from the downstream sector in namibia following what it called a “strategic review” of its namibian assets.

But wait there’s more! Brazilian company HRt oil & Gas Ltd has raised approximately US$1.3 billion from the Brazilian stock market, of which US$300 million is earmarked for oil and gas exploration in namibia, according to the Ministry. the company has undertaken to acquire approximately 9,900km of 3d seismic lines over its main

prospective areas, which is the largest 3d seismic campaign carried out in offshore namibia and perhaps the West African continental margin by a single operator, according to the namibian Ministry.

Arcadia Expro namibia (Pty) Ltd (“Arcadia”), and tower Resources PLC, through its affiliate neptune Petroleum (namibia) Ltd, are the joint venture interest holders of licence 0010 offshore namibia. Arcadia, as operator and holder of an 85% interest in the Licence, is in the process of a farm-out campaign as a precursor to undertaking a drilling campaign.

Although the country does not have a significant history of oil or gas production it is believed to hold a great deal of potential as is clear from the activity above. offshore exploration started in 1968 and resulted in the discovery of the Kudu Gas field in 1973.

2322

With the ever increasing complexity of financial crimes, it has become important for businesses and banking institutions to be more on the alert when it comes to money laundering.

What is money laundering?

Legend has it that the term “money laundering” originated in the 1920’s in the United States of America. Money laundering was originally associated with the Mafia. Criminal gangs were generating large amounts of money from activities such as prostitution and gambling and needed to disguise the sources of the money. Legitimate businesses such as launderettes and car washes, which were known for producing high turnovers, were purchased and the “dirty” money was mixed with the legitimate earnings generated from these businesses.

today, money laundering is defined as any activity which has or is likely to have the effect of concealing or disguising the nature, source, location, disposition or movement of the proceeds of unlawful activities or any interest which anyone has in such proceeds.

The process of money laundering

Money laundering usually takes place in four steps namely: the collection of dirty money, the “covering” or “placement” or “layering” of the money, the “conversion” or “cleaning” of the money and finally the “legitimisation” of the money.

Firstly, money is illegally generated through activities such as drug trading, bribes, kidnappings, extortion, contract killings and robberies.

Secondly, the money is shifted from its place of origin to another site, where people do not know about the tainted

nature of the money or the criminal launderer. the money is usually deposited in small amounts in a number of banks or transferred to foreign banks. the criminal launderer usually deposits an amount according to government rules - this is usually the highest amount for which the bank is not required to notify a government agency. this process is known as “covering” or “placement” or “layering” of the money. the criminal launderer usually looks for the following elements when it comes to foreign bank transfers: a country with low taxation rates, a country that protects the privacy of bank accounts, governments that do not ask too many questions about the origin of the money and banks that are “savvy” with technology e.g. they have electronic fund transfer facilities.

thirdly, the dirty money is converted into clean money. Usually corporations, agencies or business houses, real or fake, banks and other institutions are involved in the conversion. the process of conversion requires business activities, flow of money and profits. the dirty money is deposited in such organisation which, after subjecting it to conversion processes (investment, profit etc), retransfers the money, through banks, to the source of its origin or where the launderer wants it to be transferred. the conversion of dirty money often starts with its wire transfer to offshore banks. if the money is shown as profits “earned through” some fake business activity, it stands to be converted into clean money. the last leg of the money laundering process is the legitimisation of the money. Legitimisation is the mixing of the converted money with the legitimate money of legitimate business(es) in the country of origin. For example, when the money was deposited with a foreign bank, an international credit card is used to draw the money, or the money is converted to travellers cheques.

Money laundering - hanging dirty money out to dry

By Naticia Chetty


LITIGATION

2827 29

ADAMANDERSON

JUNAIDBANOOBHAI

BIANCAMASTERTON

MANDISIRUSA

MANDYMUNRO-SMITH

DONNAGEWER

CHARLOTTENIKSCHTAT

MATTHEWPURCHASE

FAHDIABHAYAT

MICHAELWAGENER

GORDONRUSHTON

MILESCARTER

GREGHIGGINS

PERUSHAPILLAY

HAROONLAHER

PETERWHELAN

QUINTONPIETERSE

ITUMELENGPHALANE

RICHARDFITZGERALD

JAMESMcKINNELL

RICHARDSHEIN

JASONSEWANYANA

SHANEVOIGT

JASONSMIT

STEPHANIEESTERHUYSE

JOHANKRUGER

JONATHANSAHLI

TIMGORDON-GRANT

ATHOLGORDON

LYNDALCOOK

ADAMHARRIS

KEVINILES

24

With the ever increasing complexity of financial crimes, it has become important for businesses and banking institutions to be more on the alert when it comes to money laundering.

What is money laundering?

Legend has it that the term “money laundering” originated in the 1920’s in the United States of America. Money laundering was originally associated with the Mafia. Criminal gangs were generating large amounts of money from activities such as prostitution and gambling and needed to disguise the sources of the money. Legitimate businesses such as launderettes and car washes, which were known for producing high turnovers, were purchased and the “dirty” money was mixed with the legitimate earnings generated from these businesses.

today, money laundering is defined as any activity which has or is likely to have the effect of concealing or disguising the nature, source, location, disposition or movement of the proceeds of unlawful activities or any interest which anyone has in such proceeds.

The process of money laundering

Money laundering usually takes place in four steps namely: the collection of dirty money, the “covering” or “placement” or “layering” of the money, the “conversion” or “cleaning” of the money and finally the “legitimisation” of the money.

Firstly, money is illegally generated through activities such as drug trading, bribes, kidnappings, extortion, contract killings and robberies.

Secondly, the money is shifted from its place of origin to another site, where people do not know about the tainted

nature of the money or the criminal launderer. the money is usually deposited in small amounts in a number of banks or transferred to foreign banks. the criminal launderer usually deposits an amount according to government rules - this is usually the highest amount for which the bank is not required to notify a government agency. this process is known as “covering” or “placement” or “layering” of the money. the criminal launderer usually looks for the following elements when it comes to foreign bank transfers: a country with low taxation rates, a country that protects the privacy of bank accounts, governments that do not ask too many questions about the origin of the money and banks that are “savvy” with technology e.g. they have electronic fund transfer facilities.

thirdly, the dirty money is converted into clean money. Usually corporations, agencies or business houses, real or fake, banks and other institutions are involved in the conversion. the process of conversion requires business activities, flow of money and profits. the dirty money is deposited in such organisation which, after subjecting it to conversion processes (investment, profit etc), retransfers the money, through banks, to the source of its origin or where the launderer wants it to be transferred. the conversion of dirty money often starts with its wire transfer to offshore banks. if the money is shown as profits “earned through” some fake business activity, it stands to be converted into clean money. the last leg of the money laundering process is the legitimisation of the money. Legitimisation is the mixing of the converted money with the legitimate money of legitimate business(es) in the country of origin. For example, when the money was deposited with a foreign bank, an international credit card is used to draw the money, or the money is converted to travellers cheques.

Money laundering - hanging dirty money out to dry

By Naticia Chetty


LITIGATION

2827 29

Regulation of money laundering

in South Africa, money laundering is mainly regulated by three pieces of legislation namely: the Prevention of organised Crime Act no. 121 of 1998, the Financial intelligence Centre Act no. 38 of 2001 and the Banks Act no. 94 of 1990. the Prevention and Combating of Corrupt Activities Act no. 12 of 2004 which regulates the general offence of corruption also regulates money laundering to an extent.

The Prevention of Organised Crime Act (“POCA”) applies to “proceeds of unlawful activity”. PoCA defines “proceeds of unlawful activity” as “any property or any service, advantage, benefit or reward which was derived, received or retained, directly or indirectly, in the Republic or elsewhere, at any time before or after the commencement of this Act, in connection with or as a result of any unlawful activity carried on by any person, and includes any property representing property so derived.”

“Unlawful activity” is defined to mean “any conduct which constitutes a crime or which contravenes any law whether such conduct occurred before or after the commencement of the Act and whether such conduct occurred in the Republic or elsewhere”.

PoCA restricts the definitions of the offences relating to proceeds of unlawful activities to situations where the person “knows or ought reasonably to have known” that the property is or forms part of t

nature of law - chinagoabroad · 2021. 1. 12. · 2011 edition 2 money laundering: hanging dirty...

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