in the americas - sullivan & cromwell for the in-house community in asia & the middle east l...

Vol 8 Issue 3 April 2010

MAGAZINE FOR THE IN-HOUSE COMMUNITY IN ASIA & THE MIDDLE EAST l www.inhousecommunity.com

PUBLISHED BY

Introducing Wake & Paine LLPAlternative billing: a new era

A new M&A hurdle to overcome in the PRC Q&A: Ahmad Rizwan of Dubai Government

The Challenges, Risks and RewaRds

inVesTingin The ameRiCas

INTERACTIVE EDITION

FINANCIAL INSTITUTIONS • ENERGY • INFRASTRUCTURE AND COMMODITIES • TRANSPORT • TECHNOLOGY

Norton Rose Group has always served the needs of clients with interests in the Asia Pacific region. But now that Norton Rose Australia has joined forces with us, we’ll be even better placed. The move will create a major legal practice across the region. 700 lawyers in 13 offices to be precise. Our clients right around the world will benefit from a new wealth of resources, knowledge and contacts.

www.nortonrose.com/asiapacific

700 lawyers, 13 offices, one team

Norton Rose Group in Asia Pacific

In this issue Vol 8 Issue 3April 2010

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48

Investing in the Americas Special Report24 A window of opportunity With the help of experienced guides, the time might be right for

Asian companies to explore investment opportunities in the US, says M&A partner Robert DeLaMater of Sullivan & Cromwell LLP.

26 An informed approach Partners from Dewey & LeBoeuf’s Washington office explain how

companies can form effective M&A strategies whilst avoiding the pitfalls of a CFIUS screening.

30 With eyes wide open… The rewards for Asian investors in Latin America are plentiful, say

lawyers from Diaz, Reus & Targ, LLP. Yet awareness of risks, and how best to handle them, are vital to success.

36 Close attention to detail Thorough due diligence and a careful review of the applicability of a

range of regulations will go a long way to ensuring successful investment in the US, say M&A lawyers from Shearman & Sterling LLP.

23

Plus17 Internal fraud investigation in Asia An executive summary – based on a presentation by Navigant Consulting

and Winston & Strawn LLP – of the implications of the FCPA for companies in Asia, and steps organisations can take to avoid or mitigate violations.

42 Dealing with product liability in the PRC Liability claims are becoming more popular in the PRC due to increasing

consumer protection laws and a more demanding public, explains Beiten Burkhardt lawyer Willi Vett. Is your company prepared?

Departments3 News Focus Why the PRC’s proposed national security review mechanism for foreign

investment in China is causing investors uncertainty on a number of issues.4 The Briefing The latest news, moves and deals from across the region.14 Ear to the Ground Taking an alternate route: the importance of getting legal billing right.40 In-House Insight Ahmad Rizwan, legal advisor with the Government of Dubai, shares the core

competencies which he and his employer rely on for success.44 Jurisdiction Updates All the latest legal developments from across the region. 50 Asian-Counsel Direct

Important contact details at your fingertips.53 Helping Hands Striving to save Japan’s legendary Itou

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Rebecca Brookes – Managing Editor [email protected]

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Opinions expressed herein do not constitute legal advice, and do not necessarily reflect the views of the publishers.

ISSN1729-3405

ContributorsAn associate attorney with Diaz, Reus & Targ, LLP, Sumeet Chugan focuses on interna-tional litigation, arbitration, white collar crime, complex civil and appellate litigation, OFAC and bank secrecy laws, and money-laundering compliance research and trial sup-port. He is also skilled in M&A, financial services and cross-border transaction issues.

Robert DeLaMater is a partner of Sullivan & Cromwell LLP in the firm’s M&A Group. From 1993 to 2003 he was a resident partner in S&C’s Tokyo and Hong Kong offices, advising clients throughout Asia in the region’s most significant transactions. Recently, he advised Tokio Marine in its acquisition of Philadelphia Consolidated, and AIG in various dispositions including the pending US$15.5 billion sale of Alico to MetLife.

Michael Diaz, Jr. is the founding and managing partner of Diaz, Reus & Targ, LLP. He concentrates his practice on domestic and international trade and investment transactions, litigation and arbitration of complex commercial disputes, white collar crime and regula-tory investigations.

Benjamin P. Fishburne is a partner in Winston & Strawn’s Hong Kong office. Active in domestic and international business transactions for more than 30 years, he has advised US and non-US clients during his career on investment, acquisitions, technology transfer, business ethics, and major infrastructure projects in many regions including the Middle East, Southeast Asia, Eastern Europe, and Latin America. He also represents clients in international dispute resolution.

James E. Gordon is managing director and practice leader of Navigant Consulting’s Disputes & Investigations practice in Asia. With more than 25 years of experience, Gordon has developed expertise in internal investigations, electronic discovery and com-puter forensics, and was one of the pioneers in investigating computer and cyber-crime. He has focused his career on conducting and managing complex high stakes litigation and investigations for a diverse group of clients.

Xiaomin (Samantha) Hu is an associate attorney with Diaz, Reus & Targ, LLP. A native of China, Hu is a US trained attorney and fluent speaker of English and Mandarin Chinese. She is skilled in corporate affairs including advising public and private entities on investment, intellectual property, corporate, and immigration related matters.

Gregory D. Puff is a partner in Shearman & Sterling’s M&A Group in Hong Kong. Puff has been involved in a wide array of public and private mergers and hostile transactions, stock and asset purchases, and joint ventures. He is admitted to the Bar in New York and Hong Kong and is a Certified Public Accountant.

Brian Wheeler is a senior associate in the M&A Group at Shearman & Sterling. Prior to transferring to the Tokyo office in October 2006, he was based in the firm’s London office. He has represented corporations, private equity firms and investment banks in a wide range of transactions, including cross-border transactions, and recently represented Shiseido in its acquisition of Bare Escentuals Inc.

Asian-Counsel is grateful for the continued editorial contributions of:

www.hughescastell.com

In-house

AP Head of Compliance (12+ yrs pqe) Hong Kong Take on a leadership role at this Fortune 500 company. This position requires substantial compliance experience, preferably at a multinational or media, technology or financial services company. This is an EB role. Ref: 8834/AC

Assistant General Counsel (8+ yrs pqe) Hong Kong This top tier financial services firm is seeking an Assistant General Counsel at the VP level. You must be ready to give legal support and advice to a key regional business group. Experience in banking legal services such as treasury or cash management would be a plus, fluent English and strong negotiation skills a must. Ref: 8856/AC

Senior Counsel (6-8 yrs pqe) Hong Kong Work directly with the CEO at this top Hong Kong investment group. The ideal candidate has a background in aircraft finance, leasing or engineering and can be trusted with key accounts. Hong Kong or PRC qualification with good English and native Mandarin required. Ref: 8855/AC

Contract Risk Manager (8+ yrs pqe) Shanghai Proactive lawyer needed to take the lead on a variety of complex commercial transactions at this Fortune 500 company. You must have excellent drafting and negotiation skills, preferably with some experience in the energy sector. PRC and US Bar with fluent Mandarin and English required. Ref: 8854/AC

Legal and Compliance Officer (8+ yrs pqe) Tokyo Help lead the legal department for this well-known multinational corporation. You must have a good understanding of Japanese funds settlement, anti-money laundering, credit card and banking law. Fluent Japanese and English a must. Ref: 8817/AC

Licensing and Transactions Counsel (4-5 yrs pqe) Beijing Develop your career by joining the team of this world leading tech company. You must have proven experience in IP law with a focus on telecom or technical matters. Patent, licensing and litigation experience with good English required. Ref: 8852/AC

Legal Counsel (4+ yrs pqe) Hong Kong Exciting opportunity to work on one of the world’s fastest growing markets at this financial services firm. This position covers mainly private equity funds with a PRC focus. Excellent documentation and drafting skills needed. Ref: 8846/AC

Senior Manager: Legal & Compliance (8+ yrs pqe) Mumbai Our client, a widely recognized multinational, is seeking an experienced professional who can take the lead in developing their new legal team in India. A strong understanding of Indian law and regulations that are applicable to payments, remittances and e-commerce is necessary to succeed. General banking knowledge would be helpful. Ref: 8816/AC

Legal Counsel (4+ yrs pqe) Hong Kong Exciting opportunity to work on one of the world’s fastest growing markets at this financial services firm. This position covers mainly private equity funds with a PRC focus. Excellent documentation and drafting skills required. Ref: 8846/AC

Legal Counsel (4+ yrs pqe) Singapore Support the international business of this respected professional services firm. You must have experience in contract review, drafting and negotiation, preferably in-house, and be ready to work with a global team. This is a new role with excellent prospects for expansion. Ref: 8829/AC

Legal Counsel (3+ yrs pqe) Shanghai Great opportunity on the expanding legal team at this Hong Kong based financial services firm. The ideal candidate is PRC qualified and has proven experience in property funds, financing, asset management and private equities. Native Mandarin and good English required. Ref: 8859/AC

Private PracticeReal Estate Lawyer (2-4 yrs pqe) Hong Kong This prestigious UK law firm is seeking a junior associate to join their Hong Kong real estate team. You will work closely with a partner who is experienced in property development, investment acquisitions and real estate finance. Conveyancing experience and Chinese language skills required. Ref: 8843/AC

Associate (3-4 yrs pqe) Shanghai Join this US law firm that is a world leader in M&A and securities deals. This position covers US capital markets and M&A. JD graduates preferred, but those with a LLM and PRC qualification will also be considered. Native Mandarin and excellent English a must. Ref: 8840/AC

LONDON • PARIS • BEIJING • HONG KONG • SINGAPORE • BEIJING • SHANGHAI • BRISBANE • MELBOURNE • PERTH • SYDNEY • AUCKLAND • WELLINGTON

HONG KONGTel: (852) 2520 1168 Fax: (852) 2865 0925 Email: [email protected]: (65) 6220 2722 Fax: (65) 6220 7112 Email: [email protected]: (86) 10 6581 1781 Fax: (86) 10 6581 1773 Email: [email protected]: (86) 132 2996 6550 Email: [email protected]

Markets Are Blooming: Is Your Career?

AC Apr10 Blooming.indd 1 4/27/2010 9:14:31 AM

The Briefing

4 ASIAN-COUNSEL www.inhousecommunity.com

China is in the process of developing new rules for national security reviews of mergers and acquisitions between Chinese and foreign companies. The new Plan for National Security Review Mechanism (NSR Plan) will establish a multi-ministry committee to review national security issues presented by foreign mergers and acquisi-tions with Chinese domestic companies. This will present an additional regulatory hurdle for foreign transactions, separate from the competition review under the 2008 Anti-Monopoly Law (AML). Article 31 of the AML already provides for national security reviews, but until now no mechanism for those reviews has been implemented.

This development comes amidst increasing expres-sions of concern by foreign governments and business organisations about a perceived increase in domestic protectionism and economic nationalism in China. The NSR Plan is expected to be promulgated as early as this year, though further details have not been made publicly available.

Legal and regulatory backgroundA vigorous debate has been underway in China for years regarding the perceived national security issues arising from foreign acquisitions of domestic companies, with particular concern focused on “strategic and sensitive” industries and Chinese national champions. It was widely reported that Carlyle Group’s proposed acquisition of Xuzhou Machinery in 2005 failed to obtain Chinese gov-ernment approval due to national security concerns.

The AML’s Article 31 requires mergers and acquisi-

tions by foreign investors to undergo a separate national security review in addition to antitrust review. It has been widely understood that such national security review would be conducted by a separate authority according to forthcoming laws and regulations, but no implementing rules have been published and no cases are reported to have been subjected to separate national security review under the AML. The NSR Plan is expected to make Article 31 operational.

In addition to the AML, Article 12 of the Rules on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (Foreign M&A Rules) requires foreign investors to report to the Ministry of Commerce (MOFCOM) any transactions in which they will acquire control of domestic entities in key economic sectors or which affect national economic security or famous Chinese brands. Article 12 does not include a list of “key economic sec-tors” or define “national economic security”. Although the antitrust merger review chapter of the Foreign M&A Rules is understood to have been superseded by the AML, Article 12 appears to remain in force. As of March 2010 there have been no reports of MOFCOM receiving notifications or explicitly challenging transactions pursu-ant to Article 12, although a number of transactions (such as Carlyle/Xugong) have failed to obtain approval for undisclosed reasons.

The national security review planDuring the annual session of the National People’s Con-gress in March 2010, Premier Wen Jiabao stated in his

N E W S F O C U S

Plan for M&A national security review underway

Acceleration in planning of the PRC’s proposed national

security review mechanism for foreign investment in

China is causing investors uncertainty on a number of

issues, says partner Peter Wang of Jones Day.

5 APRIL 2010

national security review of foreign investment in US companies.

The details currently available about the NSR Plan remain thin and leave considerable uncertainty about a number of issues, including:

• How broadly “national security”will be defined;

• Industries considered importantto national security;

• The timeframe and process forreview and approval;

• Whether review will be initiatedupon the discretion of the Joint Ministerial Committee, through a mandatory prior notifica-tion system governed by objec-

annual Government Work Report that the Chinese government will “acceler-ate the establishment of the National Security Review Mechanism of foreign investment.” A new plan for national security review of mergers and acquisi-tions by foreign investors has already reportedly been submitted to the State Council for approval. This NSR Plan was jointly drafted by MOFCOM, the National Development and Reform Commission (NDRC), and the Legisla-tive Affairs Office of the State Council. The NSR Plan was reportedly com-pleted in early 2009, but approval was delayed due to the global financial crisis. It now is expected to be promulgated as early as this year. However, furtherdetails of the draft Plan currently are not available, and it is unclear whether the Plan itself will be published.

The Joint Ministerial CommitteeThe proposed national security review will reportedly be conducted by a Joint Ministerial Committee comprised of ministers from multiple government ministries including NDRC, MOFCOM, the Ministry of Industry and Informa-tion Technology (MIIT), the Commission of Science, Tech-nology and Industry for National Defense (COSTIND), the Ministry of Science and Technology (MOST), the Ministry of Agriculture, the State-Owned Assets Supervision and Administration Commission (SASAC), the China Banking Regulatory Commission (CBRC), the State Administration of Industry and Commerce (SAIC), the State Administra-tion of Taxation (SAT), and some important trade associa-tions. The Committee will be headed by a state leader at the vice-premier level.

Uncertain scope and process of reviewThe scope of transactions subject to national security review will apparently depend both on the industry involved and the scale of the proposed transaction. The NSR Plan reportedly includes a list of strategic and sensitive industries but that list will not to be published, “according to international practice.” The plan is said to be modeled after the Committee on Foreign Investment in the United States (CFIUS), which is responsible for US

“The plan is said to

be modeled after the

Committee on Foreign

Investment in the United

States (CFIUS), which

is responsible for US

national security review

of foreign investment in

US companies”

tive reporting thresholds (as for antitrust review), or otherwise;

• TherelationshipbetweentheNationalSecurityReviewCommittee and the Anti-Monopoly Commission, both of which are joint ministerial-level authorities with simi-lar constituent members;

• Therelationshipsamongnationalsecurityreview,Arti-cle 12 of the Rules on Foreign M&A, and the Catalogue for the Guidance of Foreign Investment Industries (which designates industries in which foreign investment is prohibited, restricted or permitted).

Practical impact and policy considerationsWhen finalised, the national security review mechanism will provide an additional regulatory hurdle for mergers and acquisitions by foreign investors in China, albeit one that Chinese legislators and regulators would say follows existing practice in other jurisdictions such as the US CFIUS process. Despite these international precedents, Chinese national security review is likely to add to increasing con-cern by Western observers about domestic protectionism and economic nationalism in China, which has been sparked by recent actions such as a government initiative favoring indigenous innovation in government procurement.

[email protected]

The Briefing


AUSTRALIA

Allens Arthur Robinson (AAR) has bolstered its Melbourne prac-tice with the appointment of Anthony Arrow, one of Australia’s leading infrastructure and construc-tion lawyers, to its projects team. Currently General Counsel at John HollandGroupPtyLtd,Arrowhassignificantexperiencein front-end construction and major infrastructure proj-ects.HehasrecentlyworkedontheVictorianDesalina-tion Plant PPP, the Peninsula Link PPP and the Ararat Prison PPP projects.

AAR has also appointed resources and native title practitioner Mar-shall McKenna as partner. Hispractice focuses on commercial, mining and native title litigation, in addition to land access agree-ments, negotiating compensation, heritage and intellectual property.

McKenna joins AAR from Perth firm Hunt & Humphry,where he has been a partner since 2000.

HONG KONG

Sidley Austin has strengthened its Hong Kong offering with theappointment of Alex Lloyd as a partner in its US Corporate Finance Practice. Lloyd’s practice focuses on debt and equity capital markets including high yield debt offerings, IPOs, restructurings, SEC regulatory compliance and liabil-ity management transactions, and he has represented issu-ers and underwriters in a number of high yield offerings in Asia.LloydhaspractisedlawinHongKongforfiveyears,after previously practising in London and Washington DC.

INDIA

Khaitan & Co has appointed three new partners to its Indian team: Based in New Delhi, Asim Abbas will head the firm’s

Telecom and Media Practice. Ear-lier in his career, Abbas worked as Director (Tariff and Costing) in the Government of India’s Department of Telecommunica-tions, where he had extensive interactions with members of regional and international telecom agencies.He later joined a leading Indian law firmas atelecomspecialist,andhasalsoservedasVice-President(legal) at the corporate office of Bharti Airtel Limited.

Based in Mumbai, Amitabh Sharma is joining the firm’s Infra-structure and Projects Practice. He was previously a partner inanother Indian firm where he spent almost five years focusing on infra-structureandprojectsmatters.Hiswide experience includes advis-

ing on investments, financing and structuring of infra-structure projects, public-private partnership projects, environment, health and safety, forestry and land laws. Sharma has advised domestic and foreign entities, fund-ing agencies and lenders and PE funds on infrastructure, power and mining projects.

Also based in Mumbai, Shishir Mehta will join the firm’s Banking and Finance Practice. He startedhis legal career in London as a trainee solicitor with Slaughter and May where he later became an associate, focusing on banking, finance, private equity and corpo-rate matters. Mehta subsequently joined White & Case in New York, gaining valuable experience in leverage and acquisitions financing. Hehas regularly advised on financing transactions including credit facility arrangements, security documents, inter-creditor arrangements, debt restructuring and cross-borderissues.HeisaccreditedtopracticelawinGujaratin India, in New York, and in England and Wales.

M O V E S

Anthony Arrow

Marshall

McKenna

Alex Lloyd

Asim Abbas

Amitabh Sharma

Asia’s latest corporate legal appointments

Shishir Mehta

With over twenty years’ experience in the global legal market, Laurence Simons offers far more than jobs.

As well as advice on which fi rms are looking and why, we offer a truly consultative service tailored entirely to your needs, so whether you require help in negotiating packages or expert assistance in writing your CV and business plan, Laurence Simons’ should be your fi rst port of call.

Our team is run by some of our most senior people. People who can add real value to your search. We don’t pretend that our partnership will always deliver the perfect job, but we do promise that we will work responsibly, professionally and in complete confi dence to help you identify and secure your ideal career move.

www.laurencesimons.com

Funds Associate 4-7PQE | Hong KongUS law fi rm with one of the largest funds/fi nancial services teams seeks a mid to senior associate. The role will handle investment fund transactions, particularly the development of innovative fund structures and fi nancial products, including hedge funds and private equity arrangements. Ideally candidates will have a strong Funds background, but top tier M&A lawyers looking to switch will be considered. Chinese language skills and experience gained in this region preferred. Ref: 106001

Competition Antitrust Associate 3-5PQE | BeijingPremier Law Firm seeks a competition/anti trust lawyer for their highly regarded team in Beijing. The ideal applicant will have 3 plus years’ experience, a Common Law or US qualifi cation and will already be working for a leading international fi rm in the APAC region. Whilst fl uent Mandarin and an EU competition background are preferred, they are not essential. A genuine commitment to making a long term career in China is essential. Ref: 105001

Corporate Energy Counsel 8+PQE | Hong Kong/ChinaOur Client, a cutting edge solar power technology MNC requires a senior legal counsel to lead their China operations. A unique opportunity to partner with management in a truly dynamic environment. Solid PRC corporate experience essential and a knowledge of construction, including EPC contracts would be an advantage. Fluent Mandarin and English language skills are prerequisites. Candidates from in house and private practice will be considered and a proactive approach is a prerequisite. Ref: 111400

Shipping Partner | ShanghaiRare opportunity for a Partner to join this leading International law fi rm with an excellent reputation across the region. Senior associates on the cusp of partnerships will be considered. The successful candidate will have strong commercial litigation or shipping experience covering the full range of maritime work, acting on behalf of charterers, owners and P&I clubs. Lawyers in Singapore and Hong Kong who are keen on relocating to Shanghai will be considered. Ref: 107100

Corporate Counsel 5+ PQE | BeijingOur client, an innovative market leading US technology MNC seeks an attorney to be their sole counsel in Beijing. The role will support the Company’s offi ces throughout the PRC and will focus on software license, reseller, consulting and other customer contracts. There will also be responsibility for IP, managing litigation, supporting JVs, providing internal legal training and acting as the FCPA compliance offi cer in China. At least 5 years’ experience, gained in the PRC and US training and experience would be ideal. Fluency in English and Mandarin essential. Ref: 104201

Legal Counsel China 7 + PQE | ShanghaiOur client designs personal equipment for a vast array of communications products. They now seek a lawyer to join the APAC legal team and focus on China in a newly created position. Ideal applicants will have experience of general corporate commercial matters, including licensing, distribution, marketing and sales agreements. Fluent Mandarin language skills are essential and whilst this role will focus on China, you will work on matters throughout APAC. International experience and Common-law qualifi cation, or similar are required. Ref: 105600

Asia Pacifi c Counsel 7+ PQE | SingaporeOne of the world’s leading open source software providers, this US multinational now wishes to hire a Senior APAC attorney. You will mainly deal with various IT-related agreements, contracts and support the legal needs of the business in the region. Ideal applicants will have 7 years’ plus experience including substantial commercial transactional work. Your strong negotiation skills and strategic outlook will be rewarded with excellent and defi ned career progression. Ref: 102301

Litigation Counsel 5+ PQE | Hong Kong/SingaporeGlobal leader in private wealth management with an outstanding reputation in Asia now requires an ambitious experienced litigator to join them for a 6 month contract. Applicants will have at least 5 years’ PQE gained in litigation and cross border experience is required. Ideally you will have China/Taiwan experience and some banking/fi nance experience, though this is not necessary for the right applicant. This role can be based in Hong Kong or Singapore and you must be immediately available to commence work. Ref: 104801

Commercial Counsel 4+PQE | Hong Kong/SingaporeLeading Global Telecommunications Service Provider seeks two further lawyers to join the APAC regional team in Hong Kong and Singapore. The roles will support the sales and business development teams and provide advice on the structuring of transactions, a key part of the role will focus on contract drafting and negotiation. You will need to be between 4-9 years’ qualifi ed in a common law jurisdiction and preferably be already working in a high tech or telecommunications company. Ref: 104101

Corporate Partner | ShanghaiOur Client, a Global 100 Law fi rm with over 20 offi ces worldwide is seeking an additional Partner or team for their Shanghai offi ce. A solid track record in M&A, FDI and Private Equity is a prerequisite. Whilst a portable book of business and Mandarin language skills are required, Mandarin language skills may not be essential for the right individual. A stellar opportunity for a dynamic, entrepreneurial, energized lawyer who wants to join an international law fi rm with an established track record in Asia. Ref: 105401

To hear more about these roles, please contact:Tara Brennan, Rebecca Collins or Denvy Lo on +852 3154 9271 or email [email protected]. If we successfully place someone you refer you will be entitled to receive HK$8000 worth of gift certifi cates.

The Briefing


On 2 April 2009, the High Court of Hong Kongintroduced significant changes to its civil proce-dure processes through the Civil Justice Reform

(CJR). The underlying objectives of the CJR were to increase the cost effectiveness of proceedings and to ensure that cases are dealt with expeditiously. So with the passing of the CJR’s one year anniversary, just how effective have the reforms been?

“With only twelve months post CJR and the lack of statistics on costs for comparison purpose, it is difficult to illustrate in monetary terms whether or not litigation has become more affordable or cost effective,” says partner James Kwan of Simmons & Simmons’ Disputes Group in Hong Kong. “To an extent, cost effectiveness can bereflected by how well the CJR has eliminated delays and improved the efficiency of proceedings, and some specific measures have assisted in this regard.” He refers to theintroduction of measures at the pleading stage which cause pleadings to be more focused – parties are now required to support pleadings with a statement of truth, forcing them to take more responsibility regarding the substance of their claims and defence – whilst case management conferences, mediation and better control over time extension applica-tions are also assisting to expedite matters.

Yet these measures and other aspects of the CJR have also presented some problems. According to Kwan, one such problem is the lack of sufficiently-qualified mediators in Hong Kong – outside the construction space – to dealwith commercial disputes. And whilst pre-trial timing may

have been shortened, one of his main criticisms is that cost savings in large disputes have been minimal. “We acted in a large shareholders’ dispute last year – one of the biggest dis-putes in 2009 – which took less than a year to reach trial,” he says. Whilst Kwan concedes that prior to the CJR a simi-lar matter would have taken at least two years to reach trial, he notes, “Although the client saved on time, the work had to be front-loaded – we were forced to put a bigger team on the matter in order to comply with the Court’s deadlines – which meant that costs were not necessarily saved.”

Whilst fast-tracking has improved timing in some mat-ters, there is still room for improvement. Kwan says that since the implementation of the reforms, he has experi-enced delays in obtaining hearing dates in busy lists. “There have been cases where interlocutory applications have taken six months to complete, and I had a discovery applica-tion which took three months to hear because of the lack ofavailabilityofdates,”henotes.Heiseagertoencouragecontinuity of case management by having a single judge preside over the various steps in individual matters where practical, and believes there would be further benefits were the courts to adopt arbitration-style discovery and consider resolving interlocutory applications on paper unless a hearing is truly necessary.

One year on: measuring the success of Hong Kong’s Civil Justice Reform

N E W S i n b r i e f

people make the differenceTo view opportunities advertised on our website please visit

www.aquissearch.com

For a confidential discussion call +852 2537 0333or email [email protected] or [email protected]

Investment Banking Counsel SingaporeAn outstanding opportunity has arisen for an experienced lawyer to join this global financial powerhouse supporting investment banking activities across the region. This is a deal driven role covering IPO, M&A and related transactions across Asia Pacific with a focus on South East Asia.

Working within an established legal infrastructure the successful applicant will advise investment bankers on the legal risks and ensuring they are properly monitored and escalated to ensure deals are managed efficiently across Asia.

The successful applicant will have at least six years of post qualification experience from a leading US or UK firm to be considered and experience working in the Asian market is an advantage. Outstanding remuneration on offer and excellent career prospects for top performers.

Reference number: 851

This preeminent investment bank has an established sales and trading desk that provides cutting edge products and solutions across the region. A new role has been created for an experienced derivatives lawyer to work on structured solutions for a variety of clients.

In this role the successful applicant will provide transactional and advisory support across a breadth of equity and credit linked products including hybrid and retail structured products. You will also be drafting and negotiating complex transaction documentation, assisting with the structuring and execution of those transactions and providing regulatory advice as needed.

The position calls for an experienced derivatives counsel with at least four years of post qualification experience and strong technical skills. This is an opportunity to develop within a growing platform offering excellent compensation.

Reference number: 855

Derivatives Counsel Hong Kong

The Briefing


D E A L S

A snapshot of recent noteworthy transactions from across the region

AUSTRALIA

Blake Dawson has advised PetroChina in respect of the proposed acquisition, with its joint venture partner Royal Dutch Shell, of Queensland-based Arrow Energy, an inte-grated energy company with extensive interests in the coal seamgas sector.ValuedatA$3.5billion (US$3.27b), thedeal will proceed by scheme of arrangement and is subject to shareholder and regulatory approval. It is the largest Chinese joint venture bid in Australian corporate history and the first major acquisition in Australia by PetroChina, the world’s largest company by market capitalisation. Part-ner Justin Shmith led the firm’s advisory team.

CHINA

Davis Polk & Wardwell LLP has advised China Mer-chants Bank Co Ltd, the PRC’s sixth largest bank in termsofassets,inrespectofitsUS$3.2billionglobalrightsoffering. The offering consisted of a public offering of A shares (listed on the Shanghai Stock Exchange) in the PRC, apublicofferingofHshares(listedontheHKSE)inHongKong,andprivateplacementsofHsharestoinstitutionalinvestorsoutside thePRCandHongKong.The transac-tion marks the first global rights offering by a Chinese bank and the first rights offering by a Chinese company made available to US investors. UBS AG and CICC were the global coordinators of the offering. The firm’s advisory team was led by James C Lin.

HONG KONG

White & Case LLPhasadvisedRichardLi’sHongKong-based Pacific Century Group (PCG) in respect of the closing of its purchase of AIG’s investment advisory and asset management business. The worldwide deal closed in New York on 26 March 2010. The New York-based AIG Investments operates in 32 countries and manages approx-imatelyUS$87billionof investments for institutionalandretail clients. PCG’s current interests are focused in infra-structure, property, satellite communications and other investments in Asia-Pacific. The firm’s advisory team was led by partners Steve Teichman and John Hartley.

INDIA

AZB & Partners has advised Reliance Industries Lim-ited (RIL) in respect of the establishment of a 50:50 joint venture company between RIL and US-based sports mar-ketingandmanagementcompany IMG.The JVcompanywill create and operate sports and entertainment proper-ties in India and develop a “world-class” sports coaching infrastructure for the country. Deal closing is subject to the satisfaction of certain conditions. Partner Shuva Mandal led the transaction.

INDONESIA

WongPartnership LLP has acted as Singapore counsel for a group of banks headed by the Japan Bank for Inter-national Cooperation in respect of the approximate US$595millionfinancinggrantedtoIndonesia’sindepend-ent power producer PT Cirebon Electric Power, to finance a power venture in Cirebon in West Java, Indonesia. This is the first new international independent power producer project to be financed in Indonesia since 1997. PartnerAlvin Chia acted on the matter.

OMAN

Lovells Lee & Lee has advised Sembcorp Utilities Pte Ltd and the Oman Investment Corporation in respect ofaUS$1billionconstruction,financinganddevelopmentof an independent water and power project in Salalah, Oman. The bidding and financing occurred amid the credit crunch which affected the cost and availability of bank loans. After several months of intensive negotiation, financial close took place towards the end of last month. This is the first power and water project in the Middle East that involves funding from Chinese institutions. Singapore office partner Ken Hawkes led the transaction.

PHILIPPINES

Pinsent Masons has advised Power Sector Assets and Liabilities Management Corporation (PSALM) – the state agency responsible for handling the sale of the Philip-pines’ National Power Corporation’s asset – in respect of the bidding for the privatisation of the 1200-MW Ilijan Natural Gas-Fired Power Plant on 16 April 2010. The suc-cessful bidder was San Miguel Energy Corporation, with a bidofUS$870million.HongKongpartnerJohn Yeap led the firm’s advisory team.

The Briefing


SINGAPORE

WongPartnership LLP has acted as Singapore counsel for Bharti Airtel Limited in respect of the grant, valued at approximatelyUS$7.5billion,fromaconsortiumoflenderstoBhartiAirtel International (Netherlands)BVandBhartiInternational (Singapore) Pte Limited, in connection with the acquisition by the former of the entire issued share capitalofaleadingAfricanmobileoperatorZainAfricaBV,the African unit of the Zain Group. Partners Susan Wong, Choo Ai Leen and Tan Kay Kheng acted on the matter.

SOUTH KOREA

Davis Polk & Wardwell LLP and Shin & Kim have advised the consortium of underwriters in respect of a global IPObyKoreaLifeInsurance(KLI)ofmorethan217millioncommon shares valued at approximately KRW1.8 trillion (US$1.6b).KLIistheoldestKoreanlifeinsurancecompany.The common shares were listed on the Korea Exchange and were offered through a registered public offering in Korea

and placed under Section 4(2), Rule 144A and Reg S outside Korea. The transaction marks the largest Korean IPO since 2006, with approximately 50 percent of the common shares subscribed for by overseas investors. The Davis Polk advi-sory team was led by Tokyo partner Eugene C Gregor, whilst partners Woong-Soon Song and Jong-Ho Song led the Shin & Kim team. KLI and the selling shareholders were advised by Simpson Thacher & Bartlett LLP as to US law and by Lee & Ko on Korean law.

THAILAND

Watson, Farley & Williams LLP has advised Conergy Renewable Energy Singapore Pte Ltd (Conergy) in respect of the formation of a consortium with Yanhee Solar and Annex Power to develop and construct one of Thai-land’s largest private solar projects to date: a 3MW plant. Conergy will be responsible for the design, engineering, and components supply of the project. The plant is expected to be completed in Q4 2010. The firm’s Singapore team was led by partner Ken Cheung.

D E A L S

www.andrewhitchen.com

http://www.andrewhitchen.com/

13 APRIL 2010

®

it an offence to get around the technical measures used to stopthecopyingofmaterialsoldonCDs,DVDsorotherdigital media.

“Each Party shall provide for adequate legal protection and effective legal remedies, in the form of civil remedies or criminal penalties in appropriate cases of wilful conduct, against the circumvention of effective technological meas-

ures that are used by authors, performers or produc-ers or phonograms in connection with the exercise

of their rights and that restrict unauthorized acts in respect of their works, performances, and phonogram,” it says….

There were fears at one point that ACTA would demand that signatory countries search

people on their way in and out of the country, check-ing digital media devices for copyright infringement. The

treaty specifically excludes such activity from its scope.“Parties may exclude from the application of this Sec-

tion small quantities of goods of a non-commercial nature contained in travellers’ personal luggage [or sent in small consignments.],” it says.

The treaty is being negotiated by the US, Japan, South Korea, Mexico, Canada, New Zealand, the European Com-mission and others….

www.out-law.com

Secret copyright treaty publishedN E W S i n b r i e f

For information on how to contribute email: [email protected]

In next month’s issue…Don’t miss next month’s edition of Asian-Counsel, in which we take a look at the state of legal markets in the Middle East. We also investigate the reasons behind increasing business interaction between Asia and the Middle East, which sectors are hot, and why law firms and companies alike are being drawn to opportunities in emerging markets such as Qatar and Saudi Arabia.

A secretive global negotiation on new copyright rules will not force countries to adopt ‘three strikes’ internet disconnection policies. A draft of the Anti-Counterfeiting Trade Agreement (ACTA) has been published officially for the first time.

The treaty, which is being negotiated outside of exist-ing trade bodies the World Trade Organisation and the World Intellectual Property Organisation, has

been the subject of negotiation by governments for two and a half years, but its contents have been kept secret from citizens, until [now].

Under pressure from digital rights activists and follow-ing the European Parliament’s vow last month to take the European Commission to court if the documents were not published, the govern-ments negotiating the treaty have agreed to publish the current draft.

It reveals that fears that the Agreement would force all signatory governments to dis-connect businesses and households from the internet after three accusations that copyright infringe-ment had taken place were ill-founded.

ACTA does say, though, that the existing immunity of internet service providers (ISPs) from legal action because of subscribers’ copyright infringements should be depend-ent on it taking action to curb infringement.

The Agreement lays out two options [regarding poten-tial ISP immunity], either of which might be agreed on when the treaty is ratified later this year….

The treaty demands that signatories pass laws making

Ear to the Ground


A recently leaked memo from a New York-based global 100 law firm stated:

“As you are all aware, our pricing power is diminished. In more and more areas, clients are seeking discounts or other billing arrange-ments. On new business pitches, discounts are routinely being sought. In 2007, our realization

was 110%; in 2008, our realiza-tion was 97%; for 2009, we origi-nally budgeted 93%, and we are now running at a realization of around 89%. We want incremental business and we are realistic about what is needed to obtain attractive incremental business…we are willing to fix fees. If a particular partner rate or particular class

rate is a sticking point, we can discount those rates to be com-petitive. We can quote a blended rate. In brief, we are flexible on rates and want to do what we need to do in order to expand our share of the high-end busi-ness out there.”

As the memo suggests, there seems to be little doubt that in-house counsel are now in a posi-tion to dictate fees to law firms like never before. This has been backed up by comments in the public arena. Amy Schulman, the General Counsel of Pfizer, has stated that law firms have been too profitable in the past and she is now insisting on fixed

fees and discounts from the company’s reduced number of law firm panel members. Whether she is right to dic-tate on law firm profitability is subject to question, but there is little doubt that as a client one can demand some degree of pricing certainty and many corporations are doing just that. Additionally, Lexis Nexis surveys from 2009 show that over 50 percent of in-house counsel believe that law firms are too profitable, whilst 55 per-cent plan to reduce their spending on outside counsel in 2010.

The Big BoysEarlier this year, Microsoft’s General Counsel Brad Smith was quoted as saying that up to 45 percent of the technology giant’s legal bills will be on an alternative fee basis, with the company also facing a reduced legal budget of about 10 percent. He is cer-tainly not alone in the emphasis he places on alternative fees. Other notable in-house counsel in the United States – including DuPont’s GC Thomas Sager; United Technologies’ Associate GC Chester Paul Beach; and FMC Technologies’ GC Jeffrey Carr –

Taking an alternate routeManaging director Robert Sawhney of SRC

Associates Ltd (Hong Kong), a boutique consultancy

which provides strategic and advisory services for

professional service firms and SMEs, explains the

importance of getting legal billing right.

ALTERNATEALTERNATEALTERNATE

ROUTEROUTEROUTE

Taking an alternate route

By Robert Sawhney, SRC Associates Ltd

APRIL 2010 15

are all strong advocates of alternative billing arrangements. Recent research from Australia also suggests that in-house departments in that country are putting almost 40 percent of their legal spend towards fixed fees.

However, the deal that really made people sit up and take notice was that between Levi Strauss and law firm Orrick Herrington & Sutcliffe. Under the terms of that arrangement, Levi has agreed to give all their worldwide legal work to Orrick which will, in return, charge fees on a yearly basis (to be payable in monthly installments).

The rationale and anatomy of alternative feesThe concept of alternative fees is hardly new. The demise of the billa-ble hour has been proclaimed for over 20 years now, yet during this time little really changed. The recent global financial crisis, however, has given in-house counsel the proverbial arrows they needed to throw at exter-nal counsel to elicit a shift in think-ing. With the budgets of many legal

as Valorem or Exemplar in the US – appear happy to charge 100 percent of their work on a fixed fee basis, many of the larger law firms from the US and the UK are also moving towards more alternative fee work. They also have sophisticated systems for scop-ing work upfront.

From a law firm perspective, the preferred terminology for alternative fees is value pricing… at least, that is what consultants tell them. In essence, law firms need to tie-in their price set-ting with their overall strategy and marketing efforts so they better under-stand the value they deliver to clients and indeed, what clients value! From an in-house perspective, research does support the concept that in-house decision makers choose law firms that have specialised expertise in their industries and who understand the commercial aspects of their business. This is the ‘value add’ in the relation-ship and hence requires a different way of communicating between lawyer and client.

There are a number of alternative fee arrangements around:

departments being cut, in-house staff are now under increasing pressure to control legal spend, and it is unsur-prising that alternative fee arrange-ments such as fixed fees provide the certainty and control that corporations are seeking.

In order to secure both longstand-ing and new clients, many law firms have begun to embrace this new way of billing. Whilst smaller firms – such

(Source: Stop the Clock: A research report on fees and value in legal services. BDO Stoy Hayward, 2007)

There is no certainty over the final cost

There is no incentive for the firm to be quick and efficient

It encourages padding

I cannot measure the value-add

It is hard to assess the quality of the work

I am subsidising the high salaries paid to junior staff

56% 94%

82%

74%

54%

46%

43%

55%

50%

49%

34%

11%

10%

It is simple

I can break the bill down

I can compare the cost of different firms

It is measurable

It provides transparency

It is more practical than the alternatives

There are no strengths

Figure 1: Strengths of hourly billing model Figure 2: Weaknesses of hourly billing model

In essence, law firms

need to tie-in their price

setting with their overall

strategy and marketing

efforts so they better

understand the value they

deliver to clients

and indeed, what

clients value

Ear to the Ground


• Fixed price agreements (FPA) –the bundling together of services over a time period or matter with unlimited access to the service provider;

• Changeorder–putinplacewhenadditional service needs arise that are not covered in the original FPA. Services rendered here are charged separately;

• Serviceguarantees–perhapswor-rying, but some firms are offering money-back guarantees based on client satisfaction at the discretion of the client;

• Risk based – sharing in the sav-ings/revenue generated for clients or the size of a transaction;

• Task based – a set fee for eachtask, such as filing a motion or deposition etc;

• Discountedratesforaguaranteedvolume of work;

• Discountratepluskicker–agreedhourly rate plus performance based pay;

• Annualretainers;• Buy-in,follow-onapproach–offer-

ing low prices on an initial engage-ment in return for the client’s promise of future purchase of linked services or ancillary services.

In reality, these approaches can be summarised under two major head-ings identified by Leonard Berry and Manjit Yadav in the Sloan Management Review (1996):

Pricing strategies to reduce uncertaintyThese include service guarantees, benefit driven pricing, and fixed price agreements, with the idea being that where clients are unsure of the service

[email protected]

or situation facing them, the service provider can reduce any resulting anxiety by providing up-front fee schedules or sharing in the outcome success of a project.

Relationship pricingIncluding discounted rates for large volumes of work or the buy-in, fol-low-on approach, the underlying idea here is that building long term rela-tionships with the right kinds of cli-ents can be beneficial for both the client and the service provider.

Getting it right There are a number of arguments against alternative fees (aside from regulatory issues, such as litigation tax requirements in Hong Kong), although not many hold water. In-house counsel are often concerned that outsourced work will be pushed down to lower level juniors to save money under a fixed fee model. A

common method to ensure this does not happen is for in-house counsel to hold some money back to be based on outcome. This motivates law firms to put their best people on the job to ensure that agreed objectives and, in some cases, certain outcomes are met. Firms may resort to the argu-ment, “How can we price upfront when we don’t know how much work is involved?”. In reality, firms should know based on experience how much time something will take and the costs involved. They will also have the historic data to help them gauge costs. If they don’t, maybe they are the type of firm you don’t want to be working with!

Setting the price and scope of work will require detailed conversa-tions between both parties that focus on the objectives of the work, the out-comes expected, and expectations of service quality. This may be a new conversation for many law firms and their clients. Once the historic data has been dug up, General Counsel are starting to demand discounts of 20 to 30 percent, a fact that should ‘encour-age’ firms to adopt a new way of working which focuses on modern practice management and increased efficiency. In other words, moving to a new type of business model.

More than ever before, it seems that alternative fee arrangements have gained real traction. I believe the ben-efits to both the client and law firm are palpable and in the long run will increase the profitability and working relationships of both parties, with first movers gaining a real advantage.

Firms may resort to the

argument, “How can we

price upfront when we

don’t know how much

work is involved?”. In

reality, firms should know

based on experience

how much time

something will take and

the costs involved

An executive summary based on a presentation by

James E. Gordon of Navigant Consulting and

Benjamin P. Fishburne of Winston & Strawn LLP.

Internal fraud investigation in AsiaImplications of the FCPA and critical steps for organisations

Feature


On 31 March 2010, Navigant Consulting and Winston & Strawn LLP (in association with Luk & Co) conducted an exclusive seminar for senior in-house counsel and company

directors in Hong Kong on how organisations can best evaluate and mitigate the risk of corporate fraud. Led by James E. Gordon, managing director and practice leader of Navigant Consulting’s Disputes & Investigations practice in Asia, and partner Benjamin P. Fishburne of Winston & Strawn – two recognised experts in the field of Foreign Corrupt Practices Act (FCPA) mat-ters and corporate fraud investigation – the seminar provided an overview of the United States’ FCPA and prac-tical guidance as to how organisa-tions should conduct internal fraud investigations and ensure compli-ance from employees and relevant third parties.

Although the underpinning con-cepts of the FCPA are not new – Fishburne says the core provisions of the FCPA were originally passed in 1977, with several subsequent amend-ments in 1988 and 1998 – it is a subject which has recently generated much discussion in Asia, and for good reason. Increasing enforcement under the FCPA and escalating penalties require companies operating in Asia to have a strong appreciation as to how they may be affected by the Act’s provisions, and why traditional ways of conducting business in Asia mean compliance can require even greater vigilance.

Think ignorance is bliss? The enforcers of the United States’ Foreign Corrupt Practices Act would beg to disagree. We take a look at the potential implications of the FCPA for Asian companies, and consider how organisations can take practical steps to combat internal fraud.

Legal aspects and practical implicationsThe FCPA’s broad jurisdictional application means that any person (regardless of nationality) who engages in acts in furtherance of an improper payment in the United States

can be caught by its provisions. US-incorporated subsidiaries of Asian-based companies are also implicated, as are Asian companies who choose to undertake listings on US stock exchanges. Whilst on the face of it the Act does not cover foreign individu-als, foreign subsidiaries or foreign joint ventures, such parties can be found to be aiders, abettors or co-conspirators of improper payments under the Act. Furthermore, the activi-ties of overseas entities can often lead to investigation of a US parent com-pany and its management. Accordingly, both Gordon and Fishburne say that an awareness of the legislation’s appli-cation and reach is vital for in-house counsel and senior management work-ing in Asia.

The FCPA prohibits the making of direct and indirect bribes (through third parties) to foreign officials in return for securing an advantage or receiving beneficial treatment for business pur-poses. Under the legislation, a “bribe” is viewed as anything from a payment or offer of payment, or promise or

authorisation of such payment or offer, to providing anything of value.

Fishburne says that any company which may be covered by FCPA provisions needs to be very careful in undertaking gift-giving and providing hospitality in the course of

The FCPA’s broad jurisdictional

application means that any person (regardless

of nationality) who engages in acts in furtherance of an

improper payment in the United States can

be caught by its provisions

Internal fraud investigation in Asia

APRIL 2010 19

By Rebecca Brookes

business. In many Asian markets, this can be troubling as such displays can be very important in the business context. The provisions do not mean that companies need to refrain from all such activities, but Fishburne advises that it is better to err on the side of caution. “Gifts valued at RMB200 (approximately US$25) or more must be disclosed,” he says. “You need to evaluate what might be an appropriate level for the gift. With banquets in China, for instance, use a rule of reason and think about what your company’s rules are in relation to entertainment. If you are entertaining or hosting people on a business trip, my rule is that 70 percent of the trip has to be directly related to business… it can’t all be strictly for the sake of entertainment.”

With respect to payments to third parties, the FCPA includes a “knowing standard”: essentially, the existence of warning signs that should “reasonably alert [a person] to a high probability of an FCPA violation” will satisfy the test. Fishburne says the standard clearly warns against a “head in the sand” when it comes to agents and commissioned sales representatives. Companies have a positive duty to deter-mine the reputations of such third parties as they can also be held liable when bribes have been paid by third parties with-out the company’s knowledge. “A conscious disregard and deliberate ignorance of a known circumstance is sure to lead to violation,” he cautions. “However, you’re in a pretty good position under the knowing standard if you have undertaken proper due diligence in addition to having decent contracts. You have then gone a long way to protecting your company from the actions of an intermediary or agent.”

Devising and maintaining a system of internal account-ing controls will also go a long way to demonstrating that transactions have been authorised, executed and recorded properly, should a company ever be investigated. Moreover,

the FCPA requires US public companies to have such con-trols, as well as accurate books and records. In addition to being good business practice, such efforts are worthwhile in light of the FCPA’s wide-reach, as the criminal and civil penalties for violation can certainly add up. Business entities face a US$2 million penalty per violation, for instance, whilst individuals can face fines up to US$100,000 and imprisonment. There can be additional consequences for breach of the Act’s anti-bribery provisions, including debar-ment from contracting with the US Government and loss of certain US export privileges. Organisations found to be in breach may also be subject to compliance monitoring for a lengthy timeframe.

The threat of such penalties is very real. In recent years, the US Government has brought enforcement actions against companies in numerous sectors – including the manufacturing, financial services, energy, pharmaceutical and telecommunications industries – as a result of improper interaction with government officials in various Asian countries including China, India, Vietnam and Indonesia.

When it comes to the attention of management that there has been a breach or possible breach, the best and first course of action is to find out what actually happened through an internal investigation. “Don’t ignore it!” says Fishburne. “If you get caught whilst looking the other way, the outcome is only going to be worse.” Additionally, the company should consider whether voluntary disclosure of the actual or possible breach is in its own interests. “If you conduct an investigation yourself and it’s credible, and you also decide to flag the issue with the regulators, a solid inves-tigation will provide a basis

“If you conduct an investigation yourself and it’s credible, and you also decide to flag the issue with the regulators, a solid investigation will provide a basis for the Department of Justice accepting its findings and not just immediately handing you over to the FBI for further investigation”

Benjamin P. Fishburne

19

Feature


for the Department of Justice accepting its findings and not just immediately handing you over to the FBI for further investigation,” he says.

Critical steps for a successful investigationA violation of the FCPA or other means of corruption can come to light in a multitude of ways: via whistleblower, rumours, high profile transactions, regulatory requirements, and areas of operational risk. So what is the appropriate course of action, whatever the originating circumstances, when a company in Asia is confronted with a violation of the FCPA or other possible fraud? Those in relevant posi-tions of responsibility need to be aware of key criteria for conducting successful internal investigations. According to Gordon, adherence to the following points is crucial to ensure the integrity of an investigation:• proper selectionof an investigative teamanddelinea-

tion of roles and responsibilities;• clearobjectivesas to the information thatneeds tobe

ascertained;• identification,collectionandpreservationofdocuments

and electronic data; and• organisation of information and documenting the

sequence of events for counsel/company interviews.

In choosing a suitable investigative team, in-house counsel should be aware that teams comprised solely of employees may restrict the investigation to only that which has occurred within the company’s boundaries, when external activities

might be just as important in sourcing the nature of the offending behaviour. Regardless of

composition, it is vital that the team map out all areas of inquiry and seek as much knowledge – internally and externally – as is necessary in order to be effective. Doing so will allow the team to determine where there

are connections, which may in turn put the team on the right path to finding the required information.

Gordon stresses the importance of ensuring the investiga-tive team has experience in the context of the relevant geo-graphical region, and that it possesses appropriate language capabilities and understands local customs and idiosyncra-sies. This will assist in assessing how the relevant data is likely to be stored and therefore collated. “In China, SMS texting and instant messaging are prevalent ways of business communication. Emailing is not relied on as much as it is in the business environment in the United States, for instance. It is key that the team knows where to look for the right information,” he says.

Once found, preservation of evidence is just as important and Gordon says it is essential to keep knowledge of the investigation on a need-to-know basis. “Loss, destruction or deletion of hard copy files or electronic data could be fatal to an investigation. The consequences of leaving the individual suspected of wrongdoing to his/her own devices within the company could prove highly erroneous, as would be the distribution of knowledge about the investigation to others sympathetic to the offender’s plight.” Amongst others, things the investigative team should look out for include the state of local books and records, data privacy issues, travel and enter-tainment expenses, freight forwarding and customs pay-ments, cash payments to agents and distributors, and payments to offshore bank accounts. “Also be aware that companies might keep different sets of records for different audiences,” says Gordon. “Companies might keep one set for themselves, one for the tax department, one for customs, one for the parent company, etc.”

Interviews are also a crucial source of information, and the timing of such activity is critical – completed in haste, relevant material may be missed. “Interviews should be conducted when the investigation is substantially com-pleted,” says Gordon. “Yet clients often want investiga-tions to be completed as quickly as possible. This could be

“In China, SMS texting and instant messaging are prevalent ways of business communication. Emailing is not relied on as much as it is in the business environment in the United States, for instance. It is key that the team knows where to look for the right information” James E. Gordon

Internal fraud investigation in Asia

APRIL 2010 21

By Rebecca Brookes

due to a range of reasons, including monetary pressures. From an in-house perspective there has to be a balance, as you want to get as much information as possible out of an investigation.”

Reporting requirements It is important that the approach taken to an investigation be well-documented, with the aim at the conclusion of an inves-tigation to produce a comprehensive report detailing all rel-evant evidence, preservation protocols, and recommendations for further work or options available. Interim reports are just as important, and must be provided during the course of the investigation. “It has to be an interactive process,” stresses Gordon. “The more you learn and communicate, the faster and more effective (not to mention cost-effective) the inves-tigative process will be.”

Red flags and due diligenceThere are also steps that should be taken in advance of under-taking any acquisition, merger or associated transaction, to avoid possible violations of the FCPA or invoking similar legislation from jurisdictions outside the US. Companies can look for ‘red flags’ – potential compliance issues that need to be addressed before the transaction proceeds – in the transac-tion partner’s records or activities, including unusual pay-ment patterns or financial arrangements, a refusal to certify or verify FCPA compliance, and a lack of transparency in their records. Companies should also proceed with caution where a transaction partner has been recommended by a potential government official customer, or where they have close relationships with government officials.

Thorough due diligence can also go a long way to pre-venting future headaches. This process should be performed by the investors or designated agents to confirm that the target business is properly represented, and in order to secure information that will assist in asset valuation. In addition to meeting corporate governance and stakeholder requirements (where applicable), a comprehensive job ena-bles a company to review its target’s or its transaction part-ner’s background and history, reputation and connections (political or otherwise). Due diligence is also necessary in respect of intermediaries. “Don’t sign people up to represent you without having answered all the questions you need to know about them,” warns Gordon. “Don’t always take what third parties say at face value – common sense dictates that there is a reason for due diligence, and initial inquiry may save you a lot of trouble down the track.”

For more information on the issues discussed in this article, please contact:

[email protected]

[email protected] www.winston.com

Effective tools to combat internal fraudIn addition to the above, companies should ensure they have carefully crafted ethical and corporate policies to reduce exposure to potential litigation and fines under the FCPA and comparable legislation. “After such policies have been rolled out, employees should be reminded periodically of their importance,” says Fishburne. He notes that training is also critical, and says this can involve hypothetical and real-life examples and interactive elements. Gordon agrees, adding that training programs are essential to creating, maintaining and demonstrating internal compliance programs to employ-ees and outside entities. Properly taking such measures may help companies avoid FCPA violation in the future, and will certainly assist with long-term goals of achieving a best prac-tice internal fraud monitoring system.

With consulting and advisory firms on hand to offer proper guidance where required, in-house counsel and senior management should not feel alone or overwhelmed at the prospect of creating relevant policies or training programs, or conducting investigations to address issues of fraud. Gordon also believes that technology will begin to offer more of a lending hand, indicating that emerging and proven compli-ance technology will begin to mitigate many of the compli-ance risks that companies currently face. “Applications are now available that will automatically monitor, document and rate compliance risks across a broad range of activities on an integrated web based global platform,” he says. “Channel partners that pose higher compliance risks will be flagged for further vetting giving companies control and confidence in the integrity of their sales, marketing, procurement, adminis-tration and chartable functions.” He anticipates that over the next few years, global compliance technology will provide companies – especially the multinationals – not only a com-pletive edge, but also a positive return on their investment.

Opening your eyes to the possibility of fraud within your organisation, or from the parties that your organisation deals with, and being prepared and willing to undertake thorough investigations when the need arises, should go a long way in ensuring that you protect your company from the potential wrath of the FCPA.

Illustration: ww

w.ow

eiss.com

24 A window of opportunity for investing in the US26 An informed approach: avoiding the pitfalls of CFIUS 30 With eyes wide open: the rewards, and risks,

of pursuing business in Latin America 36 Close attention to detail: why careful due diligence

and a review of US regulations are essential

ASIAN-COUNSEL Special Report

INVEStINg IN thE

AmErICAS


INVEstINg IN thE AmErIcAss p E c I A l r E p o r t

Those of us working as lawyers in Asia a decade ago remember the Asian financial crisis of 1997-98 as having had two sides: great chal-lenge and stress for many Asian companies

pressured by the crisis, but also great opportunity for com-panies from outside the region (and for stronger companies within the region) to acquire on attractive terms businesses that formerly were not available at any reasonable price. Many Asian companies were willing to accept substantial minority investments with control rights, enter into joint ventures or sell subsidiaries, assets or even the entire com-pany; and their workforces, customer and supplier bases

and host governments were, if not supportive, at least toler-ant of such foreign investments. By way of examples, as the Korean chaebol restructured, iconic local brands such as Oriental Brewery were sold to European or US buyers; and financial institutions throughout Asia, with excellent local market positions but severely impaired capital, accepted substantial investments from foreign investors.

Since late 2007 the shoe has been very much on the other foot, as US businesses that were once out of reach for Asian investors and acquirors have been willing and even eager to talk. Despite a few well-publicised episodes over the years such as CNOOC/Unocal and Dubai Ports/P&O and ongoing concerns about the application of the CFIUS process in particular situations, the United States has for many years been among the most open markets in the world for foreign control of substantial business enterprises.

With the help of experienced guides, New York-based

M&A partner Robert DeLaMater of Sullivan & Cromwell LLP

highlights why the time might be right for

Asian companies to explore investment

opportunities in the United States.

A window of opportunity

“The United States has for many years been among

the most open markets in the world for foreign control

of substantial business enterprises. Indeed, the US

routinely receives far more foreign direct investment

annually than any other country (even two to three

times the FDI inflows to China in some years)”

25 APRIL 2010

A window of opportunity

By Robert DeLaMater, Sullivan & Cromwell LLP

Indeed, the US routinely receives far more foreign direct investment (FDI) annually than any other country (even two to three times the FDI inflows to China in some years).

The events of 2007-2009 in the country’s credit and financial markets put many US companies under such pressure, and reduced market values of some businesses so dramatically, that the doors opened wider than ever before, and formerly acquisitive US companies became motivated sellers of important businesses. Prominent US financial institutions accepted substantial investments from sovereign wealth funds and other investors, many from Asia, and were forced to offer for sale subsidiaries or previous stake investments even in highly promising growth areas in Asian and other emerging markets. Examples such as Barclays/Lehman, Nomura/Lehman, Tata/Jaguar Land Rover, Prudential plc/AIA and negotia-tions over various General Motors lines illustrate the opportunities available to Asian and other non-US inves-tors to acquire attractive businesses from US sellers that themselves had formerly sought rapid growth through Asian ventures.

As with any foreign travel, forays into new or unfamil-iar destinations require experienced guides. Far from being unchartered territory, the United States market and legal system are highly articulated, complex and full of pitfalls for the unwary buyer in search of the land of opportunity. Fortunately, as these pages will illustrate, the US market is also blessed with many experienced and knowledgeable guides, in the form of lawyers who have been advising non-US acquirors and investors for many years in all manner of different transactions. Many US law firms have established presences in Asia that can serve as portals to the US market. The pieces contributed to this publication provide important guidance on many issues to be consid-ered carefully by potential investors, but given the limita-tions of space this guidance is necessarily only the beginning of the inquiry that any diligent acquirer will wish to pursue.

Two recent trends illustrate the increased role of legal advisors in structuring and executing US transactions. Firstly, difficult markets lead acquirors to employ more complex forms of consideration or financing (such as structured equity or debt facilities or securities with tai-lored terms), pursue a more extended due diligence review that may drill deeply into key issues or exposures of the target company, and impose nonstandard and highly

particularised representations and warranties and condi-tions to closing. All of this leads to more extended nego-tiations and detailed documentation, which increases the importance of lawyers’ advice on legal requirements and market practice.

Secondly, the United States exhibits a cyclical pattern of alternating periods of deregulation and re-regulation, and one of the consequences of the recent US financial crisis is a strong trend toward increasing regulation of the financial sector in particular, as well as of business gener-ally. The recent enactment of comprehensive health care reform, continuing legislative debate about financial sector regulation, heightened enforcement attention to the Foreign Corrupt Practices Act and anti-money laundering rules, and changes to standards for antitrust review of business combinations illustrate the need for up-to-date legal advice on the regulatory issues implicated by a particular transac-tion as well as the regulatory consequences for the target’s ongoing business operations.

History may never repeat itself in exactly the same way, but to cite again the experience of the Asian financial crisis, history demonstrates that opportunities offered by crises do not persist indefinitely. As this publication makes clear, US lawyers stand ready to assist non-US acquirors and investors who believe the time is right for exploring the Americas.

[email protected]

…the United States market and legal

system are highly articulated,

complex and full of pitfalls for the

unwary buyer in search of the land of

opportunity



A sian and other non-United States investors who are considering acquisition of a significant interest in US business operations need to con-sider the potential relevance of the US “Exon-

Florio” law, which authorises suspension or prohibition of certain transactions that threaten to impair national security. The law establishes the US Committee on Foreign Investment in the United States (CFIUS) to screen invest-ment transactions involving foreign persons that could affect US national security. CFIUS is comprised of the heads of a variety of departments and agencies of the US federal government and is chaired by the Secretary of the Treasury.

Even if CFIUS screening does not result in the blocking of a proposed transaction (which is rare), it can present substantial challenges for Asian investors. Such challenges can include extensive and intrusive requests for informa-tion regarding the transaction and company management, delays of several weeks or more, adjustments to the trans-action, commitments to the US Government to satisfy per-ceived US national security concerns, and political attacks against the transaction and the foreign investor.

At the same time, CFIUS screening is rarely a major problem for Asian M&A transactions, and concerns in this area are often overestimated:• Manyinvestments in theUnitedStatesdonot involve

acquisitions of interests in an existing US business and hence are not covered by Exon-Florio;

• Many investments do not result in a non-US person

gaining control over a US business and hence, again, are not covered by Exon-Florio;

• Manyperceivednationalsecurityconcernscanreadilybe resolved through negotiation with US officials and innocuous changes to the transaction and contractual commitments by the parties;

• There is a growing awareness in the US governmentabout the importance of welcoming Asian, and espe-cially Chinese, investment into the US economy;

• AsophisticatedandsupportiveUSbusinesspartnercanbe effective in neutralising opposition to a proposed transaction;

• Whilst transactions thathaveeffectivelybeenblockedby CFIUS – such as CNOOC’s 2005 effort to acquire Unocal and the 2009 Northwest Non-Ferrous International Company/Firstgold Corp. transaction – generate extensive publicity, they are in fact exceed-ingly rare.

Informed prior review, careful preparation and the advice of knowledgeable and experienced practitioners can sharply reduce the unpredictability and potential for miscalculation that can otherwise characterise the CFIUS process.

Exon-Florio and other national security- related measuresBreadth of Exon-Florio The “Exon-Florio” amendment to the United States’ Defense Production Act – reenacted in 2007 as the Foreign Investment and National Security Act – generally authorises the

Looking to acquire assets in the US? Partners Harry L. Clark and

W. Clark McFadden II of Dewey & LeBoeuf’s Washington office

explain how companies can form an effective M&A strategy whilst

avoiding the pitfalls of a CFIUS screening.

An informed approach

27 APRIL 2010


By Harry L. Clark and W. Clark McFadden II of Dewey & LeBoeuf

President to disrupt or block a transaction if it has resulted or could result in a foreign person gaining control of a US business and the transaction threatens national security. Acquisition of control of US assets that do not constitute a “business” does not implicate the statute. At the same time, CFIUS has a broad view of what constitutes “control”. CFIUS has found in some circumstances that a foreign acquirer controls a US business when it obtains an equity stake of less than 20 percent and is one of multiple persons with the ability to direct operations of the US business.

CFIUS screening Parties have the option of subjecting covered transactions to CFIUS screening by notifying the transaction to the committee. Notice of a transaction to CFIUS is never mandatory. But CFIUS can request that a party to a trans-action file a notice, and, in any event, CFIUS can self-initiate a review. In the absence of clearance by CFIUS, a covered transaction is indefinitely susceptible to adverse action under Exon-Florio. Clearance by CFIUS generally insulates a transaction from adverse action under the stat-ute. CFIUS screening is administered by staff of CFIUS-member departments and agencies, with the Treasury Department, the Defense Department, the Department of Homeland Security and – for energy-related transactions – the Energy Department normally taking leading roles.

Upon receiving notice of a covered transaction, CFIUS screens it for national security concerns, typically conclud-ing its examination at the end of a thirty-day “review”.

Transactions that are determined to be relatively sensitive or that entail any of certain statutory factors are normally subjected to an additional forty-five day “investigation”. One factor that will generally result in an “investigation” is foreign government ownership or control of the non-US acquirer. Thus, one should expect CFIUS screening of an investment by a state-owned company to continue through a forty-five day investigation, although waivers of this requirement are granted for transactions that are deemed clearly to be benign. A very small portion of cases is dis-posed of through subsequent examination by the President underafifteen-daydeadline.Whilethescreeningprocessis designed to last no more than ninety days (and is ordinar-ily completed in thirty days), more time is often needed for informal work with executive branch and congressional offices before the official screening process begins.

CFIUS normally clears without incident covered trans-actions that do not involve national security concerns. If CFIUS identifies security concerns, it will often negotiate with the transaction parties “mitigation measures” on the basis of which the transaction will be cleared. These com-mitments can include, for example, changes to the transac-tion structure (e.g. selling a security-sensitive subsidiary to a US buyer) and safeguards to address perceived security concerns (e.g. compliance policies and procedures and requirements to report matters to the US Government).

“CFIUS has found in some circumstances that a

foreign acquirer controls a US business when it

obtains an equity stake of less than 20 percent

and is one of multiple persons with the ability to

direct operations of the US business”

Harry L. Clark



National security concerns The Exon-Florio statute does not include a definition of “national security”. CFIUS practice, however, shows a marked broadening in recent years of the types of covered transactions that are considered to potentially present con-cerns under Exon-Florio. Covered transactions that involve military, advanced technology and, as of the last ten years, energy assets or activity are typically considered to present national security issues.

Party disclosure requirements CFIUS recently expanded the body of information that transaction parties must include in the notice of the trans-action. Information required to be disclosed – such as extensive personal information about individuals associ-ated with foreign acquiring entities – can be difficult to compile, and disclosure to the US Government can be discomfiting to some. At the same time, the government is required to treat as confidential information submitted to CFIUS in the notice and other filings.

Multidimensional character of US examinations of foreign investment Apart from the legal and technical aspects of a CFIUS screening, parties need to be sensitive to other considerations

that can be relevant to resolution of the US Government’s consideration of foreign direct investment transactions. These include policy, political and media considerations. It has become increasingly likely that Members of Congress will express interest in and views about the outcome of CFIUS examinations, often at the instigation of commercial competitors. It can be important for parties to address the concerns of Members of Congress in a timely manner.

Other investment and national security-related measures United States agencies administer a variety of other rules that bear on foreign investment. Other national security-related measures that affect foreign investment include trade regulations regarding inter-nation technology transfer and trade in military and otherwise sensitive items. They also include government contracting rules relating to clas-sified information. Agencies examine transactions under these measures independently of CFIUS screening, and CFIUS often requires that these other requirements be sat-isfied prior to CFIUS screening. Finally, many other US legal requirements can affect foreign investment including antitrust, telecommunications, consumer protection and environmental protection rules.

Informed approach to Exon-Florio and related measuresThe Obama Administration has recently demonstrated that that it generally seeks to implement Exon-Florio require-ments in a manner that does not needlessly penalise invest-ment in the United States. For example, a subsidiary of China National Petroleum Corporation recently formed a joint venture with ION Geophysical Corporation, a leading

“Apart from the legal and technical aspects of

a CFIUS screening, parties need to be

sensitive to other considerations that can be

relevant to resolution of the US

Government’s consideration of foreign direct

investment transactions. These include policy,

political and media considerations” W. Clark McFadden II

29 APRIL 2010


By Harry L. Clark and W. Clark McFadden II of Dewey & LeBoeuf

The authors would like to thank their colleagues Paul Chen and Heng Loong, from Dewey LeBoeuf’s Hong Kong office, for their assistance in the writing of this article.

[email protected]@[email protected]@dl.comwww.deweyleboeuf.com

US petroleum sector seismic solutions company, without apparent incident under Exon-Florio. Meanwhile reports indicate that in February 2010, CFIUS cleared the merger of the printed circuit board (PCB) business of Meadville Holdings Limited of Hong Kong and TTM Technologies Inc, the largest PCB manufacturer in North America. This involved the establishment of a special security agreement regarding the governance and operations of TTM’s defense-related production business. China Investment Corporation, a major state-controlled sovereign wealth entity, also recently completed a transaction with the US energy com-pany AES Corporation.

In addressing whether and how to approach Exon-Florio and related measures, an Asian acquirer should begin by evaluating whether a transaction under consideration is cov-ered by Exon-Florio. Again, the key question is whether it could be considered to result in non-US control of existing US business operations. A transaction can be covered even if, for example, the acquisition is of a non-US company that holds US operations and even if the US operations are already controlled by other foreign persons.

If it is uncertain whether a transaction is a covered trans-action, it is often advisable to submit an Exon-Florio notice to CFIUS but show in the notice why the parties believe that it is not covered. CFIUS will dismiss the notice if it deter-mines that the transaction is not covered.

If the transaction might be considered to be covered by Exon-Florio, a sensitivity analysis is needed. Firstly, the Asian acquirer should assess its own status in the eyes of CFIUS examiners. For example, is it government-owned or controlled? Is it linked to government leaders in other ways? Has it had significant legal compliance challenges?

In addition, the Asian acquirer should evaluate the status under Exon-Florio of the US operations that would at least arguably come under its control. Important questions include, for example:• WhethertheyareinarelativelysensitiveareaforExon-

Florio purposes e.g. the defense, advanced technology, energy or homeland security sectors;

• Whethertheyengageingovernmentcontracting;• Whethertheyholdclassifiedinformation;• Whether they engage in activity that requires export

licensing authority; and• Whether they hold what might be deemed “critical

infrastructure” such as oil refining or liquefied natural gas facilities.

The acquirer should also ask whether there are other factors that might result in an unusual level of opposition to the transaction. A foremost such factor would be a US com-petitor that is capable of generating US media scrutiny and political opposition.

Based on this assessment, and with expert advice, the Asian investor should be able to make an informed judg-ment about how best to approach a transaction vis-à-vis Exon-Florio and other US legal requirements.

If the transaction might be

considered to be covered by Exon-

Florio, a sensitivity analysis is

needed. Firstly, the Asian acquirer

should assess its own status in the

eyes of CFIUS examiners



I t is no secret, and indeed well-publicised, that Asia’s population growth and economic expansion have stimulated the region’s hunger for natural resources and agricultural commodities. Many Asian nations,

however, do not have the domestic supply of raw materials to maintain such drastic growth. Enter Latin America. Rich in copper, oil, timber, and various agricultural products, Latin America as a region is well-positioned to satisfy Asia’s growing resource needs. With Sino-Latin American trade alone exceeding US$120 billion in 2009, there is no doubt that a strong connection already exists between China and Latin America. The recent signing of several Free Trade Agreements (FTAs) between various Asian and Latin American nations further confirms the strong rela-tionship between the regions.

Investors throughout Asia are looking to Latin America as a vital marketplace for the supply of raw materials needed for their export-driven industries. While Latin America is certainly a lucrative market, investors must be conscious of the risks and hazards associated with doing business in the region. As Latin America grows it will offer investors golden opportunities. These boons, however, come with challenges. Only those investors who are able to success-fully balance risk and reward will truly benefit from the integration of Asia-Latin American trade and investment.

The rewards: fulfillment of Asia’s needs As this past decade has demonstrated, Latin America is one of Asia’s most reliable suppliers of agricultural products,

raw materials and energy. Agriculture – namely soybeans and cotton – as well as metals and fossil fuels are exported to fulfill the needs of Asia’s ever-increasing population. Investors from Asia have noticed Latin America’s ability to produce and supply what are labeled “scarce” goods in Asia’s domestic markets. This, in turn, has created a strong interdependence between Asia and Latin America which, despite the global recession, will see a steady growth rate in trade. This bond creates exciting business opportunities for investors looking beyond commodity trade between Asian and Latin American nations.

Agriculture & raw materials While many Asian nations are making concerted efforts to be self-sufficient, limited arable land requires importa-tion of agriculture to fulfill their citizens’ needs. With vast land availability and varying geothermal climates, Latin America can offer diverse agricultural commodities. For example, over 50 percent of China’s massive soybean import currently comes from Argentina, Brazil, and Paraguay.

Asian demand for consumer electronics, hybrid vehi-cles and electric cars – and the raw materials needed to produce these commodities – has also forced Asian nations to look beyond their borders for additional lithium supplies, and investors continually look towards Latin American countries where a majority of the world’s lithium deposits are found. Chile, Bolivia, and Argentina, which together hold 80 percent of the world’s known lithium reserves, will

The rewards for Asian investors who look to Latin America are

plentiful, say managing partner Michael Diaz, Jr. and associates Sumeet

Chugani and Samantha Hu of Diaz, Reus & Targ, LLP. Yet awareness of

associated risks, and how best to handle them, are vital to success.

With eyes wide open…

31 APRIL 2010


By Michael Diaz, Jr., Sumeet Chugani and Samantha Hu of Diaz, Reus & Targ, LLP

“Even with its most abundant resources, immense

domestic consumption within Asia threatens the depletion

of its energy reserves. China, for example, holds the

world’s third largest coal reserve, yet its reserve/

production ratio leaves the country no option than to

replenish abroad” Michael Diaz, Jr.

be key players in the future development of Asian indus-tries. The number of investors seeking to acquire lithium through “land grabbing” from Latin American owners or direct importation will also continue to increase.

Copper ore, used widely in the automotive industry, is also being widely sought out by Asian companies, both state-run and private. With the demand for this commodity drastically rising and domestic supply severely limited, Asian investment in Latin America is projected to increase ten-fold by 2020, despite dire predictions to the contrary. Notably, in 2008, Chile and Peru accounted for over 50 percent of China’s copper ore imports. Recently, Chinalco – China’s largest domestic producer of aluminum and copper – invested US$900 million in Peruvian Copper and continues to inject money into further mining. China has also invested more than US$500 million for further devel-opment of Cuba’s nickel mines. As Asian-based companies continue to place their stake in long term endeavours, look for Latin America’s infrastructure to further develop. This will lead to additional investment opportunities for the Asia-Latin American financier.

Energy supply Even with its most abundant resources, immense domestic consumption within Asia threatens the depletion of its energy reserves. China, for example, holds the world’s third largest coal reserve, yet its reserve/production ratio leaves the country no option than to replenish abroad. The need to ensure a long-term energy supply is forcing Asian companies to search for assets and supply agreements overseas. Again, Latin America is fulfilling this need, using its unique geology which has gifted the region with vast amounts of minerals and petroleum. On the energy side, Latin America produces enormous amounts of crude oil, gas, biomass, hydroelectric, coal and nuclear power. Of

these, crude oil, hydroelectric power and industrial bio-mass are high on the wish list of many Asian nations. As a result, investment in these industries has dramatically increased in the recent past.

In addition to recently signing two large crude oil deals with Venezuela and Brazil, China has – alongside Ecuador, Peru, Columbia and Argentina – staked out a strong pres-ence in the oil business in South America. China has also entered long-term contracts for offshore drilling with many of these nations. The financial impact of these agreements are wondrous for emerging Latin American nations. Last September, Petroleos de Venezuela and China National Petroleum Corporation, both state-owned enterprises, entered into an agreement calling for over US$16 billion for China to sustain current crude oil importation and fund further development of oil reserves in Venezuela’s Orinoco river belt. China National Offshore Oil Corporation (CNOOC) signed an agreement with Venezuela to further develop a different block of the Orinoco River Belt. China and Brazil have also signed a long-term agreement to ensure that China will receive 100,000 to 160,000 barrels of oil a day in exchange for financing Petrobas, a Brazilian entity, with US$10 billion for further development along Brazil’s coasts.

Asian investors utilise varied payment forms to finance their operations and partnerships with Latin American cor-porations. Stock and bond purchases, share-swaps, and long-term indentures are just a few examples. This is evi-dence that Asia will be in Latin America for the long term; this is not just a short-term quenching of Asia’s thirst for commodities and energy supply.

The future of the Asia-Latin America synergy In 2010, China is poised to achieve an economic growth rate of 8 percent, and an approximate population increase



Sumeet Chugani

of 6 percent. India is set to hit a 9 percent economic growth rate by year’s end. The economic policies of these nations will continue to play catch-up to their respective growth platforms. The story is the same throughout much of Greater Asia. The increase in Asia-Latin American FTAs indicates, however, that Asian governments are beginning to take essential steps to meet these demands. On 1 March 2010, the bilateral free trade agreement between Peru and China became effective. China, as Peru’s second most important trade partner, now gains tariff-free products including bovine fiber, seafood and agricultural commodi-ties, while Peru holds onto a deep-pocketed investor. The agreement prompts more than 10,000 new Peruvian com-panies to export to China in its first decade.

Costa Rica is following in Peru’s footsteps. On 8 April 2010, Costa Rica signed a FTA with China to remove trade barriers and enhance bilateral ties. Most importantly, the FTA lifts tariffs off more than 90 percent of the products traded between the nations. As China’s ninth largest trading partner in Latin America, Costa Rica hopes that the FTA will open more sectors for Asian investment as well as synergise a relationship of culture, sports and technology. Costa Rica has also signed a FTA with Singapore to elimi-nate duties on future Costa Rican imports. After seeing the growth potential from lowering barriers and opening its borders to Asian counterparts, other Latin American nations will likely follow suit.

In the near future, massive cross-border investments will increase imports while guaranteeing long-term sup-plies for each nation’s potential needs. The coming decade will witness Asian and Latin American corporations expand-ing their domestic markets overseas in an attempt to create wealth at multiple ends of a new trading platform. This opens up exciting business opportunities for investors on both sides of the Asia-Latin American market beyond the important natural resources and commodities trade.

The risks: evaluation and mitigation

As trade and investment opportunities arise between Asia and Latin America, investors must fully understand the risks involved before jumping into any venture. Due to language barriers, cultural differences and geographic obstacles between Asia and Latin America, evaluating and mitigating those risks is not an easy task. Latin American nations also have unique political and legal systems, in addition to a business culture distinct from many Asian counterparts.

Political and other significant risksPolitical risks are a grave concern for most investors. The instability of many Latin American governments may scare off foreign investors who are risk-averse. For Asian inves-tors who are used to a different business culture and gov-ernance, Latin America’s political dynamic is complicated and at times too fluid to quickly grasp. Another issue is the inconsistency in foreign investment policy and regulations during an election period. In other words, political officials often make glaring misrepresentations in their election speeches regarding foreign investment policy to gain sup-port from foreign investors, yet fail to uphold their prom-ises. Accordingly, investors must do their homework. This includes familiarising themselves with the history and political climate of any nation which may be a target for investment. On the other hand, Latin American countries are similar to Asian countries in terms of the importance of connections, or “guanxi” as the Chinese call it. Contacts with key players in political and financial circles will make investments smoother and more successful.

Investors must also consider risks of national expropria-tion, as they will not be keen to invest billions of dollars in a nation where the government is likely to take their prop-erty without compensation or prohibit expatriation of prof-its. Many US citizens have been forced to bring cases seeking just compensation for property seized by govern-ments in Latin America. Land is usually the subject of

“In 2010, China is poised to achieve an economic growth rate

of 8 percent, and an approximate population increase of 6

percent. India is set to hit a 9 percent economic growth rate by

year’s end…. The increase in Asia-Latin American free trade

agreements indicates… that Asian governments are beginning

to take essential steps to meet these demands”

33 APRIL 2010


By Michael Diaz, Jr., Sumeet Chugani and Samantha Hu of Diaz, Reus & Targ, LLP

expropriation, which makes this factor more important in the agricultural, travel, transportation, and real estate indus-tries. Protectionist labor unions, which invoke strike activi-ties within Latin American nations, also place fear in the hearts of foreign investors. In 2008, massive strikes caused a detrimental financial impact to Shougang’s (Shoudu Iron and Steel Group Company, China’s fourth-largest steel company) Peruvian factory and mining operation. Likewise, Chinese investors lost millions of dollars in oil projects in Ecuador due to political unrest, strikes and riots. Foreign businesses will also have to put up with non-governmental organisations and wildlife advocates seeking to protect Latin America’s natural resources.

Unforeseen events such as earthquakes in Chile and mudslides in Argentina can also cause investments and business to halt, or cause dramatic spikes and fluctuations in market futures for designated commodities. Investors need to be aware of how natural disasters can affect the stock and bond value in Asia’s domestic stock markets. For example, copper futures rose as much as 5 percent in the Greater Asian markets just days after the 2010 earthquake in Chile.

Many of the above mentioned risks are hard to predict. Government policies can change, legal systems could shift, and unforeseen events always loom. If such events do occur, Asia-Latin American investors must be ready to communi-cate through diplomatic channels to protect their interests and have a plan prepared to protect foreign assets.

Investors would be wise to evaluate all risks (legal, political and financial) in order to select the appropriate nation to invest in. Bilateral trade agreements will provide

more secure protection for foreign investors. Such agree-ments between Chile and China, for example, set forth beneficial investment policies and dispute resolution mechanisms and have allowed Chile to become more attractive to the Greater Asia-Latin American investor. In addition, bilateral agreements between China and Peru, and between Singapore and Costa Rica, provide even greater incentives for Asian-based importation of Latin American commodities.

Money laundering concerns Foreign investors must also be aware of money laundering risks within Latin American nations. Latin American coun-tries have, by and large, prepared themselves very well to meet the anti-money laundering requirements of the Financial Action Task Force and other global anti-money laundering regimes. However, money laundering – includ-ing terrorist and drug financing – is still pervasive in the region. Venezuela, for instance, has been criticised and is considered “high risk” for international investors based on its close ties to the Middle East. Due to the large amount of money transferred during an investment project or interna-tional trade, any monetary movement may be susceptible to triggering red flags. Unlike political risks, money launder-ing threats can be mitigated by taking precautions such as conducting due diligence on a respective transactional counterparty, by making careful inquiries, and by maintain-ing proper documentation throughout the transaction.

If a foreign investor’s activities have been flagged for terrorist links or money laundering concerns or the local authorities have commenced an investigation, the investor must swiftly seek experienced anti-money laundering counsel who can assemble a team to represent the client’s best interests throughout the investigation.

Legal risksGiven Latin America’s different legal systems, foreign investors must understand the pertinent laws and regula-tions that will affect their investments. Investors must also contemplate an exit strategy which conforms to local laws. Since many Latin American countries have overly bureaucratic, unstable and inefficient judicial systems, it is critical to work with a reputable, experienced partner that is familiar with domestic laws, customs, trade practices, busi-ness norms and regulations. Maintaining continuity of the applicable investment policies and regulations is essential for long-term investments in infrastructure and mining.

Latin American countries are

similar to Asian countries in terms

of the importance of connections,

or “guanxi” as the Chinese call it



Well-designed dispute resolution procedures form an essential part of one’s overall investment, as they often give an investor the best chance to protect his or her interests in a neutral forum. Thus, Asian investors venturing into Latin America must carefully evaluate, consider and implement such procedures prior to entrance. Arbitration is usually preferred over litigation because of cost and time savings, as well as the flexibility of mutually selecting an arbitration tribunal and designated arbitrators. A well-drafted arbitra-tion clause should include, at a minimum, a proper arbitra-tion tribunal and the applicable laws, procedures and a chosen language for arbitration. Of course, it is always beneficial for Asian investors to ensure that a nation it seeks to invest in is a party to the 1958 New York Convention, which provides for recognition and enforce-ment of cross-border arbitration awards.

Fraud, bribery and corruptionWhere there is money, there is usually fraud and corruption close afoot. For Asian investors who may be new to the Latin American financial and business culture, the chances of losing money based on illegitimate schemes or fraudu-lent tactics are very high. Thousands of people continue to lose their hard-earned money because of pyramid or Ponzi schemes and other financial frauds.

Investors must be aware of the posed risk of fraud in order to formulate a specific plan to avoid it. Having trust-worthy and experienced legal counsel present when sign-ing any agreement will help protect against such risks. This is especially true if the agreement is in a foreign lan-guage and encompasses unfamiliar and ever-changing local laws and regulations. If an investor chooses not to hire an attorney, he or she must do the necessary home-work. Reading and understanding the local regulations, laws, contracts, agreements and policies will prove to be a wise move. Careful investigation and due diligence are required before entering any negotiation. An investor must

always investigate a counterparty’s background and finan-cial situation. In addition, for those investing in Latin American mining projects, it is essential to ensure that the counterparty owns the property rights and the licenses to exploit the resources. In a recent survey of 900 senior executives worldwide, 72 percent of those companies operating in Latin America saw themselves as vulnerable to fraud and corruption. Asian investors must evaluate and carefully consider the threat that fraud and corruption plays in their industries. Doing so will help mitigate the risk of entering the Latin American market.

Likewise, internal compliance programs and properly trained employees will help minimise this risk. Creating compliance programs can be costly for foreign investors not physically present in Latin America. Accordingly, retaining local counsel familiar with domestic law and business culture may be the most economical approach.

The time is now This past decade has demonstrated that the Greater Asia-Latin American strategic relationship has benefited both regions: Asia has acquired much-needed commodities, while Latin America has obtained foreign direct investment used to spur growth and become an emerging power player in the global economy. Asian investors, seeing their gov-ernments’ keen eye towards Latin America, now seek to tap into the benefits of this important marketplace. The out-come will be beneficial to both sides as long as all parties are cautious about the myriad of risks involved and take necessary steps to avoid them.

Samantha Hu

[email protected]@[email protected]

“Where there is money, there is usually fraud and corruption close

afoot. For Asian investors who may be new to the Latin American

financial and business culture, the chances of losing money based on

illegitimate schemes or fraudulent tactics are very high”



M uch has been written about the need for care-ful due diligence in connection with any acquisition. However, many buyers are una-ware of the scope of US regulations that may

have an impact on transactions, including those which involve non-US parties or non-US business. For example, in August 2007, Elandia International Inc (Elandia) dis-closed in a US Securities and Exchange Commission (SEC) filing that its management had identified control deficien-cies in its financial reporting. The disclosure was later revealed to result from a pattern of bribes paid in Yemen and Honduras by its subsidiary Latin Node, Inc – the acqui-sition of which had closed barely two months earlier.

In addition to promptly disclosing the potential prob-lems to investors, Elandia immediately conducted an inter-nal investigation (eventually involving external counsel and a committee of its board of directors), terminated the agreements that resulted from the improper payments, and voluntarily notified and cooperated with the US Department of Justice (DOJ) and the SEC. The individuals involved, who included corporate officers and senior employees, were promptly fired. It was not enough: the Department of Justice brought criminal charges against Latin Node under the Foreign Corrupt Practices Act (FCPA), resulting in a guilty plea by Latin Node and the payment of a fine by Elandia in an amount equal to approximately 10 percent of the purchase price. Elandia was eventually forced to write off its entire investment, wind down Latin Node’s opera-tions and terminate nearly all of its employees.

Elandia’s textbook response was not without benefit. The US$2 million fine that was levied was below what the government’s guidelines called for, and the DOJ declined to bring criminal charges against Elandia itself. However, given the substantial harm that Elandia suffered as a result of the ill-fated acquisition, and what the government called its “commendable cooperation” with their investigation, the DOJ’s prosecution seems rather harsh. It is, however, consistent with the government’s clear views on the sub-ject. In its FCPA Opinion Procedure Releases, the DOJ provides guidance on its decision-making process in deter-mining penalties for violations at newly-acquired busi-nesses. Among the critical factors considered is whether the acquiror conducted “reasonable due diligence”. It is here that Elandia failed. Elandia appears to have relied on the seller’s representations regarding FCPA matters rather than conducting its own due diligence. This case illustrates how the DOJ is stepping up its enforcement of FCPA cases, and demonstrates the necessity of conducting and documenting careful due diligence.

Similarly, when Halliburton agreed in 2009 to pay a record US$579 million fine to the SEC and the DOJ relat-ing to corrupt practices at its former subsidiary Kellogg, Brown & Root (KBR), the SEC strongly criticised what it characterised as due diligence failures on the part of Halliburton, particularly with respect to KBR’s agents, through whom the bribes were paid. Among the specific failures cited were an inadequate effort to determine how a particular agent carried out his duties, the lack of any

Thorough due diligence and a careful review of the applicability

of a range of regulations will go a long way towards ensuring a

successful investment in the United States, say M&A lawyers

Gregory Puff and Brian Wheeler of Shearman & Sterling.

Close attention to detail

37 APRIL 2010

Close attention to detail

By Gregory Puff and Brian Wheeler of Shearman & Sterling

specific description of the agent’s duties, inadequate accounting and audit of the fees received by the agent, and the reliance on false representations of KBR when approv-ing a new contract with an agent in lieu of conducting its own investigation. The SEC’s enumeration of these fail-ures provides a valuable roadmap for acquirors. If any questions remain after this thorough diligence review, acquirors should proceed with caution. Alternatives include requiring the target company to remedy the failures prior to closing, maintaining the acquired company or business as a stand-alone entity until the issues are resolved, or simply walking away from the transaction.

While the results in the Latin Node and Halliburton cases are drastic, the risks of not conducting adequate pre-closing due diligence are substantial, and include criminal risk under various statutes, regulatory risk, civil lawsuits and reputational risk. The thorough internal investigation that will be needed if inappropriate conduct is suspected will also involve substantial cost and distraction, as will ongoing remediation and monitoring and potential changes in the target’s business. Depending on the severity of the conduct, retaining employees may become difficult as morale suffers.

The FCPA is one potential pitfall for the unprepared buyer. In addition, foreign investment review, sanctions, banking regulations and antitrust regulations can also affect an unknowing or unprepared buyer – even in what appears to be a non-US transaction.

The Committee on Foreign Investment in the United States (CFIUS), discussed in more detail elsewhere in this

issue, can play a similarly unwelcome and often surprising role in a transaction. While Dubai Port World’s acquisition of the US assets of Peninsular and Oriental Steam Navigation Company, a British company, was not prohib-ited by a CFIUS decision (the acquisition was in fact ini-tially cleared by CFIUS before being resubmitted for additional review), it was the adequacy of the CFIUS review that played a major role in the ensuing, highly-politicised public debate that ultimately led to Dubai Port World giving up on the US assets. Experienced buyers acquiring businesses where CFIUS filings are made know that a careful review of potential issues identified through due diligence, and early vetting of those issues, can lead to successful results; last-minute and hastily prepared pres-entations have led to undesirable outcomes.

US regulations imposing trade sanctions can also raise similar concerns. The Iran Sanctions Act and the Helms-Burton Act (which imposes restrictions on trade with Cuba) can result in liability even for a non-US acquiror. Any business transactions in these countries should be carefully reviewed in order to assess the possible applica-tion of US regulations.

But these are not the only potential traps for the unwary: widely known rules may have a much broader scope than expected. For example, the importance of care-fully reviewing the regulatory regime when acquiring a US bank is well-known. In addition to potential state-law change of control approvals, the acquisition of a regulated US bank requires the acquiror to seek prior approval from the Federal Reserve Board (the Fed) to become a bank

“While the results in the Latin Node and

Halliburton cases are drastic, the risks of not

conducting adequate pre-closing due diligence

are substantial, and include criminal risk under

various statutes, regulatory risk, civil lawsuits and

reputational risk” Gregory Puff



holding company (BHC). The Fed conducts a thorough review of the acquiror, including a determination of whether the acquiror is “well-capitalised” and “well-man-aged”. But a critical part of the review is not within the acquiror’s control – the Fed must also find that the acqui-ror is subject to “comprehensive consolidated supervision” in its home jurisdiction. The Fed has determined, for example, that banking supervision in Japan satisfies this requirement (Mizuho Financial Group and Mitsubisi UFJ Financial Group were approved as BHCs), as does that of Korea (Shinhan Financial Group), but has not made a determination with respect to other Asian jurisdictions. Further, the Bank Holding Company Act (BHCA) does not simply govern the management of the bank or its parent company going forward – the acquiror will need to con-duct extensive due diligence to ensure that all of the direct and indirect activities and investments of both the target and the acquiror and their subsidiaries are BHCA-compliant. Consolidated positions of 5 percent or more of the voting securities of any company, even non-financial, with a branch or subsidiary in the US may require special approval from the Fed.

But it is also important to note that US banking regula-tion does not simply cover the acquisition of US banks – while the degree of burden varies depending on the nature of the investment, even the acquisition of less than 25 per-cent of a non-US bank that has a single US branch may require certain approvals, and the acquisition of control of such an entity would be subject to the BHCA’s restrictions on activities.

Similarly, premerger notification may be required under the Hart-Scott-Rodino Act (the HSR Act) in a non-US transaction. The HSR Act generally requires that an investment of more than US$63.4 million in a US com-pany be reported to both the Department of Justice and the Federal Trade Commission. This requirement, however, is not limited to acquisitions of US companies. A transaction involving two non-US parties is subject to the same notifi-cation requirement and waiting period as a domestic trans-action if it involves the acquisition of a company with more than US$63.4 million of sales or assets in the US, or the acquisition of assets outside the US if those assets gen-erate at least US$63.4 million of sales in the US. Careful review of the target’s business is required to ensure that the HSR Act’s filing requirement and waiting period do not come as a surprise.

Successful buyers know there is no substitute for care-ful pre-closing due diligence, and special attention should be paid to regulations that may have a broad application. This is true not just in acquisitions of US companies, but in any acquisition or investment that involves US assets, subsidiaries or material sales. A close look at the target’s business, taking the acquiror’s existing business into con-sideration, is necessary to determine the applicability of US regulations. Anything less may lead to dramatic and unexpected consequences.

“In addition to potential state-law change of control

approvals, the acquisition of a regulated US bank

requires the acquiror to seek prior approval from the

Federal Reserve Board… to become a bank holding

company. The Fed conducts a thorough review of the

acquiror, including a determination of whether the

acquiror is “well-capitalised” and “well-managed”

[email protected] [email protected] www.shearman.com

Brian Wheeler

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In-house Insight


In-house Insight

Asian-Counsel: How did your career lead you to your current role? Ahmad Rizwan: When I qualified to practice law in 1993 back in Malaysia, I never thought that my career destiny would lead me to my current role with the Government of Dubai. Fresh out of law school I was no different from many young lawyers, full of ideals straight from the law books and wanting to change the way the world works. As my legal practice evolved in time, reality of the world also set in, and so I fashioned my practice to be more adaptable to life’s realities.

Having started my career as a banking and finance lawyer, I realised that in order to be more adaptable and to add value to my clients, I needed to add corporate knowl-edge to my practice. I subsequently took on a wider focus of legal practice to include banking, finance, corporate and Islamic finance. Eventually, I decided to peek into the ‘other side’, moving in-house as the Head of Legal for a Malaysian financial institution. A few years later I decided to further ‘complicate’ my career by moving into investment banking, and I relocated to Dubai to take up a role as Head of Legal & Execution of an international investment bank.

As it turned out, I could not resist the pull from the rapid development of the UAE’s legal system, and I returned to legal practice with Habib Al Mulla & Company, a pre-mium Dubai-based law firm. After undertaking two years of private practice in Dubai, I was humbly honored to be presented with the opportunity to join the esteemed Gov-ernment of Dubai in my current roles as legal advisor to the

Department of Finance and the Dubai Financial Support Fund.

AC: How do you manage your time as legal advisor to two government entities?AR: The core competencies and KPIs for both roles are centred primarily on money matters from a legal perspec-tive, ergo whether to treat these two roles as one or to separate the functions becomes academic. Furthermore the inter-connectivity of the functions, roles and respon-sibilities of the Department of Finance – Government of Dubai and the Dubai Financial Support Fund are closely interlinked and thus it makes the choice a non-issue. I utilise five core competencies in managing my time in both roles, specifically: resource allocation, proficiency, specialisation, communication and collaboration. These five core competencies reflect the organisational values and ethos of the Government of Dubai that are applied efficiently throughout its organisational structure, which ultimately allows me the flexibility to reach out and tap into the expertise and experience of my other learned colleagues from the various governmental departments and entities both efficiently and effortlessly.

AC: In which circumstances might the entities you advise seek the advice of external counsel? Are there any criteria followed in choosing suitable practitioners?AR: The institution of the Government’s legal advisor may itself not be particularly old, but the customary rules and

The challenges that lie aheadAhmad Rizwan, a legal advisor with the

Government of Dubai, says that in-house counsel

now face more competition, greater expectations and

a tougher business environment than ever before. He

shares with us the core competencies both he and his

employer rely on for success.

41 APRIL 2010

The challenges that lie ahead

By Rebecca Brookes

norms – including the use of external specialists – have now more or less been respected for ages. Governments have always relied on experts, specialists or people of knowledge and wisdom to advise on specific issues relat-ing to the government or its transactions. We do not try to re-invent the wheel in this respect, and in many instances rely on advice of external counsel who are specialists in specific fields.

Nonetheless, due to the close relations and high level of communication between the Legal Affairs Department of the Dubai Government and all of the other governmen-tal departments, reliance on external counsel is somewhat limited to a very small number of sectors and specialised areas. The Legal Affairs Department of the Dubai Government boasts some of the most experienced legal experts in the region and this knowl-edge bank, together with its human resources capital, are utilised effi-ciently across the various govern-ment departments.

Choosing the right external coun-sel for us has provided various chal-lenges, even though Dubai hosts many of the top international law firms from a global perspective. Our core focus first and foremost is conflict of interest and we undertake a micro-scopic examination to ensure that the external counsel we engage are not conflicted in any way whatsoever. We also place a heavy premium on exter-nal counsel that illuminates regional knowledge capabilities and cultural sensitivities. Many heavyweight law firms tend to market their interna-tional reputation as their selling point but in this current day and age, such notion alone is not a strong factor. Our selection process utilises the basic and time-tested principles of the Five Cs: Competency; Capacity; Commit-ment; Communication; and Cost. It is important to us that each external counsel engaged acts as a strategic lawyer and not a mere technician. They must fully

appreciate our goals and not focus solely on minimising legal risk, but rather marry the two in order for us to achieve our objectives.

AC: How has the in-house role evolved during your years in practice?AR: It has often been perceived by many that the role of in-house counsel in an organisation is operational rather than strategic. It is my view that this dimension has now drastically evolved, with the driver behind this evolution being the status of the primary fuel that in-house counsel manage: legal risks and commercial knowledge.

For the first time in the world’s economic history, legal risks combined with a lack of com-mercial knowledge have become a permanent and fundamental threat to stakeholder value. In today’s com-plex, multi-cultural and cross-border business environment, approaches to legal risk require a new blending of legal and expertise standards.

In-house counsel, as the jani-tors of legal risks, have now sud-denly became the guardians of one of the pillars of an organisation’s strategic interests, and subsequently enjoy a more celebrated attention from all levels within the organisa-tion. Nonetheless, as history has abundantly demonstrated, this also means that in-house counsel now face bigger challenges, more com-petition, greater expectations and a tougher business environment. With the changing status of legal risks, the responsibilities of in-house counsel have grown more important, and indeed changed quite profoundly so that the correct equilibrium between performing the role of guardian of the organisation and being a busi-ness facilitator can be found. This also includes knowledge and exper-

tise in other related areas including compliance, risk man-agement and business ethics. ac

“In-house counsel,

as the janitors of

legal risks, have now

suddenly became the

guardians of one of

the pillars of an

organisation’s

strategic interests,

and subsequently

enjoy a more

celebrated attention

from all levels within

the organisation”

Feature


Product quality, after-sales service and product liability concerns have been receiving increased attention in the PRC. High profile cases, such as the recent milk scandal involving Sanlu,

have highlighted product liability concerns and put pres-sure on national and local authorities to enact legislation and streamline administrative proceedings. Meanwhile, PRC consumers are becoming increasingly aware of their legal rights and are willing to enforce them, if nec-essary, through court proceedings.

Generally speaking, claims can be based on breach of contract, tort or product liability laws, and sellers, manufac-turers, importers and parts producers may all be held liable for losses resulting from defective products. Losses due to a defect can be limited to the product itself or, in more complex scenarios, can extend to damage caused by its use. Furthermore, when a defective part damages a larger product, such as a motor vehicle, damage to the end-product may give rise to an additional claim.

Claims based on contractThe legal basis for contractual claims is the PRC Contract Law (the Contract Law) together with the underlying con-tract. If the condition of a product upon sale does not meet the required quality standard, the Contract Law grants the buyer the right to claim for repair, replacement, re-manufacture, exchange or reduction of the sale price (Articles 155, 111 and 113). Generally speaking, the quality requirements of a product are based primarily on the underlying contractual agreement (Articles 154 and 61). But if the parties have not

agreed on a quality standard, PRC courts can apply the rele-vant industry standard.

Contractual claims can only be considered if a contractual relationship exists. For example, everyday consumers gener-ally do not have a direct contractual relationship with the manufacturer of consumer goods. The contractual relation-ship usually exists between the consumer and seller. Likewise, separate contractual relationships exist between the seller and manufacturer and between the manufacturer and parts pro-ducer. Despite the chain of contracts, a consumer does not have a direct contractual claim against a parts producer.

Claims based on tortThe new PRC Tort Law (the Tort Law), which comes into force on 1 July 2010, is largely a compilation of existing legislation from the PRC Basic Principles of Civil Law, the PRC Product Quality Law and other laws. Tort claims can be considered if a product causes further damage (for exam-ple, a defective battery damages other parts of the motor vehicle), damages the property of third parties or causes personal injury.

Claims in tort exist independently from any contractual relationship. Therefore, a consumer could bring a tort claim against the manufacturer of a defective part or product. A quasi-manufacturer – a company that appears to be the manu-facturer because, for example, the product depicts its name or logo – may also be held liable. In contrast to claims based on product quality, tortious liability requires the defendant to be at fault. Generally, this means that the defendant must, at the very least, have acted negligently. The claimant is obliged to

Dealing with product liability in the PRC

A proliferation of consumer protection laws and

a more demanding public look to set the scene for a

host of liability claims in the PRC, explains lawyer

Willi Vett of Beiten Burkhardt’s Shanghai office.

Is your company prepared?

Dealing with product liability in the PRC

By Willi Vett, Beiten Burkhardt

APRIL 2010 43

supply sufficient evidence of such negligent (or intentional) behaviour. The Tort Law, however, may drop the require-ment to prove negligent or intentional behaviour under cer-tain circumstances that involve matters such as product liability and environmental protection.

As the Tort Law is not yet in force, some questions about its application and interpretation will have to be answered by subsequent regulations and court practice.

Claims based on product quality lawsThe PRC Product Quality Law (the Product Quality Law) as amended in July 2000 remains the legal foundation for product liability cases. Since 2000, however, many regula-tions have been enacted to strengthen the legal framework for product quality requirements, product recall measures and consumer action. Some of these are directed at product quality generally, while others are directed at specific industries.

Under the Product Quality Law, a manufacturer or seller is liable if a product is placed on the market that exhibits a design or manufacturing defect that injures a person or dam-ages property. Certain defences against product liability claims are available to the manufacturer or seller.

The Product Quality Law defines products as all manu-factured or processed goods intended for sale. Agricultural products, non-processed products and raw materials do not fall within its scope. Buildings are also expressly excluded from the scope of the law. However, this exclusion does not apply to parts of buildings or construction materials. According to the Product Quality Law, a product is defective if it exhibits a manufacturing defect or a product design defect, or if the instructions on its safe use are inadequate.

Both the manufacturer and the seller of a product can be held liable. The manufacturer faces so-called absolute (or strict) liability. This means that even manufacturers that have not acted negligently are liable for defects in the products. PRC legal experts disagree about whether strict liability also applies to sellers, or if they are only liable if they act improp-erly (tortious liability). The structure of the Product Quality Law indicates that sellers only face tortious liability, but this remains to be tested in court proceedings. On the other hand, a seller who does not provide relevant information on the manufacturer or supplier of a defective product is strictly liable. Lastly, a licensor who allows a third party to use the licensor’s trademark, trade name or other distinguishing marks on the defective product may be liable together with the manufacturer and seller.

According to the current interpretation of the Product Quality Law, it appears that product liability claims can only be made against those who make, sell or license defective end-products. Product liability claims against suppliers and parts producers are not admissible. But a manufacturer of a defective end-product will undoubtedly attempt to limit its liability by suing (based on contract) a supplier of a defective part that caused the problem.

Another aspect of strict liability is a shift in burden of proof. PRC civil law generally requires the party claiming compensation to prove its claim. However, in a product lia-bility case, the claimant need only prove that the product was indeed defective and that the defect caused the damage. The claimant need not prove that the manufacturer acted negli-gently, which could be difficult as the claimant would not usually be knowledgeable about the manufacturer’s opera-tions. Instead, according to Article 41 of the Product Quality Law, it is up to the manufacturer to substantiate a defence by proving, for example, that there was no defect when the product was placed on the market, or that the claimant grossly violated the safe use limits of the product, and that this contributed to the injury or damage.

Facing a shift in attitudeWith the proliferation of consumer protection laws in the PRC and the appearance of a more demanding public, manu-facturers and sellers are bracing for more liability claims. Minimising liability involves carefully documenting the manufacturing and sourcing processes to show that an alleg-edly defective product was, in fact, in good working order. Even in cases of defective products, proper documentation can greatly assist to minimise costs and friction in connec-tion with handling claims and, if required, product recalls.

[email protected] www.beitenburkhardt.com

PRC civil law generally requires the party claiming compensation to prove its claim. However, in a product liability case…. it is up to the manufacturer to substantiate a defence

JURISDICTION UPDATES


As we reported in the March edition of Asian-Counsel, a new structure for foreign investment – the foreign-invested partner-ship (FIP) – was officially launched in China on 1 March 2010, with local media reporting the registration of China’s first FIP in Kunshan, Jiangsu.

This new form of foreign-invested enterprise is regulated by the Administrative Measures on the Establishment of Partnership Enterprises in China by Foreign Enterprises or Foreign Individuals (the FIP Measures) and the Regulations for the Administration of Foreign-invested Partnership Enterprises (the FIP Registration Regulations), both effective as of 1 March 2010.

Stringent industry restrictions The FIP Registration Regulations proscribe FIPs in “prohibited” industrial categories, as described by the Catalogue for Guidance of Foreign Investment in Industry (Foreign Investment Catalogue), and categories where there is a (upper) limit on foreign ownership. It appears, therefore, that FIPs are subject to more stringent industry restrictions than other types of foreign-invested enter-prises.

Streamlined establishment processThe new regulations indicate that the Ministry of Commerce (MOFCOM) or its local counterpart will play a small role in the FIP regulatory environment. The FIP Measures provide that the estab-lishment, modification, liquidation and deregistration of an FIP that is “in compliance with China’s industrial policies for foreign invest-ment” require only registration with the local counterpart of the Administration for Industry and Commerce (AIC). MOFCOM approval is not required.

Under the FIP Registration Regulations, when investors seek to establish an FIP that falls under a “restricted” category which

sets out restricted activities and sectors for all foreign invested enterprises (as provided in the Foreign Investment Catalogue), or that involves a project overseen by a government authority, the AIC must seek a written opinion from the relevant government authority within five days after accepting the application.

Flexibility for capital contributionsUnlike other types of foreign investment enterprises, FIPs are not subject to any minimum capitalisation requirements. The FIP Registration Regulations allow foreign investors to invest in the FIP with their legitimate Renminbi income derived from China, sub-ject to State Administration of Foreign Exchange approval. The FIP Registration Regulations further allow foreign investors, as the general partners in the FIP, to make capital contributions in the form of services.

Remaining ambiguitiesThe PRC Partnership Enterprise Law obliges partners to pay their respective income taxes according to the relevant taxation provisions. However, existing laws and regulations do not address the taxation of a foreign limited partner’s interest in an FIP.

It remains unclear how a foreign-invested venture capital enterprise organ-ised in the form of a non-legal person and subject to MOFCOM approval differs from a partnership, and whether a foreign-

invested venture capital enterprise may now be restructured as an FIP. Similarly, the regulations do not provide guidance on the formation of foreign-invested RMB funds in the form of partner-ships, an issue of significant market interest.

Foreign-invested partnerships in China: an update

By Tracy Liu

BEITEN BURKHARDTSuite 1001, 10/F, Chong Hing Finance Center 288 Nan Jing Road WestHuang Pu District Shanghai 200003, P.R. ChinaTel.: (86) 21 61417807Fax: (86) 21 61417899Email: [email protected] www.beitenburkhardt.com

CHINA


The new regulations

indicate that the Ministry

of Commerce

(MOFCOM) or its local

counterpart will play a

small role in the FIP

regulatory environment

APRIL 2010 45

INDIA

From 21 May 2009, India’s Competition Act, 2002 (CA) finally became effective, albeit partially. While the provisions relating to prohibition of anti-competitive agreements and abuse of domi-nant position by enterprises are now operational, the merger control regime is yet to come into effect.

The CA provides a 210 day waiting period under the merger control provisions. This is very long when compared to interna-tional best practices – in most jurisdictions the waiting period normally varies between 30 and 120 business days, with around 90 percent of applications approved in the first 30 business days. Enterprises are apparently worried about the long statutory wait-ing period in India under the CA and have voiced their concerns in both national and international forums.

The Competition Commission of India (CCI) is mandated under Section 64 of the CA to formulate its own regulations. In a few regulations, the CCI has defined ‘working day’ as the days on which it shall function, which does not include public holidays, Saturdays and Sundays. Coupled with this, the Competition Appellate Tribunal (CAT) – the first appellate tribunal – is also only required to work on ‘working days’ and closes for vacation for about six weeks during summer and for about ten days during winter. Under the CA, an appeal lies from every order of the CCI to the CAT. The CAT must endeavour to dispose of such appeals within a period of six months.

Where a merger is blocked by an Order of the CCI on the 210th day (which is in reality about 300 calendar days) and an appeal is subsequently lodged with the CAT on the last working day before the summer vacation, then it is feasible the final order may not be passed by the CAT until the expiry of six months after the CAT resumes work after vacation. This could potentially delay a transaction by eighteen months. Can parties, especially in cross-border transactions, wait this long? The anomaly does not end

here. The inquiry procedure for mergers under section 29 of the CA stipulates both ‘days’ and ‘working days’, thereby making the situation more difficult for enterprises.

Section 64 of the CA does not require the CCI to formulate comprehensive merger regulations, but merely to prescribe ‘filing fee’ and ‘forms’ for merger control. It will be interesting to see how the CCI overcomes concerns such as “waiting period” within the restricted statutory ambit of its own regulations. The CA also requires the CAT to formulate its own regulations – unless the CCI and the CAT work in tandem, any such merger regulations may cause additional concerns for enterprises before the CAT.

Furthermore, while most mergers enhance economic effi-ciencies in the market, a long waiting period for merger approval could jeopardise the commercial rationale for such mergers and affect consumers which the CA hopes to protect.

ConclusionIrrespective of the CCI’s working days, the waiting period of 210 days should be read as ‘calendar days’ so that merging parties do not suffer on account of the CCI’s official holidays. Upon finding that filing formalities have been complied with, the CCI should – in order to implement legislative intent – specify the 210 day waiting period and communicate such specification in writing to the party. For example, if finding an application is in order on 1 April 2010, the CCI must communicate to the party in writing that the ‘waiting period’ of 210 days ends on 27 October 2010, unless additional time has been requested and allowed. We are hopeful that as and when the merger control provisions are noti-fied by the Government of India, the CCI will – as intended by the amended legislation – proactively and expeditiously dispose merger applications as a non-adversarial ex ante process.

Khaitan & Co801 Ashoka Estate24 Barakhamba RoadNew Delhi 110 001, IndiaTel: (91) 11 4151 5454 Fax: (91) 11 4151 5318Email: [email protected] Bangalore Kolkata Mumbai New Delhi

‘Waiting Period’ for mergers: too long for comfort

By Manas Kumar Chaudhuri and Varun Chopra



MALAYSIA

The Parliament of Malaysia passed the new Central Bank of Malaysia Act 2009 (the Act) in July 2009. The Act received royal assent on 19 August 2009 and was later gazetted on 3 September 2009. Officially, the Act came into force on 25 November 2009.

As highlighted in a press release issued by Bank Negara Malaysia (BNM) – Malaysia’s Central Bank – on 25 November 2009 with regard to the enforcement of the Act, the legislation provides greater clarity on BNM’s mandate and vests it with the necessary powers and instruments to achieve this mandate. In addition, the Act offers a more robust governance framework that provides for a high degree of accountability and transpar-ency. Furthermore, the Act institutionalises the good practices that have been put in place over the recent decade which have proven to be important in enhancing the function and effective-ness of BNM.

Recognition of a dual financial system in MalaysiaIt is interesting to note that the Act also explicitly acknowledges the dual financial system in Malaysia, which was not mentioned anywhere in the Central Bank of Malaysia Ordinance 1958 (Act 519). Section 27 of the Act clearly states that the “financial system in Malaysia shall consist of the conventional financial system and the Islamic financial system.”

This is seen as a clear recognition by the Government of Malaysia of the rapid development of Islamic banking and finance in Malaysia alongside conventional banking. This is also consist-ent with the goal by the Government to promote Malaysia as an international centre for Islamic finance globally.

Enhancement of the roles and functions of the Shariah Advisory Council The roles and functions of the Shariah Advisory Council of the Central Bank of Malaysia (SAC) have been enhanced and rede-

fined in this Act. Part VII of the Act, entitled Islamic Financial Business, is divided into two chapters.

Chapter 1 governs the establishment and functions of the SAC, the effect of the SAC’s ruling and the appointment of its members. On the other hand, Chapter 2 provides the power of BNM to issue circulars, guidelines etc on Shariah matters relating to Islamic financial business.

On the establishment of the SAC, Section 51(1) of the Act provides that BNM may establish a SAC which shall be the authority for the ascertainment of Islamic law for the purposes of Islamic financial business.

According to the Act, the appointment of the members of the SAC shall be made by the Yang di-Pertuan Agong on the advice of the Ministry of Finance after consultation with BNM. The Act also sets out the criteria of members to be appointed to the SAC whereby the candidates must be “amongst persons who are qualified in the Shariah or who have knowledge or experience in the Shariah and in banking, finance, law or such other related disciplines”. This is provided under Section 53(1) of the Act.

Binding effect of the SAC’s rulings under the ActIt is interesting to note that the Act has put to rest the issue of the binding effect of the rulings made by the SAC, which have been disputed in several judicial decisions previously. Section 16B(9) of Act 519 merely provides that the SAC rulings issued by the SAC were only binding upon arbitrators.

Due to the limited binding effect of the SAC’s rulings as enunciated in the above provisions, the courts in several decided cases had refused to refer to the SAC’s rulings since such rulings were not binding upon the court.

Azmi & AssociatesGlobal Financial Services & Islamic Banking Practice Group14th Floor, Menara Keck Seng, 203 Jalan Bukit Bintang,55100 Kuala Lumpur, Malaysia.Phone: (603) 2118 5000 ext :5063Fax: (603) 2118 5111E-mail: [email protected] www.azmilaw.com

Highlights of new Central Bank of Malaysia Act 2009

By Ahmad Syahir Yahya

APRIL 2010 47

MIDDLE EAST

In late 2009, Dubai made headlines for all the wrong reasons with the announcement that Dubai World, the owner of Dubai’s most-prominent property developer, Nakheel, proposed to restructure debt owed to a range of banks and trade creditors. Although Dubai was not alone in suffering the effects of the Global Financial Crisis, it was nonetheless a dark day for Nakheel – spon-sor of the world-famous “Palm” developments – and for the region generally.

In December 2009, the Government of Dubai enacted spe-cial legislation (Decree No. 57 of 2009) to support the restruc-ture of Dubai World (the Decree) and a Special Tribunal was established to oversee the process. The Decree seeks to impose international standards of transparency and fairness to the restruc-turing process and various distinguished judicial officers have been appointed to the Special Tribunal. The Decree contemplates that a Dubai World company may, if it wishes, issue an application that the Special Tribunal give effect to a voluntary arrangement to bind all of that company’s creditors.

Despite this, the last few months have been a period of sig-nificant uncertainty for creditors of Dubai World, many of which are large multinational construction companies engaged by Nakheel and other Dubai World companies on major projects. Firstly, the detail of the proposed restructure had not been released. Secondly, given the establishment of the Special Tribunal, the ability of creditors to pursue claims for payment in the meantime was not clear, especially in respect of contracts containing arbitration agreements.

In March 2010, there were three major developments that improved the lot of trade creditors:• On17March,theDubaiCourtofFirstInstancedecidedthat

it could not hear a claim brought against Nakheel because Decree 57 prevented the Dubai Courts from hearing such matters. While there is no law of precedent in Dubai and an

appeal is possible, this decision clarified that the Special Tribunal probably has exclusive jurisdiction to hear and decide claims now and in advance of a Dubai World company filing a proposed voluntary arrangement under the Decree. Indeed, at least one creditor has filed such claim with the Special Tribunal since.

• On25March,theGovernmentofDubaiannouncedthatanarrangement would be proposed to creditors of Dubai World and Nakheel that was backed by up to US$9.5 billion of state funding. While details of the proposal will only be revealed to individual creditors in private discussions over the coming weeks, the announcement stated that the Nakheel Restructuring Proposal would feature an offer to trade credi-tors of “a significant cash payment shortly and a tradable security”.

• On 30 March, the Special Tribunal issued Practice DirectionNo. 1 of 2010 stating that it has a policy “to respect and enforce arbitration agreements made between [Dubai World] and its creditors”. The practice direction states further that “the Tribunal expects the parties to continue with pending arbitration proceedings in accordance with their contractual obligations.” This suggests that Decree 57 does not override arbitration agreements in contracts with Dubai World companies.

While there remain many obstacles to the resurrection of Dubai World and Nakheel – not the least of which is the possibility that creditors may not support the current restructuring proposal – the month of March has heralded giant leaps forward. Trade creditors can now have much greater confidence in knowing the legal position and what their commercial options are. This can only be positive for Dubai and its future success.

Dubai World and Nakheel – three major developments

Clyde & CoProjects and ConstructionDubai Office: City Tower 2, Sheikh Zayed RoadPO Box 7001, Dubai, United Arab EmiratesTel: (971) 4 331 1102Fax: (971) 4 331 9920Email: [email protected] [email protected] www.clydeco.com

By Mark Blanksby and Ben Cowling



SINGAPORE

In the recent case of Mühlbauer AG v Manufacturing Integration Technology Ltd [2010] SGCA 6, the Singapore Court of Appeal overruled a judgment from the country’s High Court in Mühlbauer AG v Manufacturing Integration Technology Ltd [2009] SGHC 45 concerning the issues of novelty and inventive step, holding that Singapore patent No 117982 (“the Patent”) was both novel and non-obvious, and therefore valid.

The Patent, owned by Mühlbauer AG (the Appellant), relates to a device for checking and rotating electronic compo-nents. In the High Court proceedings the Appellant, as Plaintiff, has alleged that the Manufacturing Integration Technology Ltd – the Respondent in the Court of Appeal proceedings (the Respondent) – had infringed the Patent. The Respondent had acknowledged in the High Court proceed-ings that its device infringed all ten claims of the Patent, but counterclaimed that the Patent was invalid. The Appellant subse-quently appealed against the lower court’s decision that the Patent was invalid for lack of novelty and inventive step.

In reaching its decision, the Singapore Court of Appeal (SCA) felt it necessary to emphasise two preliminary points. One of these preliminary points relates to the role of expert evidence in a patent dispute.

Although the SCA considered the testimony of the expert witnesses in the case to be helpful, it took the view that the experts’ views were not critical except in so far as they enabled the Court to understand what the precise claims were in the Patent. The SCA further emphasised that it is the Court which decides whether or not the requisite legal provisions have (or have not) been satisfied. This is consistent with the view stated by Jacob L.J. in the English case Technip France SA’s Patent [2004]

R.P.C. 46, where he said at paragraph 12 on the role of an expert witness that:

“Their primary function is to educate the court in the tech-nology – they come as teachers, as makers of the mantle for the court to don. For that purpose it does not matter whether they do or do not approximate to the skilled man. What matters is how they are at explaining things.”

The SCA further emphasised that in the legal test for inventive step under the Singapore Patents Act, “a person skilled in the art” does not assume knowledge and expertise that goes beyond what a reasonable person “skilled in the art” would possess. As stated in McGhan Medical UK Limited v Nagor Limited Case No

CH 1999 1720 (28 February 2001), and followed in the Singapore case of Ng Kok Cheng v Chua Say Tiong [2001] 2 SLR(R) 326, “the addressee is deemed to be unim-aginative and uninventive but is equipped nevertheless with a reasonable degree of intel-ligence and with a wish to make directions in the patent work.”.

In summary, it is important to take note that experts engaged for the purpose of patent litigation would normally possess knowledge as well as expertise that goes beyond the notional person skilled in the art. Therefore, both parties should ensure when submitting expert evidence to the court that the experts only put themselves

in the shoes of “the person skilled in the art” – i.e. skilled but unimaginative – and not assume knowledge and expertise that goes beyond that. Otherwise, the expert evidence may not be useful to the court.

ATMD BIRD & BIRD LLP 2 Shenton Way, #18-01 SGX Centre 1 Singapore 068804Tel: (65) 6428 9318Fax: (65) 6223 8762Email: [email protected] www.twobirds.com

The role of expert evidence in a patent dispute

By Heng Liling

Although the SCA considered

the testimony of the expert

witnesses in the case to be

helpful, it took the view that

the experts’ views were not

critical except in so far as

they enabled the Court to

understand what the precise

claims were in the Patent

APRIL 2010 49

VIETNAM

Mergers, consolidations and acquisitions of credit organizations

On 11 February 2010, the State Bank of Vietnam (SBV) issued Circular 04/2010/TT-NHNN (Circular 04) setting out new legal stipulations on mergers, consolidations and acquisitions of mer-chant banks, financial companies, finance lease companies and credit cooperative organizations (collectively, credit organizations) in Vietnam. Circular 04 became effective 45 days from the issuing date and replaced Decision 241/1998/QD-NHNN5, which was issued by the SBV on 15 July 1998.

Definitions – The following definition are useful:• Merger:where one or more credit organizations merge with

and into another credit organization (merged organization) by way of transfer of all lawful assets, rights, obligations and inter-ests to the merged organization and, at the same time, termi-nation of the existing credit organizations takes place.

• Consolidation: where two or more credit organizations are consolidated into a new credit organization (consolidated credit organization) by way of transfer of all lawful assets, rights, obligations and interests to the consolidated credit organization and, at the same time, termination of the existing credit organizations.

• Acquisition: where a credit organization purchases all lawful assets, rights, obligations and interests of other credit organiza-tions. After acquisition, the credit organizations being acquired become subsidiaries of the acquiring credit organization.

Conditions – Circular 04 set our specific conditions applicable to each merger, consolidation and acquisition, which are general-ised as follows:• ItmustnotviolaterelevantprovisionssetforthintheLawon

Competition;• There must be a Proposal of Merger, Consolidation or

Acquisition, which consists of full information as required in Circular 04 and which must be consistent with the Contract of Merger,ConsolidationorAcquisition;

• The merged, consolidated or acquiring credit organization

must have minimum charter capital which is equal to the legal capital prescribed by laws. Apart from satisfying the require-ment on minimum charter capital, the acquiring credit organi-zation must comply with statutory requirements on the safety percentage of operation.

Forms of Mergers – The following are permitted:• Banks, finance companies, and credit cooperative organiza-

tions merging with and into a bank;• Financecompaniesmergingwithandintoafinancecompany;• Financeleasecompaniesmergingwithandintoafinancelease

company.

Forms of Consolidations – The following are permitted:• A bank(s) consolidates with other banks, finance companies

and credit cooperative organizations to form a new bank;• Financecompaniesconsolidatetoformanewfinancecompany;• Finance lease companies consolidate to form a new finance

lease company.

Forms of Acquisition – The following are permitted:• A bank is permitted to acquire a finance company(ies) or

finance lease company(ies);• A finance company is permitted to acquire a finance lease

company(ies)Itisunclearastowhetherabank,afinancecompanyorafinancelease company is permitted to acquire other banks, as this form is not specifically mentioned in Circular 04.

Process and Approval: All cases of mergers, consolidations and acquisitions must be approved by the Governor of the SBV. The process and the documents required – with particular guid-ance as to how the documents shall be prepared for obtaining approval of the Governor of the SBV – are specifically described in Circular 04.

By Tuan Anh Nguyen

bizconsult law LLC3/F, VNA Building, 20 Tran Hung Dao StreetHanoi–VIETNAMTel: (84) 4 39332129 Fax: (84) 4 39332130Email: [email protected] www.bizconsult-vietnam.com

www.inhousecommunity.com50 ASIAN-COUNSEL

AsiAn-Counsel DireCt

Law FirmsBeiten BurkhardtSuite 1001, 10/F, Chong Hing Finance Center

288 Nan Jing Road West, Huang Pu District

Shanghai 200003, P.R. China

tel: (86) 21 61417807

email: [email protected]

Website: www.beitenburkhardt.com

——————

Chang Tsi & Partners7-8th Floor Tower A

Hundred Island Park, Bei Zhan Bei Jie Street

Xicheng District, Beijing 100044, China

tel: (86) 10 8836 9999


Contact: Spring Chang

Website: www.ctw.com.cn

——————

Jun He Law Offices China Resources Building, 20th Floor

8 Jianguomenbei Avenue,

Beijing 100005, P.R. China

tel: (86) 10 8519 1300


Contact: David Dali Liu

Website: www.junhe.com

••••••••••••

reCruiTmenT Hughes-Castell Beijing/Shanghai

tel: (86) 10 6581 1781


tel: (86) 132 2996 6550


Website: www.hughescastell.com

China

Law FirmsP.C. woo & Co.12th Floor Prince’s Building,

10 Chater Road, Central,

Hong Kong

tel: (852) 2533 7700


Website: www.pcwoo.com

••••••••••••

reCruiTmenTaquis search tel: (852) 2537 0333


[email protected]

Website: www.aquissearch.com

——————

cmltel: (852) 2203 0416


Website: www.cmlor.com.hk

——————

Hughes-Castell Hong Kong

tel: (852) 2520 1168



——————

Laurence simonstel: (852) 3154 9271


Website: www.laurencesimons.com

••••••••••••

TransLaTiOnPacific Legal Translations LimitedSpecialist translators serving the legal community

since 1999.

tel: (852) 2705-9456


Website: www.paclegal.com

••••••••••••

India

Law FirmsKhaitan & Co.801 Ashoka Estate

24 Barakhamba Road

New Delhi 110 001, India

tel: (91) 11 4151 5454


——————

K.r. Chawla & Co.707, Kailash Building,

26 Kasturba Gandhi Marg,

New Delhi 110001

tel: (91) 11 23357658 61


Website: www.krcco.com

——————

nishith Desai associates 93-B, Mittal Court

Nariman Point

Mumbai 400 021, India

tel: (91) 22 6669 5000


Website: www.nishithdesai.com

——————

Put your contact

details here

Email: [email protected]

Your ‘at a glance’ guide to some of the region’s top service providers. Indicates an Asian-Counsel Firm of the Year in this jurisdiction. GraPHiC DesiGn

artmazing!Artmazing! offers you strong and relevant

designs that deliver. Providing print and web

design services for legal, corporate and financial

institutions.

tel. (852) 9128 8949


Website: artmazing.wordpress.com

••••••••••••

aPPareLZen Tailor Shop No.B,2/F.,

Entertainment Building,

30 Queen’s Road Central.

Hong Kong

tel: (852) 2868 2948

Hong Kong

51 APRIL 2010

Law Firmsazmi & associatesGlobal Financial Services &

Islamic Banking Practice Group

14th Floor, Menara Keck Seng,

203 Jalan Bukit Bintang,

55100 Kuala Lumpur, Malaysia.

Phone: (603) 2118 5000 ext :5063


Website: www.azmilaw.com

——————

Kadir andri & Partners 8th Floor, Menara Safuan, 80,

Jalan Ampang, 50450 Kuala Lumpur

PO Box 12677, 50786 Kuala Lumpur, Malaysia

tel: (603) 2078 2888


Contact: Abdul Kadir Kassim (Managing Partner)

Website: www.kaaplaw.com

——————

raslan LoongLevel 3A, Menara Manulife,

6 Jalan Gelenggang, Damansara Heights,

50490 Kuala Lumpur, Malaysia

tel: (603) 2093 3939


Website: www.raslanloong.com

——————

shearn Delamore & Co 7th Floor, Wisma Hamzah-Kwong Hing

No. 1 Leboh Ampang

50100 Kuala Lumpur, Malaysia

tel: (603) 2027 2727


Website: www.shearndelamore.com

——————

wong & Partners Suite 21.01, Level 21,

The Gardens South Tower,

Mid Valley City, Lingkaran Syed Putra,

59200, Kuala Lumpur, Malaysia.

tel: (603) 2298 7888


[email protected]

Indonesia

Malaysia

Law Firmsali Budiardjo, nugroho, reksodiputro Graha Niaga 24th Fl.

Jl. Jenderal Sudirman Kav.58

Jakarta 12190, Indonesia

tel: (62) 21 250 5125/5136

email: [email protected], [email protected]

Contact: Emir Nurmansyah


Website: www.abnrlaw.com

——————

makarim & Taira s. Summitmas I, 16th – 17th Floors

Jl. Jend. Sudirman Kav. 61-62


tel: (62) 21 252 1272, 520 0001

email: makarim&[email protected]

Contact: Rahayuningsih Hoed

Website: www.makarim.com

——————

sseKsoewito suhardiman eddymurthy Kardono 14th Floor, Mayapada Tower,

Jl. Jend. Sudirman Kav. 28


Contact: Ira Eddymurthy (Managing Partner)

tel: (62) 21 5212038, 5212130


Website: www.ssek.com

Law FirmsaFriDi & anGeLL Po Box 9371, Emirates Towers,

Level 35, Sheikh Zayed Road,

Dubai, U.A.E.

tel: (971) 4 330 3900


Contact: Bashir Ahmed

Website: www.afridi-angell.com

——————

Clyde & CoProjects and Construction

Dubai Office: City Tower 2,

Suite 102, Sheikh Zayed Road

PO Box 7001, Dubai, United Arab Emirates

tel: (971) 4 331 1102


[email protected]

Webiste www.clydeco.com

Middle East

Singapore

Law Firmsallen & Gledhill LLP One Marina Boulevard #28-00

Singapore 018989

tel: (65) 6890 7188


Contact: Lucien Wong (Managing Partner)


Website: www.allenandgledhill.com

——————

aTmD BirD & BirD LLP 2 Shenton Way, #18-01 SGX Centre 1

Singapore 068804

tel: (65) 6428 9318

Fax: (65) 6223 8762


Website: www.twobirds.com

——————

Titus & Co., advocatesTitus House, R-77A,

Greater Kailash- I,

New Delhi-110 048, India

tel: (91) 11 2628 0900, 2628 0800,

(91) 11 2628 0100

email: [email protected], [email protected]

Contact: Diljeet Titus ([email protected])

Suhail Dutt ([email protected])

Rai S Mittal ([email protected])

Abhixit Singh ([email protected])

www.inhousecommunity.com52 ASIAN-COUNSEL

AsiAn-Counsel DireCt

Law Firmsbizconsult law LLCHanoi

3rd Floor, VNA Building

20 Tran Hung Dao Street

Hanoi, Vietnam

tel: (84) 4 39332129


[email protected]

Website: www.bizconsult-vietnam.com

——————

Bross & Partners Suite 1705, Unit 3, GTC Building,

No. 15-17 Ngoc Khanh Street,

Ba Dinh District, Hanoi, Vietnam

tel: (+84.4) 3 726 3955


Website: www.bross.vn

——————

indochine CounselUnit 4A2, 4th Floor

Han Nam Office Bldg.

65 Nguyen Du, District 1

Ho Chi Minh City, Vietnam

tel: (848) 3823 9640


Contact: Mr. Dang The Duc

Website: www.indochinecounsel.com

Law FirmsDewey & LeBoeufemail: [email protected]

[email protected]

[email protected]

[email protected]

Website: www.deweyleboeuf.com

——————

Diaz, reus & Targ, LLPemail: [email protected]

[email protected]

[email protected]

Website: www.diazreus.com

Vietnam

United States

Law Firmsnatee international Law Office, Limited Alma Link Building, 16th Floor

25 Soi Chidlom, Ploenchit Road

Bangkok 10330, Thailand

tel: (66) 2 655 5425 (8 lines); 253 5157


Contact: Natee Thongdee (Managing Director)

Website: www.nateelaw.com

——————

siam Premier international Law Office 26th Floor the Offices at Central World

999/9 Rama 1 Rd, Pathumwan


tel: (66) 2646 1888


Contact: Phisud Dejakaisaya (Managing Partner)


Website: www.siamlaw.co.th

——————

Tilleke & Gibbins international Ltd Supalai Grand Tower, 26th Floor

1011 Rama 3 Road, Chongnonsi, Yannawa


tel: (66) 2653 5555


Website: www.tillekeandgibbins.com

ThailandSouth Korea

Law FirmsKim & Chang Seyang Building, 223 Naeja-dong,

Jongno-gu, Seoul 110-720

tel: (822) 3703-1114


Contact: K.T. Jung

Website: www.kimchang.com

——————

Lee & Ko 18th Floor, Hanjin Main Building,

118, Namdaemunno 2-ga,

Jung-gu, Seoul, Korea

tel: (82-2) 772 4000


Website: www.leeko.com

——————

shin & Kim 6th Floor, Ace Tower

1-170 Soonhwa-dong, Jung-gu

Seoul 100-712, Korea

tel: (82-2) 316-4114


Website: www.shinkim.com

wongPartnership LLP One George Street #20-01

Singapore 049145

tel: (65) 6416 8000


Website: www.wongpartnership.com

••••••••••••

reCruiTmenT Hughes-Castell tel: (65) 6220 2722



Yulchon Korea: Textile Center 12th Floor,

944-31 Daechi 3-dong,

Gangnam-gu, Seoul 135-713

tel: (82) 2 528 5200


Website: www.yulchon.com

April 2010 53

In 2008, Mark Weeks, the managing partner of Orrick, Herrington & Sutcliffe LLP’s Tokyo office, was on a fly-fishing trip to Mongolia when he met

Zeb Hogan, the head of National Geographic’s Meg-afishes Project. This project is the first worldwide attempt to document and protect the planet’s giant fresh-water fish. After discussing the local Mongolian Taimen, Zeb soon turned the discussion to the Mongolian fish’s Japanese cousin, the Itou, a rare species that Mark had first encountered as a high school exchange student in Japan more than thirty years ago.

A legendary seagoing freshwater fish found in Hokkaido, the Itou is a truly impressive creature, reaching almost two meters in length and living for more than twenty years. Unfortunately, it is also an endangered species. Logging activity around the Itou’s native waterways, agricultural development, river augmentation projects and the construction of floodgates and dams threaten the Itou’s environment, including its route from traditional spawning grounds. Unregulated and excessive recreational fish-ing is also a concern.

Upon learning of the Itou’s plight and the efforts of the Megafishes Project, Weeks made a per-sonal commitment, as well as a pledge on behalf of Orrick, to help in whatever way possible. Once back in Tokyo, he enlisted the help of the firm’s Tokyo associate Yuko Inui, an active member of the environmental preservation com-mittees of both the Japan Federation of Bar Associations and the Tokyo Bar Association. Inui contacted a specialist at the Japanese National Institute for Environmental Stud-ies who ultimately put the Orrick team in touch with the Wild Salmon Center (WSC), a US-based environmental organisation active throughout the Pacific Rim. The WSC is currently involved in efforts to preserve the best wild salmon ecosystems where salmonids like the Itou can thrive. The protection of all wild salmon requires address-ing the issues of water quality and over-development.

Orrick assisted WSC with its initiation of a ground-breaking collaboration with Japan’s largest paper company, Oji Paper, and the Sarufutsu Itou no Kai (SIK), a local group formed to protect the Itou and to create a protected habitat area for the fish. Located on the island of Hokkaido, the protected area – named the Sarufutsu Environmental Conservation Forest – spans 2660 hectares (6573 acres).

Faced with a unique opportunity to develop a model for other environmental preservation efforts throughout Japan, the firm’s lawyers assisted WSC in creating a new and

innovative approach to this project. Orrick also advised on the deal struc-ture and terms of the agreement with Oji Paper to protect the Itou habitat. The result of this collaborative project represents Japan’s first pro-tected area on privately-held land expressly dedicated to preserving aquatic biodiversity.

Orrick is now advising WSC and SIK on the various Japanese laws and regulations that can be used to encour-age further protection of the Itou, including exploring the possibility of using local and national Japanese tax

laws to incentivise other landowners with waterfront property to use their land in a manner that protects the Itou habitat. The team is also helping to identify opportu-nities to use Japan’s new Ecotourism Promotion Law to effectively regulate recreational fishing and to promote ecotourism.

Weeks said, “Orrick has always been committed to pro bono work and community service and we are delighted to be helping with a project that will preserve critical habitat for not only the Itou but for numerous bird species and other flora and fauna found in Hokkaido. We hope that our continuing work on this project will lead to the develop-ment of a sustainable recreational fishery that will preserve the Itou as a species and have tangible economic benefits for the local community.”

Striving to save Japan’s legendary Itou

Orrick’s Mark Weeks with a close friend

Helping Hands

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