Australia's ASIC and AFP face capability reviews

56
62
42
Australia
Trends from Australia: ASIC, the AFP
& Corporate Corruption Regulation
Australia: The State of Private Equity
China
Data Privacy and Security Law
Develops Quickly in China
Japan
Local Directors no longer needed in Japan:
Practical Issues with the Recent Rule Change
India
Indian Insurance Sector – Turning a Corner
Chile
Current Legal Situation in Chile
USA
Contents
Developments and Antitrust Issues in
M&A Activity and Regulation
United Kingdom
North Sea: What Next for UKCS M&A?
Spain
Corruption: Its Impact On The Environment.
Luxembourg
Luxembourg for Private Funds
South Africa
South Africa – Combatting cartels
and abuses of dominance high on the
Competition Commission’s agenda
UAE
The UAE: A Franchise Haven,
Heaven, or Both?
Expert Directory
6
8
14
18
20
24
26
32
34
38
40
46
48
52
54
58
60
68
70
74
76
80
82
86
14
34
8
Fenice Media Ltd | 101 The Big Peg | 120 Vyse Street | Birmingham | West Midlands | B18 6NF | United Kingdom |
Tel: +44 (0) 121 270 9468 | Fax: +44 (0) 121 345 0834 | www.corporatelivewire.com
Contributing Organisations
Johnson Winter & Slattery,
MinterEllison, Jun He, Tricor,
Phoenix Legal, Philippi,
Prietocarrizosa & Uría,
Cornerstone Research, Hogan Lovells,
Rodríguez Molnar & Asociados,
Wildgen, Partners in Law,
Allen & Overy,
Norton Rose Fulbright,
Baker Botts L.L.P.
Chief Executive Officer
Osmaan Mahmood
Managing Director
Andrew Walsh
Editor-in-Chief
James Drakeford
Publishing Division
Jake Powers,
John Hart,
John Peterson
Directors
Sameena Yates
Siobhan Hanley
Awards Directors
Leah Jones,
Elizabeth Moore,
Chris Barry,
Rupert Hemingway
Awards Coordinator
Roxana Moroianu
Art Director
Timothy Nordan
Senior Designer
Lai Chun Lok
Deputy Editor
Josh Hill
Research Manger
David Bateson
Marketing
Development Manager
Dilan Parbat
Project Managers
Ibrahim Zulfqar, Rocky
Singh, Zoe Cannon
Account Managers
Norman Lee, Thomas
Patrick, Kerry Payne,
Sophie Smith, Jade
Hurley, Gemma Palfrey
Production Manager
Sunil Kumar
Competitions Manager
Arun Salik
Administration
Manager
Nafisa Safdar
Data Administrator
Dan Kells
Head of Finance
Joseph Richmond
Senior Credit
Controller
Jorawar Johl
Accounts Assistant
Jenny Hunter
Contents
Q2 Review

4 5August 2015 August 2015
Q2 Review
Introduction
There have been numerous
developments during Q2-2015 that
have shaped the current global
economic outlook and altered the
landscape for business activity
moving into the second half of the
year. Some of these developments –
such as Greece’s role in the Eurozone,
asset market conditions in China,
the continued issues with ISIS, and
the standoff between Saudi Arabia
and OPEC over Brent Oil prices –
continue to create uncertainty and
hamper market confidence in their
respective regions, but there are also
other areas where Q2 has provided
greater clarity.
Wehavewitnessedseverallegislative
changes around the world including
the National Security Law and the
Cyber Security Law in China as
well as the abolition of the local
representative requirement in Japan.
In this Expert Guide we take a look
at the practical issues with these
recent rule changes and summarise
the new regulatory requirements
for businesses operating in these
jurisdictions.
Going into Q2-2015, one market in
which change had become inevitable
was mergers and acquisitions. Over
the previous two quarters global
activity posted strong results with
Q4-2014 reaching $817 billion –
the highest in at least four years,
followed by the richest first quarter
for M&A activity since 2007 with
more than $843 billion in deals
closed. This Expert Guide takes a
look at Developments and Antitrust
IssuesinM&AActivityandRegulation
within the United States.
This Expert Guide also provides
an outlook on specific industries
which noted interesting trends and
developments during the quarter.
In South Africa the Competition
Commission has placed an increased
emphasis on combatting cartels
and abuses of dominance in what is
expectedtobecomeamorepertinent
subject over the coming months. We
have also featured the current state
of private equity in Australia as well
as highlighting the present landscape
for private funds in Luxembourg.
Editor In Chief
James Drakeford
Introduction

Q2 Review
Australia
robert.wyld@jws.com.au
+61 282 749 593
Trends from Australia: ASIC, the AFP & Corporate Corruption Regulation
By Robert Wyld
lawyers are called in and battle stations
are manned.
One significant area for examination for
ASIC is whether it can or should play a
role in the investigation and prosecution
of foreign bribery. As a general rule, the
investigation and prosecution of foreign
bribery is time-consuming, complex and
expensive. ASIC’s current position is
that as foreign bribery is criminal (in the
Criminal Code 1995 (Cth)), it is up to the
Australian Federal Police (AFP) to run
those investigations. Indeed, while the
AFP hosts the Australian Fraud and Anti-
Corruption Centre in which ASIC partici-
pates, it remains the case that Australia’s
present record in this area is woeful –
two prosecutions in over 15 years since
foreign bribery was criminalised (one
prosecution, in the Securency banknote
printing case commenced in 2011 is sub-
ject to widespread suppression orders
and the second was only commenced in
March 2015). There have been no ad-
ministrative or civil prosecutions as the
false or misleading accounts provisions
in the Corporations Act 2001 (Cth) are
woefully inadequate in terms of effect
and penalty2
. Despite the AFP saying
they have numerous “current investiga-
tions”, no prosecutions have emerged.
Indeed, while the US SEC fined BHP Bil-
liton (a dual Anglo-Australian listed enti-
ty) with a US$25 million fine for contra-
ventions of the US Foreign Corrupt Prac-
tices Act books and records and internal
control offences in July 2015, no action
has yet been taken in Australia3
.
There are two very significant reviews
currently underway in Australia that has
the potential to substantially reform the
role and activities of ASIC and potential-
ly the AFP.
The first is a Capability Review of the
whole of ASIC’s functions, to be com-
pleted by the end of 2015.
The Capability Review arises out of the
Australian Government’s Financial Sys-
temInquirythatrecommendedareview,
and indeed, periodic reviews, of the ca-
pabilities of the financial regulators. The
Review may examine, and make recom-
mendations on how efficiently and ef-
fectively ASIC operates to achieve its
strategic objectives, including:
• identification and analysis of im-
mediate and forward-looking priorities
or risks;
• resource prioritisation and respon-
siveness to emerging issues, including
how ASIC allocates its current resources
among its regulatory tools, such as su-
pervision, surveillance, education, poli-
For the last few years, the Australian cor-
porate regulator, the Australian Securi-
ties and Investments Commission (ASIC)
has experienced mixed reviews:
• years of investigating the Austra-
lian Wheat Board Oil-For-Food wheat
sales to Iraq scandal, modest civil pros-
ecutions, two contentious plea deals1
,
other cases discontinued “as no lon-
ger in the public interest” to run them
(despite a year-long Royal Commission
that found clear cases of
criminal and civil offenc-
es to be investigated)
and two trials yet to oc-
cur (set down for trial in
October 2015), over 15
years after some events
took place;
• ignoring whistleblower complaints
into major scandals into large financial
institutions;
• media criticism about the exis-
tence or non-existence of any investi-
gation into the Reserve Bank Securency
banknote printing corruption scandal;
and
• ultimately, an independent re-
viewed being call by the Australian Gov-
ernment into ASIC’s roles, functions and
performance.
Corporate regulatory agencies in Aus-
tralia have been regarded by many as
adopting a “light touch” philosophy
to corporate regulation. The current
Chairman of ASIC, Mr Greg Medcraft, a
banker of many years’ experience, has
stated that ASIC’s strategic goals are,
in substance, to secure a fully informed
market, whereas enforcement does not
appear to rate a mention. In contrast,
the philosophy recently stated by Chair
of the United States Securities and Ex-
change Commission (SEC) is that “com-
prehensive and relent-
less enforcement of our
securities laws is a cor-
nerstone of investor pro-
tection.”
Added to this is the pre-
dilection of Australian
governments from the Labor and the
Liberal side of politics, to constantly
cut budgets from ASIC, to reduce and
restrain compliance and integrity regu-
lation, preferring to leave it to corpora-
tions to manage themselves and for the
regulator and enforcement agencies to
act only when they need to. This has a
negative impact on overall corporate en-
forcement and appears to have failed to
instil any great sense of ethical standards
into some of Australia’s largest corpora-
tions so that when allegations of impro-
priety arise, the shutters are closed, the
Robert Wyld

Q2 Review
ery cases, is that investigators are still
coming to terms with basic corporate
law knowledge and skills7
. The office of
the Commonwealth Director of Public
Prosecutions (CDPP) acts as the foreign
bribery prosecutor yet is an office with
finite resources and what appears to be
a conservative mindset that cases can-
not or should not be commenced unless
they are almost guaranteed of success.
Corporations find it difficult to negotiate
with the CDPP (or the AFP) as there is no
structured process to negotiate complex
charges involving a corporate defen-
dant. That is not in the public interest
particularly if for any case there is a rea-
sonable prospect for a conviction. That
is for a Judge and jury to decide. This is
all the more disturbing when regulators
are constantly calling for more money,
more powers (and their existing powers
are extensive) and reversing the onus of
proof to make their lives easier to secure
a prosecution – so the rule of laws fades
into the distance. It appears to all ob-
servers that foreign bribery cases in Aus-
tralia are too hard, too expensive, they
are too complex and with a result that
is not sufficiently certain. Thus, cases
seemingly as simple at BHP Billiton’s re-
cent fine in the US appear to result in no
enforcement action in Australia.
It is hoped that these reviews of ASIC
and other corporate regulators and en-
forcement agencies takes a serious look
at the structure of corporate regula-
tion in Australia. The public have or if
not yet, are rapidly losing faith and trust
in a political and legal process that ap-
pears to excuse improper or illegal com-
mercial conduct if you are large enough
and wealthy enough to avoid indepen-
dent scrutiny and accountability which
is fundamental to a democratic system
whereby the public have faith in the in-
stitutions of government. The process
needs to change and fundamentally so.
cy, enforcement and litigation;
• how ASIC allocates its current re-
sources across its regulated population;
• the skills, capabilities and culture
of the Commission and its staff, includ-
ing in respect of internal review and im-
provement mechanisms; and
• organisational governance and ac-
countability arrangements.
The second is the Australian Senate Eco-
nomics Reference Committee review
of Australia’s foreign bribery laws. This
Senate Committee Review is due to de-
liver its report to the Senate by 1 July
2016.
The Senate Review calls for a careful ex-
amination of the fractured regulatory
and enforcement framework of Austra-
lia’s foreign bribery laws, who should
best regulate and enforce those laws
and the conduct of Australian corpora-
tions. Australia has been subjected to
serious ongoing criticism by the OECD4
and Transparency International in its
compliance with obligations under the
OECD Convention5
. While Australia’s
activity and the level of action by the
corporate regulators over the last three
years have improved, and been positive-
ly reviewed by the OECD6
, there remains
much to be done.
At the heart of the regulatory and en-
forcement process, there seems to ex-
ist a fractured and diffuse system of re-
sponsibilities and experience. ASIC are
experienced in corporate governance,
domestic and international business
practices and duties of directors and of-
ficers. Yet ASIC prefers to leave foreign
bribery cases to the AFP (unlike the US
SEC which takes a very active enforce-
ment role against corporations subject
to its jurisdiction). The AFP is an expe-
rienced police agency yet the experi-
ence of lawyers exposed to foreign brib-
Australia

Q2 Review
severe penalties for administrative or pecuni-
ary cases available to it.
3 The AFP are reported in The Sydney
Morning Herald 10 August 2015 to have nu-
merous ongoing foreign bribery investigations
and prosecutions may well eventuate, with
BHP Billiton named as under investigation for
conduct in Cambodia and in relation to the
Beijing Olympics (which was the subject of the
US SEC case).
4 OECD Phase 3 Report on Implementing
the OECD Anti-Bribery Convention in Australia,
October 2012.
5 Convention on Combating Bribery of
Foreign Public Officials in International Busi-
ness Transactions 1997.
6 OECD Australia: Follow-up to the Phase
3 Report and Recommendations, April 2015.
7 While the Australian Government has
promoted the AFP-hosted and multi-agency
Fraud and Anti-Corruption Centre, from July
2014, the concern remains that investigators
with limited commercial knowledge are being
asked to investigate complex, commercial fi-
nancial transactions.
8 © Robert Wyld, August 2015. The opin-
ions expressed herein and those of the author
and not necessarily those of his firm or the
firm’s clients.
Robert Wyld8
Partner, Johnson Winter & Slattery
Co-Chair, International Bar Association
Anti-Corruption Committee
His work has a particular focus on regu-
latory investigations and prosecutions,
white collar crime and fraud, extradition
and trade sanctions, whistleblower ad-
vice for individuals and companies and
taxation disputes in Australia and over-
seas.
Robert’s recent work includes represent-
ing four former AWB officers before the
Cole Inquiry into the AWB/Oil-For-Food
wheat contracts with Iraq and subse-
quent civil litigation and criminal inves-
tigations and conducting confidential
bribery investigations and prosecut-
ing and defending both civil claims and
criminal prosecutions in Australia and
overseas.
Robert is currently the Co-Chair on the
International Bar Association’s Anti-Cor-
ruption Committee for 2015-2016.
Recent Achievements Include:
• Author of Australia’s Anti-Corrup-
tion Laws in The Anti-Bribery & Anti-Cor-
ruption Review (1st
to 3rd
Edition, London
2013 - 2015);
• The Australian contributor to The
Anti-Corruption Ethics and Compliance
Handbook for Business published by the
World Bank, the OECD and the United
Nations Office on Drugs & Crime (No-
vember 2013); and
• The Australian author on Austra-
lia’s Anti-Corruption Compliance Laws
in Handbüch Compliance International
(Berlin 2015).
1 The Victorian Court of Appeal severely
criticised the role of ASIC and the defendant
is s eeking to downplay the role of the defen-
dant, a former company CFO, see ASIC v Paul
John Ingleby [2013] VSCA 49.
2 Corporations Act 2001 (Cth), section
286(3) and see sections 1311(1) and (1A) im-
posing the offence, with the relevant pen-
alty arising by virtue of section 1311(2) and
Schedule 3, being 25 penalty units (currently
$4,250) or 6 months imprisonment. In a re-
port published in March 2014 on Penalties for
Corporate Wrongdoing, ASIC proposed more
Australia

Q2 Review
Australia
nathan.cahill@minterellison.com
+61 2 9921 4933
Australia: The State of Private Equity
by Nathan Cahill
information. We are hopeful that gov-
ernment will shortly approve exemp-
tions for private equity and hedge funds
in this regard.
Fundraising
• Fundraising temperature – its
been a year of el nino weather extremes
in fundraising. At the hot end a number
of general partners raised quickly and
with ease - with a number of first and
final closes and no funds we have been
involved in going beyond a second close.
At the frosty end of the spectrum, those
with deal issues or depleted investor
bases have sadly not been able to raise.
• Money sources – Australian super-
annuation funds have been continuing
the trend of investing globally and each
backing only a small number of local
general partners. However, the money
lost to offshore destinations has been
more than made up for by foreign inves-
tors who have been enjoying strong re-
turns from Australian general partners.
We are seeing local investors popping
up on the registers of many leading off-
shore general partners. High net worth
money has been flooding into the Aus-
tralian market from both Australia and
broader Asia. Recent changes to Austra-
lia’s significant investor visa programme
mandates an allocation to Australian
venture capital or private equity funds
which is expected to continue to drive
high net worth investment.
• venture capital – it is true that the
old VC model in many investors’ eyes is
gone unless you are a Sequoia (US) or
similar with long decent track records.
However, there have been some great
fundraises for those Australian VC gen-
eral partners with a unique angle, track
record and a different investment mod-
el. Carnegie, Airtree and Brandon are
all great examples of decent fundraising
and deals. Fintech and biosciences has
been all the vogue. Investors are now
lookingforinvestmentmodelsthatallow
them to greater share in the value curve
than the traditional blind pool fund has
given them in the past. Brandon as an
example as been able to do this with a
very strong raising in 2015 from major
Australian superannuation funds.
• investors want assets – we have
been involved in a number of transac-
tions where the more innovative su-
per funds like Sunsuper and HostPlus
are buying assets from general partner
funds. They want long term assets par-
ticularly those that are protected from
tech disruption and perform like infra-
structure assets. Examples of such as-
sets are pub portfolios, caravan park
businesses.
2015 has been an interesting year for
private equity in Australia with fundrais-
ing and investor activity in Australia and
broader Asia creating some strong new
themes and trends.
The economic backdrop
The Australian economy has been oper-
ating in a post-resources boom environ-
ment of subdued economic activity and
low interest rates. Private equity has
enjoyed in the past decade the fruits of
substantial investment
in the resources sector.
Many outstanding deals
were done in the min-
ing services sector and
other support indus-
tries such as equipment
hire groups. The down-
turn in resources driven
in part by plummeting iron ore and oil
prices has left the sector with tapering
investment. Ultimately this has meant
higher unemployment and the con-
struction sector has been slow to fill the
gap left from tapering resource sector
investment. The low interest rates and
foreign investment has fuelled inflated
asset prices and what some are calling a
‘property bubble’ in some cities like Syd-
ney and Melbourne has started to fuel a
strong real estate sector.
Regulatory backdrop
Regulation of private equity in Australia
has been relatively stagnant save for two
areas creating headaches for investors in
private equity and general partners:
• fee pressure – there has been sub-
stantial government pressure to reduce
fees born by superannuation investors.
One of the tools to increase this pressure
is compulsory greater fee disclosure.
The disclosure regime applies standard
reporting across all asset sectors which
has the effect of making private equity
look incredibly expen-
sive. This is because fees
are measured against
invested capital and not
committed capital which
can produce fee load-
ing disclosure of 20%
per annum for a fund
that charges 2% man-
agement fee and has only called 10%
of committed capital. This is driving fee
downward pressure and alternative fee
structures.
• portfolio holding disclosure – su-
perannuation funds are required to dis-
close their portfolio holdings. This has
the effect of such funds requiring gen-
eral partners to agree to provide data
even at a portfolio company level. This
has meant a number of large investors
being rejected by local and foreign gen-
eral partners who will not disclose such
Nathan Cahill

Q2 Review
So what is ahead for us in 2016?
We don’t have to reach too far for the
crystal ball because the following is al-
ready upon us and gathering momen-
tum...
• coinvestments – with fee pressure
on super funds, coinvestment deals are
gathering momentum. We are seeing a
number of super funds step back from
fund structures and looking to invest
under a mandate structure and in some
cases moving to non-discretionary man-
dates. Whilst in Asia it is quite common
for fee free coinvestments, the desire
for coinvestment flow has meant many
coinvestors are more than prepared to
pay fees on coinvestment deals.
• capacity – investors are looking
for long term relationships with general
partners and as such general partners
need to be able to solve the issue many
super funds have which is that their fast
growing capital base is creating deploy-
ment challenges and distorting returns.
A number of funds will reach AUD-
100billion in size which means for effi-
cient investment they need to write pri-
vate equity cheques of AUD100million
or above. To this end, if general partners
can talk to filling investor capacity re-
quirements in a cost effective manner –
without strategy drift - they will find a
willing audience.
• fundraising – there are a number
of top quality Australian and Asian gen-
eral partners coming to market for what
will be a strong year of fundraising.
Returns from Australian private equity
have continued to outperform other as-
set classes (source: AVCAL, 2015) and
with relatively benign economic activity
and potentially choppy equity markets,
the ability of general partners to drive
value through market cycles should
make private equity look even better in
2016.
Nathan Cahill is a leading private equity
and hedge fund formation and financial
services industry lawyer with wide expe-
rience in local and offshore hedge, pri-
vate equity and other alternative invest-
ment funds. He is lauded and sought
after for his commercial acumen, inno-
vation and valuable strategic advice to
major financial institutions and Boards
on their key business initiatives includ-
ing the establishment and restructure of
their financial services businesses and
defending predatory investors.’
Argentina

Q2 Review
China
dongx@junhe.com
+86 10 8519 1233
Data Privacy and Security Law Develops Quickly in China
By Marissa Dong
vides for “safeguarding the national cy-
berspace sovereignty”, and adds cyber
and information security as an impor-
tant part of national security, compared
with the former NSL which was primarily
focusing on counter-espionage. NSL fur-
ther requires the state to establish a na-
tional security review system to review
matters and activities that influence or
may influence national security, includ-
ing that relating to network information
technology products and services.
In this connection, a few days later on
6 July the National People’s Congress
Standing Committee released the draft
Cyber Security Law (the “CSL”) to solicit
public comments before 5 August 2015.
The draft CSL further provides for “safe-
guarding the national cyberspace sov-
ereignty” as a fundamental principle,
and, for that purpose, the draft includes
provisions on, inter alia, the strategy,
plan and promotion of cyber security,
network operation security, network in-
formation security, and alarm and emer-
gency response systems, especially in
the following aspects.
The CSL endeavors to strengthen the
network operation security obligations,
for example, the draft provides various
security obligations of network product
and service providers, makes classified
network security protection a legal ob-
ligation of network operators including
classifying data as well as backing up key
data and encrypting the same. Network
operators are also required to provide
necessary assistance and support to in-
vestigation authorities where necessary
for protecting national security and in-
vestigating crimes.
In particular, the draft CSL heightened
protection for the operation of “key in-
formation infrastructure facilities”. Such
requirements include key information
infrastructure facility operators should
store personal information of citizens
and other important data within the
PRC territory (unless there is a business
imperative to store data overseas they
can apply to government who will evalu-
ate the specific situation). Additionally,
security review is required to be con-
ducted on the procurement of network
products and services by key informa-
tion infrastructure operators.
The CSL also includes requirements for
network operators on the protection of
personal information of users. Such re-
quirements are primarily based on the
requirements of existing laws and regu-
lations, with a few new requirements
such as notifying users who may be af-
fected in the event of a data breach.
The information and technology se-
curity related legislation and practice
develops quickly in a fast changing en-
vironment for China’s national security
challenges. In April 2014, to respond to
the various challenges in the new era,
President Xi Jinping for the first time
raised the “overall concept of national
security”. Thereafter, a series of legisla-
tion relating to national security was put
on an accelerated track, including the
Counter-terrorism Law (the “CTL”), the
National Security Law (the “NSL”), the
Cyber Security Law (the “CSL”), the For-
eign Non-governmental
Organization Admin-
istration Law, and the
Counter-espionage Law.
The CTL, NSL and CSL all
include or are likely to
include provisions relat-
ing to information and
technology security, and
have drawn wide atten-
tion from foreign companies especially
high-tech and internet companies who
have operations in China.
The draft CTL was released for public
comments on 3 November 2014 un-
til 3 December 2014. The provisions in
the draft CTL caused broad discussions
are articles 15 and 16 which in princi-
ple require telecom business operators
and internet service providers to set up
technical interfaces in the design, con-
struction and operation of telecoms and
the internet, and file encryption plans
to government for review, and it further
requires such operators and service pro-
viders who provide service within the
territory of the China shall retain within
the territory of the China the relevant
equipment and data of “users within the
territory of the China”. The provisions
are drafted in a comparatively vague and
general way and there is no interpreta-
tion on how such requirements would
be applied especially to
foreign companies’ busi-
ness in China. Media re-
ported that several for-
eign trade associations
have raised concerns
over these articles with
Chinese government.
The second deliberation
of the draft CTL was held
in February but there is no updated in-
formation since then on when the third
deliberation will be held and CTL will be
formally released.
Following on, on 1 July 2015, China’s
legislature, the National People’s Con-
gress Standing Committee, passed the
NSL, and it came into effect on the same
date. The NSL, for the first time, pro-
Marissa Dong

Q2 Review
The draft also requires network opera-
tors to record the real identity of users,
to cease and prevent the dissemination
of unlawful and harmful information,
and to make records and report to gov-
ernment.
Once adopted and implemented, the
CSL may influence the technology and
internet industries significantly, and may
even impact enterprises in finance, en-
ergy, transportation, medical and health
services and other public service areas.
The new legislative trend reveals that
Chinese government’s attention to
strengthen the management and op-
eration of national security including
network security. As many may recall,
earlier this year, the requirement by
Chinese government on establishing a
“secure and controllable” system in the
banking industry is also part of this ef-
fort. In relation to data privacy area, al-
though China does not have a personal
information law at the present and it
may still take sometime for a unified
legislation on personal information to
be promulgated, we expect to see more
regulations and rules on the protection
of personal information of users in vari-
ous industries, as a part of the network
information security.
Marissa Dong is a partner in Jun He Law
Offices based in Beijing. She has advised
many private and public transactions
for multinational companies, private eq-
uity firms and Chinese state-owned and
private companies and across the wide
spectrum of industrial sectors, particu-
larly internet and telecommunication,
education and manufacturing business.
In addition to her corporation and M&A
practice, as an Information Law expert,
Marissa Dong has advised many multi-
nationals (including both Chinese and
foreign nationals) on data privacy, infor-
mation security and related regulatory
matters in China.
China

Q2 Review
Japan
info@jp.tricorglobal.com matthew.kyle@jp.tricorglobal.com
+81 3 4580 2709
Local Directors no longer needed in Japan: Practical Issues
with the Recent Rule Change By Henry Tan & Matthew Kyle
incorporated under Japanese Law. In
such types of companies each mem-
ber (i.e., equity holder) (or a part of
members if otherwise provided by the
AoI) has representative power; and if
a member with representative power
is a corporate body it must appoint an
individual as a representative officer
(shokumu-shikkosha). Under the poli-
cy at least one member with represen-
tative power who is an individual, or
one representative officer appointed,
was required to be a local resident.
However, since the Japanese business
environment has become much more
international and technology allows
the people of the world to be in many
places at one time it has led to an in-
creased pressure and demand for Jap-
anese companies to be able to incor-
porate under Japanese Law without a
local representative.
In response, a Working Group for Fos-
tering Inbound Investments organised
by the Cabinet Office in December
2014 (the “Inbound Investment WG”)
led government-internal discussion to-
wards changing the policy and under
“Abenomics” the MoJ accepted aboli-
tion of the requirement based on two
factors:
1. Adoption of a new requirement
that all directors (not just representa-
tive directors) register their addresses
for the benefit of creditors.
2. Confirmation by the Japanese
Supreme Court that directors of a Jap-
anese company residing abroad would
be subject to jurisdiction in Japanese
courts.
From the discussion held by the In-
bound Investment WG, the officers of
the MoJ announced on 16 March 2015
that the company registration practice
announced in 1984 and 1985 would be
rescinded, and the LAB would accept
applications for the establishment
of KKs with no local representatives.
This new announcement is also ap-
plied for local representatives of the
other three types of companies incor-
porated under Japanese law.
The abolition of the local represen-
tative requirement does not apply to
Japanese branches of non- Japanese
entities. The Companies Act clearly
states in Article 817 that a branch of
a foreign company needs to have at
least one representative who lives in
Japan. Since this is an explicit statu-
tory requirement it cannot be over-
ridden by administrative action by the
MoJ. The Inbound Investment WG has
Over the past decade Henry Tan, Rep-
resentative Director of Tricor K.K., has
helped companies of all industries en-
ter the Japanese market. Each time
a company planned to set up an en-
tity in Japan, without fail, there was
a discussion about why there was a
requirement to appoint a local Japa-
nese resident, member or officer (de-
tails are explained below) (“local rep-
resentative”). With the 16 March
2015 official statement by the Japa-
nese Ministry of Justice (“MoJ”) abol-
ishing this requirement, the details
of the discussion have
changed considerably.
In the following article
he will explore the his-
tory of the issue, how it
was before the recent
statement by the MoJ
and provide personal
insights into the reality
of the situation.
The Companies Act of Japan, which
came into effect on 1 May 2006 and
before it, the Commercial Code of
Japan put into place in 1899 states
that there are four types of compa-
nies that can be incorporated under
Japanese Law. Before the Companies
Act, it was the Kabushiki Kaisha (“KK”,
stock company), Yugen Kaisha (“YK”,
limited company) and two other less
frequently used types of companies
(Gomei Kaisha, Goshi Kaisha). Now,
after the establishment of the Compa-
nies Act, the YK has been removed and
the Godo Kaisha (“GK”, limited liability
company) has been added.
Neither the Commercial Code nor the
Companies Act states anywhere that
the above respective four types of en-
tities are required to appoint a local
representative. However, in 1984 and
1985 the MoJ provided a set of official
statements which in
summary required that
at least one represen-
tative director named
at the time of registra-
tion be a local resident.
The policy adopted by
the 1984 and 1985 offi-
cial statements was fol-
lowed in company registration practice
by all Legal Affairs Bureaus (“LAB”s) in
the Japan, surviving the change from
the Commercial Code to the Compa-
nies Act.
The MoJ and the LAB also, in compa-
ny registration practice, applied the
concept of this policy to the other
three types of companies that were
Henry Tan Matthew Kyle

Q2 Review
you know how different the require-
ments can be amongst owners. My
general assumption and experience is
that foreign multinational friendly of-
fice space providers that offer “turn-
key” solutions will be willing to rent
space to companies without a local
representative. It is yet to be seen
how more conservative landlords will
act towards companies without a local
representative.
Business Licenses: Even though the
policy regarding company registra-
tion practice has been changed, many
business licenses in Japan still require
a local representative to be named in
order to apply.
Directors of Japanese Entities resid-
ing Abroad subject to Japanese Ju-
risdiction: During legal matters direc-
tors of Japanese companies residing
abroad may be subject to jurisdiction
in Japanese courts and thus be asked
to appear in court.
Corporate Seals: Even if there isn’t a
local director, every company must
have at least one Corporate Seal (basi-
cally a portable power of attorney of
the company which can bind the com-
pany to any agreement). Given that
it is most practical to keep the seal in
Japan for execution of Japanese docu-
ments, transactions, etc, it isn’t clear
where the seal will be held. The seal
is linked to the listed representative
on the Corporate Registry (each rep-
resentative can have their own seal,
but only one seal is required). With-
out someone local to wield that power
responsibly, how will the seal be main-
tained safely for clients that set up with
the representative residing abroad?
What would I do?
So what do you do when setting up
an entity in Japan? Honestly, with the
ripple-effects from the announcement
still visible it is hard to say. I am learn-
ing each day what the effects may be
but it is still very exciting to see things
changing in Japan; however small or
large of a step it may be. One thing
is for sure though; if you do not want
to run into delays during your set up
phase, it may be best to either hire a
representative director from the pool
of talent in Japan or to appoint a nom-
inee local representative from a repu-
table service provider. Removing the
local representative (hired internally
or a nominee) later on once things are
set up properly may be OK but it re-
announced that it will consider further
deregulation for branches of foreign
companies in Japan.
After the New Official Statement
made by the Ministry of Justice: Now
that the policy has changed, practical-
ly speaking, it has become relatively
easier to set up a subsidiary in Japan.
Without the requirement of a local
representative, simply collecting the
information for preparing the neces-
sary documents is enough for submis-
sion to the LAB (evidence of capital
and a registered address in Japan are
still required to be provided during
registration). Even with this perceived
simplification of the establishment
process, there are some issues that
may be of interest to foreign based ex-
ecutives of multi-national companies.
How to show Evidence of Capital:
When you set up a KK [1] evidence of
the initial capital has to be shown in
a Japanese bank account before the
LAB will process the registration of es-
tablishment of the company. Before
the official statements were changed
by the MoJ it was normal practice that
the evidence of capital would be sim-
ply a copy of the bank book of the lo-
cal representative showing the appli-
cable capital amount. Now that the
guidelines have changed it is not clear
exactly how evidence of capital will be
established. There are some options
that can be entertained:
1. Still appoint a local representa-
tive during the establishment phase to
use his or her personal bank account.
2. Appoint a promoter locally to set
up the company who will initially own
the shares of the KK. Once established
the promoter would then transfer the
shares to the appropriate shareholder
immediately.
3. Set up an Escrow bank account
(別段預金 “betsudan yokin” in Japa-
nese) for deposit of initial capital for
evidence to show the LAB. Setting up
an Escrow account may take consider-
able time depending on the bank.
Setting up a Bank Account: Most banks
in Japan require a local representative
to set up a bank account. As of the
writing of this article, Mizuho Bank is
the only bank I have identified that ac-
cepts bank account applications with-
out having a local representative in Ja-
pan.
Dealing with Landlords: If you have
ever dealt with a Japanese Landlord
Japan

Q2 Review
8. Dealing with Landlords without
a local representative may become
more difficult.
9. Obtaining business licenses may
be difficult or impossible without a lo-
cal representative.
10. Representatives appointed
abroad may be subject to jurisdiction
in Japanese courts.
11. Where will the Corporate Seal
be held if there is no local representa-
tive? The seal is a portable power of
attorney which can bind the company
to any agreement, so it should be held
somewhere responsibly. Holding it
outside of Japan is impractical, so how
can companies ensure its safety?
12. Using a local representative still
is the most understood way for setting
up smoothly in Japan. It remains to
be seen what sort of delays may occur
without one.
Tricor K.K. (Tricor Japan), the Japan arm
of Tricor Group, supplies comprehensive
business and corporate services includ-
ing entity establishment, accounting,
payroll/benefits, HR Advisory, banking
& administration, and tax and corporate
secretarial services. Tricor K.K. provides
a bilingual and bi-cultural approach ded-
icated solely to foreign managed multi-
national enterprises which value a na-
tive English point of contact and an un-
derstanding of the business culture, both
locally as well as internationally. As a
groupwestrivetobeAsia’sone-stopshop
for international expansion back office
needs. For more information please con-
tact matthew.kyle@jp.tricorglobal.com.

The views and opinions expressed here-
in are solely the views and opinions of
the author and are not in any way a
guarantee or definitive conclusion on
the subject. Any actions taken by the
reader based on the information pre-
sented in this document are solely the
responsibility of the reader and not the
responsibility of Tricor Group, Tricor
K.K. or any other affiliated companies.

1Evidence of equity contribution is re-
quired for a KK and GK establishment.
[For KK, this is Article 47(2)(v) of the
Rules of Commercial Registration. For
GK, this is Article 117 of the Rules.] For
a Gomei Kaisha and Goshi Kaisha, actual
evidence of capital is not needed.
mains to be seen for all cases.
It should be noted that removing a lo-
cal representative working at the com-
pany can become a burdensome task
as this person may not be the most co-
operative during a forced removal. I
will cover this issue in more detail in a
later article coming out soon. Further,
if a company sets up without some-
one local to hold the Corporate Seal
responsibly, a corporate governance
risk exists since the seal is a portable
power of attorney of the company. If
not held safely issues may arise. At
the end of the day I know that com-
panies entering Japan do not want
to take their first step backwards or
in the wrong direction, so for now, I
would still use a local representative
during set up stages at the very least.
Key Points Summary:
1. There is a difference between
companies incorporated under Jap-
anese Law and those that are not.
Companies incorporated under Japa-
nese law include the KK and GK among
less commonly used company types.
A Branch Office is always incorporat-
ed under the laws of the country the
branch extends from and not under
Japanese law.
2. As of 16 March 2015 the KK and
GK no longer require a local represen-
tative for establishment, Branch Of-
fices do.
3. The Japanese Companies Act,
established on 1 May 2006 has not
changed – this is a common miscon-
ception. Simply, the Ministry of Jus-
tice has announced a new official
statement for Legal Affairs Bureaus to
adhere to in order to accept an appli-
cation for setting up a company incor-
porated under Japanese law.
4. Issues may arise from this offi-
cial statement change. The extent of
the issues remains to be seen but as of
writing this I have noticed that:
5. The way of showing evidence
of capital for a KK has shifted toward
other, arguably, less commonly used
methods before the official statement
change.
6. Opening a bank account at cer-
tain Japanese banks may still require a
local representative.
7. Mizuho Bank, however, has been
identified as a bank that accepts com-
panies without a local representative.
Japan

Q2 Review
India
mrinal.ojha@phoenixlegal.in
+91 9910900575
Indian Insurance Sector – Turning a Corner
By Mrinal Ojha
lationships between the partners, may
be put to the test. A gamut of issues will
arise, mainly, concerning valuations and
the methodology for increasing the eq-
uity whether through exercise of call op-
tions at a pre-determined price/formula
or infusion of fresh capital.
In the long run, the reforms are expect-
ed to give prospective investors greater
access to the untapped Indian insurance
market which is likely to translate into
more scope for innovation i.e., develop-
ing unique products as opposed to offer-
ing tried and tested products. Given the
largely under-insured population of the
country, the opportunities would also
be expected to be greater specifically in
terms of distribution of products.
Furthermore, foreign reinsurers would
now have the opportunity to set up
branches in India to carry on reinsurance
business. At present, reinsurance is be-
ing solely undertaken by the GIC of India.
Notably, the Lloyd’s has also been given
statutory recognition under the amend-
ed (Indian) Insurance Act, 1938. While
reinsurers have always been able to do
business in India from overseas, a more
direct presence could positively impact
the way they interact with cedents and
bring a more robust underwriting and
claims experience on the ground.
It is difficult to comment on the right
time for a prospective investor to ven-
ture into the Indian insurance space. FDI
reforms are a key but by no means the
only driver for that decision. There are
diverse target groups as far as oppor-
tunities are concerned as the reforms
open up the sector not just for insurers
but also for intermediaries such as bro-
kers, surveyors, loss assessors and third
party administrators. Even within the
insurance business there are different
segments – life, non-life and miscella-
neous insurance business and interest-
ingly, health insurance companies have
now been recognised as a standalone
category.
The first step provides that one would
expect prospective investors to under-
stand the market more holistically and
identify the right partner. Since the only
way for an investor to invest in the in-
surance sector is through a joint ven-
ture, it would be sensible to understand
the business culture and the manner
in which Indian JV partners operate.
They should also take into account not
only the numbers in terms of penetra-
tion of the market but also familiarise
themselves with other key factors that
impacts businesses such as the prevail-
ing judicial/legal environment for reso-
lution of claims which is core to their
India started with the liberalisation
of the insurance sector at the turn of
this century with the foreign direct in-
vestment (FDI) with Indian Insurers
(and intermediaries like insurance bro-
kers) being opened up to 26%. Foreign
investors were assured that the next
phase would follow soon and increase
the FDI to 49%. After a long (and rather
frustrating) wait since the steps towards
this were taken in 2008, the Govern-
ment of India finally took action under
the Insurance Laws (Amendment) Act,
2015 (2015 Act) earlier this year raising
the FDI cap to 49%.
That said there are still
uncertainties in the
amended (Indian) insur-
ance Act, 1938 which
may raise concerns for
investors – for instance,
at present a key appre-
hension particularly for
existing foreign investors is the require-
ment of Indian ownership and “control”.
The term “control” has been defined to
include the right to appoint the majority
of directors or to control the manage-
ment or policy decisions, including by
virtue of shareholding or management
rights or shareholder agreements or vot-
ing agreements. At best, the decision
on management control should have
been left to the regulator, IRDAI, which
already has inherent powers under the
IRDA Act, 1999 and the Insurance Act,
1938 to deal with, and in fact did effec-
tively deal with, the manner in which
an Indian insurance company would be
managed and controlled. This was whilst
keeping in view the interests of the poli-
cyholders, the insurer and stakeholders.
Currently, there is lack of conclusiveness
on whether typical minority protection
rights would be considered to give an
investor “control”. While one would ex-
pect the IRDAI to take a
sensible stand on this is-
sue, in the event the IR-
DAI/Government takes
the view that “negative
rights” would constitute
control then it is likely
to lead to a situation
where: (i) the existing
investors may feel that
they were better placed as 26% share-
holders under the erstwhile regime; and
(ii) the ability of prospective investors to
have reasonable protection which was
available as a 26% shareholder under
the earlier regime may be impacted.
The short term consequences of the
present reforms would be that the exist-
ing shareholding arrangements, and re-
Mrinal Ojha

Q2 Review
tory steps for an investor should broadly
include approaching the IRDAI for infor-
mal guidance, diligence on the Indian
insurance market and the legal/judicial
environment particularly in the context
of the associated risks and reviewing
capital commitment requirements.
Mrinal Ojha, a partner based in the
firm’s Delhi office, focusses on the firm’s
disputes practice.
Mrinal acts for insurers and reinsurers
with a focus on liability insurance, in-
cluding errors and omissions insurance,
directors and officers insurance, employ-
ment practice liability insurance, com-
mercial general liability insurance, and
public liability insurance. He has handled
matters concerning a variety of jurisdic-
tions including Switzerland, United King-
dom, Greece, South Africa, Syria, Zam-
bia, Singapore, and the United States.
Mrinal has previously been recognised
by The Legal 500: Asia Pacific as an
“exemplary and focused” lawyer and is
mentioned in the 2015 edition of Who’s
Who Legal for insurance work.
work. The newer corporate laws under
which they will need to function are, for
example, the new Companies Act 2013,
bodies such as the Securities Appellate
Tribunal which although presently is
devoid of much insurance expertise, is
the body where the insurers’ appeals
against the IRDA’s decisions will lie.
Prospective players should also step
back and look at the economy as a
whole and see whether their goals fit in
with what is happening in other sectors
where the Indian Government is push-
ing for reform, such as in infrastructure,
transport and more recently the nuclear
energy sector.
Given that the Indian insurance sector is
at somewhat an adolescent stage, new
players should take advantage of the
existing business models and the mo-
dus operandi of other players who have
been operating in India for the last 15
years. In this regard; data from the IR-
DAI’s repository should serve as a tool
for tremendous learning for prospective
investors.
In the above background, the prepara-
India

Q2 Review
Chile
Cristian.Conejero@ppulegal.com
+562 2364 3776
Current Legal Situation in Chile
By Cristián Conejero
ternational arbitration act that regulates
all international arbitrations.
In addition to CAM, the International
Chamber of Commerce, (“ICC”), has
played a critical role in contributing to
the development of international arbi-
tration in Chile. In particular, ICC arbi-
trations have been used prominently in
large and complex arbitrations that in-
volve mining, energy and construction
disputes.
Arbitration Law in Chile
In 2004, the Chilean legislature estab-
lished Law No. 19.971 on International
Commercial Arbitration, (“ICA”). The ICA
follows the 1985 UNICTRAL Model Law
on International Commercial Arbitra-
tion, (“Model Law”). The 2006 amend-
ments to the Model Law have not been
adopted by Chile.
Chile is a party to the New York Conven-
tion. It signed the 1958 Convention on
the Enforcement and Recognition of Ar-
bitral Awards in 1975, (“New York Con-
vention”). Chile has not adopted any
reciprocity provisions under the Con-
vention. Thus, the New York Conven-
tion applies to all foreign arbitral awards
and is not limited to awards only made
in contracting states to the Convention.
Enforcing a foreign arbitration award in
Chile is relatively easy. To enforce an
award a party must obtain leave from
the Supreme Court using an “exequatur”
procedure. This procedure is regulated
by the Chile’s Code of Civil Procedure.
Through the exequatur, the Supreme
Court will determine whether the New
York Convention applies to the award
and whether it is entitled to recognition
and enforcement. After the Supreme
Court determines that the New York
Convention applies to an award, a party
has three years to initiate enforcement
proceedings before a domestic court in
Chile. There are no appeals from the Su-
preme Court’s decision to apply (or not
to apply) the New York Convention to a
foreign arbitration award.
To set aside a foreign arbitration award
in Chile, a party must satisfy the require-
ments established in Article 36 of the
ICA, which contains identical language
as Article V of the New York Conven-
tion. The principal grounds for vacating
an arbitration award in Chile are: (1) if
a party was denied due process during
the arbitration; (2) if the arbitration vio-
lated the parties’ arbitration clause; (3)
if enforcing the arbitration award would
violate Chilean public policy; and (4) if
the subject matter of the arbitration
was illegal. A party has three months to
Located in the south west of South
America between the Pacific Ocean and
the Andes mountains, Chile is widely
considered one of the most prosperous
and stable countries in Latin America.
Having achieved economic growth of
approximately 5% over the last decade,1
Chile leads many of its neighbouring
countries in development, foreign in-
vestment and education.2
This strong
profile has allowed Chile not only to re-
inforce its traditional industries in agri-
culture, fishing and mining, but also to
expand investment
in other sectors that
require 21st Century
skills in science, math
and engineering. In-
vestors and other
countries have taken
notice: Chile has Free
Trade Agreements
that touch markets
representing nearly two thirds of the
global population and it has Bilateral
Investment Treaties with 52 countries.3
No part of Chile has experienced the ef-
fects of this growth more than Santiago,
Chile’s capital and its financial and in-
dustrial home. Given this platform, it is
no surprise that Santiago has become a
leading player in international arbitra-
tion over the last decade.
Santiago as a Growing Place for Inter-
national Arbitration
The Arbitration and Mediation Center,
(“CAM”), is the leading arbitration in-
stitution in Chile and administers both
domestic and international arbitration.
Created in 1992 by the Santiago Cham-
ber of Commerce, CAM established an
international arbitration centre in 2006.
CAM administers around 120 domestic
arbitrations per year, a number that has
been growing over the last several years.
The number of interna-
tional arbitrations has
also been increasing.4
To manage its arbitra-
tion caseload, CAM
developed procedural
rules for domestic and
international arbitra-
tions. The current do-
mestic arbitration rules were established
on 1 November 2000, and the interna-
tional arbitration rules on 1 June 2006.5
Chile does not have special legislation
that only applies to domestic arbitration;
rather, various articles from the Code of
Judicial Organization and from the Code
of Civil Procedure govern domestic arbi-
tration. Any issue not resolved by those
articles is governed by Chile’s civil proce-
dure laws. In 2004, Chile adopted an in-
Cristián Conejero

Q2 Review
cluded that enforcing the award did not
violate any domestic law or public policy
of Chile. The Court’s decision in Labo-
ratorios Kin, S.A is consistent with other
cases that recognise and enforce foreign
arbitral awards.9

Conclusion
Santiago is well equipped to serve as a
seat for international arbitration in Latin
America. In addition to its well respect-
ed international arbitration institutions
like CAM and the ICC, Santiago’s world
class hospitality and professional servic-
es sectors, mature legal market and easy
access from basically all locations in Latin
America through Arturo Benítez Interna-
tional Airport, has allowed the city, and
Chile in general, to increase its profile
as a place for international arbitrations
within the region. Public entities from
Ecuador have already chosen Santiago
as the seat for its arbitrations with for-
eign investors and international arbitra-
tions involving Argentina, Uruguay and
Brazil have already taken place in Chile
even though no Chilean interests were
at stake in the disputes. Given this back-
ground, it is clear that Chile is primed to
play an even bigger role in international
arbitration in the years to come.
Cristián Conejero is a partner at Philip-
pi PrietoCarrizosa Uría in Santiago
(Chile) and he is also the Head of the Ar-
bitration team, having substantial expe-
rience in international arbitration, both
as counsel and arbitrator. Cristián is cur-
rently the Chilean Member of the ICC In-
ternational Court of Arbitration in Paris,
and Professor of Commercial Law at the
Pontificia Universidad Católica de Chile.
Before he was a partner at Iberian firm
Cuatrecasas, Gonçalves Pereira in Paris,
Madrid and Sao Paulo, Counsel for Latin
America and Iberia at the ICC Interna-
tional Court of Arbitration, and an asso-
ciate at Shearman Sterling in New York.

Cristián graduated from the Pontifi-
cia Universidad Católica de Chile, and
also obtained a LL.M. at Columbia Uni-
versity, where we were awarded with the
Parker School Recognition in Compara-
tive and International Law and as Har-
lan Fiske Stone Scholar.

He has been frequently recognised as a
leading practitioner in arbitration and
dispute resolution by Chambers and
Partners, Legal500, Who’sWho Legal,
Expert Lawyers, Global Arbitration Re-
view, and Latin Lawyer, among other le-
gal directories”.
annul a foreign arbitration award under
the ICA after it receives notice. Except
for the grounds laid out in Article 36 of
the ICA, no other formalities for vacat-
ing an award are required.
Case Law in Chile is Friendly to Interna-
tional Arbitration
A cursory review of recent Chilean case
law on the recognition and enforcement
of foreign arbitral awards reveals that
such awards are generally enforced and
only rarely set aside by the Supreme
Court or Courts of Appeal.
Chileans courts have ruled that the pri-
mary grounds for vacating a foreign
arbitral award must be based on the
grounds provided by ArticleV of the New
York Convention or Article 36 of the ICA.
For example, in Emex Limitada v. Court
of Appeal (2014), the Supreme Court
held that an arbitral award can only be
challenged based on the grounds estab-
lished in the ICA.6
Therefore, the Court
rejected Emex’s claim –which relied on a
“recurso de queja,” a procedural mech-
anism that can only be used when no
other procedure exists for attacking a
judgment – that the Appellate Court in
Santiago engaged in misconduct when it
refused to vacate the underlying arbitral
award. This decision is consistent with
Chilean jurisprudence that rejects the
use of a recurso de queja to overturn a
foreign arbitral award.7
Even when a party seeks to vacate a for-
eign award based on grounds provid-
ed in the ICA, Chilean courts rarely set
aside the award. For example, in Labo-
ratorios Kin, S.A., v. Laboratorio Pasteur
S.A. (2014), the Supreme Court upheld
an arbitration award even though it was
challenged under the ICA.8
There, the
defendant Pasteur objected to the en-
forcement of the award because alleg-
edly: (1) the composition of the arbitral
tribunal was inconsistent the parties’ ar-
bitration clause; (2) the award dealt with
issues outside the scope of the arbitra-
tion; (3) the arbitration agreement was
invalid because the arbitral institution
chosen by the parties did not exist; and
(4) recognition of the award would be
contrary to public policy because the tri-
bunal lacked jurisdiction. The Supreme
Court rejected the defendant’s claims
and recognised the foreign award, con-
cluding that the defendant’s first three
arguments concerned the arbitral tri-
bunal’s assertion of jurisdiction based
on its reading of the parties’ arbitration
clause – a matter outside the Supreme
Court’s scope of review. It further con-
Chile

Q2 Review
ment.aspx?id=kli-ka-1428008 (recognizing
arbitral award) (last visited, 13 August 2015)
; Constructora Emex Ltd. v. Organización Euro-
pea, Court of Appeal of Santiago, No. Civil 9211-
2012, 10 April 2014, available at: http://www.
kluwerarbitration.com/CommonUI/document.
aspx?id=kli-ka-1428010 (recognizing arbitral
award and reject defendant’s claim based on
public policy) (last visited, 13 August 2015);
Ann Arbor Foods S.A. v. Dominos Pizza Interna-
cional Inc., Court of Appeal of Santiago, No, Civil
1420-2010,9October2012,availableat:http://
www.kluwerarbitration.com/CommonUI/docu-
ment.aspx?id=kli-ka-1351010 (same) (last vis-
ited, 13 August 2015); Stemcor UK Ltd. v. Com-
pañía Comercial Metalúrgica Ltd., Supreme
Court of Chile, No. Civil 1724-2010, 21 June
2010, available at: http://www.kluwerarbitra-
tion.com/CommonUI/document.aspx?id=kli-
ka-1351006 (recognizing arbitral award even
though the defendant failed to present a de-
fense) (last visited, 13 August 2015); cf. EDF In-
ternacional S.A. v. Endesa Latinoamericana S.A.
et al., Supreme Court of Chile, No. Civil 4390-
2010, 8 September 2011 (rejecting recognition
of arbitral award where it was set aside at place
of arbitration) (last visited 13 August 2015).
1 World Bank, GDP growth (annual %),
available at: http://data.worldbank.org/indi-
cator/NY.GDP.MKTP.KD.ZG (last visited, 13 Au-
gust 2015).
2 United Nations Development Pro-
gramme, Human Development Reports, avail-
able at: http://hdr.undp.org/en/countries
(last visited, 13 August 2015).
3 Chile, Economy: stable and open to the
world, available at: http://www.thisischile.
cl/economy/?lang=en (last visited, 13 August
2015); United Nations Conference on Trade
and Development, Investment Hub Policy,
available at: http://investmentpolicyhub.unc-
tad.org/IIA/CountryBits/41 (last visited, 13
August 2015).
4 No other court or tribunal in Chile is
dedicated to resolving arbitration disputes.
5 Santiago Arbitration and Mediation
Center, Bylaws and Rules, available at: http://
www.camsantiago.cl/reglamento_CAMsan-
tiago.html (last visited, 13 August 2015).
6 EMEX v. Court of Appeals, Supreme
Court of Chile, No. Civil 8699-2014, 30 April
ka-15-20-005 (last visited, 13 August 2015).
7 See e.g, Ann Arbor Foods, Supreme
Court of Chile, No. Civil 7701-2012, 29 January
ka-1351009 (rejecting claim to vacate an arbi-
tral award based on a “recurso de queja”) (last
visited, 13 August 2015).; Felipe Barrera San-
cho, Iltma, Court of Appeal of Santiago, No. Civil
4902-2012, 24 July 2012, available at: http://
ited, 13 August 2015).; Alejandro Romero Seg-
uel, Court of Appeal Santiago, No. Civil 2363-
2010, 23 July 2010, available at: http://www.
kluwerarbitration.com/CommonUI/docu-
ited, 13 August 2015).
8 Laboratorios Kin S.A. v. Laboratorio Pas-
teurS.A.,SupremeCourtofChile,No.Civil1270-
2014, 13 October 2014, available at: http://
ment.aspx?id=kli-ka-15-20-004 (last visited, 13
August 2015).
9 See e.g., Productos la Sabana v. Tampi-
co, Court of Appeal of Santiago, No. Civil 6975-
2012, 29 April 2014, available at: http://www.
kluwerarbitration.com/CommonUI/docu-
Chile

Q2 Review
USA
khatzitaskos@cornerstone.com
+1 202 912 8817
Developments and Antitrust Issues in M&A Activity and Regulation
By Kostis Hatzitaskos
tory hurdles. Obtaining antitrust clear-
ance from authorities can sometimes be
as much of a challenge as arranging the
deal itself. In this context, it is important
to note the trends in regulatory enforce-
ment and potential antitrust issues.
In the United States, the Hart-Scott-
Rodino (HSR) Act mandates that deals
over a certain threshold require anti-
trust clearance from either the Federal
Trade Commission or the Department of
Justice. Some telecommunications and
media mergers are also evaluated by
the Federal Communications Commis-
sion. In addition, even smaller mergers
or acquisitions can be examined by the
U.S. government and challenged as an-
ticompetitive. For example, Bazaarvoice
bought its rival PowerReviews in 2012.
The merger was not reported under the
HSR Act. Once the Department of Jus-
tice became aware of the merger, how-
ever, it investigated and decided to sue
Bazaarvoice for diminishing competition
by removing its main rival. The merged
company was forced to sell the acquired
firm in 2014. This “unscrambling of the
eggs” can be very costly and disruptive
to a business. In hindsight, the compa-
nies might have been better off had they
reported the transaction and sought an-
titrust clearance before closing.
U.S. antitrust agencies have received
more than a thousand HSR notifications
in all but one of the last 10 years. Most
mergers do not raise antitrust issues
and are cleared after less than a month’s
review. If the initial review leads the
agency to conclude that the proposed
merger warrants further scrutiny, it will
issue a second request. This is a call for
the parties to supply substantially more
information that the agency believes
will allow it to determine whether to file
to block the deal. The agencies typically
issue somewhere between 40 and 60
second requests per year, depending on
the overall number of deals reviewed.
While every merger must be evaluated
on its own terms, there are some inter-
esting broad trends at the industry level.
For example, the rate at which mergers
between manufacturing firms faced a
second request fell by about a third in
2012–2014 compared to 2008–2010.
In contrast, the rate at which health-
care mergers faced a second request in-
creased by roughly 50% over the same
period.
Companies can benefit from having an-
titrust counsel and consultants evaluate
a proposed merger for potential anti-
trust concerns early on, even before the
deal is finalised. Besides being costly, a
prolonged and difficult investigation by
Like most other measures of economic
activity, mergers and acquisitions suf-
fered in the wake of the recession that
began in late 2007, both in the United
States and internationally. While the
economic recovery that started in 2010
has been slow and uneven, the number
of companies engaged in M&A deals has
trended steadily upward. M&A activity
is up significantly year-over-year, both
in terms of the number of deals and the
total size of the deals. By many mea-
sures, these levels have not been seen
since 2007. Deal making has boomed in
the first half of 2015.
M&A Activity Is Grow-
ing, Especially in the
Healthcare Sector
The growth in activity
has also brought an in-
crease in the number of
so-calledmega-mergers.
For example, from 2010 through 2013,
there were only seven deals above $20
billion. In 2014, there were eight, with
more proposed but failing to close or are
still working their way through the regu-
latory review process. In the first half of
2015, we have already seen three such
deals.
The healthcare sector has been particu-
larly active. With global deals now top-
ping a record $300 billion, healthcare
has been the most targeted industry in
the first half of 2015. Many expect the
trend to continue, especially in the Unit-
ed States. Much of the recent domestic
M&A activity has involved hospital and
physician group mergers, but many ob-
servers now also expect a wave of con-
solidation in healthcare insurance. The
Affordable Care Act, whose subsidies
were recently upheld in a U.S. Supreme
Court ruling, includes provisions calling
for insurers to minimise cost increas-
es. Insurers are explor-
ing mergers as a way to
achieve increased scale
and cost savings. Early
indications show that
some of the largest in-
surers may try to merge
in the near future.
Trends in Regulatory
Enforcement and Antitrust Consider-
ations
Barring large ripples from the develop-
ing crisis in the Eurozone, economic con-
ditions are likely to remain favourable
in the short run, and 2015 could be a
record year for M&A, or close to it. As
companies rush not to be left behind, it
is important to remain aware of regula-
Kostis Hatzitaskos

Q2 Review
regulatory agencies can delay or even
block a deal. The company can make
better decisions about whether to close
a deal and how to structure the agree-
ment if it has a better understanding of
the potential antitrust issues. If the deal
is likely to receive attention at the agen-
cies, an early start can be important to
achieving a successful outcome.
Kostis Hatzitaskos is a principal in the
San Francisco office of Cornerstone Re-
search. He specialises in directing anal-
yses in complex antitrust litigation and
merger reviews. His work frequently in-
volves large teams, large sets of propri-
etary data, and complex statistical and
econometric analyses. Dr. Hatzitaskos
has experience in a variety of industries:
software products, semiconductors and
computer hardware, telecommunica-
tions, mobile phones, personal comput-
ers, food and agriculture, distribution,
financial services, and others. He also
works on intellectual property matters
and has extensive trial experience, in-
cluding work on the Microsoft v. Motoro-
la trial, the first case to evaluate Reason-
able and Non-Discriminatory-compliant
royalty rates.
The views expressed in this article are
solely those of the author, who is respon-
sible for the content, and do not neces-
sarily represent the views of Cornerstone
Research.
USA

Q2 Review
Australia
richard.tyler@hoganlovells.com
+61 282 749 593
North Sea: What Next for UKCS M&A?
By Robert Wyld
them. This is in part due to differences
in valuations between buyers and sellers
arising out of different expectations of
future oil price evolution, and the con-
tinuing fluctuations in the oil price; and
it could take months of settled oil prices
to allow this gap to close.
Examples of proposed sales from 2014
that have so far failed to go ahead in-
clude Conoco’s proposed sale of its in-
terest in the Clair field, and BG Group’s
failure to sell the Armada, Everest and
Lomond fields. In the meantime, addi-
tional assets have been put up for sale,
including Eon putting up for sale its in-
terests in the Huntington, Elgin, Franklin,
Glenelg and West Franklin fields, Total
seeking buyers for a stake in the Laggan-
Tormore gas project, and L1 Energy sell-
ing the North Sea interests acquired as
part of its takeover of RWE Dea.
In addition to valuation, two further is-
sues are seen as critical challenges to
M&A deals in the UKCS: access to infra-
structure and decommissioning liability.
Access to infrastructure featured promi-
nently in the Wood Review carried out
by Sir Ian Wood to identify solutions
for maximising recovery in the UKCS.
His report noted that “The frequency
of failure to agree between and within
consortiums on key issues, including ac-
cess to infrastructure and development
of field clusters, is very damaging”. Ac-
cording to his Review, there have been
more than 20 instances in the past three
years, where the inability of operators
to agree terms for access to processing
plants and pipelines has caused “sig-
nificant delays” to projects, or led them
down a “suboptimal” route. In some
cases, this had resulted in oil and gas
fields being left “stranded”. Improving
access to infrastructure has been iden-
tified as a priority in the context of the
new powers to be granted to the Oil and
Gas Authority (OGA) by the UK Govern-
ment.
Decommissioning liability is a particular-
ly challenging issue in the acquisition of
older, mature assets, and often transac-
tions fail as a result of the parties being
unable to agree how decommissioning
liability should be shared or priced. As
a matter of law, if a buyer is unable to
meet its decommissioning liabilities, the
government can pursue the previous
owners: so sellers want buyers to post
substantial amounts of security to cover
potential decommissioning liabilities,
which small independents find very dif-
ficult to finance. This pushes indepen-
dents to look for assets that have a lon-
ger expected lifespan and where the es-
The global energy industry continues to
be dominated by the dramatic decline in
crude oil prices since the peak of $115
per barrel during summer 2014.
Thedropinoilpriceshasaffectedactivity
in the UK Continental Shelf (UKCS) par-
ticularly hard, because its larger fields
are mature and in decline, and develop-
ment is focussed on smaller, often com-
plex, finds with higher unit costs. Oil &
Gas UK reported in the annual Activity
Survey for 2015 that, taking a base line
of 2014 costs and production, at $50/
bbl, 20% of all oil pro-
duction and one third of
oil fields would be mak-
ing a loss on a cash ba-
sis.
The first response by
E&P companies to the
decline in oil prices has
been to cut costs by cut-
ting exploration activity and overheads,
seeking to change working practices
and postponing developments in order
to preserve capital and protect dividend
pay-outs.
Another visible effect stemming from
the decline in oil prices has been the re-
cent increase in equity issuance among
E&P companies, especially in the US,
with companies such as Noble Energy,
Concho Resources and Newfield Explo-
ration issuing in total some $8 billion of
E&P equity issues in the first half of the
year. This new equity should serve as a
balance sheet buffer in case estimates of
the length of the downturn are wrong,
and to give those companies the option
to acquire assets.
UKCS M&A Activity
Before the drop in the Brent crude price
there had been the expectation that the
ongoing process of M&A
deals in the UKCS would
continue, driven by the
exit of large operators
such as BP, Shell and To-
tal (to focus on explo-
ration in areas with the
potential for larger dis-
coveries), with their in-
terests being taken over
by smaller players, including companies
specialising in maximising recovery from
late life fields or new entrants looking
to acquire interests in UKCS for strategic
reasons.
However the drop in the Brent crude
price has brought this process to a stand-
still: while many assets have come up for
sale, few buyers have materialised for
Richard Tyler

Q2 Review
(i) investment horizons tend to be
much longer than for conventional pri-
vate equity investments;
(ii) targeted returns may not be
achievable due to costs, revenues and
the existing fiscal regime;
(iii) providing security or otherwise
satisfying sellers that they will be pro-
tected from decommissioning liabilities;
and
(iv) ring fencing of long term liabilities
in the context of limited life funds.
Potential Triggers of Future Activity
If the low oil price and volatility continue
in the medium to long term, the situa-
tion for many UKCS players will become
increasingly challenging and the num-
ber of distressed sales can be expected
to increase, potentially closing the gap
in valuations.
Continued loss of production in the UKCS
may also prompt the UK Government
to take further measures to change the
existing fiscal regime, which sees tax of
up to 75% on some projects, in order to
stimulate activity, including M&A activi-
ty, in the offshore UK oil and gas market.
Richard is a partner in the Energy and
Natural Resources team. His practice is
focused on gas and LNG, power and re-
newables. He has more than 15 years’
experience advising energy companies
on projects, transactions and regulatory
issues in these sectors. With regards to
LNG, he has worked on liquefaction proj-
ects and regas projects in both Atlantic
and Pacific basins. He is an acknowl-
edged expert on UK and European gas
and electricity trading agreements. He
also advises on the acquisition, disposal
and restructuring of energy assets.
timated decommissioning liabilities do
not yet significantly impact on the NPV
calculation.
Areas of Activity
One segment that has seen a number of
transactions progress in the UKCS is oil/
gas transportation infrastructure, with
BG Group and BP selling their interests
in the CATS pipeline to infrastructure
fund Antin Infrastructure Partners, and
Total being in advanced negotiations
with various infrastructure funds and
trade buyers, including Macquarie, for
the sale of stakes in the Frigg UK pipe-
line and terminal and the SIRGE Pipeline.
Pipelines are of interest to infrastructure
investors due to the predictability of the
revenue, critical role of these assets in
the UK Government’s plans to ensure
maximum recovery of oil throughout
the UKCS, and relatively smaller decom-
missioning costs (due in part to the pos-
sibility of leaving the pipelines in place
upon decommissioning).
Another potential source of M&A ac-
tivity comes from the involvement of
private equity firms, which see sharply
lower prices as potentially leading to at-
tractively priced assets coming to the
market and have been raising substan-
tial amounts of funds for investments
into oil and gas. As an example of this,
Carlyle has declared that it is preparing
to invest up to $1bn into the UKCS as-
sets (including potentially taking operat-
ing stakes) although it will be seeking as-
sets that have long lifespan expectation
rather than larger, declining assets.
However private equity firms may face
some specific, additional challenges
when investing into the UKCS:
Australia

Q2 Review
Spain
h.rodriguezmolnar@rm-as.com
+34 91 431 6795
ip@rm-as.com
Corruption: Its Impact On The Environment.
By Héctor Rodríguez Molnar & Juan Botella
or the lumber illegal traffic in certain
regions of East Asia – hosting perhaps
some 7-8% of the total mature forests
in the world – rank on top of this spe-
cial and corrupt competition for the
gold medal in affecting the planet’s en-
vironmental balance and biodiversity
through the joint illegal activity of all
operators along the distribution chain
of lumber resources; including but not
limited to forged export and transpor-
tation permits, corrupt customs offi-
cials and a long etc.
A reduced forestry area implies less oxy-
gen renewal and a correlative increase
in carbon emissions.
As far as water is concerned, figures in-
dicate that corruption in the contracting
processes of public works could increase
the costs of infrastructure construction
by as much as 40%, thus demanding
more than $12 billion more every year
to provide drinking water, sanitation
and agricultural products. Water is one
of the most basic and essential supplies
of human beings, who are made up by
some 75% of water.
A large amount of examples are available
but a detailed description would prob-
ably exceed the scope of this report.1
In a nutshell, corruption not only af-
fects the environment but also has an
extremely high social cost, to the ex-
tent that its impact on natural resources
causes severe damage to the most dis-
advantaged social layers.
The benefits of corruption are shared
among those having political or eco-
nomic power thus producing an unfair
(to call it someway) distribution of criti-
cal resources such as water and a clean
environment.
At International level, a number of Con-
ventions against corruption have been
signed in recent times such as:
(i) The UN Convention against Corrup-
tion2.
The text of the Convention against Cor-
ruptionwasnegotiatedduringsevenses-
sions of the Ad Hoc Committee for the
Negotiation of the Convention against
Corruption, held between 21 January
2002 and 1 October 2003.
The Convention approved by the Ad Hoc
Committee was adopted by the General
Assembly by resolution 58/4 of 31 Oc-
tober 2003. The General Assembly, in
its Resolution 57/169 of 18 December
2002, accepted the offer of the Govern-
It is obvious that corruption in the public
sector brings along serious consequenc-
es for the global economic as a whole –
to the extent that the affected amounts
are diverted from their legitimate goals
– and for specific economic sectors as
well. The Environment is not an excep-
tion.
Environmental management encom-
passes a large number of sectors where
activities are subject to the granting of
prior consents, licenses or authorisa-
tions, thus being fertile land for corrup-
tion. Water supply, exploitation of natu-
ral resources and management of toxic
and dangerous waste are only a few ex-
amples of areas that are sensitive to the
activities of corrupt public officials.
And corruption exists at all levels. From
large corruption cases that are clearly
visible in all media (construction per-
mits for large infrastructure projects,
licenses for the exploration or exploita-
tion of hydrocarbons, mining permits,
etc.) to daily minor corruption cases at
local level, this disease adopts a myriad
of forms and ill procedures.
The so called “urbanistic corruption” in
particular entails serious environmen-
tal consequences to the extent that it
places the private illegal interests of
corrupt public officials or civil servants
(who “joint venture” with private con-
struction companies) over and above
public interest by re-qualifying rustic or
protected land and natural spaces to be-
come areas where luxury construction
is permitted in furtherance of allegedly
high goals such as “economic develop-
ment” or significant “social benefits”
such as increased employment levels in
a given area; when the goal is actually
nothing but the furtherance of private
illegal benefits for a reduced number of
individuals in high social layers. The ac-
tivity is always to the prejudice of envi-
ronmental balance and the sustainabil-
ity of resources and species. The actual
goal is obviously hidden to the eyes of
the general public.
All of which results in a clear lack of pro-
tection of the territory for the benefit of
those who are entitled to authorise the
questionable activities. Unfortunately,
this disease exists all around the world.
While the European Commission con-
siders that Spain ranks among those
countries more heavily contributing to
gross up the €120 million that corrup-
tion drains from legitimate funds, Eu-
rope is not exclusive.
The devastation of Amazonian forests
Héctor Rodríguez Molnar Juan Botella

Q2 Review
cially Supported Export Credits adopted
by the OECD Council on 14 December
2006.
Interpol lists among offences against the
environment (1) the illegal exploitation
of wild fauna and flora; (2) contamina-
tion and (3) the illegal commerce and
disposal of dangerous waste or materi-
als against provisions of international as
well as national legislation.
In addition to the presently known of-
fences, some new illegal activities are
popping up such as those related to
Emissions Trading and ill Management
of Water Resources. And many of such
unlawful activities are being carried out
in an organised manner by despicable
organisations at international but also at
national levels (such as the Cosa Nostra
in Italy, namely, the illegal collection and
disposal of hazardous waste) and featur-
ing a sustained increase by contaminat-
ing public bodies controlled by given po-
litical parties.
The NGO Transparency International
considers that:
“Environmental degradation is another
consequence of corrupt systems. The
lack of, or non-enforcement of, envi-
ronmental regulations and legislation
means that precious natural resources
are carelessly exploited, and entire eco-
logical systems are ravaged. From min-
ing to logging, to carbon offsets, com-
panies across the globe continue to pay
bribes in return for a right to unrestricted
destruction”.
Already in its report for 2006, this organ-
isation indicated that «the environment
where corruption reaches its highest lev-
els lies at local governments; namely on
the coast or in the surroundings of large
cities” in the form of “qualification of ur-
ban land”.
This is why the price of housing in Spain
has increased in recent years. It seems
therefore mandatory to concentrate ac-
tions on a country-by-country basis with
a particular focus being placed on those
public institutions and official activities
more easily corruptible because of their
own administrative and political struc-
tures. Corruption is enrooted at nation-
al, regional and local levels alike. The
fight is expected to be fierce.5
It is necessary to implement approved
controls on the way public servants be-
have and act, by establishing clear cri-
teria, principles and procedures. The
rules on Public Contracts6
(certainly ex-
isting and not always easy to read and
ment of Mexico to host a high-level po-
litical signing conference in Mérida for
the purpose of signing the United Na-
tions Convention against Corruption.
In accordance with article 68 (1) of Res-
olution 58/4, the United Nations Con-
vention against Corruption entered into
force on 14 December 2005. A Confer-
ence of the States Parties is established
to review implementation and facilitate
activities required by the Convention.
(ii) The UN Convention against Trans-
national Organized Crime and the Pro-
tocols thereto3
The United Nations Convention against
Transnational Organized Crime, adopted
by General Assembly Resolution 55/25
of 15 November 2000, is the main inter-
national instrument in the fight against
transnational organised crime. It was
opened for signature by Member States
at a High-level Political Conference con-
vened for that purpose in Palermo, Italy,
on 12-15 December 2000 and entered
into force on 29 September 2003.
The Convention is further supplemented
by three Protocols, which target specific
areas and manifestations of organised
crime: the Protocol to Prevent, Suppress
and Punish Trafficking in Persons, Espe-
cially Women and Children; the Proto-
col against the Smuggling of Migrants
by Land, Sea and Air; and the Protocol
against the Illicit Manufacturing of and
Trafficking in Firearms, their Parts and
Components and Ammunition.
Countries must become parties to the
Convention itself before they can be-
come parties to any of the Protocols;
and
(iii) The OECD Convention on Combat-
ing Bribery of Foreign Public Officials in
International Business Transactions4
.
The OECD Anti-Bribery Convention es-
tablishes legally binding standards to
criminalise bribery of foreign public of-
ficials in international business transac-
tions and provides for a host of related
measures that make this effective. It is
the first and only international anti-cor-
ruption instrument focused on the “sup-
ply side” of bribery transactions.
The 34 OECD member countries and
seven non-member countries – Argen-
tina, Brazil, Bulgaria, Colombia, Latvia,
Russia, and South Africa – have adopt-
ed this Convention.
It is possible to consult also the OECD
Recommendation on Bribery and Offi-
Spain

Q2 Review
reasons why the Regional government
was involved in such a significant case
having material importance for the An-
dalusian Region.
In any event, it would seem that we are
facing a clear cut case of “prevarication”
(that is, the action whereby a public of-
ficial knowingly issues an unjust resolu-
tion) allegedly having some sort of eco-
nomic compensation on the part of the
awardee. The reasons may not neces-
sarily be immediate but the officials in-
volved are probably looking for a “gold-
en exile” once their public duties come
to an end, by being retained by the same
companies that benefitted from their il-
legal actions as public officials. This is
what is known as “revolving doors”, a
practice that is usual in the electric sec-
tor that is far from being the only one, as
most economic sectors are affected; in-
cluding but not limited to, the manage-
ment of the health system.
All these problems can sometimes be
addressed by simply implementing (or
improving) adequate regulatory controls
capable of preventing abuses. In other
instances it is a matter of granting judg-
es, prosecutors and auditors enough au-
thority to apply controlling actions (such
as environmental audits) and resources
to demand either strict compliance with
the law or the public responsibility of
the politicians and public officials vested
with decision making authority in pub-
lic contracts and awards, thus allowing
for the right control and transparency of
the process by all parties involved.
Corruption may come to an end if the
criteria, structures and procedures ap-
plicable to the award of public contracts
and the procedures for the implementa-
tion of large infrastructure projects are
made public, thus putting an end to the
“nothing will ever happen” feeling of
superiority that still seems to prevail in
spite of the many cases that are current-
ly under judicial scrutiny.
The position of the entrepreneurs fac-
ing institutionalised corruption is cer-
tainly sensitive, as they start to consider
that such illegal demands are a normal
part of doing business; so that in order
to survive in the market they may have
to go along with them (“if you want to
work here, you have to pay”)
Theallegationthatentrepreneursshould
refrain from doing business in this man-
ner is simple but –from the business per-
spective of the entrepreneurs – also un-
realistic as it is well known that in case
one refuses to pay in one region (and
even worse, if one files a denunciation
understand) must be strictly observed
in order to avoid the unlawful drafting
of bid terms and conditions and other
contracting provisions that are often tai-
lored made to fit a particular bidder who
is likely to be aware of such terms and
conditions in advance of other bidders
and is given privileged access to the eco-
nomic and other contents of competing
bids.
The recent case involving the award by
Public Bid of the exploitation of the Mine
of Aznalcollar by the regional Govern-
ment of Andalucía (Junta de Andalucía)
seems to be a clear cut example of the
sophisticated level of illegal procedures
applied by corrupted officials in securing
unlawful results.
While the case is still under judicial re-
view, the reports issued by the police
and the investigation carried out by ju-
dicial sources have – according to press
sources – identified a number of irreg-
ular behaviours affecting the formal as
well as the substantive aspects of the
Bid to the benefit of one of the two
companies that were competing for the
project.
In reviewing the national press (El País, 2
July 2015) it is possible to read:
“The police consider that when calling
the bid for tenders for the Aznalcollar
Mine, the Board of Andalusía altered the
criteria set forth by the Mining Law in
order to make them less concrete, thus
allowing for more discretional decisions
and for awarding it to a pre-selected
winner.
Researchers consider, further, that the
technical staff in charge of the bid issued
biased assessments intended to preju-
dice........” in particular, with regard to
the economic chapter and the budget
for investigation per sector of mining
grid. The Project of 7
………….. offered
an investment of ............. million Eu-
ros while the alliance ….. offered [only]
……… in spite of which this latter was
awarded the project with 75.9 points
over the 73.6 points of the other bidder.
The police construes that ................ was
unduly deprived of at least 6.5 points.”
Calculations made by applying unreal-
istic water volumes and the proposal of
constructing pools for toxic waste (for-
bidden by the law) would have been
enough to discard the allegedly winning
bid; assuming that the insufficient docu-
mentation presented had not been re-
garded as being serious enough by itself
to throw the bidder out of the competi-
tion. But the reverse actually happened.
It will be necessary to see the outcome
of the judicial investigation to clarify the
Spain

Q2 Review
against the officials involved) you will be
excluded from doing business in all re-
gions.
Companies are slowly introducing anti-
corruption principles in their SCR codes
and this should, in theory, improve the
public perception about their activities
and assist them in adopting common
measures against corruption.
Any civil servant or public official who is
aware that all his/her actions are under
close surveillance would be extremely
careful, as any damaging impact on his/
her public profile could put an end to
his/her political career or employment
with the Public Administration.
We are therefore facing a fierce fight
against practices that seriously threaten
the world’s environmental balance and
the sustainability of our eco-systems.
Our children do not deserve such dan-
gerous heritage.
1 Greenpeace quotes cases such as the
illegal burials of untreated toxic waste in Ori-
huela, the corruption in water management in
Mallorca with the “Cloaca” operation, urban-
istic speculation based on the re-conversion of
rustic land into urban land that was handed
over to construction companies at extremely
low prices, and others.
2 https://www.unodc.org/unodc/en/
treaties/CAC/
3 http://www.unodc.org/unodc/trea-
ties/CTOC/. See also The Globalization of
Crime: A Transnational Organized Crime
Threat Assessment (UN publication E.10.IV.6).
UNDP, 2011. And Fighting Corruption in the
Water Sector. Browse http://www.undp.org/
content/undp/en/home/librarypage/demo-
cratic-governance/anti-corruption/fighting_
corruptioninthewatersector.html
4 http://www.oecd.org/corruption/oec-
dantibriberyconvention.htm
5 According to Greenpeace, more than
1500 suits were brought in 2011 against cor-
rupt activities involving the illegal re-qualifica-
tion of land and more than 400 jail sentences
were issued.
6 For example, Spanish Legislative Roy-
al Decree 3/2011, of November 14 that ap-
proved the Joint Text of the Law on Contracts
of the Public Sector. (Official Bulletin “BOE”
núm. 276, of 16/11/2011).
7 Names and economic contents have
been voluntarily not disclosed.
Spain

Q2 Review
Luxembourg
jean-christian.six@allenovery.com
+352 44 44 55 727
Luxembourg for Private Funds
By Jean-Christian Six
own fully-fledgedAIFM. Of course,some
fund managers may rely on various ex-
emptions available under the AIFMD,
such as the exemption available for fund
managers managing portfolios of assets
not exceeding €100 million (or €500 mil-
lion for managers of unleveraged funds
with a minimum five-year lock-up pe-
riod). However, exempted AIFs do not
benefit from the AIFMD passport, and
this may restrict their ability to raise
funds within the EU. Certain fund man-
agers may get access to the AIFMD pass-
port without setting up their own AIFM
by appointing a third-party AIFM. The
use of third-party AIFMs is not appropri-
ate in all circumstances and is subject to
compliance with certain requirements
set out in the AIFMD. However, in cer-
tain cases it may be a very attractive so-
lution for fund managers without any
European presence, be it as an interme-
diary step before launching their own
AIFM.
Key trends of the Luxembourg private
fund market over the last two years in-
clude (i) the growth of infrastructure
funds and debt funds and (ii) a shift from
using regulated vehicles to unregulated
vehicles.
In terms of assets under management
and number of structures, hedge funds,
privateequityfundsandrealestatefunds
(and funds of funds focussing on these
asset classes) clearly represent the ma-
jority of Luxembourg AIFs. However, we
have seen over the last two years a ma-
jor uptake in the number of infrastruc-
ture funds and debt funds launched in
Luxembourg. A combination of factors
has been the impetus for the growth of
funds investing in those asset classes.
On the one hand, asset managers have
to fill in the gaps left by cash-strapped
public authorities that are no longer in
a position to fund global infrastructure
needs and by banks that have signifi-
cantly reduced their lending activities
in the wake of the financial crisis. On
the other hand, in a prolonged low-yield
environment, investor appetite for in-
frastructure and debt funds has grown
considerably. We can expect that infra-
structure and debt funds will continue
to grow steadily in the years to come.
Luxembourg has a strong track-record
in those asset classes and is therefore
uniquely positioned to continue benefit-
ing from this trend.
Another trend relates to the evermore
frequent use of Luxembourg’s unregu-
lated vehicles for the structuring of AIFs.
One of the key strengths of Luxembourg
as a fund domicile is the wide range of
fund vehicles available. However, un-
til two years ago all these fund vehicles
The term “private fund” does not bear
a specific legal meaning in Luxembourg.
However, Alternative Investment Funds
(AIFs) that do not offer their shares or
units to the public at large and that are
reserved for investment by sophisticat-
ed investors are frequently referred to as
“private funds”. Exam-
ples of private funds in-
clude for instance hedge
funds, private equity
funds, real estate funds,
infrastructure funds and
debt funds.
After breaching the sym-
bolic threshold of €3 tril-
lion in September 2014, the net assets
of Luxembourg funds have continued to
grow steadily during H1 2015, reaching
an amount in excess of €3.6 trillion as at
31 May 2015. Although UCITS still repre-
sent the bulk of that total amount, AIFs
(i.e., non-UCITS) have grown consider-
ably – with net assets as at 31 May 2015
in excess of €574 billion. This amount
only represents a portion of the Luxem-
bourg AIF market, as an increasing num-
ber of AIFs are established as unregu-
lated vehicles, for which no statistics are
publicly available for the time being.
In the course of 2014 and H1 2015, Lux-
embourg has consolidated its position
as a leading European fund domicile,
both for UCITS and AIFs. Clearly, as a Eu-
ropean onshore centre, Luxembourg has
benefited from the introduction of the
AIFMD regime. The AIFMD introduced
a passport enabling duly authorised EU
AIFMs to market their AIFs across the EU
on the basis of a market-
ing passport. Not sur-
prisingly, Luxembourg –
as a leading hub for the
global distribution of
funds – is emerging as
a jurisdiction of choice
for the establishment of
AIFs to be marketed on
a cross-border basis un-
der the new regime.
The AIFMD regime fully entered into
force on 22 July 2014, with the end of
the grand-fathering period. Nearly one
year after that important milestone, the
industry has now a much better under-
standing of what is expected of it under
the new regime and the benefits of the
passport. Clearly, complying with the
new regime requires significant invest-
ment, but in many cases these costs are
outweighed by the advantages linked to
the pan-EU passport. Also, pragmatic
solutions have emerged to ensure com-
pliance with the new requirements. Not
all fund managers need to set up their
Jean-Christian Six

Australia's ASIC and AFP face capability reviews

Australia's ASIC and AFP face capability reviews

Recomendados

Recomendados

Mais conteúdo relacionado

Mais procurados

Mais procurados (20)

Destaque

Destaque (20)

Semelhante a Australia's ASIC and AFP face capability reviews

Semelhante a Australia's ASIC and AFP face capability reviews (20)

Último

Último (20)

Australia's ASIC and AFP face capability reviews