Lawyer Issue

Malta – an Island of 

Opportunities 

Injunctions in Canada Can 

Reach Far and Wide 

Resolving Real Estate Disputes in 

Indonesia Q&A

Contents 

Contact 

www.lawyerissue.com 

Malta – an Island of Opportunities 4 

The Bahamas – Protecting the Confidentiality of Trusts 10 

Developments and Critical Issues of Corporate Governance in Italy 13 

Injunctions in Canada Can Reach Far and Wide 18 

Gas Regulations of Bangladesh 23 

Recent Change of Regulations and Practice in Construction and Energy 

in Japan 27 

People with Significant Control Register for UK companies 32 

Valuing a Component Technology of an Integrated Manufacturing Process 40 

Franchise Hong Kong and China 45 

Mediation – Practical Guidelines, Part 1: Basic principles and preparing for the 

mediation hearing 48 

Mediation – Practical Guidelines, Part 2: The mediator – role and limits as the 

moderator of the process of reaching an agreement 52 

Seabed Mining and the application of Maritime Law Concepts 59 

Recent Changes in the Competition Regulatory Framework in Latvia 66 

Resolving Real Estate Disputes in Indonesia Q&A 71 

50 Jurisdictions, 300 Million Potential Customers: Unlocking One of the 

World’s Biggest Markets, The United States of America 76 

Can Parents Contractually Select the Forum for A Custody Dispute? 80 

Quantum awards in international arbitration – how can arbitrators and 

experts get it right? 84 

Environmental Legal Risk in Mergers and/or Acquisitions 88 

Structuring European M&A activity: why Gibraltar? 91

Company Formations 

Malta – an Island of Opportunities 

By Dr. Tonio Ellul, 

Dr. Louise Ellul Cachia Caruana 

1. Corporate Vehicles 

Over the years, Malta has developed a 

strong reputation as a financial services 

centre offering an attractive and 

competitive environment for operators 

looking to set-up a business or invest in a 

European Union compliant jurisdiction. 

The benefits of selecting Malta are 

numerous, including a quick and efficient 

incorporation process, comparatively 

low running costs, a skilled and diverse 

workforce, and an extensive treaty network. 

The Maltese jurisdiction recognises a 

variety of legal vehicles taken from both the 

Civil and the Common law tradition thus 

allowing individuals a choice of structures to 

fit their specific needs, whether in relation 

to business structuring, estate planning or 

other purposes. The various forms include 

commercial partnerships, public and 

private limited liability companies, trusts, 

foundations and associations. 

2. Limited Liability 

Companies 

The defining feature of a Limited Liability 

Company is the fact that the liability of the 

shareholders is limited to the part unpaid (if 

any) on their shares. 

Form 

A limited liability company is the preferred 

means of doing business in Malta, due to 

its separate legal personality and limited 

liability. Limited liability companies can 

be classified as either of a private nature 

(Limited or Ltd) or of a public nature (Plc). 

With the exception of single member 

companies (discussed below), private and 

public companies must have a minimum of 

two shareholders. 

Private limited companies are formed 

by means of capital divided into shares 

and shareholder liability is limited to the 

amount of unpaid share capital. In a private 

company, the right to transfer shares must 

be restricted, for example through preemption 

rights, the number of members 

cannot exceed fifty and invitations to 

the public to subscribe to its shares or 

debentures are prohibited. 

It is possible to set-up a single member 

private company, however, such a company 

may only carry out one principal activity. 

In addition, it must satisfy the conditions 

of a private exempt company, being, that 

it cannot have more than fifty debenture 

holders and that no body corporate can act 

as a director. 

There are no restrictions regarding the 

nationality or the place of residence 

of the directors, shareholders or other 

officers of a Malta company. Furthermore, 

a Malta company may be set-up for any 

lawful purpose. There are, therefore, no 

restrictions regarding the type of activity of 

a company, provided that certain activities 

may render the company subject to license 

requirements such as, for example, gaming 

companies, telecommunications companies 

and financial services companies. 

Shareholders in Malta companies can be 

either individuals or bodies corporate. It 

is also possible for shares in a Maltese 

company to be held on a fiduciary basis 

by an entity authorised/ licensed for such 

purposes allowing the beneficial owners to 

retain confidentiality. 

The Memorandum and Articles of 

Association of both private and public 

companies must contain: 

• the name of the company; which is to 

include Plc, Limited or Ltd, subject to the 

public or private nature of the company 

respectively, 

• the name and residence of the 

subscribers (in the case that a fiduciary 

is appointed, the name and details of the 

fiduciary are specified), 

• the registered office of the company, 

which must be located in Malta, 

• objects of the company, 

• the authorised and issued share capital 

of the company divided into shares of 

fixed nominal value, 

• number of directors, 

• name and residence of first directors, 

and name and registered or principal 

office, if the director is a body corporate, 

• the manner in which the company is 

to be represented, and the chosen 

representative, and 

• name and residence of first company 

secretary. 

Share Capital Requirements 

The minimum share capital in private 

limited companies is €1,165 and the 

minimum percentage paid up is 20%, 

whereas in public companies the minimum 

share capital is €46,588 and minimum 

percentage paid up is 25%. 

Time 

Following satisfactory completion of the 

KYC/due diligence process, a company 

can be registered by submitting the 

necessary documentation to the Registrar 

4 | LawyerIssue 5


of Companies, including therefore the 

• he is a minor who has not been 

the management of the property held under 

returns every quarter and pay the relative 

Memorandum of Association as well as an 

emancipated; or 

fiduciary obligation, and are duty bound 

VAT thereon. The company may also need to 

identification document of the subscribers 

and proof that the initial share capital was 

• he is the subject to a disqualification 

to return property held under a fiduciary 

obligation when their mandate terminates. 

submit recapitulative statements depending 

on its activities. 

deposited in favour of the company-information. 

The Memorandum and Articles 

of Association must be signed by the 

subscribers or their attorneys. Generally, 

order. 

Power 

Directors, as officers of the company, are 

entrusted with keeping statutory registers 

and minute books such as a register of 

5. Taxation of Malta 

Companies 

registration is completed within 24 hours of 

Company directors are generally vested 

members, a register of debentures, minutes 

Companies registered in Malta are very tax 

receipt of all documentation required. 

with the legal and judicial representation 

of board and general meetings’ and minute 

efficient vehicles which one can use to carry 

Cost 

of the company. This authority is however 

limited by the Companies Act, in that, 

directors may not: 

books as well as completing the annual 

returns and filing any changes in the 

company’s corporate structure with the 

out trading activities and / or hold overseas 

investments. A company is considered 

resident in Malta if it is incorporated in Malta 

A registration fee is to be paid to the 

Registrar of Companies, the value of which 

• act or enter into transactions which 

Registry of Companies. 

or, in the case of a foreign body of persons, 

if its management and control are exercised 

depends on the amount of authorised 

go beyond the company’s objects and 

Directors are personally liable in damages 

in Malta. Companies that are resident and 

share capital of the company being set-up 

powers; 

for any breach of duty committed as well 

domiciled in Malta are subject to income 

but ranges between a minimum of €245 (for 

a share capital that does not exceed €1,500) 

• disregard other limitations imposed by 

as liable to make a payment towards the 

company’s assets, as deemed fit by the 

tax in Malta on their worldwide income and 

capital gains at the rate of 35% which is the 

and a maximum of €2,250 (for a share 

the company’s Memorandum or Articles 

court, upon dissolution, if the company 

maximum rate of tax in Malta. 

capital exceeding €2,500,000). 

of Association; or 

continues to trade while said director knew, 

3. Directors (power, 

appointment, duties and 

liability) 

Appointment 

• disregard instructions properly issued by 

the company in relation to the exercise 

of their powers. 

• The Directors have the power to appoint 

and remove the company secretary. 

or ought to have known that there was 

no reasonable prospect that the company 

would avoid being dissolved due to 

its insolvency. 

The court may release the director from 

liability if it is satisfied that the director took 

However, in view of Malta’s full imputation 

system of taxation, any income tax 

paid by the company is credited in full 

to the shareholder upon a distribution 

of dividends, so as to avoid economic 

double taxation and, in addition, entitles 

shareholders to a refund of any tax paid 

The business of limited liability companies 

is conducted by its directors. The directors 

are appointed by the shareholders. A 

private company must have at least 

one director, two in the case of a public 

company. Directors may be individuals or 

Duties and Liabilities 

The directors must perform their duties 

with a degree of care, diligence and skill 

which is to be exercised by a reasonably 

every step he ought to have taken with a 

view of minimising the potential loss to the 

company’s creditors. 

4. Filing Obligations 

by the company which is in excess of the 

shareholders’ income tax liability. 

Tax Refunds 

Shareholders of Maltese resident companies 

corporate entities. The shareholder/s may 

diligent individual. They must not have a 

All companies registered in Malta must 

are also entitled to a refund with respect to 

be appointed as director/s. A person shall 

conflict of interest between the benefit of 

prepare financial statements which must be 

the corporate tax paid by the company on 

not be qualified for appointment or hold 

the company and their personal benefit and 

audited by a Certified Public Accountant who 

the profits distributed to the shareholders. 

office as director of a company if: 

they must not compete with the company. 

must also be a registered auditor. Audited 

The amount of refund varies depending on 

• he is interdicted or incapacitated or is an 

undischarged bankrupt; 

• he has been convicted of any of the 

crimes affecting public trust or of theft 

Furthermore, the Director qua fiduciaries 

owe fiduciary obligations towards the 

company which include the duty of loyalty 

and care of a bonus pater familias. They 

must keep property acquired under 

financial statements must be presented to 

the tax authorities and to the Registry of 

Companies on an annual basis. 

A company is also required to prepare and 

submit its annual tax return and make 

the type of income being distributed. 

Participation Exemption 

The participation exemption regime ensures 

that dividends and capital gains derived by 

or of fraud or of knowingly receiving 

fiduciary obligations separate from their 

payment of the annual tax due. If the 

companies registered in Malta from their 

property obtained by theft or fraud; 

own personal property, they must render 

company’s activities are subject to VAT, 

qualifying participating holdings in any 

an account and keep records in relation to 

the company will also need to submit VAT 

jurisdiction will not be subject to any tax 



in Malta, provided that the anti-avoidance 

measures are satisfied in case of dividend 

income. 

Alternatively at the option of the Malta 

Company, income or gains derived from 

a participating holding may be taxed at a 

flat rate of 35% less any available double 

taxation relief. In such circumstances, 

however, upon a subsequent distribution 

of dividends by the company out of the said 

taxed income or gains, the shareholders of 

the Malta company would be entitled to a 

full refund (100%) of the Malta tax paid. 

Double Taxation Relief in Malta 

Malta does not impose any withholding tax 

on outgoing dividends, interest and royalties 

irrespective of the recipient’s tax residence 

and status. However, income received from 

foreign sources may be subject to foreign 

withholding tax or other foreign taxes. 

Consequently Malta’s fiscal legislation offers 

different forms of double taxation relief 

to ensure that double taxation is avoided. 

Malta has concluded more than 70 double 

taxation agreements, mostly based on the 

OECD Model Convention, which provide for 

the relief of double taxation. 

Branches 

Maltese legislation provides for companies 

incorporated or constituted outside Malta 

to conduct business in or through Malta 

by using a branch or a place of business in 

Malta. This creates a viable alternative when 

companies opt not to register a separate 

legal entity, yet carry out business in Malta 

by an extension of their foreign corporate 

vehicle. As a result, a branch qualifies to be 

considered as a company registered in Malta 

and is taxed in Malta on any income and 

gains arising in Malta which are attributable 

to the branch at a rate of 35%. Tax refunds 

may still be claimed in relation to dividends 

distributed from such branch profits. 

6. Other Vehicles 

Other commercial partnerships 

Maltese law provides for partnerships 

en nom collectif where the liability of the 

partnership is guaranteed by the unlimited, 

joint and several liability of all the partners, 

and partnerships en commandite where 

the liability of the partnership is guaranteed 

by the unlimited, joint and several liability 

of the general partners, and by the liability, 

limited to the amount, if any, unpaid on the 

contribution, of one or more partners, called 

limited partners. 

The advantage with partnerships is that they 

can elect to be taxed as companies or can 

be tax transparent in which case the income 

of the partnership is taxed at the level of the 

partners. 

Trusts 

The Trusts and Trustees Act regulates the 

creation and administration of trusts. A 

Maltese trust may be created verbally, in 

writing (including by will), by operation of 

law or by a judicial decision. Trusts are an 

ideal instrument for estate planning as they 

allow flexibility and a degree of privacy. 

Foundations 

Maltese law also provides for the creation 

and administration of foundations (whether 

set-up for private or charitable purposes). 

A foundation, as opposed to a trust is a 

separate legal entity subject to registration 

with the Registrar of Legal Persons. 

Unlike the trust deed, which is kept by the 

trustee under confidentiality, the deed of 

foundation is registered with the Registrar of 

Legal Persons and is available for inspection having non-commercial aims. 

by the public. However, the identity of 

the beneficiaries may be specified in a 

The presence of such a wide variety of 

separate document which is not published. vehicles, together with an advantageous tax 

Foundations are the ideal structure for nonprofit 

organisations because they enjoy the set-up a business or within which to invest. 

regime makes Malta and ideal jurisdiction to 

benefit of separate legal personality while 

Dr. Tonio Ellul 

Partner at EMD Advocates 

T: +356 22030000 

Email: tellul@emd.com.mt 

Tonio is a Partner at EMD Advocates since 2003 and also holds directorships in various companies within the EMD 

group. He specialises in corporate law, gaming law, trusts and foundations, tax law and employment law. 

Prior to joining EMD, Tonio provided in house Counsel for one of the largest consultant firms in Malta and was a 

member of the Malta-EU Steering Action Committee (MEUSAC) Core Group. He has also been Visiting Lecturer and 

Examiner in company and commercial law at the University of Malta 

Dr. Louise Ellul Cachia Caruana 

Partner at EMD Advocates 

T: +356 22030000 

Email: lellulcachiacaruana@emd.com.mt 

Dr. Louise Ellul Cachia Caruana is a Partner at EMD Advocates since 2012. She previously held the position of a Senior 

Consultant with the same firm. Prior to joining EMD, between 1992 and 2006, Louise held the position of Head of the 

Legal Department of one of the four largest consultancy firms in Malta. Louise is a former member of the Board of 

Governors of the Malta Financial Services Authority. She specialises in corporate law, trusts and foundations, tax law 

and employment law. 

Louise is examiner of the Business and Corporate Law module for the Association of Chartered Certified Accountants 

(ACCA) and a Moderator and Examiner of the Trust Foundation Certificate run by Malta Institute of Financial Services 

Practitioners and is Senior/Visiting Lecturer at the Faculty of Law, University of Malta. 


Trusts 

The Bahamas – Protecting the 

Confidentiality of Trusts 

By Sean N. C. Moree, 

Vanessa Lee 

Section 83 of the Trustee Act is an enactment 

unique to the Bahamian jurisdiction which 

attempts to codify the rights and obligations of 

trustees in relation to disclosure. The disclosure 

of trust information by trustees has been 

the subject of judicial debate for centuries; 

and as trusts have developed so too has the 

jurisprudence on the rights of beneficiaries 

and third parties to trust information and 

documentation. Recently, the trust has come 

under intense scrutiny from regulators and 

tax agencies alike, so the clarity Section 83 

provides not only assists the appointed trustee 

and designated beneficiaries, but provides 

comfort to settlors who wish to keep their wishes 

private and desire to shield his/her trustee from 

unwanted interference. 

Subsections (1) and (2) simply require the trustee 

to take reasonable steps to inform a beneficiary 

with a vested interest under the trust of its 

existence and general nature of their interest or 

in the event there is no beneficiary with a vested 

interest, a person who is capable of enforcing 

the trust and the general nature of the interest 

entitling him/her to enforce. This formalizes the 

long settled duty of a trustee to notify the objects 

of the trust of its existence, first discussed in 

Lloyd v Attwood (1859) 3 De G. & J. 614 at 649. The 

subsections clearly limit the notification to the 

existence of the trust and the general nature of 

that interest, which settles any doubt as to the 

scope of the duty to notify. 

However, the trustee may escape the aforesaid 

duty of notification in the event it deems, in its 

absolute discretion, that such notification would 

not be in the best interest of the beneficiary(s). 

Obviously the exercise of this discretion would 

need to be exercised properly and in accordance 

with the fiduciary obligation the trustee owes the 

beneficiaries under the settlement. 

Subsection (3) expressly prohibits disclosure of 

the existence of the trust to (a) any beneficiaries 

who are interested only contingently; (b) any 

persons who are only objects of discretionary 

powers; or (c) any other persons who are not 

entitled to vested interests under the trust. 

This does not prohibit disclosure to the class of 

persons aforesaid if it is necessary or convenient 

in connection with distributions or in the interest 

of the trust as a whole. The trustee retains the 

absolute discretion to disclose the existence 

of the trust in subsection (4); but the decision 

to make such disclosures should be made 

thoughtfully. 

Subsection (5) deals specifically with the 

disclosure of the trust instrument, financial 

statements of the trust and all financial 

statements of companies wholly owned by the 

trustees of the trust. This is helpful as there has 

been both judicial and academic discussion as to 

the scope of the term ‘trust documents’. With the 

burgeoning use of trusts for increasingly diverse 

purposes, so too has the type of documents 

attributed to trusts and their management. 

The disclosure of trust documentation to 

beneficiaries often causes trustees angst, as 

they must balance their duty to protect the 

confidentiality of trust information against the 

interests of the beneficiary and their desire to 

be informed. While beneficiaries who hold a 

vested interest in the trust are entitled to trust 

documents, all other persons are specifically 

excluded from access unless the trustee 

deems disclosure necessary for the proper 

administration of the trust and is for the trusts 

overall benefit. In the event a trustee wishes to 

disclose documentation, it must consider any 

request from a beneficiary which has requested 

confidentiality and determine if confidentiality is 

in the best interest of other beneficiaries. 

Notwithstanding the trustee’s ability to disclose 

trust documents to vested beneficiaries, 

subsection (8) prohibits the production of (i) 

any document revealing the wishes of the 

settlor; (ii) documents relating to the exercise 

of any discretion of the trustee; or (iii) any 

documents disclosing deliberations or reasons 

for the exercise of the trustee’s discretion. 

This prohibition extends to any process of 

discovery or inspection within litigation. One can 

understand Parliament’s sacrosanct treatment 

of a trustee’s exercise of its discretion but 

the provision severely limits the ability of a 

beneficiary trying to sustain a claim against 

a trustee for the wrongful exercise of a its 

discretion. 

Section 83 clarifies the common law principle 

established in In re Londonberry’s Trusts: Peat 

v. Walsh [1965] Ch. 918 which recognizes a 

beneficiaries’ entitlement to access trust 

documents, save for information or documents 

evidencing the deliberations of trustees when 

exercising his/her discretionary powers. The 

Act sets clear parameters as to the scope of 

the disclosures, the class of persons entitled to 

disclosure and the type of documents which are 

accessible. 

While the trust instrument can always prescribe 

additional entitlements of disclosure upon a 

beneficiary(s), the enactment of Section 83 

displays a Parliamentary intention to protect 

trustees from unwarranted disclosures, preserve 

the sanctity of the trustee’s discretion and to 

afford privacy to the settlor’s wishes. Although 

the Trustee Act was enacted in 1998, section 83 

has remained largely untested in the Bahamian 

Courts. There are no published Bahamian cases 

which consider the ambit of section 83. 

Recently, the English High Court considered the 

extent of Section 83 in the case of Dawson Damer 

& Others v. Taylor Wessing [2015] EWHC 2366 

(Ch). Here, the beneficiaries of a Bahamian trust 

sought the disclosure of legal advice provided 

to the trustee by its English solicitors. Judge 

Behrens found that the Bahamian Trustee Act 

differed from the English common law rules and 

the beneficiaries were not entitled to information 

that the Trustee was not required to disclose 


under Section 83. He concluded: 

“I have great difficulty in following the concept that 

the principles of disclosure in relation to trustees 

and beneficiaries can in some way be separated 

from legal professional privilege…If and in so far 

as the exception in paragraph 10 of Schedule 7 is 

restricted to the English law of disclosure and if 

and in so far as the documents discoverable under 

English law are more extensive than those under 

Bahamian law it does not seem to me a proper 

use of the 1998 Act to enable the Claimants to 

obtain documents that they could not obtain in the 

Bahamian proceedings.” 

Judge Behrens’ decision is currently under appeal 

in England, but his affirmation of the protection 

afforded to trustees under section 83 and his 

comparison to the English common law position 

is noteworthy. 

Historically principles of disclosure by trustees 

were established by the common law. The 

clarification provided by Section 83 is sure to be 

challenged in the near future but there is little 

doubt that its enactment provides the settlor 

and trustee with a higher level of confidentiality 

and protection. Its exclusivity to the Bahamian 

jurisdiction continues to provide the Bahamas 

with an advantage over other jurisdictions as to 

the level of protection afforded to trustees of 

Bahamian trusts. 

Developments and Critical Issues of Corporate 

Governance in Italy 

by Alberto Rittatore Vonwiller, 

Antonio Franchi 

Sean N. C. Moree 

Partner at McKinney, Bancroft & Hughes 

T: +1 242 322 4195 

Email: SNMoree@mckinney.com.bs 

Sean N. C. Moree is a partner in the Trusts & Private Client and Litigation & Dispute Resolution Practice 

Groups at McKinney, Bancroft & Hughes. While his practice includes corporate and commercial litigation, 

he specializes in trust and insolvency litigation. He received his Bachelor of Law Degree in 2002 from the 

University of Nottingham and completed the Bar Vocational Course at BPP Law School in 2003. Thereafter 

he was called to both the English and Bahamas Bars in 2003, Sean went on to complete his Masters of Law 

Degree at Wake Forest University, specializing in International Civil Litigation. Sean has been with McKinney, 

Bancroft & Hughes since 2005 and became a partner in 2012. 

Vanessa Lee 

Associate at McKinney, Bancroft & Hughes 

T: +1 242 322 4195 

Email: VLee@mckinney.com.bs 

Vanessa Lee is an associate in the Litigation & Dispute Resolution Practice Group and specializes in trust and 

insolvency litigation. She received a Bachelor’s Degree in International Studies and Political Science from the 

University of Miami in 2006 and completed a Juris Doctor from Nova Southeastern University in Florida in 

2010. She was called to the Florida Bar in 2010 and The Bahamas Bar in 2014. 

A summary of the most significant 

amendments to the Corporate Governance 

Code for Italian listed companies (the 

“Code”) approved on July 9, 2015 by the 

Corporate Governance Committee seated at 

the Italian Stock Exchange (the Committee) 1 

is indicated here in. 

1 The Committee, with seat at Borsa Italiana S.p.A., Milan, 

Piazza Affari 6 (the Italian Stock Exchange), was set up, in 

its current composition, in June 2011 on the initiative of 

the main Italian associations representing corporations 

and institutional investors (ABI, ANIA, Assonime, Confindustria, 

Assogestioni) and Borsa Italiana S.p.A. and it is 

composed of representatives of the promoters above and 

Italian listed companies. 

The Committee is in charge of promoting good corporate 

governance of Italian listed companies, pursued by a 

constant alignment of the Code with best practices and 

through initiatives which would enhance the credibility of 

the Code. 

Adherence to the Code (or any other 

corporate governance code) by Italian listed 

companies is voluntary and based on the 

so-called “comply or explain” principle 2 . 

For companies adhering to the Code, the 

changes (with the exclusion of changes 

regarding the statutory auditors, which 

2 As provided pursuant to Directive 2013/34/EU and 

Article 123-bis of the Consolidated Law on Finance (i.e., 

Legislative Decree No. 58 of 24 February 1998, as subsequently 

amended), each listed company is required to 

include a “corporate governance statement” in its annual 

management report, indicating “the corporate governance 

code which the undertaking may have voluntarily decided 

to apply”. In case a listed company decides to depart 

from any provision of the corporate governance code to 

which it voluntarily adhered, it should provide a clear and 

exhaustive explanation thereof. A listed company should 

also adequately explain its decision not to adhere to any 

corporate governance code (see Article 20 of EU Directive 

2013/34/EU; see also the Commission Recommendation 

of April 9, 2014 “on the quality of corporate governance 

reporting (“comply or explain”)”. 


Corporate Governance 

listed companies are invited to apply since 

new provision also seems to suggest 

of committees be recorded with specific 

pursuant to a voting-list mechanism, 

the first renewal of the Board of Statutory 

that sustainability matters (such as 

minutes has been integrated with the 

which is intended to grant to the minority 

Auditors occurring after the fiscal year 

environmental matters, social and 

recommendation that the chairman 

shareholders the right to designate their 

beginning in 2015) should be implemented 

employee-related matters, human rights 

should provide information to the board 

representatives on the Board. The voting-list 

by listed companies by the end of the 

concerns, anticorruption and bribery 

of directors regarding aforementioned 

mechanism, including the right to present 

fiscal year beginning in 2016, providing 

matters) 6 may have a relevant impact on the 

recording at the first available meeting (see 

a list of candidates, is regulated by each 

information about such implementation 

business and should be considered in the 

Criterion 4.C.1. of the Code). 

company’s by-laws. 

in the corporate governance report to be 

definition of the risk profile and strategic 

published in the following fiscal year. 

objectives of a company. 

The second and more relevant amendment 

Normally, the lists of candidates are 

Amendments 

The main amendments of the Code are 

Composition of the Board 

of Directors 

concerns the recommendation that the 

Boards of Directors of companies listed 

on the FTSE MIB index 7 evaluate the 

opportunity to establish a committee in 

presented by the shareholders. However, 

Comment to Article 5 of the Code 

provides that the Committee highlights 

the importance of an engagement of the 

indicated for each topic here below. 

The Committee recommends that the 

charge of matters regarding the corporate 

nomination committee (appointed internally 

Role of the Board of 

Directors 

corporate governance report (to be 

prepared by listed companies’ directors 

jointly with the management report and 

the financial statement) should state the 

social responsibility (see the Comment 

section of Article 4 of the Code). 

The sustainability issues related to 

to the Board and composed in majority 

of independent directors) “in case the 

Board itself, as far as it is consistent with 

applicable law, submits a slate for the 

The Committee extends the role of the 

type and the organizational methods of 

the business activities of the company 

renewal of the Board”9. 

Board of Directors in relation to the 

any initiatives which occurred during the 

and its interaction dynamics with all its 

sustainability of the business. In particular, 

relevant fiscal year with regard to the 

stakeholders would be supervised by this 

Furthermore, the Committee also 

the Board of Directors has to define the risk 

induction sessions dedicated to directors 

committee. As an alternative to the creation 

recommends that, if the listed company has 

profile of the company consistently with the 

and statutory auditors, which should be 

of a dedicated committee, the Board of 

adopted a plan for the executive directors’ 

company’s strategic objectives, considering 

periodically organized by the chairman. 

Directors may choose whether to group 

succession, the plan’s procedure should 

the risks that may be relevant for the 

sustainability of the company’s business 

activities in the medium-long term 3 . 

The new provision expands the principle 

set out in Article 1 of the Code, whereby 

Independent Directors 

The Committee expands and clarifies the 

recommendation according to which the 

independent directors meet at least once a 

or to assign the tasks above to the other 

established committees, most significantly 

the Internal Control and Risk Committee. 

This second recommendation is not subject 

to the “comply or explain” principle, as it 

clearly outline the plan’s scope, instruments 

and timeline. 

Internal Control and Risk 

Management System 

the Board of Directors has to pursue the 

year separately from the other directors (see 

is included in the Comment section of the 

The Committee also passed changes 

overarching goal of “creating value for the 

Criterion 3.C.6. of the Code). 

Code 8 . 

regarding the system of internal control 

shareholders over a medium-long term 

period” 4. 

On the other hand, the new provision 

includes, among the interests that the 

Board should take care of, the principle 

Establishment and 

Functioning of the Internal 

Committees of the Board of 

Directors 

Appointment of Directors 

Under Italian law the Board of Directors of 

Italian listed companies governed by the socalled 

“traditional” governance mechanism 

and risk management, which significantly 

strengthen the effectiveness of internal 

controls. 

In particular, the revised Article 7 of the 

Code now explains that an effective system 

of sustainability, in compliance with the 

The Committee also adds two new 

is appointed by the shareholders, 

of internal controls and risk management 

most recent European legislation 5 . This 

3 Criterion 1.C.1, letter b), of the Code. 

4 Principle 1.P.2 of the Code. 

recommendations within the general 

recommendations on the establishment, 

composition and functioning of the internal 

committees of the Board of Directors. 

7 The FTSE-MIB is the primary benchmark index for the 

Italian equity markets, comprising 40 shares listed on the 

Italian Stock Exchange and capturing approximately 80% 

of the domestic market capitalization. The Index is comprised 

of highly liquid, leading companies in Italy. 

contributes to the reliability of the 

information provided to the corporate 

bodies and not only of the publicly disclosed 

5 Reference is especially made to Directive 2014/95/EU 

of 22 October 2014, providing new disclosure obligations 

for larger undertakings on “non-financial information” – 

and in particular on environmental, social and employee 

matters, respect of human rights, anti-corruption and 

bribery matters – and information on diversity policies. 

First, the recommendation that meetings 

6 See Whereas 6 of Directive 2014/95/EU of 22 October 

2014. 

8 However, since the sustainability matters should 

be included in the definition of the risk profile of each 

company pursuant to the new Criterion 1.C.1, letter b), of 

the Code, the Board of each company should reasonably 

supervise such sustainability matters (if appropriate, with 

the support of the Control and Risk Committee). 

9 Consider that under Italian law do not exist specific 

provisions on the subjects entitled to the formation of the 

lists of candidates to be voted by the shareholders and 

that, according to some scholars, the Board of Directors 

in office may decide to present such a list of candidates. 

The Code seems to support this interpretative position. 


Corporate Governance 

financial information 10 . Particularly, this 

provision includes the reliability of the 

internal flow of information among the 

core tasks of an effective system of internal 

control and risk management. 

In this regards, in the Comment to Article 

1, the Code provides the following: “under 

relevant circumstances, the Board 

of Directors acquires any necessary 

information and adopt any suitable 

measure to protect the company and the 

information to the market”. 

The Control and Risk Committee 11 appointed 

within the Board may assist the Board in 

this respect. In fact, the Control and Risk 

Committee “supports, with adequate 

preliminary activities, the Board of 

Directors’ assessments and resolutions 

on the management of risks arising from 

detrimental facts that the Board may have 

been become aware of” 12 . 

The aforementioned amendment represents 

an important development as, pursuant to 

the Code, the Control and Risk Committee 

is composed by a majority, or exclusively, of 

independent directors 13 . 

According to the provisions of the Code, 

each company should provide for the 

10 Principle 7.P.2 of the Code. 

11 According to Principle 7.P.3. letter (ii) of the Code, 

the Board of Directors shall identify within the Board “a 

control and risk committee […] to be charged with the 

task of supporting, on the basis of an adequate control 

process, the evaluations and decisions to be made by the 

Board of Directors in relation to the internal control and 

risk management system, as well as to the approval of the 

periodical financial reports”. 

12 Criterion 1.C.2, letter g) of the Code. 

13 Pursuant to principle 7.P.4 of the Code, “The Control 

and Risk Committee is made up of independent directors. 

Alternatively, the committee can be composed of non-executive 

directors, the majority of which being independent; 

in this latter case, the chairman of the committee is 

selected among the independent directors. If an issuer is 

controlled by another listed company or is subject to the 

direction and coordination activity of another company, 

the committee shall be made up exclusively of independent 

directors”. 

coordination of the corporate bodies and 

functions with specific tasks in the context 

of the system of internal control and risk 

management “in order to enhance the 

efficiency of the internal control and risk 

management system and reduce activities 

overlapping”. 

In order to reinforce this provision, the Code 

now requires each company to describe in 

its annual Corporate Governance Report 

the instruments adopted to ensure the 

coordination among the corporate bodies 

and functions responsible for the system of 

internal control and risk management 14 . 

In the Comment to Article 7, the Code 

provides that an adequate internal control 

and risk management system – at least 

in the most significant companies (i.e., 

companies included in the FTSE-MIB index) – 

should include a so-called “whistleblowing” 

system, consistently with domestic and 

international best practices and ensuring “a 

specific and confidential communication 

channel as well as the anonymity of the 

reporting person”. 

Statutory Auditors 

The last amendments to the Code 

approved by the Committee concern the 

recommendations applicable to statutory 

auditors. 

Pursuant to the “traditional” governance 

structure of Italian joint stock corporations, 

the shareholders appoint a Board of 

Statutory Auditors, vested with wide 

monitoring responsibilities within the 

supervisory system of a company. 

According to the amendments passed by the 

Committee, the results of the verification 

of the independence requirements of the 

statutory auditors, to be performed after 

14 Criterion 7.C.1, letter d) of the Code. 

their appointment and subsequently on 

Moreover, the Code now provides a 

an annual basis, shall be submitted to the 

new remuneration criteria, since the 

Board of Directors. The Board will then 

compensation of the member of the Board 

disclose such results through a press release of Statutory Auditors was not proportionate 

to the market relating to the first verification to their wide spectrum of responsibilities 

conducted after the first appointment and 

and potential liabilities (Criterion 8.C.3. of 

in the relevant corporate governance report the Code). 

with reference to the annual verification 

(Criterion 8.C.1. of the Code). 

Alberto Rittatore Vonwiller 

Partner at Carnelutti Studio Legale Associato 

T: +39 02 65585 1 

Email: alrittatore@carnelutti.com 

Alberto Rittatore Vonwiller is a partner in Carnelutti Studio Legale Associato. He is a member of the firm’s 

corporate and M&A department, where his practice focuses on mergers and acquisitions and corporate 

finance work, including joint ventures, shareholder agreements, securitizations, loans, and commercial 

contracts in Italy and abroad. 

Antonio Franchi 

Partner at Carnelutti Studio Legale Associato 

T: +39 02 65585 1 

Email: afranchi@carnelutti.com 

Antonio Franchi is a partner in Carnelutti Studio Legale Associato. He is a member of the corporate and 

M&A department, where his practice focuses on civil, commercial and corporate law. 

He advises Italian and foreign entities, including listed companies, in corporate and M&A matters, capital 

contributions in the form of transfers of businesses and shares, joint ventures, shareholders’ agreements, 

sale and purchase of real estate properties and commercial contracts. 


Intellectual Property 

Injunctions in Canada Can Reach 

Far and Wide 

By Michael D. Crinson 

Intellectual property rights (IPRs) provide the holder with a monopoly and 

control over competitors use of a particular technology, trademark, creation or 

trade secret. Accordingly, injunctive relief for an IPR holder is an extremely 

useful and important remedy to prevent infringement of their IPRs. In 

Canadian Courts this is recognised and the Courts have shown a willingness 

and flexibility where necessary to use the power of the injunction to ensure 

compliance with IPRs. This includes the permanent injunction, interlocutory 

injunctions, injunctions that extend beyond the geographical bounds of 

Canada, and injunctions against entities that are not per se infringing IPRs 

but are, even inadvertently, facilitating that infringement. 

Most IPRs are embodied in statutes in 

Canada and those statutes include a 

statutory authority for the grant of an 

injunction in cases of infringement of the 

IPR. The Patent Act 1 authorises the Court, 

on the application of either a plaintiff or 

defendant in an action for infringement 

to “make such order as the Court…sees 

fit restraining or enjoining…further use, 

manufacture or sale”. Broad language 

to similar effect is found in the Industrial 

Design Act 2 . The Trademarks Act 3 seems 

broader since “any interested person” may 

apply for an injunction where something 

has been done contrary to the Act. 

The broad discretion of Courts is quite 

explicit in the wording of the Copyright Act 

which states that the owner of copyright 

is entitled to an injunction as a remedy 

for infringement of copyright and may be 

entitled to an injunction for infringement of 

moral rights 4 . 

The Copyright Act goes even further than 

other Canadian intellectual property 

statutes in that it authorises what are 

known as wide injunctions 5 , that is an 

injunction to prevent infringement of a 

copyright work that has not been infringed 

where it is granting an injunction in respect 

of a copyright work that has been infringed 

provided the other work that will be the 

subject of the wide injunction has the 

same copyright owner (or person with an 

interest) and the plaintiff satisfies the court 

that the defendant will likely infringe the 

copyright in those other works unless an 

injunction issues. 

1 section 57 

2 section 15.1 


4 section 34 


The wide injunction can even apply to 

works that were not owned by the plaintiff 

at the time proceedings were commenced 

and even to works that did not exist at the 

time the proceedings were commenced. 

Clearly, the Courts are granted a broad 

discretion to award the equitable remedy 

of an injunction in order to remedy a 

wrong in relation to an IPR. 

While injunctions are usually considered 

discretionary the Federal Court of Appeal 

(which most frequently hears intellectual 

property matters) has said that it is only 

conduct of the party claiming an injunction 

that can bar interlocutory relief. 

The refusal to grant a permanent injunction 

after a determination of infringement 

has been likened to “the imposition of a 

compulsory licence…[in] the absence of 

legislative authority” 6 . In one recent patent 

infringement lawsuit the Federal Court 

acknowledged the granting of an injunction 

is discretionary but the injunction “will be 

commonly granted for infringement or 

threatened infringement, unless there is 

some equitable reason not to do so, such 

as acquiescence, long delay, lack of clean 

hands, unconscionability, or triviality” 7 . 

The Court continued by acknowledging 

“the granting of injunctive relief is not only 

to the benefit of a successful party but it is 

issued by the Court in the public interest to 

ensure the enforceability of the Canadian 

patent system. 

While an injunction has almost always been 

granted following a finding of infringement 

there has been an exception in the Federal 

Court of Canada. In 1993, the Federal Court 

declined to grant a permanent injunction 

6 R. v. James Lorimer & Co., [1984] 1 F.C. 1065 at 1073 

(C.A.) 

7 Eurocopter v. Bell Helicopter Textron Canada, 2012 F.C. 

113 at para. 397 



in the unique circumstances faced by the 

that the plaintiff does not practice the 

defendants have the evidence and a real 

brought a second application for a Mareva 

Court in that case 8 . 

invention in Canada or North America. 

threat the evidence will be destroyed or 

injunction. In particular, the defendants 

dissipated 10 . 

had not produced the ordered information, 

In that case the Court was faced with 

Thus, it seems a permanent injunction will 

their websites did not comply with the 

allegations of a delay by the plaintiff of 

only be denied in exceptional situations 

Norwich orders, also known as equitable 

earlier order, carried on business or moved 

eight years in commencing the action. 

such as when the right holder has 

bills of discovery, are another form of 

outside the jurisdiction of the Court and 

While this delay was not mentioned by 

acquiesced or there has been long delay 

discretionary injunction. The Norwich 

had sold some of their assets within the 

the Court as a basis for refusal of the 

or it would be unconscionable to grant the 

order compels a non-party to produce 

Court’s jurisdiction. 

injunction. 

injunction. 

information to the applicant where an 

applicant has a bona fide claim against 

On this second application the Court 

The factors the Court did explicitly consider 

Injunctions prior to a final determination 

another party but requires the information 

considered not just the dissipation of the 

in its refusal of the injunction were: (1) the 

on the merits are more difficult to obtain 

from the non-party in order to identify the 

assets sought to be frozen but also the 

patent at issue had only eighteen months 

than a permanent injunction and must 

wrongdoer or violator of the IPR. 

protection of the court’s own process 

remaining on its term; (2) the plaintiffs 

satisfy a long standing three part test. The 

from abuse. The Court granted a Mareva 

had never practised the invention in 

three part test involves consideration of: 

Mareva injunctions have been used by the 

injunction in these new circumstances 

Canada nor employed anyone to practice 

(1) the strength of the plaintiff’s case; (2) 

Court to secure assets that may be used to 

“especially given the ephemeral nature 

the invention in Canada; and (3) the 

whether the plaintiff will suffer irreparable 

satisfy a judgment and prevent them from 

of intellectual property which once 

defendants would suffer hardship as would 

harm; and (3) the balance of convenience. 

being removed from the jurisdiction or 

disseminated likely cannot be retrieved 

their “innocent employees in these hard 

otherwise dissipated. Applications for such 

and whose value diminishes as a result”. 

economic times which still appear to be 

The Ontario Court of Appeal has explained 

orders are usually made ex parte and in 

The Mareva injunction prohibited the 

a full blown recession”. Clearly the Court 

that the purpose of this test is really to 

addition to requiring a showing of a strong 

defendants from dealing with any of their 

considered factors beyond either parties’ 

balance the risks to the parties, i.e. if the 

prima facie case will also require from 

assets worldwide with the exception for 

control and considered the social effects of 

injunction is not granted will the plaintiff’s 

the applicant full and frank disclosure of 

retaining counsel and meeting ordinary 

the injunction. 

rights be so impaired that it will be 

relevant facts. 

living expenses. 

impossible to provide an adequate remedy 

Refusal of a permanent injunction in an 

at trial or if the interlocutory injunction 

In Equustek 11 the plaintiff applied to the 

That same Equustek 12 proceeding has 

intellectual property matter is extremely 

is granted will the defendant suffer such 

Court for an interlocutory injunction 

also led to a worldwide injunction against 

rare. While a factor in the above example 

harm from being enjoined in what proves 

prohibiting the defendants from using 

non-parties, Google Inc. and Google 

was the fact that the claimant did not 

to be unlawful conduct. It is for this 

certain confidential information and 

Canada Corporation, in a decision which 

practice the invention in Canada, more 

reason that if an interlocutory injunction 

trademarks of the plaintiff and for a limited 

is now scheduled to be appealed to the 

recent case law shows that a non-practicing 

is granted, ordinarily the plaintiff will be 

Mareva injunction. 

Supreme Court of Canada. The proceeding 

entity can obtain a permanent injunction 

required to provide an undertaking in 

had progressed such that the defendants 

in Canada. In the Uponor case 9 decided 

damages to the defendant to compensate 

Initially the court granted the interlocutory 

had failed to comply with various court 

this year the Court granted a permanent 

them in case the interlocutory injunction 

injunction but denied the Mareva 

orders, had moved their business from 

injunction to a non-practising entity. 

later turns out to have been inappropriate. 

injunction concluding that “the plaintiffs 

being in Vancouver to operating as a virtual 

have failed to show a good reason why the 

company and proliferated their network 

The permanent injunction was granted 

The Canadian Courts have utilised a series 

court should deprive the defendants of 

of websites through which they advertised 

notwithstanding evidence suggesting the 

of variations on the interlocutory injunction 

control of their assets before the plaintiffs 

and sold the allegedly infringing product. 

plaintiff was aware of the infringement 

in order to assist the resolution of IPR 

have succeeded at trial”. The defendants 

for about six years prior to commencing 

disputes. One form is the Anton Piller 

in that case promoted and sold their 

The application was for an injunction to 

a lawsuit, that the plaintiff was not a 

order which is tantamount to a civil search 

products exclusively over the internet. 

compel Google to remove the defendants’ 

competitor for the product of the patented 

warrant to find and preserve evidence for 

websites from its Google search results. 

process in Canada or North America, and 

which there is a real threat of destruction 

When the defendants failed to comply 

Google resisted the injunction but admitted 

or dissipation. The party seeking the Anton 

with this interlocutory order the plaintiffs 

it could remove websites from its search 

8 Unilever PLC v. Proctor & Gamble Inc. et al, (1993) 47 

C.P.R. (3d) 479 F.C.T.D.) 

9 Uponor AB v. Heatlink Group Inc. et al., 2016 FC 320 

Piller order needs to establish an extremely 

strong prima facie case, clear evidence the 

10 Celanese Canada Inc. v. Murray Demolition Corp., 

2006 SCC 36 

11 Equustek Solutions Inc. v. Jack, 2012 BCSC 1490 

engine results and routinely does so in 

12 Equustek Solutions Inc. v. Jack, 2014 BCSC 1063 



various situations. 

After concluding that the British Columbia 

court had jurisdiction and that California 

was not a more appropriate forum to 

hear the application, the Court went on to 

consider whether the injunction should be 

granted. 

The two main issues on whether an 

injunction should be granted were whether 

this injunction could be issued against a 

non-party, and whether the Court could 

make an order with worldwide effect. 

The Court after noting that there were 

exceptions in which injunctive relief can be 

granted against a non-party, concluded that 

injunctions can be issued when the court 

considers it just and convenient to do so on 

terms and conditions the court thinks just. 

The Court concluded that in order to 

preserve the effectiveness of their 

judgments, they must “adapt to 

new circumstances”. Applying this 

consideration, the Court commented that 

it must “adapt to the reality of e-commerce 

with its potential for abuse by those who 

would take the property of others and sell 

it through the borderless electronic web of 

the internet”. As a result the Court granted 

an interim injunction compelling Google 

to block the defendants’ websites from 

Google’s search results worldwide. 

While courts in Canada have always 

recognised their discretion to award an 

injunction to assist a holder of IPRs there 

appears to be a greater willingness to grant 

injunctive relief to preserve the integrity of 

the Court process (including fact finding, 

evidence and asset preservation) and the 

effectiveness of judgments. This includes 

injunctions against parties and non-parties 

and injunctions with worldwide effect. 

As commerce takes on a more global 

or international scale it seems likely the 

possibility of injunctive relief to facilitate a 

court’s process will increase in Canada. 

Gas Regulations of Bangladesh 

By Sharif Bhuiyan, 

Tanim Hussain Shawon 

Michael D. Crinson 

Partner at Dimock Stratton LLP 

T: +1 647 288 9529 

Email: MCrinson@Dimock.com 

The Gas Act, 2010 (“the Gas Act” or “the Act”) has been passed to regulate the 

transmission, distribution, marketing, supply and storage of natural gas and liquid 

hydrocarbon in the land territory of Bangladesh and in its determined sea boundaries 

and economic zones.The Act has been enacted in Bangla language and no official 

English translation is available yet.The objective, according to the preamble to the Act, is 

to ensure the proper and appropriate use of the regulated substance.The exploration and 

production of natural gas and the related resources are not regulated by the Gas Act. 

Michael D. Crinson is a Partner at Dimock Stratton LLP where he practises exclusively in the field 

of intellectual property, including patent, trademark, copyright and trade secrets. He is one of 

Canada’s most experienced patent trial counsel. He has significant experience coordinating litigation 

in Canada with related litigation in other jurisdictions and has been described in IAM Patent 1000 

as a versatile IP expert with more experience than some partners twice his age. His practice includes 

technology in the biotechnological, chemical, mechanical, electrical, bio-technical and bio-medical 

arts. He is also involved in the Intellectual Property Institute of Canada (IPIC) and AIPPI. In his spare 

time he is a soccer referee. 

The authority that has been empowered to apply 

the provisions of the Gas Act is the Bangladesh 

Energy Regulatory Commission (BERC), which has 

been established pursuant to the Bangladesh 

Energy Regulatory Commission Act, 2003. 

The term “gas” is defined in the Gas Act to 

include Natural Gas, Natural Gas Liquid (NGL), 

Liquefied Natural Gas (LNG), Compressed 

Natural Gas (CNG), Synthetic Natural Gas 

(SNG), Liquefied Petroleum Gas (LPG), Coal Bed 

Methane (CBM), Underground Coal Gasification 

(UCG), or such natural mixture of hydrocarbon 

which is formed by the transformation into 

gaseous elements due to normal temperature 

and pressure. 


Oil and Gas 

According to the Gas Act, a licence from the BERC 

the power to limit or suspend or disconnect gas 

is required for conducting the following activities: 

supply if: 

• transmission, marketing and distribution, 

• the lives and properties of the people of the 

supply, storage, delivery to various classes of 

area concerned are in danger; 

customers, transportation, sale or transfer 

by any other approved method of gas and 

• an operational defect is discovered in the 

other commodities prepared by processing 

gas network; 

of gas or other associated substance; 

• there is a gas crisis at a national level; 

• any survey, test or research and 

development activities related to 

• unpaid arrears are not settled; 

transmission, marketing and distribution, 

supply and storage of gas or related to any 

• illegal use of gas is taking place; 

• the need to construct the proposed pipeline; 

may be up to 10 years and the maximum fine 

other work which is supplemental, relevant 

may be up to Taka one million. A person, who 

or is a consequence of the same. 

• gas meter is tampered or gas is used 

• whether sufficient gas can be supplied; 

is not the principal offender, but who has aided 

through a bypassed line; 

or abetted in the commission of an offence may 

• construction of pipelines for transmission, 

• the location of the proposed pipeline in 

also be punished under the Act. 

distribution, supply and storage of gas; and 

• need arises to establish priority between gas 

relation to the consumers; 

users; or 

The offences created under the Act include: 

• establishment and operation of a CNG 

• the timeline for construction of the pipeline; 

refuelling station, a factory to convert 

• gas is used in such a manner that the 

• using gas by bypassing the meter and 

vehicles to CNG-driven vehicles, a business 

efficiency of gas use prescribed by the 

• a plan/design of how the final consumer will 

creating a direct line between the supply line 

in LPG or LNG. 

Government or BERC is not satisfied. 

connect to the gas network; 

and the internal line; 

The Gas Act sets out the following obligations 

As gas crisis is common in Bangladesh from 

• the financial implications of installing the gas 

• tampering with the meter so as to show 

that a distributor of gas must adhere to: 

time to time, and particularly during the winter 

connection; 

underuse of the gas; 

season, the gas distribution companies (which 

• maintaining the quality, pressure, 

are wholly state-owned) invoke this provision 

• practical plans with regard to the cost of 

• using gas by using unauthorized supply line; 

environment and safety of gas in accordance 

to limit or suspend gas supply to industrial 

resettlement in case of acquisition of land, 

with the methods determined by the BERC; 

customers. 

environmental aspects and matters related 

• installing, without the written consent 

to security; 

of the licensee, any line for the purpose 

• following the principle of non-discrimination 

Regarding the business of supply and storage 

of extracting gas or accepting such a gas 

between customers of the same class; 

of gas, the Gas Act provides that except for 

(i) the technology and technical skills 

connection, using the gas connection for 

supply and storage of gas under a Production 

required; 

a purpose other than that for which the 

• installing meters for measuring gas quantity; 

Sharing Contract (PSC), the price for supply 

gas connection was given, exceeding the 

and storage of gas will be determined by the 

(j) the total cost of the project and details of 

stipulated monthly load of gas prescribed at 

• ensuring appropriate maintenance and 

BERC in accordance with the provisions of the 

the source of financing; 

the time of taking the connection or stealing 

repair of distribution pipeline, and regulating 

Bangladesh Energy Regulatory Commission Act, 

condensate in any way from a condensate 

and metering stations (RMS); and 

2003. 

• a loan repayment schedule; and 

pipeline; 

• installing distribution pipelines to 

The Gas Act provides that the following factors 

(l) matters related to socio-economic 

• establishing, without a licence, a CNG 

connect consumers to the main pipeline 

and increasing the capacity of existing 

must be considered before constructing or 

installation of a gas pipeline: 

development. 

refuelling station or a CNG conversion 

workshop; exceeding, on the part of a 

distribution pipelines; 

The Gas Act has created certain offences, which 

CNG refuelling station, the pressure of gas 

• an evaluation of the demand for gas of 

are punishable by imprisonment and fine. The 

specified by the Government or selling gas 

The Act provides that the licensee would have 

different classes of consumers; 

maximum period of imprisonment under the Act 

by tampering with the meter; 


Oil and Gas 

• destroying or sabotaging a condensate, 

CNG or LPG establishment or a gas system 

management business or a gas industry 

business; 

• refusing entry to or restricting access to 

a representative of a gas distribution or 

supply authority in the performance of his 

duty, to the place where the gas connection 

is installed or to its equipment or confining 

him beyond the entrance; 

• stealing a pipeline, meter, regulator or 

any other object which belongs to an 

establishment that transmits, distributes or 

supplies gas, or intentionally causing harm 

to such objects; 

A person or organisation, even if convicted and 

punished for any offence under the Gas Act, 

will not be relieved of the debt owed to a gas 

distributor or supplier. 

Prior to the Gas Act, there was no statute 

specifically regulating transmission, distribution, 

marketing, supply and storage of natural gas and 

liquid hydrocarbon. 

These matters used to be regulated under 

the generally applicable petroleum laws and 

regulations. With the new gas regulations, it 

remains to be seen how they are applied by the 

regulator and how they impact the efficiency, 

governance and sustainability of the gas sector. 

Recent Change of Regulations and Practice 

in Construction and Energy in Japan 

By Miho Niunoya 

• buying or selling gas pipeline, meter, 

regulator or any such object. 

Sharif Bhuiyan 

Partner at Dr. Kamal Hossain & Associates 

T: +88 02 955 2946 

Email: sbhuiyan@khossain.com 

Practice Areas: Admiralty; Arbitration; Aviation; Banking; Competition; Corporate & Commercial; 

Employment; Energy; Intellectual Property; Securities; Taxation; Technology; Telecommunication; 

World Trade Organization 

Tanim Hussain Shawon 

Senior Associate at Dr. Kamal Hossain & Associates 

T: +88 02 955 2946 

Email: tshawon@khossain.com 

Practice Areas: Admiralty; Arbitration; Banking; Competition; Corporate & Commercial; 

Constitutional & Administrative; Employment; Energy; Intellectual Property; Telecommunication 

Introduction – Tightness in 

the Construction Industry 

Recently, a number of events have kept the 

construction industry very busy in Japan, 

including the clean-up and rebuilding after 

a number of large scale earthquakes and 

various construction activity in the build up 

to the 2020 Tokyo Olympics. 

The Olympics have spurred not only 

the construction of public facilities and 

infrastructure, but also many private 

projects planned for completion by 2020 

on the expectation of an influx of foreign 

visitors. Rehabilitation and reconstruction 

after the 2011 East Japan Earthquake and 

tsunami is still ongoing, but in April this year, 

half of the island of Kyushu, Japan’s fourth 

biggest island was also hit by series of large 

earthquakes. This has put pressure on an 

already tight construction industry with 

serious shortages of workers and materials. 

Industry insiders appear concerned about 

uncertainties related to the forecasting of 

construction cost. In these circumstances, 

some local governments are beginning to 

defer less urgent public works projects until 

after 2020, in order to avoid unexpected 

cost increases. 

The Japanese government has also taken 

measures to help relieve the shortage 

of construction workers, including by 

deregulation of foreign construction 


Real Estate and Construction Law 

workers. Until one year ago, it was 

financial services group, and VINCI Airports, 

types of infrastructure. The most likely 

energy covered by the Act include 

not allowed to use foreign workers at 

a French airport concession company. 

candidates are water supply facilities, 

solar power, wind power, water power, 

construction sites except for training 

waste water treatment facilities, toll roads 

geothermal power and biomass energy. 

purposes and the training period was 

An interesting aspect of this tender project 

and sports facilities. Concession tender 

limited to three years at most. 

was that it was truly opened up to foreign 

projects have already commenced for a toll 

The Act and this system are supervised 

bidders, with efforts made to accommodate 

road in Aichi Prefecture and a waste water 

by the Agency of Natural Resources and 

However, as of April 1, 2015, the foreign 

and attract such bidders, something 

treatment facility in Hamamatsu City. 

Energy, an agency of the Ministry of 

workers who have completed training 

that has not been the case to-date for 

Economy, Trade and Industry (“METI”). 

to work at a construction site are now 

infrastructure projects in Japan. Following 

PFI projects are typically financed using 

The fixed purchase price and fixed period, 

allowed to continue working for several 

this airport concession tender project, we 

project finance, under which the project 

which are determined and announced by 

years beyond the three year limit. This 

expect there will be more PPP/PFI projects 

company procures finance from banks 

the Minister of METI every fiscal year based 

deregulation is, however, effective only until 

that are opened up for foreign companies to 

under limited recourse loans. The banks 

on the opinion of the committee specially 

March 31, 2021, which means that such 

more easily participate. 

obtain security on every asset and right 

established for calculation of purchase price. 

foreign workers will presently be allowed to 

owned by the project company. One of 

The fixed purchase price tends to decrease 

work on construction sites only until shortly 

The Japanese government has been taking 

the characteristics of Japanese PFI finance 

gradually over time. As an example, the 

after the Tokyo Olympics. 

many other measures to stimulate the 

schemes is that bankruptcy remoteness is 

purchase price for mega-solar electricity 

use of PPP/PFI projects in addition to 

not strongly emphasized. 

rapidly decreased from JPY 40/kWh in 2012 

Aside from construction related to the 

concessions. One effective measure was 

to JPY 24/kWh in 2016. 

Olympics and reconstruction following 

the request issued by the Cabinet Office 

In PFI project, a project company is usually 

earthquakes, there has also been a gradual 

in December of 2015, addressed to the 

formed as a stock company (kabushiki 

Project finance is regularly used to finance 

increase in PPP/PFI projects in Japan, a 

government authorities and the major local 

kaisha) and the major consortium members 

renewable energy projects. The project 

number of changes in the regulation of 

governments. 

are required to hold its shares throughout 

company is usually formed as godo kaisha, 

the renewable energy market, and a new 

the project period. Mezzanine finance is 

which offers an advantage over a kabushiki 

infrastructure fund market. 

It requested them to put a priority on PPP/ 

rarely used in PFI projects. However, the 

kaisha in terms of bankruptcy remoteness. 

Increase of PPP/PFI 

PFI schemes when planning public projects 

and also for each authority and large local 

government to prepare and issue guidelines 

PFI Fund, which was established under the 

revised PFI Act tends to actively provide 

mezzanine finance to PFI projects. 

Investors commonly invest in the project 

company under a silent partnership 

(tokumei kumiai). For this reason, 

The Japanese government has been 

stipulating the procedure for utilizing PFI/ 

renewable energy project financing is similar 

promoting PPP (Public Private Partnership) 

PPP schemes. 

This fund was established in 2013 by both 

to real estate finance rather than other PFI 

and PFI (Private Finance Initiative) projects 

government and private companies, for 

project financing schemes. 

since the PFI Act was enacted in 1999, with 

Under a PPP/PFI process, a private company 

the aim of procuring finance for concession 

limited success. In 2011, the government 

or consortium conducting PFI/PPP projects 

projects and other PFI projects in which the 

For the last three years, the number of 

introduced a concession scheme, under 

is chosen through a bid process in which 

project company is to be run independently. 

solar power projects has dramatically 

which a private project company may be 

proposals from bidders are evaluated for 

So far, the fund has provided or decided to 

increased mainly due to the ease with which 

granted with the right to operate publicly 

factors other than simply price, including 

fund a total of 15 PFI projects. 

photovoltaic plants can be constructed 

owned facility and to gain income from the 

operation. The first concession project was 

the project to operate two airports in the 

design, construction plan, operation plan, 

financial plan and risk mitigation measures. 

As a result of these measures, it is highly 

Renewable Energy 

compared with other types of renewable 

energy plants. The Japanese government 

appears to be attempting to now lead 

Osaka area for 44 years. Operation by the 

likely that we will see more public projects 

In Japan, the Feed-in Tariff (FIT) Act came 

production of renewable energy away 

private project company has commenced in 

taking this kind of bidding process. 

into force in July 2012. Since then, the 

from solar power projects to other types of 

April this year. 

number of renewable energy projects, 

renewable energy projects, such as wind 

Following the first concession project for 

especially solar power projects, has 

power, water power, geothermal power and 

Since the concession fee of this project 

was quite high (about 2.2 trillion yen) the 

the airports in Osaka, a number of other 

airport concession projects are currently 

increased tremendously. The key concept 

of the Act is that the local electric utility 

biomass energy. 

winning consortium included 30 large 

in the process of bidding or preparation 

companies are obliged to purchase 

One of the major issues of practice under 

companies in the Osaka area in addition to 

for tender. The Cabinet Office also plans 

renewable energy at a certain fixed 

the FIT Act is that the authorizations of 

Orix Corporation Group, a leading Japanese 

to expand the concession projects to other 

procurement price. The types of renewable 

renewable energy were granted by METI to 


Real Estate and Construction Law 

many more solar power projects than was 

Infrastructure Fund Market 

this, the first IPO of an infrastructure fund, 

that rocked the construction world in Japan. 

originally anticipated, but many approved 

In order to introduce more private finance 

Takara Reven Infra Investment Company, 

One was that Toyo Tire & Rubber Co., Ltd., 

projects have failed to reach operation. 

into infrastructure projects in Japan, in April 

was approved by the Tokyo Stock Exchange 

one of the world biggest tire and rubber 

2015, Tokyo Stock Exchange, Inc. established 

and is scheduled to be listed on June 2, 

companies, had used fraudulent data to 

A change in the Act has been proposed to 

a market specifically for infrastructure 

2016. 

obtain a certification of seismic isolation 

the Diet in order to more quickly eliminate 

funds. The projects to be listed with this 

rubber from a government authority. 

projects that are delayed and promote 

market are in principle limited to projects 

It has been announced that the Takara 

other projects that are able to come online 

that have been in operation for more than 

Reven Fund will invest primarily in solar 

The other was the news of piling work on 

sooner. 

one year and are producing a stable income. 

power projects. It is also predicted that 

a large multistory residential building built 

several other infrastructure funds dealing 

by Sumitomo Mitsui Construction Co., Ltd., 

If the proposed change passes the Diet, 

The system of this market is similar to the 

mostly with solar power projects, such 

one of Japan’s largest general contractors, 

approvals already granted may be cancelled 

J-REIT (Japan Real Estate Investment Trust) 

as Ichigo Holdings and Sparks Group for 

together with its subcontractors, causing 

if the project company fails to execute a grid 

system, a market that opened on the Tokyo 

example, are to be listed within this year. 

the building to begin leaning. This will 

connection contract with the relevant utility 

Stock Exchange in 2001 specifically for 

undoubtedly result in greater scrutiny of 

company by April 1, 2018. It is also planned 

real estate investment. For both markets, 

It is anticipated that initially, at least, this 

supervision and compliance across the 

to decrease the burden of environmental 

investment corporations (toushi houjin) 

infrastructure market will be utilized mostly 

construction industry. 

assessment for other types of renewable 

and investment trusts (toushi shintaku) 

by solar power project funds. Over time, 

energy projects, such as wind power. 

established under Japanese law can 

however, it is expected that domestic and 

Environmental requirements are also 

be listed. 

foreign funds investing into various types of 

becoming increasingly strict in Japan. In 

The dramatic fall in the purchase price of 

infrastructure, including PFI/PPP projects, 

July 2015, a new piece of legislation was 

energy produced by mega-solar power 

However, one important difference 

will be listed before long. 

promulgated that require certain type of 

plants, from JPY 40/kW in 2012 to JPY 24/ 

kW in 2016, also reflects this change in 

from the J-REIT market is that foreign 

infrastructure funds can also be listed on 

Closing – Other trends 

buildings, such as new non-residential 

buildings larger than 2,000m 2 , to meet 

government policy. Nevertheless, many 

this infrastructure market. Considering 

specified standards for energy consumption, 

still view solar power projects as viable 

the important role of the operator, timely 

Recently, there were two pieces of news 

without which, construction will not be 

financially, despite the removal of such 

disclosures are required of the operator of 

concerning defects of construction work 

approved. 

incentives. 

the assets. 

Many solar power projects that were 

approved in the first three years after the 

beginning of the FIT system, are moving 

from the development and construction 

stage to an operation stage. Some of these 

projects will be owned by infrastructure 

funds after commencement of operation, 

some of which will be listed. 

When the FIT Act first came into force, there 

were many unclear points and it was difficult 

to evaluate the potential risks during the 

development period and the following 20 

year operation period. Now, however, the 

situation has become much clearer and 

more stable, making the solar power market 

less risky and more suitable for fund-based 

investment in many ways. 

In the case of domestic funds, it is also 

required to disclose the criteria for selection 

of an operator. Foreign infrastructure funds 

may be listed to the Tokyo Stock Exchange 

only in conjunction with listing to a foreign 

financial instruments exchange. 

In the one year since the infrastructure 

market was opened, there has been no IPO 

yet. One of the major reasons for this is 

that tax incentives were afforded only for a 

period of 10 years to infrastructure funds, 

which invest more than 50% in renewable 

energy projects, while the life of solar power 

facilities under tax treatment is 17 years. 

In April 2016, however, tax reforms came 

into effect that extended the tax incentive 

period from 10 years to 20 years. After 

Miho Niunoya 

Partner at Atsumi & Sakai 

T: +81 3 5501 1163 

Email: miho.niunoya@aplaw.jp 

Miho Niunoya’s practice focuses on domestic and overseas construction, PPP (Public Private 

Partnership), energy, project finance and resolution of construction disputes. Recent transactions 

include a large scale national hospital, MICE (Meeting, Incentive Travel, Convention and Exhibition), 

urban development projects, various water supply and waste water treatment facilities, waste 

disposal plants, development and M&A in relation to solar power plants, and dispute settlement 

regarding an overseas power plant project. She has been consistently recognized in the fields of 

construction and energy by Chambers, Legal 500, IFLR, The Best Lawyers, and Asialaw Profiles. She 

also has extensive experience acting a committee member for selection of winning bidders on PPP/ 

PFI projects. 



PEOPLE WITH SIGNIFICANT CONTROL REGISTER 

FOR UK COMPANIES 

By Martin Palmer 

The United Kingdom has introduced, with effect from 6 April 2016, a new statutory 

register for UK companies called a PSC register. This is an acronym for “People with 

Significant Control”. Any individual who exercises or who has the right to exercise 

significant influence or control over a UK company must have his or her particulars 

entered on the PSC register. 

The new transparency rules are contained in 

s81 of and Schedule 3 to the Small Business 

Enterprise and Employment Act (SBEEA). 

Schedule 3 provides a core statutory framework 

for the transparency rules. However, this 

framework is in many respects an outline 

and requires the detailed embellishment 

and clarification of secondary legislation (or 

regulations). These regulations are now in final 

form and there is also statutory guidance on 

the meaning of “significant influence or control”, 

as well as general guidance to companies, 

Sociatates Europeae, Limited Liability 

Partnerships and PSCs themselves. There is 

no doubt about the purpose and intention of 

SBEEA’s transparency provisions. This is that 

the names and other particulars of beneficial 

owners with significant control of a UK company 

should be entered on the company’s PSC 

register, which will be available for more or 

less indiscriminate public inspection. PSCs will 

have very limited statutory protection from 

public disclosure, unless they can show to the 

satisfaction of the Registrar (or the High Court 

on appeal) that their disclosure on the PSC 

register puts them at serious risk of physical 

harm. 

Which UK Companies are Affected? 

SBEEA’s transparency rules apply to all UK 

companies that are not DTR 5 issuers. DTR 

5 issuers are essentially UK companies that 

are listed on a regulated market in the UK, 

including AIM. UK companies whose voting 

shares are listed on a regulated stock market 

in any EEA State and certain other specific 

countries are also excluded in the regulations. 

LLPs are also subject to the new transparency 

rules under the LLP regulations (the Limited 

Liability Partnerships (Register of People with 

Significant Control) Regulations 2016). This 

article considers the application of the primary 

and secondary legislation as it affects UK limited 

companies. 

Conditions of PSC Status 

Condition 1: X holds directly or indirectly more 

than 25% of the shares in the UK company; 

Condition 2: X holds directly or indirectly 

more than 25% of the voting rights in the UK 

company; 

Condition 3: X holds the right directly or 

indirectly to appoint or remove a majority of the 

board of directors; 

Condition 4: X has the right to exercise or 

actually exercises significant influence or control 

over the company; 

Condition 5: the trustees of a trust or the 

members of a firm not being a legal person 

meet any of Conditions 1 to 4 in their capacity 

as trustees or partners of a firm, in relation 

to a UK company (or would do so if they were 

individuals) and X has the right to exercise or 

actually exercises significant influence or control 

over the day to day activities of the trust or firm. 

Conditions 1-3 are essentially objective. Indirect 

ownership means ownership by companies that 

are not subject to the SBEEA or comparable 

transparency rules overseas. Such companies 

(e.g. offshore companies) are “looked through” 

by the new transparency rules, but this lookthrough 

has its limits, as will be illustrated 

towards the end of this article. 

Condition 4 is the flexible, subjective Condition. 

X is a PSC if he has the right to exercise, or 

actually exercises, significant influence or 

control over the UK company. The Secretary 

of State has issued statutory guidance on the 

meaning of “significant influence and control” 

in the context of this fourth Condition and 

also the fifth Condition. Regard must be had 

to this guidance in interpreting references to 

“significant influence or control” in Sch 1A to the 

Companies Act 2006. 

Condition 5 of PSC status is presumably not 

a “look-through” provision against trusts or 

firms, provided that the trustees or general 

partners are the only persons who exercise 

significant influence and control of the trust 

or partnership. But as will be shown in the 

examples at the end of this article, some 

uncertainty remains around Condition 5 

The PSC Register 

All UK companies have been required to keep a 

PSC register since 6 April 2016. The PSC register 

must contain all the particulars of the PSC 

required by SBEEA. There are eight particulars 

per PSC including name, service address, 

country of residence, nationality, date of birth, 

usual residential address, the date on which the 

individual became registrable and the nature of 

his or her control. Until a PSC’s particulars are 

“confirmed”, they cannot be entered in the PSC 

register. 

A PSC’s particulars are confirmed if: 



• the PSC supplied or confirmed them to the 

It is not enough for SBEEA to require companies 

time specified on the notice.” 

an order to deny the request. A UK court will 

company; 

• another person did so with the PSC’s 

to maintain and populate a PSC register. SBEEA 

must give the company investigatory duties and 

powers. A UK company must take ‘reasonable 

PSC’s Duties to Provide Information to 

the Company 

only order a UK company not to comply with 

the request if the court is satisfied that the 

inspection or copy is not sought for a proper 

knowledge; or 

steps’ to find out if anyone is registrable on the 

PSCs have reciprocal duties to notify UK 

purpose. 

PSC register. 

companies of their status, and supply their 

• they were included in a statement of 

particulars. They must also reply reasonably 

A court order requiring non-disclosure will 

initial significant control delivered to the 

A UK company does this by giving notices to 

promptly to notices issued by a UK company 

be a rare occurrence, given that the grain 

Registrar by the company’s subscribers on 

anyone it has reasonable cause to believe is a 

requesting their information or particulars. 

of the legislation is towards transparency of 

incorporation. 

registrable person or registrable RLE (s 790D). 

ownership. If the UK company fails to secure 

And a UK company may also give notice to 

SBEEA contains enforcement provisions 

such a UK court order, it must permit the 

Until all the individuals’ particulars have been 

anyone it thinks knows the identity of a PSC, RLE 

to support these disclosure requirements, 

inspection or copying immediately or it commits 

supplied or confirmed, none of the PSC’s 

or any legal entity who knows the identity of 

enabling a UK company to apply restrictions 

a criminal office. Inspection of the PSC register 

particulars must be entered on the PSC register. 

someone likely to have that knowledge. 

on share rights of PSCs, or any other person 

is free of charge. A company may charge £12 for 

But the PSC register must never be empty of 

with an interest in the company, who does not 

a copy of its PSC register. 

content. It must contain narrative (which is 

provided by the regulations and non-statutory 

Recipients of such notices must reply to the 

company within a month. A UK company 

respond to notices issued by the company. 

Possible sanctions include restrictions on the 

The Central Register 

guidance), describing the company’s progress 

also has a duty to keep PSC particulars up 

transfer of shares, or the exercise of share 

The Central Register is in effect a PSC register 

with its investigatory and information gathering 

to date, and must give notices to PSCs if it 

rights. 

maintained by the Registrar of Companies and 

obligations. 

has reasonable cause to believe that their 

can be unconditionally searched by anyone. UK 

particulars have become out of date (s 790E). 

It is important to note that the residential 

companies can choose between keeping their 

So, for example, if no one is a PSC or otherwise 

Again recipients must reply within a month. 

address of all people with significant control will 

PSC’s particulars on their own PSC register, or 

registrable on the PSC register – which is 

be kept by the company, but will never appear 

on the Central Register. 

possible – this fact must be stated in the PSC 

If s 790D or E notices are not replied to within 

on the PSC register (or the Central Register 

register. The prescribed narrative for this state 

the specified period of a month, the company 

maintained at Companies House) unless this is 

The Central Register will not be ready until 

of affairs is: 

must record this in the PSC register. For 

provided as the service address. Furthermore, 

30 June 2016, which means that on 6 April 

example, if after one month of the date of a 

the day of the date of birth will be suppressed 

2016 when the PSC register was launched, 

“The company knows or has reasonable cause 

s790D notice it has not been replied to by the 

on the Central Register as an anti-fraud 

all UK companies in existence and all new UK 

to believe that there is no registrable person or 

addressee, the following must be recorded in 

measure provided the company maintains its 

companies formed between 6 April 2016 and 

registrable relevant legal entity in relation to 

the PSC register: 

own PSC register (and does not elect for the 

29 June 2016 will have to create a PSC register. 

the company.” 

Registrar to maintain the register). 

Once the PSC register and the Central Register 

Circumstances in which a corporate can be 

“The company has given notice under s790D of 

the Act which has not been complied with.” 

Copying or Inspecting the PSC Register 

exist in tandem, i.e. from 30 June 2016, then UK 

companies can choose between maintaining 

entered on a PSC register 

The PSC register is a register maintained by 

their own PSC register or delegating this to the 

Where a s 790E notice has not been complied 

the company itself. The PSC register must 

Registrar. UK companies can ‘chop and change’ 

The general rule is that corporate bodies are 

with, the prescribed wording is: 

be available for inspection or copying by any 

between the maintenance of a PSC register 

kept off the PSC register. But as with all rules, 

person at the registered office of the company, 

and a central register, although there is little 

there are exceptions. An important exception 

“The addressee has failed to comply with a 

or at some other specified place in England and 

advantage in doing so. 

is that a “Relevant Legal Entity” (RLE) is 

notice given under s790E of the Act.” 

Wales. A person wishing to inspect or copy the 

registrable on the PSC register, if it is a person 

PSC register must make a request to the UK 

Where a UK company that already has a PSC 

with significant control – i.e. would be a PSC if 

Where a notice given under s790D or s790E is 

company. This request must contain the name 

register makes an election to maintain PSC 

it were an individual. The hallmark of an RLE 

complied with after the time specified in the 

and address of the requesting party, and the 

particulars on the Central Register, any pre- 

is that it is subject to SBEEA or transparency 

notice, the company should record in its PSC 

purpose of the request. 

existing PSC register becomes ‘historic’. Third 

requirements equivalent to SBEEA. Therefore 

register, along with the date on which the notice 

party rights to inspect or copy the historic PSC 

all UK private companies are RLEs. 

complied with the following: 

The UK company then has five working days 

register will continue, and the historic PSC 

UK Companies Duty to Investigate 

“The notice has been complied with after the 

to comply with the request to inspect or copy 

the PSC register, or apply to the UK courts for 

register must notify inspectors or copiers that 

PSC particulars are maintained on the Central 



Register. Once the Central Register is launched, 

regime for all PSC particulars that would 

comply with SBEEA will result in the commission 

The psychological nuances may be unknowable 

every new incorporation must provide an initial 

otherwise normally be published on the PSC 

of criminal offences. Conviction on indictment 

and unquantifiable. This sort of uncertainty 

statement of significant control to the Central 

register and Central Register. To achieve this 

can result in a prison term of two years, or a 

is removed if the board of directors function 

Register and provide an annual statement 

complete confidentiality the PSC must be able 

fine, or both. Summary conviction can result 

individually and collectively in accordance with 

under the ‘check and confirm procedure’. If the 

to show that if his or her PSC particulars were 

in a prison term of one year, or a fine, or both. 

their statutory and fiduciary obligations. 

government keeps to its timeline, then after 

placed on the public register either the PSC or 

Some infractions of SBEEA involve only fines and 

30 June 2017 the details of the PSCs of all UK 

someone they live with would be at serious risk 

daily default fines. Criminal penalties also apply 

• What about 3.3 of the statutory guidance?“A 

companies should be recorded in the Central 

of violence or intimidation. 

to PSCs who fail to reply to investigatory notices 

person would exercise “significant influence 

Register at Companies House. Anyone can 

from the UK company without reasonable 

or control” if:a) They are significantly involved 

inspect the Central Register, without identifying 

In this case, the serious risk of violence or 

cause, or who fail to notify the company of 

in the management and direction of the 

themselves or declaring their purpose. 

intimidation need not have to arise solely from 

changes to particulars without reasonable 

company, for example: a person, who is not 

Protecting Residential Addresses 

the activities of the company, but may arise 

from a particular characteristic or attribute 

cause. In addition, UK companies can encourage 

disclosure by restricting a persons’ share rights. 

a member of the board of directors, but 

regularly or consistently directs or influences a 

There are statutory protections for PSCs at 

specific to the PSC, taken together with the 

significant section of the board, or is regularly 

serious risk of violence or intimidation, but 

activities of the company he or she exercises 

Some examples of PSC identification: 

consulted on board decisions and whose 

these are limited in scope. First, as already 

mentioned, residential address details of PSCs 

significant control over. This may assist PSCs 

from countries outside the UK who are resident 

Example 1 

views influence decisions made by the board. 

This would include a person who falls within 

will always be protected by the PSC and Central 

in countries with poor human rights records, or 

the definition of “shadow director” set out 

Registers. These are therefore suppressed from 

high corruption indices. Applications will be to 

in section 251 of the Act, but the situation 

public view, unless the PSC has nominated his 

the Registrar with a possible appeal to the High 

is not confined to shadow directors.b) Their 

residential address as his service address. But 

Court in the case of unsuccessful applications. 

recommendations are always or almost 

residential address information can still be 

always followed by shareholders who hold the 

made available to Credit Reference Agencies 

Unsuccessful appeals will lead to the PSC’s 

majority of the voting rights in the company, 

(CRAs) by the Registrar. 

particulars of already incorporated UK 

Comment 

when they are deciding how to vote. For 

companies being published, but there will be 

example: A company founder who no longer 

However, regulations will allow vulnerable 

a ‘grandfathering’ period for people who are 

• No-one is a PSC under PSC Conditions 1-3 

has a significant shareholding in the company 

PSCs to apply to Companies House to prevent 

PSCs on 6 April 2016, when the PSC register 

referred to above 

they started, but makes recommendations to 

their residential addresses being disclosed to 

is launched. They will have a limited period 

the other shareholders on how to vote and 

CRAs. UK company directors are already able 

of time – ending on 30 June 2016 to make an 

• What about the flexible and subjective 

those recommendations are always or almost 

to obtain this level of protection, and if the PSC 

application for protection. 

Condition 4? The statutory guidance 

always followed.” 

is or was a company director, or a member of 

suggests at 3.2:“All relationships that a person 

an LLP already receiving this protection it will 

If the application fails it will not lead to the 

has with the company or other individuals 

This provides firmer ground for assessment 

be possible to make an application on that 

automatic disclosure of the PSC on the Central 

who have responsibility for managing the 

and brings into play consideration of de facto 

individual’s behalf in his ‘PSC’ capacity without 

Register and PSC register, if the person in 

company, should be taken into account, to 

directors and shadow directors. Presumably 

having to evidence serious risk of violence or 

relation to whom the application was made 

identify whether the cumulative effect of 

business consultants are not PSCs where 

intimidation. 

notifies the Registrar in writing that he or she 

those relationships places the individual 

they are engaged to advise a board that is 

is no longer a PSC of the company concerned, 

in a position where they actually exercise 

functioning properly. 

To obtain this limited confidentiality protection, 

together with the date he ceased to be a PSC. 

significant influence or control. For example: 

a PSC must normally show that he or she or 

The PSC will have 12 weeks from notice that his 

A director who also owns important assets or 

Directors and other officers of UK companies 

somebody they live with would be at serious 

appeal for protection has been unsuccessful to 

has key relationships that are important to 

are required to take reasonable measures 

risk of violence or intimidation due to the 

divest himself of significant influence or control 

the running of the business (e.g. intellectual 

to identify people with significant control of 

activities of the company they are involved with, 

of the shares or rights that give rise to his PSC 

property rights), and uses this additional 

their UK companies. The difficult subjective 

were this information to be disclosed to CRAs. 

status. 

power to influence the outcome of decisions 

judgements and perceptions that may be 

Statutory Protection for Vulnerable 

PSCs 

Criminal Penalties for Noncompliance 

with SBEEA 

related to the running of the business of the 

company.”But in many cases such judgements 

may require subjective assessments that 

required to be taken account of under Condition 

4 may well in real life fall to be resolved by 

more practical assessments of the objective 

There is a much more fundamental protection 

Failure by UK companies and their officers to 

cannot be made with reasonable certainty. 

Conditions 1-3. 



Special challenges exist in assessing UK 

company. 

no such person as “X”? The RLE cannot be 

In the example it is therefore not apparently 

companies owned by offshore companies, or 

registered on the UK companies PSC register 

clear how to proceed. Assuming the Jersey 

offshore trusts. These are briefly considered here: 

The implication of this is that if Mr A in the 

under Condition 5, because Condition 5 

corporate trustee is a licensed professional 

example owns only 50% of the shares – perhaps 

admits of only an individual (“X”). Paragraph 

trustee it is likely to be diversely held with a 

Interests held through other legal entities 

with a co-venturer (Mr B) – and assuming BVI Co. 

5.2 of the Statutory Guidance (published 

board of at least three directors. In this scenario 

is genuinely “deadlocked”, then neither Mr A nor 

14 April 2016) supports this view. However 

it would be unlikely that there is a person X to fit 

Suppose Mr A holds an interest in “UK Co.” via 

his co-venturer, Mr B are PSCs of UK Co. in the 

such an analysis, if right, conflicts with the 

into Condition 5 of PSC status (this might even 

“BVI Co.”. Assume Mr A owns 51% of the shares 

example above. 

Guidance for Companies, SEs and LLPs on 

conflict with the trustee’s regulatory or fiduciary 

of BVI Co., which owns all the shares in UK Co. For 

page 15 which says:“You should consider 

obligations, were it to permit a non-trustee to 

clarity, this is shown in the diagram below: 

Many offshore trusts directly or indirectly own 

whether there is a trust or firm (without legal 

exercise such control). The primary legislation 

shares in UK companies. Consider the example 

personality) which would have met any of the 

says that a Jersey corporate is not an RLE and so 

below: 

conditions (i) to (iv) if it were an individual. 

cannot be registered as a PSC under conditions 

Where this is the case (sic), the trustees would 

(i) to (iv) under the “if it were an individual” test. 

be entered on the PSC register and shown 

That being so, the final result might be to record 

as meeting whichever of Conditions (i) to (iv) 

in the PSC register that no-one is a PSC. 

apply.” 

Conclusion 

Comment 

Mr A is a PSC of UK Co. 

This is because he owns a “majority stake” in BVI 

Co., and BVI Co. owns a “majority stake” in UK Co. 

The concept of the majority stake is contained in 

para 18 of Schedule 1A of CA 2006. 

BVI Co. is not a “relevant legal entity”, so it cannot 

be entered in UK Co’s PSC register. 

Mr A is regarded as having a majority stake in 

another company – (e.g. UK Co. In the example), 

if Mr A: 

1. holds a majority of the voting rights in the 

company; 

2. is a member of the company and has the 

right to appoint or remove a majority of the 

directors of the company; 

Condition 5 says that “X” is a PSC of “Y” (a UK Co.) 

if the trustees of the trust meet any of the other 

specified Conditions of PSC status i.e. Conditions 

1-4 (in their capacity as trustees) in relation to 

UK company “Y”, or would do so if they were 

individuals and “X” has the right to exercise, or 

actually exercises, significant influence or control 

over the activities of that trust. 

This seems to be the only test of PSC status 

where a trust owns directly or indirectly the 

shares of a UK company. 

Who is X? Presumably “X” could be: 

1. a sole individual trustee (although the 

statutory guidance suggests that Condition 5 

focuses on non-trustees); or 

2. a sole director of a corporate trustee; or 

Given that it is the trustees who own the share 

The new transparency legislation still has legal 

assets directly or indirectly (and not the trust) 

and administrative grey areas. Professional 

one wonders if the general guidance is correct in 

advice will be an important protection for UK 

saying that such trustees are registrable. RLEs 

company directors in light of the possible criminal 

are registrable on the PSC register, but not Jersey 

penalties for non-compliance with the new 

or other offshore corporate trustees, which are 

legislation. 

not RLEs. 

Martin Palmer 

Director and Principal at Jordans Trust Company Limited 

T: +44 (0) 117 918 1321 

Email: mpalmer@jordanstrustcompany.com 

Martin joined Jordans in 1984 and was appointed to the Jordans 

main board in 1995. He holds the Advanced Diploma in International 

Taxation from the chartered Institute of Taxation and graduated in 

Law with Honours from Nottingham University. 

3. is a member of the company and controls 

alone, pursuant to an agreement with other 

shareholders or members, a majority of the 

voting rights in it, or 

4. has the right to exercise or actually exercises 

dominant influence or control over the 

3. any other individual non-trustee. However, it 

is difficult to square “X’s” significant influence 

or control as a non-trustee with (for example) 

professional trustees who exercise sufficient 

control themselves to be would-be PSCs if 

they were individuals.What if the trustee 

is a corporate RLE of the trust and there is 

He has been a speaker at the ICAEW Annual Tax Conference, the 

INTAX Forum and The International Tax Planning Association. He is 

a contributing editor of “The Journal of International Tax Trust and 

Corporate Planning: UK Companies and Partnerships”. This is now in its 

4th edition and published by Lexis Nexis 


Technology 

Valuing a Component Technology of 

an Integrated Manufacturing Process 

By Scott Vandervliet 

Valuing a technology that is part of a bundle of integrated technologies used in a 

manufacturing process presents additional challenges beyond those encountered 

when appraising a stand-alone technology. This additional complexity requires 

significant experience and judgment to properly apply current valuation best 

practices and conclude an appropriate and supportable value. 

Introduction 

The valuation of developing and recentlydeveloped 

technology can be challenging 

even when it is the only technology 

underlying a manufacturing process. 

Appraising a single component technology 

used in an integrated process that combines 

multiple technologies is even more complex. 

This incremental complexity arises because 

the benefits are derived from the total 

technology “bundle” and are realized from 

the inter-relatedness of the various pieces. 

In other words, the whole technology bundle 

provides more utility, and is therefore more 

valuable, than the sum of the individual 

component technologies. 

To place this issue in context, technology 

often has a direct, measurable benefit, such 

as cost savings. These savings can be in 

the form of requiring less raw material or 

allowing cheaper inputs. The cost savings 

can also manifest itself by automating or 

otherwise reducing the “human capital” 

required. 

The technology can also reduce fixed capital 

costs, for example, by reducing or eliminating 

certain undesirable byproducts like wastes 

that require treatment to comply with 

environmental, safety, or other regulatory 

constraints. In these circumstances, the value 

of the future benefits over the economic 

life of the technology can be quantified and 

reduced to present value by discounting the 

benefits using an appropriate rate of return. 

In other instances, the technology may 

yield benefits in a product, rather than the 

process used to manufacture the product. 

For example, in the realm of sporting goods, 

there have been technology cycles in golf and 

tennis where the equipment has incorporated 

new, advanced technology that resulted in 

lighter weight, better accuracy, or greater 

power. This gave rise to the perception that 

the average player could improve virtually 

overnight with this equipment. The economic 

benefits of such technology can be quantified 

based on unit price premiums or incremental 

market share. 

The Excess Earnings Method 

In circumstances where such direct economic 

benefits are not present, or cannot be readily 

quantified, one must resort to alternative 

means of valuing the technology. One such 

technique is the so-called “excess earnings” 

method, where the income stream associated 

with the technology is allocated to account 

for the contribution of all other assets that 

support the income stream. 

These contributory assets are often primarily 

working capital, machinery and equipment, 

and real property, but can include intangible 

assets such as trademarks or copyrights. Any 

earnings in excess of the fair rate of return 

on all contributory assets are deemed to be 

due to the technology. This method presents 

three fundamental issues: 

• Identifying all categories of contributory 

assets, which, in the case of new 

technology, typically comprise working 

capital and tangible assets. Overlooking 

the economic “rent” on such assets 

would otherwise overstate the benefit 

from, and the value of, the technology; 

• Estimating the values and appropriate 

rates of return for each contributory 

asset that are commensurate with the 

asset’s risk. Incorrectly estimating the 

portion of the total benefits allocable 

to the contributory assets results in 

a corresponding miss-measurement 

of the portion allocable to the subject 

technology; and 

• Estimating an appropriate rate of return 

for the subject technology, as that rate 

is used to discount any excess earnings 

to present value after accounting for the 

contributory assets. 

Risk Assessment 

The second issue can be particularly 

problematic, as the required risk assessment 

analysis poses its own set of challenges. 

For example, the risk analysis for property, 

plant and equipment entails an evaluation 

of possible alternative uses. The more 

alternative uses and the more active the 

secondary, or resale market, the lower the 

risk of the assets. Highly-specialized property 

with limited alternative use, or that cannot 

easily be sold, is inherently risky because if 


Anti-trust/Competition Technology 

Law 

the technology fails, the entire investment in 

allocated the earnings between contributory 

front payment generally correspond with 

contribution of each technology to the total 

that asset may be lost. General use property 

assets and the total technology bundle, the 

higher running royalties. 

“excess” earnings. 

can more easily be re-purposed. 

appraiser must now allocate the excess 

earnings between the subject technology and 

The running royalty payments are typically 

Using a reasonable basis for this allocation, 

Once these first two issues are resolved and 

any other process technology used in the 

structured as a percentage of top line 

the appraiser must then allocate the 

the appraiser has estimated the portion 

manufacturing process. 

revenue, either gross or net sales. However, 

projected excess earnings between the 

of the aggregate earnings stream that 

represents a fair return on each contributory 

asset, the third issue presents its own 

Royalty Rates 

it is not uncommon for such royalties to be 

applied to a different base such as gross 

profit, operating profit, or pretax profit. 

subject and other technologies. Once this 

analysis is complete, the excess earnings 

allocated to the subject technology must 

challenges. Some of the questions that must 

In certain situations, this issue can be 

Royalty payments based on profit mitigate 

then be discounted to their present 

be answered include: 

circumvented. In some circumstances, 

risk to the licensee, as royalties are only 

value equivalents using an appropriate 

the output could be sold on the open 

payable if profits are actually realized. 

discount rate based on market participant 

• What alternative technologies are 

market, rather than serving its intended 

assumptions. 

available, if any? 

• What are the strengths and weaknesses 

purpose as the raw material input for other 

“downstream” processes. 

Royalty rates typically are lower when based 

on top-line revenue, and progressively higher 

based on the extent to which the licensee’s 

Discounting to Present Value 

of the alternatives compared to the 

If this notional approach is relevant, then 

costs are captured in a measure of profit. 

One useful frame of reference for gauging 

subject technology? This analysis 

a hybrid market-income method such as 

That is, royalties are typically stated as a 

appropriate discount rates is the venture 

should consider such factors as initial 

the “relief-from-royalty” method may be 

lower percentage of revenue and a higher 

capital market. Venture capital investments 

fixed capital cost, physical footprint of 

feasible. Unit prices for the products of the 

percentage of gross profit, and an even 

have a higher level of risk for an investor 

the plant; environmental “ footprint”; 

manufacturing process are projected based 

higher percentage of pretax profit. 

than most other forms of investment. 

conversion efficiency/yields; energy 

on market data, and a notional revenue 

efficiency; flexibility in terms of use of 

stream is developed. 

Once an appropriate royalty rate and 

Venture capital investments are typically 

alternative raw materials; permitting and 

base are established, the notional royalty 

early-stage or developmental companies, and 

regulatory requirements; and ramp-up 

This revenue is then converted into a 

payments are then computed using 

are privately owned with little or no collateral 

and deployment time. 

value estimate using market based royalty 

projections for the relevant royalty base 

security or liquidity. To compensate for this 

rates observed in arm’s-length licensing 

(revenue or profit). These projected notional 

higher risk, venture capitalists seek to achieve 

• What is the regulatory environment, 

transactions for comparable or “guideline” 

royalties must then be discounted to 

a higher rate of return than what is offered 

currently and prospectively? 

technologies. Value is based on these royalty 

their present value equivalents using a 

by more traditional and secure types of 

Environmental concerns must be 

payments that are avoided by owning the 

discount rate commensurate with the risk of 

investments. 

considered for virtually any type of 

asset or technology. The concept is similar to 

these payments. For unproven technologies, 

process technology. 

valuing a house by determining the rent that 

discount rates are usually much higher than 

This higher level of risk is similar to that of 

is avoided by owning the house. 

for proven technologies with demonstrated 

unproven technology. On an investment-by- 

• In what stage of development is 

commercial success. 

investment basis, venture capitalists target 

the subject technology? Has it been 

The royalty rates indicated by such arm’s- 

high rates of return, with an expectation 

patented and, if so, how extensive are 

length licensing transactions must be 

If such a hybrid market-income approach 

that certain investments will be unsuccessful 

the patent claims? 

evaluated based on a comparison of 

is not practical, an alternate method of 

and may result in a loss of some or all of 

the associated technologies and the 

allocating the total “excess” earnings 

the original investment amounts. Only by 

• Has the technology been tested on a 

subject technology. Terms of the licensing 

between the subject technology and other 

targeting high individual rates of return can 

bench-top or pilot plant basis? All else 

agreements are analyzed, such as exclusivity 

technologies in the manufacturing process 

venture capitalists achieve an acceptable 

equal, the closer the technology is to 

of use, the scope of the geographic markets, 

must be identified. The appropriate method 

risk-adjusted return on an overall portfolio of 

commercial scale deployment, the lower 

the duration of the agreement, and whether 

depends on the facts and circumstances of 

investments. 

its risk profile. 

an up-front payment is required in addition 

to the ongoing, or “running”, royalties. 

the particular technology and situation. 

The rates of return targeted by venture 

When the subject technology is not the only 

One possible option is to use the relative 

capitalists often range from 30 percent to 

technology employed in the manufacturing 

All else equal, exclusive rights, wide 

fixed capital costs associated with each 

70 percent. The lower end is applicable 

process, another step is required. Having 

geographic scope, longer term, and no up- 

technology as a proxy for the relative 

to entities that generate revenue and are 

42 | LawyerIssue 

43

Technology 

profitable. The higher end corresponds to 

start-ups, where market penetration potential 

is unclear and business plans lack refinement. 

Conclusion 

Given the complexities discussed herein, 

one gains an appreciation for the crucial role 

of judgment and experience. There is often 

a lack of explicit market data for such key 

inputs as contributory asset rates of return 

and technology rates of return. Isolating the 

excess earnings from the subject technology 

is particularly challenging. As has been aptly 

stated, “Valuation is an art, not a science.” 

This is particularly true when appraising 

technology that is one part of a bundle, 

requiring judgment at virtually every step of 

the analysis. 

Appraisal Economics has over 25 years of 

experience appraising various technologies 

and the assets of technology firms. We have 

a seasoned staff of independent valuation 

experts, including engineers who have 

significant experience with technology 

and understand the unique valuation 

complexities. 

If you are looking for an appraisal firm that 

has a deep understanding of your industry 

and need a valuation for accounting, tax, 

transaction, or litigation purposes, please give 

us a call at +1 201 265 3333. 

Disclaimer: this article has content that is 

general and informational in nature. This 

document is not intended to be accounting, 

tax, legal, or investment advice. Data from 

third parties is believed to be reliable, but 

no assurance is made as to the accuracy or 

completeness. 

Franchise Hong Kong and China 

By Ella Cheong, JP 

Scott Vandervliet 

Hong Kong has been targeted as the regional franchising hub for many international 

brands. According to the Hong Kong Trade Development Council, many brands identify 

Hong Kong as the prime location to set up their franchise network as it is an ideal 

two-way springboard for gaining access to the Asian markets, and for Asian brands to 

venture into the global marketplace. 

Vice President at Appraisal Economics Inc 

T: +1 201 265 3333 

Email: svandervliet@ae-us.com 

Scott Vandervliet is a vice president for Appraisal Economics Inc., where he is primarily responsible 

for the valuation of business interests and intangible assets. He has over thirty years’ experience, 

completing valuations for a wide variety of purposes including: due diligence, mergers and 

acquisitions, joint ventures, corporate restructuring, litigation, and much more. Mr. Vandervliet 

holds a Bachelor of Engineering degree with High Honors from Stevens Institute of Technology, 

where he was a chemical engineering major. He also received a Master of Business Administration 

degree with Honors from New York University, where he majored in finance. 

Being one of the world’s freest economy, there 

is no specific legislation governing franchise 

operations in Hong Kong, nor are there any 

exchange controls, foreign equity participation or 

local management participation regulations. 

The realms of law that govern franchise 

agreements are common law, principles of 

contract law and any legislations relating 

to registration, licensing and protection of 

intellectual property rights such as Trade Marks 

Ordinance, Trade Descriptions Ordinance, 

Copyright Ordinance, Registered Designs 

Ordinance and Patents Ordinance. 

Despite the lack of regulations in Hong Kong, 

a non-legally binding association namely Hong 

Kong Franchise Association (HKFA) offers 

some guidance on franchising. HKFA defines 

franchising as a method of marketing goods and 

services. The basic features of typical franchising 

arrangement include: 

• the franchisor allowing the franchisee to use 

its name or brand; 

• the franchisor exercising continuing control 

over the franchisee; 

• the franchisor providing assistance to the 

franchisee; and 

• the franchisee making periodical payments 

to the franchisor. 

Additionally, HKFA published a code of ethics 

on their website as a reference for franchisors 

and franchisees. This code is divided into four 


Franchise Law 

sections, including general provisions, provisions 

relating to franchisor, provisions relating to 

franchisee and code of ethics for franchise 

consultants. A copy of the code of ethics can 

be found at http://www.franchise.org.hk/ 

codeofethics.asp. 

The lack of laws and regulations allows 

maximum flexibility for parties entering into a 

franchise relationship to freely negotiate their 

franchise agreements as well as operate the 

franchise business without the need of seeking 

approval from authorities. However, more 

difficulties arise when entering into the 

Chinese market. 

Unlike Hong Kong, franchising activities are 

overseen by authorities and is highly regulated 

in our Chinese counterpart. In China, the 

Ministry of Commerce (MOFCOM) and its 

commerce regulatory agencies of various level 

are the regulating authorities. Several laws and 

regulations govern franchise activities. 

The primary laws that are applicable includes: 

Measures for the Administration on Foreign 

Investment in Commercial Sector; Regulation on 

the Administration of Commercial Franchises; 

Administrative Measures for Information 

Disclosure of Commercial Franchises; and 

Administrative Measures for the Record Filing of 

Commercial Franchises (the “Franchise Laws and 

Regulations”). 

To file as a franchisor in China, the franchisor 

must provide trademark(s) and/ or patent(s) 

registration certificates issued by the Chinese 

authority as well as other business operation 

resources related to the franchise. A minimum 

of one such certificate is required from the 

potential franchisor by the Ministry of Commerce 

(MOFCOM). However, where the potential 

franchisor is unable to provide such certification, 

it may be sufficient to provide MOFCOM with 

a trademark license agreement or equivalent 

document indicating authorization to use the 

trademarks and to sub-license the same to 

franchisees. It is important that the trademark 

licence documents must indicate that only the 

licensor and potential franchisor can use the 

licensed trademarks and that the potential 

franchisor can sub-license the trademarks to its 

China franchisees. 

A further requirement specified by the Franchise 

Laws and Regulations is that a franchisor must 

have a minimum of two direct sales stores, and 

have undertaken the business for more than one 

year. This requirement is also known as the “two 

plus one” requirement. Only a franchisor or its 

direct subsidiary will be qua1ified for two plus 

one requirement but not its parent entity. 

Another requirement stipulated by the Franchise 

Laws and Regulations is that a franchisor 

must provide an exhaustive list of items to 

be disclosed prior to signing of the franchise 

agreement. At least 30 days before entering into 

the franchise agreement, the franchisor shall 

furnish the franchisee with the following: 

• franchisor’s name, domicile, legal 

representative, registered capital, business 

scope and the basic situation of franchising 

activities; 

• basic information of the franchisor’s 

registered trademarks, corporate logos, 

patents, proprietary technology and 

business model; 

• type, amount and method of payment of 

franchise fees; 

• price and prerequisites of products 

providing services and equipment to the 

franchisee; 

• provide specific methods for continuous 

business guidance, technical support and 

operation training to the franchisee; 

• specific methods of supervising and guiding 

the operation activities of the franchisee; 

• estimated budget of investment for the 

franchise outlets; 

• number, geographical distribution and 

business conditions assessment of the 

existing franchisees in China; 

• last two years’ briefs of financial accounting 

report and auditing report which are 

audited by accounting firm; 

• last five years of litigation and arbitration 

results related to franchising; 

• if there’s any serious illegal business records 

of the franchisor or its legal representative; 

• other information prescribed by the 

commercial administrative department of 

the State Council. 

Having met the preliminary requirements to be 

a franchisor in China, a franchisor must further 

register al1 relevant franchising materials with 

MOFCOM within 15 days after entering into a 

franchise agreement for the franchise to be valid. 

A franchisor will be fined from CNY 10,000 up 

to CNY 50,000 should they fail to register these 

documents. The materials include: 

• a photocopy of the business license or 

enterprise registration certificate; 

• a sample franchise contract; 

• a brochure for franchised operations; 

• a marketing plan; 

• a written commitment and relevant 

Ella Cheong, JP 

certification materials proving that 

provisions in Article 7 of the Regulation 

on the Administration of Commercial 

Franchises are followed; and 

• other documents and materials prescribed 

by the commercial administrative 

department of the state Council. 

Overall franchising in Hong Kong is relatively 

straightforward in comparison to China 

and franchising in China is very onerous on 

the franchisor while appears to benefit the 

franchisee. Notwithstanding the difficult and 

burdensome approval process for franchising in 

China, the rapid changing demographics, rising 

incomes and increased consumer spending are 

all attractive factors for franchisors to break into 

the Chinese market. 

As McDonald’s CEO Easterbrook revealed on 31 

March 2016, the goal is to make China become 

McDonald’s second largest market, moving it 

ahead of Japan and directly behind the U.S by 

opening 1,000 new franchise restaurants in China 

in the next five years! 

Lawyer, qualified HK (Roll of Honour of HK Law Society), UK, 

Singapore, and Australia. at Ella Cheong Law Office 

T: +852 2810 7400 

Email: ellacheong@ellacheonglaw.com 

Established ELLA CHEONG LAW OFFICE (HK) and agency ELLA CHEONG (HK/BJ). By invitation of Singapore 

Government also established ELLA CHEONG LLC in Singapore with support office in Malaysia, handling 

issues for ASEAN countries. 

Gives talks, authored articles, chaired IP Committee of Law Society, member of Government’s Patents 

Steering Committee, founded (President) APAA HK Group. 

Her international achievements: 

AAA – Life Founder Member 

AIPPI - Member of Honour 

APAA – APAA Enduring Award 

FICPI – Member of Honour 

INTA - President’s Award 


Mediation 

Mediation – Practical Guidelines, Part 1: Basic 

principles and preparing for the mediation hearing 

By Dr. jur. Dirk Oldenburg 

Mediation is a subject of much discussion, spurred by the legislative initiative at the EU level 

(Directive 08/52/EC) and the transposition thereof by national laws. There are now also a number of 

different ways to obtain training as a mediator. 

But has mediation also made significant gains in 

terms of its importance in practice, outside the 

fields of law where it is traditionally employed 

(such as family law)? There is reason for doubt. 

Why has mediation evidently not yet achieved 

the prominence in practice that it should be 

accorded in the interests of all concerned? 

Successful mediation is not based on complex 

academic theory. Instead, it requires three things 

above all: 

• logistical preparations for the mediation 

that are appropriate to the case, including 

appropriate preparation of the subject 

matter of the conflict; 

• the specific craft of the mediator in 

conducting the discussion and leading the 

procedure; and, most important of all, 

• an experienced figure who has the 

qualities required of a mediator: 

integrity, natural authority, engagement, 

determination, and creativity. 

I. Methodology: strictness 

versus variety 

Article 3 of Directive 08/52/EC places the term 

“mediation” in quotation marks and defines it 

as any kind of voluntary attempt to resolve a 

dispute, “however named or referred to.” It is 

already apparent from this that there cannot be 

a strict methodology for mediation, but rather 

that the manner in which the attempt to reach a 

resolution is made is subject to the autonomy of 

the interested parties. 

Still, certain mediation principles have taken hold 

in doctrine and practice (especially the “Harvard 

concept”), so in simplified terms, the mediation 

process can be broken down into the following 

rough phases: 

• Preparing for the mediation, including 

setting down rules of procedure, logistics, 

etc. 

• “Opening” the mediation hearing, with an 

introduction to the basic principles and 

features of the mediation procedure, the 

facts of the matter, and the status of the 

dispute; under some circumstances, an 

informal meeting may be held ahead of 

time. 

• Jointly working out all subjects in dispute 

from a factual and legal standpoint and 

otherwise. 

• Jointly working out and identifying the 

actual underlying interests and needs 

of the parties to the conflict and their 

relative importance and significance to the 

respective parties. 

• Jointly working out, in creative form, all 

theoretically conceivable approaches that 

might be taken to achieve a resolution, 

initially without evaluating or assessing 

them at the same time. 

• Jointly working out all theoretically 

conceivable scenarios in which an amicable 

resolution is not reached, initially without 

evaluating or assessing them. 

• Evaluating and comparing all of the 

identified scenarios in which an amicable 

resolution is not reached on the one hand 

and all possible approaches for reaching 

an amicable resolution on the other. 

• Working toward realistic models of 

achieving an amicable resolution. 

This methodological approach is just one 

of many, and it affords as much leeway as 

desired for specific emphases appropriate to 

the individual case. In principle, mediation can 

be used to address any kind of difference of 

opinion; only non-waivable law (i.e. questions of 

status) sets boundaries for whether a conflict can 

undergo mediation. 

This paper cannot possibly address all of the 

challenges that can arise during mediation, nor is 

it intended to do so. Instead, it will focus on a few 

important aspects. 

II. The “who, where, how” of a 

mediation hearing 

Mediation’s eventual success or failure is 

determined to a large extent early on, during the 

planning and conceptualization of the mediation 

procedure. 

Who is the most important point for the 

mediation procedure—that is, determining 

the size and composition of the parties’ 

representation. What are the crucial criteria 

when it comes to the question of who should 

participate as the parties’ representatives? 

• Under no circumstances should there 

be too many people involved. The most 

reasonable number is between one and 

five per side. The delegations should be at 

least roughly the same size. 

• There must be sufficient knowledge of 

the matter represented on all sides in the 

delegation, or this knowledge must be 

available to the delegation on short notice. 

• There must be persons with adequate 

decision-making authority at the table. 

The level of the hierarchy above the one 

where the case is being handled and, if at 

all possible, decision makers from outside 

the legal department should also be 

represented. 

The main decision makers should be able 

to view each other as equals in terms of 

the corporate hierarchy, so they can talk to 

each other as equals as well. 

Only if these conditions are met does the 

mediation have optimum prospects of success. A 

certain amount of distance from the matter itself 

and not having had too much prior involvement 

greatly enhance the parties’ objectivity in 

assessing their own prospects and risks. On the 

other hand, it is also necessary to ensure that 


Mediation 

the representatives are familiar with all matters 

and aspects that are favorable to their party and 

can bring them into the proceedings so that they 

do not agree to a solution that unreasonably 

disadvantages their party for lack of awareness 

of these points. 

It should be pointed out that decision makers 

from outside legal departments often display a 

more pragmatic, more realistic view, basing their 

assessment on whether a potential approach 

to achieve a solution seems appropriate and 

reasonable on the whole rather than following a 

particular—and chiefly legal—analysis. 

Each party should have as many representatives 

in the mediation procedure as necessary, but 

as few as possible, as the development of a 

relationship of mutual trust between those who 

are conducting the negotiations for the opposing 

sides (and, of course, between the parties’ 

representatives and the mediator) is critically 

important to the success of mediation. Without 

a certain level of mutual trust, it is much more 

difficult to talk about ways to bring the parties’ 

positions together or bring up possible scenarios 

to resolve the matter. 

This means that the mediator must keep these 

circumstances—along with interpersonal 

compatibility—in mind early on in the process, 

during the considerations regarding the 

determination of the parties’ representatives. 

It is easier to foster and build trust between a 

modest number of representatives of the parties 

than if there is a large delegation on each side. 

And it is not uncommon—in fact, it is quite 

typical—for final talks between just two or three 

persons to be necessary in order to overcome 

the last obstacles to achieving an agreement. 

The mediator also needs to take great care 

with the aspects of where and how early on, 

reviewing where, in what physical setting, and 

on what schedule the mediation is to take place. 

Depending on the nature and subject matter of 

the dispute, a wide range of different concepts 

may be appropriate and promising in this regard. 

These outward circumstances must be 

appropriate to the complexity of the matter, 

the economic or other importance of the case, 

and the persons involved. Only if the critical 

persons on all sides view these conditions as 

being appropriate and comfortable is it possible 

to create a discussion atmosphere that permits 

and even fosters the building of trust between 

the relevant decision makers in a relatively 

short time—and without that, the prospects of 

successful mediation are poor. 

Not every conflict justifies spending several 

days in negotiations in an exclusive, isolated 

location—but for complex, highly important 

conflicts, this kind of setting often gives rise to 

the best prospects of success. In other cases, 

the prospects of success may be greatest if it is 

possible to bring the final decision makers on 

both sides together in person, even if only for 

three hours at an airport hotel. 

No two cases are alike. And yet, one common 

thread is that the participants should already 

perceive even the general framework of the 

mediation as representing more than just the 

logistical details of a business meeting. Deciding 

that one is willing to engage in a cooperative 

mediation procedure marks the first step toward 

achieving an amicable agreement; this is exactly 

where the mediator needs to meet the parties 

to the conflict and then bring them along by 

creating the framework for constructive talks in a 

spirit of mutual trust. 

It is definitely possible, especially in large 

organizations and in the case of largescale 

procedures, that not all of the parties’ 

representatives will feel that pursuing mediation 

is the right approach. They may interpret a push 

to achieve an amicable resolution as criticism of 

their management of the conflict so far, or, in the 

case of large-scale matters, they may even see an 

agreement as jeopardizing the main thing they 

have been working on (possibly for years), their 

“raison d’être,” or even their economic livelihood. of the parties’ representatives to communicate 

This makes it all the more important for the 

in line with the cooperative principle behind 

mediator to strive to keep up the momentum 

mediation while putting a stop to any emerging 

formed by the decision to attempt mediation 

signs of aggressive communication behavior in 

and try to bring all delegation members fully on 

order to avoid jeopardizing the mutual trust that 

board for the procedure. 

has been built—or to be able to establish that 

trust in the first place. 

In principle, therefore, mediation starts with a 

positive initial situation. Immediately launching 

Setting down the details of who, where, and 

directly into the process of working on the 

how in a mediation agreement may be a good 

issues without allowing the persons involved 

idea, but it is not critically important. Rather it is 

to get a feel for one another beforehand 

important that a shared understanding on these 

should be avoided. If at all possible, the parties’ 

points does exist or, even better, for them to be 

representatives should get to know one another left up to the mediator. 

first, without direct reference to the conflict. In 

this way, initial personal impressions are formed 

Part 2 of these guidelines will address preparing 

during discussion of general topics, not later on, 

for the conflict before the mediation hearing and 

during the discussion of the conflict, which is 

the specifics of conducting the hearing as such. 

naturally contentious. 

Ideally, even the very first round of discussion of 

the facts of the matter will be less contentious on 

both sides if this is done, with a greater sense of 

partnership. Throughout the mediation hearing, 

one of the mediator’s key tasks is to remind all 

Dr. jur. Dirk Oldenburg 

Attorney at Law at Dr. jur. Dirk Oldenburg 

T: +49 (0) 178 41 41 935 

Email: do@dirk-oldenburg.com 

Dr. Dirk Oldenburg (born 1957 Kiel, Germany; qualified German lawyer/Rechtsanwalt) has 

gathered more than 30 years experience as partner of an international law firm in Frankfurt 

(Puender pp; today part of Clifford Chance) on the one hand and thereafter in the corporate 

world as General Counsel, Management Board Member and Chief Compliance Officer of the 

global pharmaceutical company Aventis/Sanofi. Utilizing his expertise and experience both 

from the attorney´s point of view as well as from the perspective of a corporate lawyer and 

corporate executive Dirk Oldenburg has moved into the field of mediation of complex dispute 

situations - be it due to legal or factual issues, due to interpersonal or intercultural difficulties 

within a relationship or because of high sensitivity or urgency of a matter. 


Mediation 

Mediation – Practical Guidelines, Part 2: The 

mediator – role and limits as the moderator of the 

process of reaching an agreement 

By Dr. jur. Dirk Oldenburg 

While part 1 of these guidelines addressed the basic principles of the mediation procedure in general 

and, above all, the logistical issues of “who, where, how,” part 2 deals mainly with preparing for the 

conflict before the mediation hearing and the specifics of conducting the hearing as such. 

I. Moderating the process of 

reaching an agreement 

Every mediator will have his or her own style 

and basic concept regarding the sequence 

and structure of a mediation hearing, which 

he or she is then required to adjust to the 

respective individual case. 

1. Written narrative summary by the 

parties to the conflict 

The mediator cannot reasonably be expected 

to work his or her way through what may 

be mountains of files on a lengthy conflict, 

nor is it certain that he or she would in fact 

discern the true core of the conflict even 

so. Both parties must therefore be asked to 

summarize the facts of the matter and the 

status of the dispute from their standpoints, 

in a manner appropriate to the complexity 

of the case. To this end, the mediator 

should, after consulting with the parties 

to the conflict, set out clear rules for the 

maximum scope and submission deadline 

and potentially establish an organizational 

structure that applies to all sides with regard 

to the subjects to be addressed. Within 

a further time limit after that, each party 

will then have the opportunity, after taking 

note of the opposing side’s submissions, to 

submit supplementary written remarks on 

the statements made therein within a certain 

time window and maximum scope. 

These clear and easily understood summaries 

– which are termed “narratives” hereinafter – 

form the basis for the mediator to familiarize 

himself or herself with the substance of the 

conflict and plan the mediation process. 

2. Opening phase of the mediation hearing 

At the start of the mediation hearing, the 

mediator should provide an introduction to 

mediation in general, the planned process of 

the talks, and the procedural rules that must 

be observed. 

After that, one option is to allow the parties 

to the conflict to present their respective 

standpoints orally within a certain speaking 

time. Instead of that, and often preferably, 

the mediator, who is now quite familiar with 

the matter from reading the written remarks, 

can outline his or her understanding of the 

status of the dispute and the issues that are 

especially relevant to the conflict and ask the 

parties to the conflict to add to or correct 

these remarks. 

This method has one major advantage in 

that it precludes potentially heated debate 

between the parties right at the start of 

the talks, instead offering an avenue of 

introduction to the subject matter of the 

conflict through the mediator’s presentation 

and with the mediator’s distance from the 

case. 

3. Looping and paraphrasing 

One factor that is absolutely crucial to the 

success of the mediator’s work is ensuring 

that all parties to the conflict have a firm 

sense at all times that the mediator is 

paying attention to and considering their 

submissions and actually understanding 

them as intended by the presenting party. 

The technique of “looping” or paraphrasing is 

an excellent way to do this. What this means 

is that the mediator repeats or paraphrases 

the parties’ submissions on an ongoing 

basis to ensure that he or she does in fact 

understand both parties’ submissions and 

arguments accurately. Having the mediator 

summarize the written narratives is another 

side of this same technique, which is why it 

is an excellent way to start the discussions 

and negotiations. In this way, the parties’ 

representatives can build the necessary 

fundamental trust in the mediator’s 

impartiality and understanding of the facts of 

the matter. 

4. Interests/needs versus positions 

The positions and demands or denials 

expressed by the parties to the conflict 

are obvious and clearly apparent. They are 

generally quite easy to ascertain and name. 

In terms of looking for possible solutions 

that involve an amicable agreement later 

on, however, it is highly important to “see 

through” these positions and discern the 

actual interest or need on which the party to 

the conflict bases the position. 

Although a position is generally expressed in 

the form of a monetary amount, in the vast 

majority of cases even a monetary position is 

backed by an identifiable interest or concern 

that does not have to do primarily with 

money. Finding out these underlying interests 

or needs on the part of all of the parties to 

the conflict (not just the claimant) is very 

often the key to identifying the best possible 

alternative solution in the further course of 

the negotiations. 

5. Evaluating and weighing the parties’ 

interests/needs 

In many cases, the matter concerns not just 

one need on the part of one of the parties 

to the conflict, but rather several, which 


Mediation 

generally vary in their importance to that 

Where the conflict exists on a relationship 

process of weighing these factors. Holding 

the conflict to think about possible solutions 

party. But the other parties to the conflict 

level, achieving a certain level of satisfaction, 

open discussions to assess the various 

from the other side’s perspective as well, 

also have needs and interests of their 

or at least airing of concerns, on the part 

alternatives for reaching or not reaching an 

regardless of their own situations. 

own, and they also vary in relevance. For 

of the affected parties is even generally the 

amicable resolution means that in factual 

mediation purposes, it is important for the 

primary goal. Since relationship conflicts 

terms, part of the process of weighing the 

During this process, the interested parties 

true interests/needs of everyone involved 

are very difficult to categorize, it is nigh 

various factors takes place in the presence 

should be urged to be as creative as possible 

in the conflict to be identified through open 

impossible to generalize about how to handle 

of the opposing party, and most of all, in the 

so that no theoretically conceivable solutions 

discussion and then evaluated or categorized 

them, except to say that the most promising 

presence of the mediator. 

are overlooked. In this regard, the mediator 

jointly by the interested parties in terms 

path is generally to gently and carefully 

should act as a catalyst for the parties’ 

of their importance and significance to the 

identify and name the deeper-seated areas of 

That means the mediator can more readily 

creativity. 

parties to the conflict. In many cases, the 

personal dissonance. It may be necessary to 

influence the evaluation of the alternatives 

interests of those involved in the conflict have 

hold a large number of individual discussions, 

and the process of weighing the options 

The mere fact that they are considering, at 

more aspects than is initially apparent. 

or even to call in an appropriate expert. 

than if these consultations were to take 

least in part, ways of arriving at an amicable 

In many cases, even simply allowing the 

place among the parties’ representatives 

agreement while taking the interests and 

This can open up possible avenues of 

affected parties to voice their concerns with 

themselves, confined to their own 

needs of the other side into account fosters 

reaching an agreement, as accommodating 

the mediator’s guidance can lead to a greater 

delegations, without the mediator taking part. 

greater understanding for the opposing 

a need that has been acknowledged as 

understanding of the opposing side’s views 

In particular, the mediator can ensure that all 

side’s concerns, whether they are purely 

being especially important to one party may 

and feelings. 

interested parties have a clear sense of the 

financial in nature or involve communication 

generate greater value for that party than 

scenarios in which an amicable resolution is 

challenges, financial problems, or something 

conceding the point “costs” the opposing side 

In addition, naming and identifying the 

not reached as they make their decisions. 

else. The important thing is to set down all 

– so a kind of added value with regard to one 

deeper-seated root causes of a conflict 

of the possible solutions so that they can be 

aspect or another can be generated through 

often points to ways that the parties could 

During the discussion that follows within 

referred to anytime later on. 

these kinds of elements of mutual agreement, 

consciously avoid or handle the problematic 

a negotiation delegation, there are often 

making it easier to reach an overall solution. 

relationship in the future, for example 

different assessments and perspectives, 

9. Assessing the possible solutions 

by agreeing to change the processes by 

and different personalities also affect the 

The process of designating and attaching 

which information is shared or matters 

process of forming an opinion. Holding an 

After all of the conceivable approaches to 

values to the interests and needs of other 

are coordinated, making changes in 

open discussion as a group beforehand may 

achieving a resolution have been found, 

interested parties (and not just one’s own) 

responsibilities, involving external persons of 

shift the dynamics within the delegation 

designated and set down, the next step is to 

openly and through shared discussion creates 

trust, and so on. 

and enhance the members’ willingness to 

identify the solution models that are realistic 

a negotiation atmosphere of consideration 

compromise, because the scenarios for what 

and merit discussion. In this situation, it is 

toward the other interested parties. It is 

7. Determining and evaluating the 

will happen if an agreement is not reached 

beneficial for all interested parties to have 

much more difficult to reach an amicable 

alternatives in case an amicable resolution 

are probably clearer to them at that point 

been involved in preparing the full overview 

agreement without this kind of cooperative 

is not reached 

than they usually are. 

of all possible approaches, so all sides are 

negotiation atmosphere. 

aware that resolving the conflict – if it is in fact 

Before beginning to look for approaches to 

8. Identifying possible solutions 

possible to do so – will require them to select, 

6. Separating the factual level from the 

achieve an amicable resolution, it is advisable 

adapt, and combine the various elements 

relationship level 

to openly discuss all of the conceivable 

The task in the next stage of the process is 

from this list. 

scenarios in which an amicable resolution is 

to identify as many conceivable approaches 

It is not uncommon for conflicts (such as 

not reached as a group and evaluate their 

that can be taken to achieve an amicable 

The list of possible solutions will very likely 

those between shareholders or partners in a 

effects on the interested parties. It is certainly 

resolution as possible. Aside from the obvious 

include approaches in which the added 

business) to be based not primarily on factual 

a good idea – and a matter of course before 

options, there are almost always less obvious 

value discussed above is created by giving 

issues, but rather to have their true roots on 

reaching an amicable settlement – to identify, 

ones, which are more likely to be found in 

something to one party that is more 

the relationship level. If the mediator is not 

assess, and weigh the prospects and risks 

joint brainstorming sessions. For all kinds 

important to that party than conceding it 

successful in identifying and understanding 

these root causes – which are often not clear 

associated with continuing the conflict. 

of brainstorming, the main point is to elicit 

as many thoughts and ideas as possible, 

costs the other. Special attention should be 

paid to seeking out these kinds of elements 

from the exchange of written narratives – it 

Although this sounds like it goes without 

refraining for the time being from making 

and including them in an overall concept. 

will be very difficult to resolve the conflict. 

saying, there are nonetheless many parties 

any value judgments or ruling anything out. 

who do not go through a clearly structured 

The mediator’s role is to ask the parties to 

If at all possible, a good overall solution 


Mediation 

should address all of the matters involved 

agreement? 

entirely at any time, and events that form 

especially those concerning the facts of 

in the conflict and, beyond that, all other 

connecting factors between the parties, since 

a full package solution makes it much easier 

to balance out points of contention with 

concessions or promises made elsewhere, 

thereby crafting an overall solution that is 

suitable for consensus and advantageous for 

all of the parties involved. 

This means that all levels and topics, whether 

factual or personal in nature, should be 

included in the package in order to arrive at a 

That brings us to the question of what limits 

the mediator needs to observe. The goal 

of this section is to shed some light on the 

borderline issues that typically come up. In 

general, of course, any mediator who works 

close to the limits of his or her actual role 

makes himself or herself more vulnerable to 

attack, so one side or the other might assert 

that the mediator’s neutrality has been lost 

– with the result that the mediator should 

recuse himself or herself immediately. 

part of the mediation process cannot be used 

in court proceedings concerning the dispute 

(Article 7 of Directive 2008/52/EC). However, it 

must be clear to the mediator in such a case 

that he or she is playing with fire. 

There are two reasons for this. First, 

examining witnesses, for example, would 

pose an elevated risk that one of the parties 

could allege that the specific nature of the 

questioning constitutes the mediator’s taking 

sides; and second, it is questionable whether 

the matter, witness statements, matters of 

credibility, expert opinions, legal questions, 

and issues of solvency is a particular reason 

why it is possible to achieve solutions through 

agreement and compromise, and why these 

solutions should in fact logically be achieved 

in most cases. 

The mediator must resist any temptation 

to assume the role of deciding the matter 

or permitting others to place him or her in 

such a role; in principle, this applies even if 

solution that appeals to all sides and establish 

a relationship that is as free of tension as 

possible for the future. 

As part of this process of identifying a 

solution, it is occasionally a good idea to refer 

once again to the alternatives that have been 

However, the mediator can guard against this 

risk to a certain extent by coordinating any 

activities that could leave him or her open to 

attack with all of the parties to the conflict in 

advance and engaging in these activities only 

if all parties have agreed. 

clarifying factual issues (or supposedly 

clarifying them, at any rate, as they often 

remain disputed even afterward) would 

truly improve the prospects of reaching an 

amicable agreement or would actually tend to 

worsen them instead. 

all parties turn to the mediator with this in 

mind. Before acceding to such a request, the 

mediator would have to be firmly convinced 

that the mediation is unlikely to succeed 

otherwise. 

3. Individual discussions? 

identified in the event that no agreement 

is reached in order to maintain the parties’ 

interest in achieving an amicable resolution 

and ensure that they do not give up their 

efforts prematurely. Mediation negotiations 

often seem to have failed conclusively, 

but can then be started back up again 

successfully, for example if the parties take a 

break so they can resume the discussion with 

renewed energy and after reconsidering the 

alternatives that will apply if an agreement is 

not reached. 

For the typical activities in question (such 

as individual discussions with one of the 

parties to the conflict), this can already be 

set out in general terms in the mediation 

agreement (agreement between the parties 

to implement mediation) or the mediator 

agreement (agreement between the 

parties and the mediator on various points, 

particularly describing the engagement, 

compensation, liability and possibly also the 

nature and limits of implementation). 

After all, uncertainty on certain issues 

– regardless of the nature thereof, and 

wherever possible, regarding as many open 

issues as possible – can be viewed as building 

blocks for an amicable resolution. It is 

therefore recommended that mediators not 

be available to clarify the facts of the matter 

as a basic principle. At most, the mediator 

should only state that he or she is willing to 

do this if there is pressure to do so from all 

of the parties to the conflict, and only if it is 

extremely unlikely that an agreement would 

Individual discussions should be an option, 

and for the sake of clarity, specific rules 

on this point should be set down in the 

mediation agreement or the agreement 

with the mediator. If one party suspects 

that a mediator would act unfairly during 

an individual discussion, that party would 

be best advised to reject the mediator 

immediately. 

Without violating his or her obligations in 

1. Clarification of facts by the mediator? 

be reached otherwise. 

any way, a mediator can address the risks 

In these kinds of situations, it is crucial for 

that arise for one party in a conflict better 

the mediator to retain firm control of the 

course of the hearing at all times, intervening 

in situations of escalating conflict or where 

a breakdown seems imminent and taking 

procedural measures to affect how the 

negotiations proceed. This is one reason that 

mediation involving a strong, experienced 

mediator has significantly better prospects 

of success than normal bilateral settlement 

negotiations. 

Can and should a mediator make himself or 

herself available to clarify disputed facts (e.g. 

by examining witnesses), and is the mediator 

even allowed to do this? This kind of activity 

clearly does not fall within the scope of the 

mediator’s role. If the parties wish it, however, 

it is not prohibited; the parties’ autonomy 

in determining the course of the mediation 

allows it. 

2. Assessment of factual, legal, evidentiary 

questions? 

In principle, the mediator should refrain from 

expressing any opinions of his or her own 

on these kinds of questions that are relevant 

to the conflict, but instead should view the 

mediator’s role as lying solely in pointing out 

which questions should be viewed as open 

and without a certain final answer. 

and with greater emphasis if the mediator is 

meeting one on one with that party. This kind 

of treatment could be viewed – possibly even 

correctly – as a violation of the obligation 

of neutrality if it occurred in a discussion 

attended by all parties. If the parties accept 

their mediator, they will assume that he or 

she applies the same standards on both 

sides. Naturally, the mediator must live up to 

these expectations and cannot allow himself 

II. A generator of limitless 

After all, the parties have the option of 

withdrawing from the mediation process 

Uncertainty in questions of all kinds, 

or herself to be made into a tool for one side. 


Mediation 

4. Suggestions for reaching an agreement? 

These kinds of suggestions should exist – 

but only as a last resort. There is no doubt 

whatsoever that one of a mediator’s main 

tasks is to be creative in seeking out potential 

approaches to take in order to reach an 

agreement and introduce any approaches 

not identified or designated by the parties 

themselves into the discussion on a hypothetical 

basis. 

However, the mediator should fundamentally 

interpret his or her role as being merely that of 

a catalyst for the parties to reach an agreement 

between them, and not, like an arbitrator, 

making a suggestion that he or she perceives to 

be fair as an intermediary. 

As a precaution, it is a good idea to insert a 

provision in the mediation agreement and/or 

the agreement with the mediator stating that 

the mediator is entitled to make suggestions 

regarding possible agreement between the 

parties at his or her own discretion, but the 

mediator should not exercise this right except if 

all parties specifically wish it and if the mediator 

believes that in all likelihood, the parties would 

not reach an agreement otherwise. 

III. Outlook 

It appears that there is so far no widespread 

practice in Europe of using mediation to settle 

conflicts in economic matters. In the interests 

of the overloaded justice system and with an 

eye to settling conflicts faster and at lower cost 

and conserving resources in general, and in the 

fundamental interest of dealing with one another 

in a spirit of cooperation, this should be changed 

for the good of all. 

Seabed Mining and the application of 

Maritime Law Concepts 

By Wylie Spicer, 

Peter L’Esperance 

Dr. jur. Dirk Oldenburg 

Attorney at Law at Dr. jur. Dirk Oldenburg 

T: +49 (0) 178 41 41 935 

Email: do@dirk-oldenburg.com 

Dr. Dirk Oldenburg (born 1957 Kiel, Germany; qualified German lawyer/Rechtsanwalt) has 

gathered more than 30 years experience as partner of an international law firm in Frankfurt 

(Puender pp; today part of Clifford Chance) on the one hand and thereafter in the corporate 

world as General Counsel, Management Board Member and Chief Compliance Officer of the 

global pharmaceutical company Aventis/Sanofi. Utilizing his expertise and experience both 

from the attorney´s point of view as well as from the perspective of a corporate lawyer and 

corporate executive Dirk Oldenburg has moved into the field of mediation of complex dispute 

situations - be it due to legal or factual issues, due to interpersonal or intercultural difficulties 

within a relationship or because of high sensitivity or urgency of a matter. 

Introduction 

Seabed mining (SBM) is an emerging industrial 

activity involving the recovery of mineral 

resources from the ocean floor. As a form 

of resource extraction or mining, SBM is a 

predominantly industrial activity. Yet, as one 

which occurs in the marine environment, SBM 

may also be characterized as a maritime activity. 

This hybrid character creates uncertainty 

concerning which legal regime will govern SBM 

activities and for what purposes? This article 

engages with that uncertainty by asking to what 

extent is SBM a maritime activity subject to 

maritime law’s application? The authors suggest 

that as SBM evolves as a maritime industrial 

activity, clarity surrounding the applicable legal 

regime will not only be a necessary pre-condition 

for commercial certainty and investment, it will 

also be necessary to safeguard the values at the 

core of maritime law: protecting life, property 

and the environment at sea. 

Seabed Mining 

Rising prices for non-energy mineral resources 

coupled with depleting mineral reserves on 

land, has prompted mining companies to 

look seawards to satisfy the world’s persistent 

demand for minerals 1 . On the ocean floor, 

minerals occur in the form of polymetallic 

nodules, sulphides and ferromanganese crusts, 

containing manganese, copper, zinc, lead, iron, 

silver, gold, cobalt, platinum and rare earth 

metals in concentrations far richer than those 

available from scarce land-based sources. 

Presently, the International Seabed Authority 

(ISA), the intergovernmental body established 

1 European Commission, “Blue Growth: Opportunities for 

Marine and Maritime Sustainable Growth”, Brussels, 13.9.2012, 

COM (2012) 494, online: http://ec.europa.eu/maritimeaffairs/ 

policy/blue_growth/documents/com_2012_494_en.pdf. 


Anti-trust/Competition Shipping and Maritime Law 

by the 1982 United Nations Law of the Sea 

legal framework must address, including: the 

national jurisdictional boundaries, the exclusive 

• Mode of propulsion irrelevant. 

Convention (UNCLOS) to regulate seabed 

ownership, financing, classification and insurance 

application of maritime law for select aspects of 

Applying the above elements to the vessels, 

activities in areas beyond national jurisdiction, 

of SBM vessels, equipment and activities; SBM’s 

SBM activities, and the concurrent application of 

installations and equipment employed in current 

has issued exploration licenses to member states 

marine spatial footprint and interactions with 

maritime law for others. 

and proposed SBM activities suggests those 

to explore defined parcels of the Pacific, Indian 

and Atlantic Oceans. 

A Canadian company Nautilus Minerals Inc. 

other maritime uses; occupational health and 

safety; pollution and environment; and civil 

liability. Currently, those laws which do apply to 

the industry derive from a patchwork of legal 

The Application of Maritime 

Law Concepts 

vessels may meet the definition of “ship” for 

select purposes. Nautilus’ proposed PSV satisfies 

many of the common elements of “ships”, 

especially when independently navigating 

(“Nautilus”) is poised to commence commercial 

sources: national and international; private and 

In gauging maritime law’s application to the 

between extraction sites. 

extraction of copper and gold from seafloor 

public. 

SBM industry, an orienting question is what 

sulphide systems in the Solwara-1 concession 

qualifies as a ship, for what purposes and with 

This characterization aligns with case law from 

approximately 1600 metres beneath the 

Part XI of the UNCLOS authorizes the ISA to 

what consequences? Although an ostensibly 

the offshore oil and gas industry characterizing 

territorial waters of Papua New Guinea 2 . To fulfil 

regulate SBM activities in the seabed Area 

simple question, characterizing whether a vessel 

MODUs, drill ships and FPSO’s as ships or vessels 

this task, Nautilus intends to rely on technologies 

beyond the continental shelves of coastal States 3 . 

or an installation is a ship has and continues to 

while in transit between production sites. 6 

derived from the shipping, offshore oil and 

Presently, the ISA has adopted regulations on the 

generate controversy given the far-reaching legal 

However, when PSVs are permanently moored 

gas, land-based mining and sediment dredging 

exploration for and is developing regulations on 

consequences attending that designation. 

or positioned to engage in SBM activities for an 

industries, including: 

the exploitation of seabed minerals. 

extended period of time, their status as ships 

• Production Support Vessel (PSV): a ship 

featuring capabilities to navigate to and 

from the extraction site, equipped with the 

facilities necessary to process, store and 

transfer mineral resources recovered from 

the seabed; 

• Riser and Lifting System (RALS): a flexible 

pipe through which the materials recovered 

from the seabed are pumped to the PSV for 

processing; and 

• Sea-floor Production Tools: consisting of 

submersible remotely operated machines 

which prepare the sea floor, gather the 

excavated materials, and pump those 

materials through the RALS to the PSV for 

processing. 

Once developed, however, ISA instruments will 

only apply the seabed Area beyond coastal State 

jurisdiction. ISA instruments will only apply to 

State parties to the UNCLOS. ISA instruments are 

not anticipated to cover subject matter within 

the scope of traditional maritime law, such as 

the ownership, financing and insurance of SBM 

equipment and technologies. 

Finally, because certain technologies involved in 

SBM perform essentially maritime activities, such 

as the PSV navigating to or between production 

sites, those activities will be subject to the 

concurrent application of maritime law. 

The first step in this analysis is considering the 

definition of “ship” and evaluating whether SBM 

vessels, installations and submersibles fall within 

that definition. As a starting point, section 313 

of the U.K. Merchant Shipping Act 1995 defines 

“ship” to include “every description of vessel used 

in navigation” 4 . 

Canada’s Federal Courts Act defines ship more 

expansively as “any vessel or craft designed, 

used or capable of being used solely or partly for 

navigation, without regard to method or lack of 

propulsion, and includes a ship in the process 

of construction from the time that it is capable 

of floating, and a ship that has been stranded, 

becomes more tenuous. 

Whether Nautilus’s proposed submersible 

SPTs constitute ships, for what purposes, and 

with what consequences is a more ambiguous. 

Canadian case law has characterized a remotelyoperated 

submersible tree harvester tethered to 

and operated from a barge as a “ship”, albeit for 

purposes of grounding admiralty jurisdiction 7 . 

Whether such an argument is compelling or 

indeed relevant for the remotely operated 

submersible equipment employed in the SBM 

context and operating largely on the seafloor is 

an open question. 

Although SBM remains in its infancy as an 

wrecked or sunk and any part of a ship that has 

industry, sustained exploration and future 

SBM activities carried out in maritime zones 

broken up.” 5 

Fundamentally, characterizing an object as 

production activities suggest that the industry is 

subject to coastal State jurisdiction, including 

a “ship” triggers the application of the law of 

technically feasible and commercially lucrative, 

the territorial sea, exclusive economic zone 

Case law interpreting what constitutes a ship 

the flag and obligation to register that ship 

confirming the need for owners, operators, 

or continental shelf, will be governed by 

is voluminous. However, a cursory survey of 

in a national registry as a pre-condition to 

insurers, financiers and governments to turn 

national laws, subject to relevant international 

legislation and case law suggests that meeting 

the ship receiving the nationality and right to 

their mind to the legal framework governing this 

obligations. In these circumstances, coastal 

the definition of “ship” requires an object to 

fly the registering State’s flag. Significantly, 

evolving industry. 

States will be required to either craft new 

satisfy at least some of the following elements: 

possession of nationality is a pre-condition for 

The Current Legal Framework 

The technology and operations involved in SBM 

depict the complex issues which an effective 

2 Nautilus Minerals Website, “About Nautilus”, online: http:// 

www.nautilusminerals.com/irm/content/overview.aspx- 

?RID=252. 

regulatory frameworks governing SBM activities 

or adapt existing ones. 

The above discussion highlights the complexities 

inherent in regulating SBM activities, resulting 

from the fragmented application of present 

and future regulations across international and 

3 UNCLOS, 1982, arts. 147–47. 

Partial navigational use; 

• Navigational capabilities; 

• Navigation through or above water; 

• Vessel under construction; and 

4 Merchant Shipping Act 1995, c 21, s 313 (UK). 

5 Federal Courts Act, RSC 1985, c F-7 (Canada). 

ships to exercise the rights and freedoms under 

international law, such as freedom of navigation 

and rights of innocent passage. 

6 See Bow Valley Husky (Bermuda) Ltd. v Saint John Shipbuilding 

Ltd, [1997] 3 SCR 2010 at para 85; see also Perks v Clark, 

[2001] 2 lloyd’s Rep 431 (Eng QB). 

7 Cyber Sea Technologies Inc v Underwater Harvester Remotely 

Operated Vehicle, Serial No. UHROV-101, [2003] 1 FC 569 at 

para 14. 


61

Anti-trust/Competition Shipping and Maritime Law 

Applying this consideration to the vessels 

employed in SBM activities suggests that 

such vessels will be characterized as ships for 

purposes of ship registration, following the 

practice in the offshore oil and gas industry 

of registering a wide variety of offshore 

installations. 

Indeed, applying flag State jurisdiction to the 

SBM vessels through registration may be the only 

option consistent with maintaining legal order 

on the ocean – the objective at the heart of flag 

State jurisdiction as articulated by the PCIJ in the 

1927 S.S. Lotus Case. 8 

Once a vessel is characterized as a ship for 

purposes of vessel registration, it follows that 

such vessels may also be classed, mortgaged, 

insured (both hull insurance and protection 

and indemnity) and chartered in a manner akin 

to ships. 9 However, substantive differences in 

SBM vessels, equipment and activities and their 

use will likely render the blanket application of 

maritime law concepts inappropriate. 

By way of example, marine mortgages enable 

shipowners to finance the costs to build, operate 

and decommission a vessel. If the shipowner 

defaults, the lender forecloses on the mortgage 

and takes possession of and sells the mortgaged 

property through an in rem action and forced 

judicial sale. Financing an SBM vessel through 

a maritime mortgage, however, poses unique 

enforcement challenges for lenders. First, unlike 

ships, which may be intercepted or arrested in 

ports or territorial waters, SBM vessels may be 

moored outside territorial waters for extended 

periods of time making the practical enforcement 

of a mortgage difficult. Second, the primary 

value of SBM vessels resides in their capacity to 

produce. Accordingly, lenders may be reluctant 

to enforce a mortgage through taking possession 

of SBM vessels where it impairs the vessel’s 

ability to generate revenue. Third, the secondary 

8 The SS Lotus Case (France v Turkey), [1927] Permanent Court 

of International Justice, Ser. A, No. 9, p 53 (dissenting opinion by 

Lord Finlay). 

9 Canadian Maritime Law, supra at 281. 

market for SBM vessels will be smaller than 

that for ships, creating valuation difficulties and 

compounding challenges faced by lenders in 

determining whether to enforce the mortgage. 

Similar questions may be posed regarding 

the application of marine insurance – hull and 

machinery; protection and indemnity – to SBM 

vessels, equipment and activities. Many risks and 

liabilities present in the evolving SBM industry 

will be shared with the commercial shipping 

and offshore oil and gas industries, specifically 

those relating to operating in a hostile marine 

environment. Equally, however, the SBM 

industry’s development will reveal new risks 

and liabilities which insurers and P&I clubs must 

respond to in determining the application of and 

indemnity available under traditional marine 

insurance, such as: 

• long term exposure of SBM vessels to 

hostile environmental conditions distant 

from commercial repair facilities; 

• stresses induced by SBM submersible 

production tools associated with operating 

in estimated water depths of 6000 m; 

• collision risks with collection and support 

vessels; 

• pollution risks associated with the transfer 

of the recovered ore to collection vessels; 

and, 

• pollution risks associated with the 

disturbance of marine benthic 

communities. 

Further, characterizing an object as a “ship” 

may trigger the application of the constellation 

of maritime law instruments regulating areas 

ranging from collision avoidance to marine 

environmental protection to maritime labour 

to the limitation of liability. Ultimately, the 

application of many of these instruments will 

depend on the precise definition of “ship” 

provided within each and their underlying 

functional rationale. 

Conclusion 

Notwithstanding the SBM industry’s novel 

characteristics, marine classification, financing 

and insurance professionals are extrapolating 

from experiences in the shipping, offshore oil and 

gas, land-based mining and sediment dredging 

industries to develop new standards to apply to 

the vessels, equipments and activities engaged in 

SBM activities. Governments, independently and 

in concert with inter-governmental organizations 

such as the ISA, are in the process of crafting new 

regulatory frameworks and adapting existing 

ones to respond to and anticipate the unique 

challenges posed by the industry in areas such 

as accommodating SBM activities with other 

maritime uses, safeguarding occupational health 

and safety, protecting the environment, and 

addressing civil liability for pollution. 

Wylie Spicer 

Counsel at McInnes Cooper 

T:+1 403 585 1543 

Email: wylie.spicer@mcinnescooper.com 

Peter L’Esperance 

This article suggests that many concepts of 

maritime law are applicable to and indeed 

necessary for the emerging SBM activity. As 

vessel owners, operators, insurers, financiers 

and governments navigate the emerging SBM 

industry, practical and functional legal guidance 

will be essential to understand maritime law’s 

application and adaptation to the next generation 

of vessels equipment and activities. Such 

guidance will not only be a necessary condition 

for commercial certainty and responsible 

investment – it will also be necessary to 

safeguard the values at the core of maritime law: 

protecting life, property and the environment 

at sea. 

Wylie acts as Counsel at McInnes Cooper. As former Managing Partner of McInnes Cooper, and with 

40 years of industry experience, Wylie brings a strong presence to our firm. Wylie’s practice focuses on 

maritime law, as well as offshore and seabed mining. Highlighted through an extensive list of worldwide 

publications, Wylie exhibits a great breadth of knowledge – earning his title as a respected leader within 

his field. Throughout his career Wylie has handled complex litigation matters in Courts throughout 

Canada from the trial level to the Supreme Court of Canada. 

A past President of the Canadian Bar Association for Nova Scotia, Wylie is admitted to the Bar of three 

Canadian Provinces: Nova Scotia, Newfoundland & Labrador, and Alberta. Wylie has been awarded 

Martindale-Hubbell’s highest rating (“AV”) and is repeatedly named in various publications as a Leading 

Practitioner in Maritime Law in Canada and alternative dispute resolution, including Best Lawyers 2010 

Halifax Best Maritime Lawyer of the Year. He was awarded the Queens Counsel designation in 1995. 

Wylie is an executive of the CBA National Maritime Law section, a member of the Canadian Maritime 

Law Association, the International Bar Association and a member of the International Association 

of Petroleum Negotiators. Through a sharing of knowledge, Wylie engaged students at Dalhousie 

University’s Schulich School of Law, where he previously taught part-time in the area of maritime law. 

Wylie currently acts as a Sessional Lecturer at the Faculty of Law, University Of Calgary on the topic of 

Law of the Sea. 

Articling Student at McInnes Cooper 


63

GREEN SHIPPING LINE 

The story of Green Shipping Line (www. 

Greenshippingline.com). Our mission is to provide 

reliable, green, economical water transportation for 

containerized imports, exports, and domestic cargos 

on the “American Marine Highway”(AMH) fulfilling the 

mandate as set forth in the 2007 Security Law passed 

by Congress. Our Motto is: Sea, The Future. 

In short, we want to unlock the unlimited capacity 

of the American Marine Highway that costs “nothing 

to build and little to maintain”, to meet the future 

transportation needs of our growing population and 

economy. Note that the AMH touches 28 states and 

we have finally solved the complex and controversial 

issue of economical U.S. ship assembly. 

Now we can move forward. Without viable coast-wide 

water transport being added to the existing stressed 

land side rail and road infrastructure networks, we 

will be at a disadvantage trading in the evolving 

global economy. 

Is the Green Shipping Line initiative important to 

the nation? We believe so, and note that our selffunded 

companies have received 2 of only 14 Marine 

Highway Project designations issued by the Federal 

Government to date. That is one of the important 

reasons we have unfettered direct access to MARAD/ 

DOT, the Washington decision makers who make the 

final determination on the CCF as well as the new 

building programs for non combat vessels as well as 

the RRF. 

A complete history and the vision of MARAD/DOT’s 

American Marine Highway program can be reviewed 

in detail at: http://www.marad.dot.gov/ships-andshipping/dot-maritime-administration-americasmarine-highway-program/ 

The U.S. maritime industry is huge -- with hundreds 

of thousands of workers and mariners contributing 

billions to our economy while securing the safety 

and security of our coasts. However, we believe the 

industry and its potential has gone unnoticed for 

far too long. That is why in this election year, we, 

along with the unions, want the AMH elevated to the 

national stage. 

We are trying to shine a spotlight on the potential 

of the AMH and coalesce vocalized support that will 

energize the industry, financiers and to educate the 

population on one of our most valuable God-given 

natural resources. 

We are not advocating that the government give 

money or subsidize this sector. Once shipbuilding and 

coastal shipping distribution is re-discovered, nature 

will take its course. 

Percy R. Pyne IV 

Founding Partner of Green Shipping Line 

Founding Partner of Green Shipping Line, hails from a family with a legendary history in transportation. 

In the Nineteenth Century, the family owned and operated one of the largest fleets of Yankee Clippers, 

doing trade internationally. More recently, Mr Pyne’s family took the leading role in integrating the rail 

and bridge networks in Metropolitan New York City, creating a viable transport network known today 

as the Metropolitan Transportation Authority (MTA). In addition to transportation, the family have been 

prominent in real estate in Manhattan and the surrounding boroughs. 

Mr. Pyne has been involved in the shipping world for more than twenty years. He has invested his time and family’s resources 

toward recreating the US Short Sea/Feedering system that existed prior to 1956. American Feeder Lines, a precursor of GSL, was 

co-founded by Mr. Pyne and, on a trial basis, operated a short-sea feeder service between Halifax, Portland, and Boston. The 

enterprise provided invaluable experience and insight into the challenges facing the nascent short-sea feedering industry. AFL 

was awarded one of only eight licenses to operate in the United States. Concurrently, Mr Pyne has worked for over 40 years in 

property acquisition, dispositions, development, ownership, management, complex ground-lease negotiations, joint ventures, and 

consulting. His company owns and/or manages substantial properties in New York City, New York and in Alexandria, Virginia and 

Denver, Colorado. 

Mr. Pyne has advised on major US and international commercial transactions for Mobil Oil, USX Corporation, Chemical Bank, 

Goldman Sachs, Merrill Lynch, The Republic of Korea. 

Mr. Pyne has been featured, quoted, and published in The Wall Street Journal, Forbes, Bloomberg, Dow Jones, Thomas Reuters, 

Commercial Property, CNBC, Fox Business News, Financial Times, Boston Globe, National Real Estate Investor, Real Estate Weekly 

and other trade publications. He holds an MBA from Columbia University and is a member of the Real Estate Board of New York. 

Eleanor B. Ford 

Founding Partner of Green Shipping Line 

Eleanor B. Ford is a founding partner of the Green Shipping Line and a now-senior member of the 

family that revolutionized the automotive industry and US transportation system. Ms. Ford has been 

involved and exposed with the Ford Motor Company since childhood. 

Historically, The Fords played an important role in developing the US shipping industry. Until 1986, Ms. 

Ford‘s forbearers maintained the largest commercial lake shipping fleet in the country. These ships served as the primary means 

for distributing Ford cars and truck parts throughout the eastern half of the United States. The Ford pedigree in shipping goes 

further back to the First World War, when Mr. Henry Ford, Ms Ford’s great great grandfather, as part of his role as member of the 

US Shipping Board, developed and built the fleet of 16 Eagle-class Patrol craft (PE boats) for the US Navy. These vessels remained 

in service through World War II, in which conflict they protected merchant shipping in the Atlantic. 

Robert Somerville 

Senior Advisor 

Robert Somerville graduated from Maine Maritime Academy with a degree in marine engineering and 

has devoted his professional life to the marine industry. His early years were spent as a seagoing 

engineer and later in gaining experience at the Newport News shipyard. Following that, he began a 

thirty-five year career with the American Bureau of Shipping (ABS) holding increasingly senior positions 

as Field Surveyor, Senior Surveyor, Principal Surveyor, Regional Manager for Western Europe, and 

President and Chief Operating Officer of ABS Europe. For eleven years prior to his appointment to the position of Chairman, he 

served as President and Chief Operating Officer of ABS. He has received numerous awards in recognition of his contributions to 

maritime safety and currently serves as Vice Chairman of the International Association of Classification Societies. 

Colleen Robertson 

Managing Director 

Ms. Robertson comes to Green Shipping Line with experience at Ford Motor Company in engineering, 

manufacturing, finance and strategy as well as a wide variety of consulting assignments. She will focus on 

the financial and strategic sides of the business. 

At Ford Motor Company in finance, she was responsible for everything from vehicle line financials to Marketing and Sales profit 

reporting, to starting up Covisint (joint venture between Ford, General Motors and Daimler-Chrysler). Her most recent positions 

were in the Office of the Chairman and Chief Executive, working on corporate strategic initiatives as well as Operations Cost at Ford 

Motor Credit Company. 

She holds an Interdisciplinary Engineering degree from Purdue University as well as a Masters in Engineering Management from the 

University of Michigan. 


Competition & Anti-trust 

Recent Changes in the Competition Regulatory 

Framework in Latvia 

By Jānis Loze, Līga Mence, 

Anna Kontere 

point to be newly opened; 

• taking back the unsold products, except 

goods of poor quality and new goods 

unknown to consumers, the initiator of the 

supply or increase in the amount of which 

is the supplier; 

• determining unfair and unjustified 

sanctions for the violation of contractual 

provisions. 

In case of retail of food products, in addition 

to the above, the food retailer is prohibited 

from obliging the supplier with the following: 

• compensating the profit not obtained by 

the retailer from selling the goods supplied 

by the supplier; 

examining complaints of consumers, 

except the case when justified complaints 

of consumers arise from circumstances, 

for which the supplier is responsible; 

• determining unfair and unjustified 

sanctions for the violation of contractual 

provisions; 

• performing unfair, unjustified payments 

(discounts) or payments (discounts) not 

provided for in the contract, except the 

case when the retailer has agreed with the 

supplier regarding bulk discount (discount 

applied depending on the amount of the 

goods ordered) or campaign discount 

(discount applied for a limited and 

indicated period of time for promoting the 

sale of goods); 

Recent changes in the competition regulatory 

in contradiction with a fair practice of economic 

• purchasing goods, services or property 

• compensating the costs of a retailer, which 

framework in Latvia by adopting a new Unfair 

activity and by which operational risk of a retailer 

from the third person indicated by the 

are related to the costs of logistics services 

Retail Trade Practices Prohibition Law 1 have 

is imposed on suppliers, additional duties are 

retailer, except the case when it has an 

of the retailer, except the case when 

raised many concerns of market participants. 

imposed or the possibility of free operation in 

objective justification and entered into 

the retailer has entered into a written 

the market is restricted. 

a separate written agreement regarding 

agreement with the supplier regarding 

The new law came into force on 1 January 2016 

purchase of such goods or services; 

distribution of goods; 

and since then (and also before) the Latvian 

In both situations the retailer is prohibited 

Competition Council has issued guidelines, 

from obliging the supplier with the following: 

• ensuring the lowest price by restricting 

• compensating the costs of a retailer, which 

organized seminars and meetings for the 

the freedom of the supplier to agree on a 

are related to its administration costs. 

affected parties, but nonetheless it seems that 

• paying directly or indirectly or otherwise 

lower price with another retailer; 

the new regulatory framework raises more 

reimbursing for entering into a contract; 

Furthermore, the new law prohibits 

questions and uncertainty in the business 

• changing the specifications of goods, 

determination of unfair and unjustifiably long 

environment than one could have expected and 

• paying directly or indirectly for the goods 

including assortment if the supplier has 

time period for settlement of accounts for the 

wanted. 

being present at a retail selling point, 

not been notified thereof within the time 

goods supplied. In case of food products, the 

including for placing of goods in store 

period specified in the contract, which may 

new law presumes that the settlement period 

Briefly, the Unfair Retail Trade Practices 

shelves, except the case when the retailer 

be not less than 10 days; 

for the delivered food products is unfair and 

Prohibition Law lists particular activities that may 

and the supplier have entered into a 

unjustifiably long if it exceeds 30 days from the 

not be carried out by (1) retailer of food products 

written agreement that it will be paid for 

• paying directly or indirectly to a retailer for 

day of delivery of such products whose term of 

with respect to the supplier and by (2) retailer 

additional arrangement of the goods in 

sales promotion measures or to otherwise 

validity is no longer than 25 days. In case of fresh 

of non-food products having significant effect in 

special places; 

reimbursing all costs of such measures 

vegetables and berries the new law provides 

retail with respect to the supplier. 

or part of them, except the case when 

additional specific regulations. 

Activities are regarded as prohibited if they are 

• compensating the costs of the retailer 

related to arranging new stores or 

the retailer has entered into a written 

agreement with the supplier regarding 

One might question why there is a need to have 

1 See the Unfair Retail Trade Practices Prohibition Law in 

Latvian here (http://likumi.lv/ta/id/274415) and in English here 

(http://vvc.gov.lv/export/sites/default/docs/LRTA/Likumi/Unfair_Retail_Trade_Practices_Prohibition_Law.pdf). 

restoring the old stores, including 

performing unfair and unjustified payment 

for the delivery of goods to a retail selling 

sales promotion measures; 

• compensating the costs related to 

such a sector specific and casuistic regulatory 

framework. In search of answer for this perhaps 

rhetorical question, it is worthwhile to highlight 



briefly the historical and political aspects related 

Amendments 2008 to the Competition Law, it 

household goods under the Drogas brand 

of the amendments 2008 to the Latvian 

to the adoption of this law. 

was not preferable to change the definition of 

was fined EUR 14,034.11 (after the Latvian 

Competition Law stated that it is not advisable to 

“dominant position” known in EU competition 

Competition Council reduced the initial fine of 

introduce a new concept “significant influence”, 

Around the year 2007, two major retail 

law by merging it with a term “significant 

EUR 26,988.68). The fine was imposed because 

but at the same time the legislator introduced 

(supermarket) chains in Latvia (selling under 

influence” as these terms differs. In case of 

Drogas had applied unfair and ungrounded 

another new concept “dominant position in 

brands RIMI and Maxima) were expanding 

“dominant position” a market participant is acting 

(i) terms on (a) return of goods, (b) discounts 

retail trade”, now the new Unfair Retail Trade 

their businesses and there were concerns that 

independently of its competitors or consumers, 

(rebates), (c) payments for delivery of goods 

Practices Prohibition Law takes over all the 

they were using their significant and increasing 

but in case of “significant influence” the market 

to a new shop to be opened and (ii) sanctions 

previous provisions related with the “dominant 

bargaining power with respect to producers 

participant has a power to impose unfair 

for violation of such terms. It is worthwhile to 

position in retail trade”, only not naming it 

and suppliers dependant on them and thus 

contract terms, but it cannot act independently 

mention that all of these decisions of the Latvian 

any more “dominant position in retail trade” 

negatively affecting competition in Latvia, for 

of its competitors or consumers. 

Competition Council have been appealed in 

but introducing a new concept “retailer with a 

example, by imposing unfair and unjustified 

courts by the market participants, however, 

significant influence on the trade of non-food 

terms on returning of goods, for placing the 

Thus, the Latvian legislator back in 2008 

unsuccessfully, showing that courts are reluctant 

products” 5 . 

goods on supermarket shelves, for requesting 

supplemented the Latvian Competition Law with 

to adopt a different approach from the one 

payment for concluding an agreement, for 

a new concept “dominant position in retail trade” 

already taken by the Latvian Competition 

This clearly shows that the adoption of the 

providing lengthy terms of payment for delivered 

targeting it at the market participants having 

Council and thus making the fight of the market 

amendments to the Latvian Competition Law 

goods, for providing unfair and unjustified 

“significant influence” in retail business, however, 

participants fined very difficult and non-effective. 

back in 2008 and replacing this regime in 

sanctions (penalty clauses) for breaching the 

without mentioning the term “significant 

2016 with a new Unfair Retail Trade Practices 

agreement, etc. 

influence”. 

Around the year 2013, it became clear that 

Prohibition Law have not demonstrated a well- 

the new regulatory framework limiting the 

considered and convincing attitude from the 

It was not possible to tackle such activities by 

These amendments 2008 to the Latvian 

bargaining power of supermarket chains was 

legislator both in 2008 and now in 2016 and 

the Latvian Competition Law 2 effective at that 

Competition Law came into force on 1 October 

not sufficient, as there were other market 

most probably in future we might expect further 

time (as these market participants were not in 

2008 and had been effective until 1 January 

participants that although did not even qualify 

changes in this field again. 

a dominant position legally and thus were not 

2016 when the new Unfair Retail Trade Practices 

under the term “dominant position in retail 

abusing it), therefore the legislator decided to 

Prohibition Law came into force and took over 

trade” were able to impose unfair and unjustified 

For businesses it is important to be aware that 

change the existing regulatory framework and 

this regulation, along with introduction of new 

provisions on suppliers. Strangely enough, there 

the Latvian Competition Council may fine for 

supplement the Latvian Competition Law with a 

regulation specifically and more casuistically 

was also a political will to promote the use of 

violations of the new Law Prohibiting Unfair 

new concept “dominant position in retail trade”. 

directed to food retail business. 

food products produced in Latvia (you can read 

Retail Trade Practices a retailer of up to 0.2 

this from the annotation 4 to the Unfair Retail 

per cent of its net turnover for the previous 

In accordance with these Amendments 2008 

From 2009 until 2016, the Latvian Competition 

Trade Practices Prohibition Law). 

reporting year each, but no less than EUR 70. 

to the Competition Law, a market participant 

Council had adopted 6 decisions related to abuse 

Furthermore, the Latvian Competition Council 

was considered in a dominant position in retail 

of dominant position in retail trade, but only in 

But, taking into account recommendations 

may impose a fine on a retailer for non-fulfilment 

trade if taking into account its buying power for 

3 decisions the Latvian Competition Council had 

already received from the Directorate-General 

of legal obligation of the new Unfair Retail Trade 

a sufficient period of time and the suppliers’ 

fined the market participants. 

for Competition in the course of adoption of the 

Practices Prohibition Law in the amount of up to 

dependency in the relevant market, it had the 

amendments to the Competition Law back in 

2 per cent of the average daily net turnover in 

capacity to apply or impose directly or indirectly 

For example, in the end of 2010, the RIMI 

2008, that additional amendments to the Latvian 

the last reporting year, but no less than EUR 70 

unfair and unjustified provisions, conditions or 

supermarket chain was fined EUR 88,609.34 

Competition Law, providing a casuistic regulatory 

for each calendar day, until the retailer fulfils its 

payments upon suppliers and thereby could 

for imposing such terms on suppliers, which 

framework for one particular micro sector in the 

legal obligation. 

hinder, restrict or distort competition in any 

provided payments (as promotion discount) for 

general macro regulation, were not advisable, 

relevant market in the territory of Latvia. 

placement of goods in shelfs of supermarkets 

the legislator consequently decided to adopt 

In the end, please note that on 15 June 2016, the 

selling under Supernetto brand. In early 2011, 

a sector specific law listing certain retail trade 

another amendments to the Latvian Competition 

As it was explained in the annotation 3 of the 

the Maxima supermarket chain was fined EUR 

practices which are regarded as unfair. 

2 See the Latvian Competition Law in Latvian here (http://likumi. 

lv/doc.php?id=54890) and in English here (http://www.vvc.gov. 

lv/export/sites/default/docs/LRTA/Likumi/Competition_Law. 

doc). 

3 Annotation of the Amendments 2008 to the Competition 

Law is available in Latvian only. See: http://titania.saeima.lv/ 

64,029.23 for imposing too lengthy settlement 

terms for payment of delivered goods. In the 

end of 2012, a retailer selling cosmetics and 

LIVS/SaeimaLIVS.nsf/0/BB45DB7A5734A63DC2257333003E- 

B222?OpenDocument. 

If previously we mentioned that the annotation 

4 Annotation to the Unfair Retail Trade Practices Prohibition 

Law is available in Latvian only. See: http://titania.saeima. 

lv/LIVS11/saeimalivs11.nsf/0/6AF59FDD1FD653EDC- 

2257C66003BD8FB?OpenDocument#b. 

5 A performer of economic activity or several performers of 

economic activity who, considering their buying power for a 

sufficient period of time and the dependency of suppliers in the 

relevant market, have the capacity of directly or indirectly applying 

or imposing unfair and unjustified provisions, conditions 

or payments upon suppliers and may hinder, restrict or distort 

competition in retail trade in any relevant market of non-food 

products in the territory of Latvia. 



Law came into force and these amendments 

abolish the existing market share threshold (of 

40%) and reduce turnover thresholds in case of 

mergers, regulate in more depth the rights of 

the Latvian Competition Council in investigating 

Jānis Loze 

the violations of competition rules, receiving 

courts permit for investigation activities, applying 

leniency regime, etc. This, however, could be a 

topic of another article and critical analysis. 

Resolving Real Estate Disputes in 

Indonesia Q&A 

By Dyah Soewito, 

Denny Rahmansyah 

Managing Partner at Loze & Partners Attorneys at Law 

T: +37 167744444 

Email: janis.loze@loze.lv 

Jānis Loze is the Managing Partner of Loze & Partners, one of the leading boutique law firms in 

Riga. He has considerable experience in the fields of Corporate Law, Intellectual Property and 

M&A. He has provided a variety of companies and individuals with legal advice and advised in 

significant M&A deals in Latvia. Experienced in corporate and business transactions, including 

company formations, shareholder agreements, his advice is often called upon by national and 

international companies. 

Līga Mence 

Attorney at Law at Loze & Partners Attorneys at Law 

T: +37 167744444 

Email: liga.mence@loze.lv 

Līga Mence is attorney at law at Loze & Partners. Her practice focuses on Commercial and 

Competition Law. She has advised many Latvian and foreign clients in corporate and M&A 

matters, been involved in various litigation processes related to shareholder disputes, 

intellectual property protection, etc. She has also specialised in Aviation Law and has provided 

legal services for notable aircraft transactions. 

Anna Kontere 

Legal Assistant at Loze & Partners Attorneys at Law 

T: +37 167744444 

Email: anna.kontere@loze.lv 

Anna Kontere is a legal assistant at Loze & Partners. She has assisted attorneys at law to 

advise companies in Competition, Commercial and Civil Law. She also deals with Intellectual 

Property Law and has provided advice on trade mark matters to a wide range of national and 

international clients in various industry sectors and assisted in real property transactions. 

1. Have there been any 

recent legislative changes or 

interesting developments in 

your jurisdiction on real estate? 

Regarding legal developments and issues in 

Indonesia’s real estate sector, two developments 

are particularly interesting and merit mention 

here. 

First, President Joko Widodo recently issued 

Presidential Instruction No. 3 of 2016 regarding 

Simplification of Licensing in Housing 

Construction (April 14, 2016) (“Presidential 

Instruction 3/2016”). This presidential 

instruction calls for ministers and heads of 

regional governments to simplify the policies, 

requirements, and process to obtain the licenses 

required for the construction of housing. The 

issuance of Presidential Instruction 3/2016 

follows the announcement of the government’s 

“one million housing” program, which, as the 

name suggests, is aimed at building a million 

houses for lower-income families. It will take 


Resolving Real Estate Disputes 

time to evaluate the effect of Presidential 

subject that touches many aspects of Indonesian 

rules they wish to use in the event of a dispute. 

the prevailing regulation. But even when a land 

Instruction 3/2016, but in the months 

law, e.g., administrative law, environmental law, 

Indonesia recognizes the enforcement of foreign 

certificate is obtained from the BPN, the risk of 

immediately following its issuance, developers 

construction law, civil law, agrarian/land law, 

arbitral awards, as Indonesia is a party to the 

dispute still exists. Other parties could challenge 

reported the same difficulties and challenges in 

etc. Second, there is no arbitration facility or 

1958 New York Convention on the Recognition 

and seek the annulment of the land certificate if 

obtaining the necessary licenses, in particular 

process specifically designed to accommodate 

and Enforcement of Foreign Arbitral Awards, 

they deem its issuance unlawful, e.g. if another 

obtaining licenses from regional government 

real estate matters under Indonesian law. Having 

which has been ratified according to Presidential 

land certificate was previously issued to another 

authorities (which, due to regional autonomy, 

established this, disputes related to real estate 

Decree No. 34 of 1981 (August 5, 1981). Foreign 

party for the land, the previous land owner 

have broad authority and discretion in the 

are treated in a similar manner as any other 

arbitral awards must be registered at the 

committed fraud by selling the same land to 

issuance of licenses for activities within their 

dispute in Indonesia. 

Central Jakarta District Court for the purpose of 

more than one party, incorrect information was 

regions, including for real estate development). 

execution. 

used by the BPN for the land certificate, etc. 

Second, another development worth mentioning 

in the real estate sector relates to the 

controversy over reclamation work in and near 

Jakarta Bay. This reclamation work is essentially 

Concerning dispute settlement through 

arbitration, Indonesia has enacted Law No. 30 

of 1999 regarding Arbitration and Alternative 

Dispute Resolution (August 12, 1999) (“Arbitration 

& ADR Law”). Under the Arbitration & ADR Law, 

3. What are the most frequent 

disputes in your jurisdiction 

regarding real estate matters? 

Under the prevailing regulation, a land certificate 

cannot be challenged after five years from the 

issuance of the land certificate in the name of a 

landowner who obtained the land validly. 

aimed at creating a new land area in densely 

parties may resolve a dispute through arbitration 

Land disputes are the most common disputes 

Such land disputes are often settled either 

crowded Jakarta for real estate developments, be 

only after they have agreed to arbitration as the 

related to real estate matters. There are many 

by arbitration, as discussed in point 2 above, 

it housing or commercial development. However, 

dispute settlement mechanism. For agreements, 

reasons for this. Real estate developers often 

or court proceedings. For court proceedings, 

the reclamation work has raised a multitude 

including agreements related to real estate (e.g., 

face difficulties in the land procurement process 

the type of land dispute determines to which 

of issues and concerns, including legal issues 

construction agreements or lease agreements 

for real estate developments. Land disputes 

court the matter is submitted for settlement, 

related to environmental law, administrative law, 

over building or office space), the parties will 

vary and include competing claims of ownership 

depending on the specific authorities of 

and anti-corruption law. 

usually insert an arbitration clause if they prefer 

over a portion of land, disputes with disgruntled 

Indonesian courts. For example, a challenge 

arbitration to settle any dispute arising from such 

local communities that oppose a development, 

to the lawfulness of a land certificate issued 

These issues, along with various political 

agreements. 

falsification of or incorrect information on a land 

by BPN will be submitted to the administrative 

intrigues, including a clash between the central 

certificate, and even issues of criminal liability. 

court, which has the authority to annul unlawful 

government and the Jakarta administration 

The most widely recognized national arbitration 

certificates and licenses. Equally, it is common 

over the authority to issue the permits and 

body in Indonesia is the Indonesian National 

In Indonesia, there are portions of land that are 

for land disputes to be brought for civil court 

licenses for reclamation work, and protests 

Arbitration Board (Badan Arbitrase Nasional 

already certificated and those that are not yet 

proceedings by tort. 

by environmental activists and residents and 

Indonesia or “BANI”). When a foreign counterpart 

certificated. The procurement of uncertificated 

fishermen near the reclamation site, have 

is involved, the parties often choose an 

land, commonly known as adat (customary) 

The above are only several examples of the 

resulted in the reclamation work progressing 

international arbitration body such as the 

land, is more prone to dispute. Due to the lack 

type of land disputes that frequently affect real 

very slowly (it is currently on hold), placing the 

Singapore International Arbitration Centre 

of a clear certificate from the National Land 

estate development in Indonesia and are far 

developers in an uncertain position. 

(“SIAC”) or the International Chamber of 

Office (Badan Pertanahan Nasional or “BPN”), 

from a comprehensive list. There are also, for 

Commerce (“ICC”) to settle their dispute. 

the authorized government agency in charge 

example, construction work disputes involving 

The above snapshot of recent developments 

of administering land in Indonesia, tracing the 

developers/contractors. Parties to a construction 

in Indonesia underlines a few of the prevalent 

The rules of the arbitration depend on the 

actual owner of adat land can be difficult and 

contract may choose foreign court proceedings 

issues in the country’s real estate sector, i.e., a 

parties’ agreement. As an illustration, if the 

more than one party may claim ownership of the 

for dispute settlement. However, Indonesia 

complex and lengthy licensing process at the 

parties choose BANI to resolve their dispute, the 

land. It is not uncommon, for example, for one 

does not recognize the enforcement of foreign 

regional level and a lack of legal certainty. 

process is (i) submission of an application for a 

party to claim ownership of land by inheritance 

court judgments as the country is not a party to a 

2. How would you describe 

arbitration facilities and 

processes in the real estate 

sector in your jurisdiction? 

Before addressing this question, two things 

notice of arbitration, (ii) response to the notice of 

arbitration, (iii) appointment of arbitrator(s), (iv) 

payment of the arbitration fees, (v) examination 

of the case, (vi) proceedings, and (vii) award. 

SIAC, ICC, and other arbitration bodies have 

different proceeding rules and the parties to 

and another party to claim ownership of the 

same land because he or she has occupied 

the land for a long time. Demarcation of the 

boundaries of adat land is another source of 

dispute. 

Adat land, when acquired by a party, including 

convention for such enforcement. 

4. Can you outline the benefits 

and drawbacks of typical court 

proceedings regarding real 

estate disputes? 

must be noted: first, “real estate” is a very broad 

an agreement are free to determine which 

a developer, is certificated in accordance with 

To clarify, there are three types of legal 


Resolving Real Estate Disputes 

proceedings in Indonesia relevant to the real 

estate sector, namely civil court proceedings, 

administrative court proceedings, and criminal 

court proceedings. Civil court proceedings deal 

with issues related to either a breach of contract 

or tort. Administrative court proceedings deal 

with claims by parties concerning the issuance 

of a decree, permit, license, or other forms of 

approval by the government. Criminal court 

proceedings deal with the determination of 

criminal acts. 

Aside from the above, land inheritance disputes 

may also involve proceedings in 

(i) the religious court for inheritance under 

Islamic law and 

(ii) civil court for inheritance under non- 

Islamic law. 

The benefit of court proceedings is that court 

fees and expenses related to handling a dispute 

are low. Another benefit, particularly for civil 

court proceedings, is that the procedural 

mechanisms require the parties to enter a 

mediation process before the proceeding 

advances to its merits. This provides the 

opportunity for a dispute to be settled amicably 

between the parties without a court judgment. 

This does not fall under the category of 

benefit, but administrative court and criminal 

court proceedings are necessary because 

the issues these courts have jurisdiction over 

(administrative and criminal law) cannot be 

resolved by any other means, such as arbitration 

or alternative dispute resolution. 

As to drawbacks, court proceedings in Indonesia 

tend to be lengthy. It can take up to two years 

to reach a final and binding decision, bearing in 

mind that the decision of a lower court can be 

appealed to a high court, and a cassation can be 

filed for with the Supreme Court. For real estate 

developers, exposure of their involvement in 

court proceedings can cause damage to their 

reputation and good name. 

5. Can you outline the 

advantages and disadvantages 

of alternative dispute 

resolution for real estate 

matters? 

Under the Arbitration & ADR Law, alternative 

dispute resolution (“ADR”) is defined as a dispute 

resolution mechanism agreed to by the parties 

that does not involve court proceedings, as a 

result of consultation, negotiation, mediation, 

conciliation, or expert assessment. Unfortunately, 

the Arbitration & ADR Law does not define each 

of these ADR methods. The Arbitration & ADR 

Law tends to leave the mechanisms for ADR up to 

the parties involved, but it does stipulate that the 

result of any settlement through ADR must be 

made in a written agreement and be registered 

with the relevant district court within 30 days 

after the execution of such agreement. 

The advantage of ADR is that it allows a dispute 

to be settled without having to use the courts. 

The drawbacks of court proceedings as explained 

in point 4 above can be avoided if ADR is applied. 

Dispute settlement through ADR also respects 

the confidentiality of the parties related to the 

dispute. 

The disadvantage of ADR is that the rules of 

ADR are not well established in Indonesia. As 

an indication of this, only one out of 82 articles 

in the Arbitration & ADR Law, namely Article 6, 

regulates the mechanisms of ADR. 

However, as indicated in point 4 above, when 

a party submits a claim through a civil court it 

must first enter mediation in an attempt to reach 

a dispute settlement. This form of mediation is 

precisely regulated in Supreme Court Regulation 

No. 1 of 2016 regarding Mediation Procedure in 

Court (February 3, 2016). 

What are the main ADR methods used to settle 

large real estate disputes in your jurisdiction? 

It is rare for large real estate disputes to be 

resolved by ADR, simply because ADR methods 

are not well established in Indonesia (as 

discussed in point 5 above). Negotiation is of 

course first sought to prevent any dispute from 

occurring. But when negotiation fails, real estate 

disputes, especially land-related disputes, are 

often brought directly to court proceedings. 

Out-of-court mediation (mediation outside 

the required mediation process in a civil court 

proceeding) may be the best alternative dispute 

Dyah Soewito 

Founding Partner at SSEK 

T: +62 21 2953 2000 / 521 2038 

Email: dyahsoewito@ssek.com 

Dyah Soewito is a founding partner of SSEK, Indonesia’s largest independent law firm. She heads 

the firm’s highly regarded real estate and shipping practices. Dyah has deep ties to the Indonesian 

legal community and government offices, giving her unique insight into the country’s regulatory 

framework. Dyah is recognized by Asialaw and Chambers Asia-Pacific as a leading practitioner 

for real estate. She is also recognized for projects and energy, and shipping and maritime law 

by leading legal publications. Dyah is a graduate of the University of Indonesia Faculty of Law 

(1977) and was a visiting scholar at the University of California, Berkeley (Boalt Hall) School of Law 

(1988). 

Denny Rahmansyah 

Founding Partner at SSEK 

T: +62 21 2953 2000 / 521 2038 

Email: dennyrahmansyah@ssek.com 

resolution mechanism to prevent a dispute going 

to court. In a recent development, the Indonesian 

Minister of Agrarian Affairs, who is also the head 

of the BPN, has publicly promoted the use of 

mediation to settle land disputes. The BPN has 

recently put in place internal regulations and 

guidelines for the mediation of land disputes. 

These regulations and guidelines are silent as 

to whether there will be any fees involved for 

mediation of land disputes. 

Denny Rahmansyah, a partner at SSEK, is deeply involved in major transactions related to 

cross-border mergers and acquisitions, cross-border debt restructurings, banking and finance, 

plantations, private power, and infrastructure projects, with a particular emphasis on real estate 

and property, including hotels and villas. Denny is recognized by Asialaw as a leading lawyer for 

corporate/M&A. Denny received his Master of Laws in international economic and business law 

from the University of Groningen, the Netherlands, in 2009. In 2007, he attended the Academy 

of American and International Law in Dallas, Texas, where he studied American law from an 

international perspective. 



50 Jurisdictions, 300 Million Potential Customers: 

Unlocking One of the World’s Biggest Markets, The 

United States of America 

By Mark Schaeffer, Patrick J. O’Neill, 

Mary-Elizabeth O’Neill 

For the uninitiated, doing business in the United 

States can seem especially daunting. Each state 

has different laws and compliance requirements, 

meaning the United States is comprised of 

50 different jurisdictions, plus the District of 

Columbia! Not only that, US territories such as 

Puerto Rico, the US Virgin Islands, Guam and the 

Northern Mariana Islands have their intricate 

regimes and require a specialist to navigate the 

waters. 

Especially now in times of economic and political 

uncertainty, the US remains the ideal business 

partner for UK enterprise. Besides the common 

language and similar entrepreneurial culture, 

the United States is consistently ranked among 

the top countries in the world for its ease of 

doing business. US businesses, regardless of 

domestic or foreign ownership, can market 

freely to 300 million Americans as well as 

another 425 million consumers via free trade 

agreements. Furthermore, the US boasts a welleducated 

and productive workforce, an excellent 

university system with innovative research and 

development programs and a transparent legal 

system emphasizing intellectual property rights 

(not to forget its GDP of $16 trillion). 

In general, there are no citizenship or residency 

requirements for forming a company in the US. 

International often form LLCs to benefit from 

pass-through taxation, that is, the requirement 

to file and pay taxes only if they have US-source 

of income (other global income of the principals 

remains unaffected). 

There can be advantages and disadvantages to 

corporations, limited liability companies, and 

limited partnerships, so it is important to keep 

the following considerations in mind when in the 

early stages of planning an expansion to the US. 

The company’s business objectives are 

paramount: are you testing the waters, or 

thinking long-term? Sometimes establishing 

a branch is a good solution as it involves far 

less on-going compliance, but a branch has no 

separate legal identity from the parent company 

and thus has much more liability. Seeking the 

advice of a tax professional is imperative at 

this stage. 

The next consideration is the choice of the 

state. Many foreign businesses head straight to 

Delaware as it is internationally known for its 

business-friendly ethos and favorable tax rates. 

Still, many US jurisdictions outside of Delaware 

offer distinct advantages, and if a company plans 

to establish its headquarters or open an office in 

a particular state, it is often most cost-effective, 

to begin with that state. 

Many companies, especially those headquartered 

on the West Coast, appreciate doing business in 

Nevada (businesses should be aware, however, 

of the business license requirement that raises 

annual fees for Nevada registrations–all entities 

are required to maintain a business license, 

regardless of whether a company is doing 

business in Nevada). 

Other popular choices are New York and Florida 

because of their business-friendly environments 

and easy compliance requirements. Virtual 

offices are freely available in almost every major 

city, supplying services from mail and telephone 

forwarding to rented or shared ownership offices 

and conference facilities. If the company will be 

operating in 4 or 5 states, it makes sense to pick 

the most “business friendly” environment as 

the primary state, and then register in the other 

states. Income can be allocated proportionally 

to each of the states in which the company does 

business. 

An international company must remember that it 

is imperative to maintain good standing, as well 

as a registered agent, in each state in which it is 

doing business. This will become more important 

as a company grows. If a company is doing 

business in multiple states, they must register or 

“qualify” in each of these states. 

So what is doing business? In general, if 

a business has an office or employees in 

a jurisdiction, it is considered to be doing 

business there. (There are also more specific 

circumstances that constitute doing business— 

for example, if a company advertises on a 

local billboard in addition to national media 

campaigns, it could be considered to be doing 

business in the state in which the billboard is 

located. 

Again, it is recommended to seek professional 

advice in each particular case). Unlike in the 

UK, financial statements or accounts are not 

required to be submitted yearly to the registrar, 

but each state requires companies to file annual 

or biannual reports. If these reports are not 

filed, companies lose good standing, which can 

make previously entered into contracts void or 

voidable and precludes doing business. 

Because penalties and interest can accrue 

exponentially due to late filings, we recommend 

that companies entrust their compliance needs 

to specialists; for instance, we offer an annual 

report monitoring service which manages 

registered agents and annual reports in one 

place. For entities already doing business, 

our Corporate Health Check identifies gaps in 

compliance and is recommended in advance of a 

company’s expansion to new states. 

In addition to state requirements, in many states, 



businesses require licenses to operate. For 

instance, in the case of Nevada, as was previously 

mentioned. However, certain industries also 

require federal, county and municipal licenses, 

with provisions varying greatly from state to 

state. Services such as comprehensive license 

research and filings, as well as assessment and 

verification of current licenses (this includes 

identification of defaults and renewal dates), are 

helpful for international businesses in light of the 

complexities of licensing from state to state. 

With our home office in New York, International 

Business Company Formation has been helping 

international companies expand to the USA 

since 1998. Our expertise and unparalleled 

experience ensure that you have everything you 

need to operate confidently in the USA, especially 

in today’s business climate with its growing 

emphasis on transparency and compliance. 

We are proud to announce the opening of our 

London office – IBCF UK Ltd. IBCF provides 

corporate services to legal and tax professionals 

throughout the world and is confident that 

the London office will facilitate an easy flow of 

corporate work between companies in the US 

and the UK, and beyond. 

Contact us at either our New York or London 

offices, depending on your time zone. We are 

here to make doing business simple, across the 

globe. 

IBCF’s Services 

• Formation of all entities including 

Corporations and LLCs, for all 50 states 

and US territories 

• Registered Agent Services 

• Business License Research and Filing 

• Document Searches (such as UCC and lien) 

• Registered Officers and Directors 

• Nominee Shareholders (where available) 

• Representation by Private/Special 

Agreement 

• Patent and Trademark Searches 

Top 10 Reasons to do Business in the USA 

1. Ease of incorporating in the United 

States: many states can get you set up within 

a day! 

2. States like Delaware and Nevada pride 

themselves on their business-friendly ethos 

3. One of the biggest and most exciting 

markets in the world with over 300 million 

potential clients 

4. A common language and similar culture 

allows you to take your business global with 

ease 

5. A skilled and well-educated workforce 

6. Dependable infrastructure including 

communications and transport 

7. Free trade agreements with 20 countries 

8. Outstanding university system 

9. Gateway to emerging markets in Latin 

America 

IBCF UK 

13 Bayley Street 

London WC1B 3HD 

t: +44 (0)20 3002 0580 

e: ukorders@ibcf.com 

w: ibcf.uk 

Mark Schaeffer 

IBCF Headquarters 

101 Main Street, Suite 1 

Tappan, NY 10983 

t: +1 845 398 0900 

e: clientsupport@ibcf.com 

w: ibcf.com 

President at International Business Company Formation, Inc. 

T: +44 (0)20 3002 0580 

Email: ukorders@ibcf.com 

Mark Schaeffer is President of International Business Company Formation, Inc. His past 

work as a senior sales executive in the legal publishing industry as well as his ownership 

of manufacturing and retail businesses have served him well in building IBCF into a global 

brand. 

Patrick J. O’Neill 

Chief Executive Officer at International Business Company Formation, Inc. 

T: +44 (0)20 3002 0580 


Patrick J. O’Neill is Chief Executive Officer of International Business Company Formation, 

Inc., and an attorney admitted to the Bar in several US states and Federal courts. He has 

more than 35 years of experience in corporate law and company formation. 

Mary-Elizabeth O’Neill 

Managing Director at International Business Company Formation, Inc. 

T: +44 (0)20 3002 0580 


• Annual Report Maintenance and 

Compliance Checks 

• Authentication of Documents including 

Legalisations and Apostilles 

10. Ability to outsource almost any 

component, commodity or service your 

business requires 

Mary-Elizabeth O’Neill is Managing Director of IBCF UK Ltd. She joined IBCF as Marketing 

and Social Media Manager after her previous work in events and public relations. She 

is internationally orientated, having studied at New York University, the University of 

Westminster in London and the Sorbonne. 


Family Law 

Can Parents Contractually Select 

the Forum for A Custody Dispute? 

By Kristin Barkett Pettey 

Where a custody dispute will be litigated can be a critical concern when 

voluntarily entering into an agreement regarding custody of children. Child 

custody issues can be further complicated when dealing with laws across state 

or country lines. 

UCCJEA 

“The National Conference of Commissioners 

on Uniform State Laws promulgated the 

UCCJEA [Uniform Child Custody Jurisdiction 

and Enforcement Act] in 1997 ‘to deal with the 

problems of competing jurisdictions entering 

conflicting interstate child custody orders, forum 

shopping, and the drawn out and complex child 

custody legal proceedings often encountered 

where multiple states are involved.’” Friedman 

v. Eighth Judicial District Court, 264 P.3d 1161, 

1165 (Nev. 2011) (quoting In re Custody of A.C., 

200 P.3d 689, 691 (Wash. 2009)). In the U.S., 

the UCCJEA (“the Act”) has been adopted by 49 

states, the District of Columbia, Guam, and the 

U.S. Virgin Islands, but not by Massachusetts or 

Puerto Rico. 

Under the Act, once a U.S. state has issued an 

initial child custody order, it will retain exclusive 

and continuing jurisdiction over future custody 

disputes so long as one parent continues to live 

there 1 . No other state has the authority to act 

and the original court’s authority does not end 

until one of two things happens: (1) the original 

1 Section 105(a) of the UCCJEA provides that a foreign country 

will be treated as if it is a state of the United States for the 

purposes of applying Articles I (cooperation principles) and II 

(jurisdiction provisions) of the UCCJEA. 

court finds that the child and both parents have 

moved out of the state, and, it no longer has 

subject matter jurisdiction, or (2) the original 

court determines that it is an inconvenient forum 

and a court of another state or country is a more 

appropriate forum This issue can be raised by 

either party, the original court, or the court of 

another state. However, the decision to decline 

or relinquish jurisdiction must be made by the 

original court. 2 

Pursuant to the Act, eight factors apply when 

considering an inconvenient forum motion. 

One factor is whether any agreement of the 

parties exists as to which state should assume 

jurisdiction. Other factors are: whether 

domestic violence issues exist; the length of 

time the child has resided outside the state, 

distance between possible courts, the parties’ 

relative financial circumstances, the nature and 

location of the evidence required to resolve 

the pending litigation, the ability of each state’s 

court to decide the issues expeditiously and the 

procedures necessary to present the evidence, 

and the court’s familiarity with the pending 

litigation’s facts and issues. UCJEEA §207(b). 

If the original court decides it is an inconvenient 

forum, it will stay the proceedings so long as 

another state promptly commences a custody 

proceeding. 

Hogan v. McAndrew 

Is a marital settlement agreement’s negotiated 

forum-selection clause enough to select 

jurisdiction? 

A forum-selection clause was considered by the 

Rhode Island Supreme Court in the matter of 

Hogan v. McAndrew, 2016 WL 556297 (Feb. 12, 

2016) In Hogan, Father and Mother were dual 

citizens of the United States and the Republic 

of Ireland. The parties divorced in 2008. In 

accordance with their property settlement 

2 Exceptions in emergency situations apply and provide for 

temporary custody orders. 

agreement, they share joint custody of three 

children, and Mother has physical placement. 

The parties agreed that Mother could return 

to Ireland with the children. They stipulated 

that any future custody disputes would “remain 

under the jurisdiction of the [Parental Kidnapping 

Prevention Act, 28 U.S.C. § 1738A], [the Uniform 

Child Custody Jurisdiction and Enforcement Act 

(UCCJEA), G.L. 1956 chapter 14.1 of title 15,] and 

the Rhode Island Family Court.” (Hogan at *p. 2) 

The children stayed with Mother in Ireland and 

visited Father in Rhode Island each summer. 

Father continued to reside in Rhode Island and, 

in 2014, filed motions in the Rhode Island Family 

Court, including an ex parte emergency motion 

to modify custody and placement. The Court 

granted the ex parte order. Mother moved to 

vacate the order and sought to dismiss the action 

asserting Rhode Island lacked subject matter 

jurisdiction as the children had resided in Ireland 

continuously for more than five years. 

The Rhode Island Family Court heard the parties 

on the issue of jurisdiction. Excepting yearly 

visits with their father, the children resided in 

Ireland continuously with Mother from January 

2009 to July 2014 while Father resided in Rhode 

Island. Father spent multiple weeks with the 

children each year, with most of this time spent 

in Ireland. 

Father testified that the parties’ agreement that 

Rhode Island maintain jurisdiction was “vital” to 

his decision to assent to the children’s relocation 

to Ireland. He further testified that “without it” 

he would “never have agreed to let them go. 

After hearing, the Court issued a bench decision 

declaring that although Rhode Island retained 

exclusive, continuing jurisdiction pursuant to 

the UCCJEA, it declined to exercise jurisdiction 

on the ground of forum non conveniens, noting 

that Ireland was a more appropriate forum for 

the dispute to be heard. The Court noted that 

a forum- selection clause is one of eight factors 

and reasoned that its inclusion in the property 


Family Law 

settlement agreement did not absolutely bind 

the Court, which must consider all of the factors 

set forth in the statute. 

Father appealed and argued that the hearing 

justice abused her discretion by failing to afford 

proper weight to (1) the mutually agreed upon 

forum-selection clause set forth in the property 

settlement agreement and in the final judgment 

of divorce, and, (2) additional factors enumerated 

under the UCCJEA. 

Rhode Island’s highest court vacated the lower 

court’s decision, holding that the hearing justice 

abused her discretion by declining jurisdiction 

on the ground of forum non conveniens. The 

Rhode Island Supreme Court explained that 

before the Family Court, vested with exclusive, 

continuing jurisdiction over the child-custody 

dispute, declines jurisdiction on the grounds of 

inconvenient forum, it must engage in a two-part 

inquiry. The Family Court justice must conclude 

both that the court “is an inconvenient forum 

under the circumstances and that a court of 

another state [or a foreign tribunal] is a more 

appropriate forum.” R.I. Gen. Laws §15-14.1- 

19(a); See UCCJEA §207. Before the Family Court 

can decide that Rhode Island is an inconvenient 

forum, it must address whether it would be 

“appropriate for a court of another state to 

exercise jurisdiction.” 

This determination is made by considering all 

relevant factors, including the eight factors 

enumerated in the UCCJEA. Then, if the court 

concludes based on the evidence that a more 

appropriate forum exists, the court proceeds to 

the second step of the analysis and considers 

whether it would be an inconvenient forum 

under the circumstances. 

The Rhode Island Supreme Court previously 

addressed the role of forum-selection clauses 

under the UCCJEA in the case of Sidell v. Sidell, 

18 A.3d 499, 504-08 (R.I. 2011). In Sidell, the 

defendant father and former resident of Rhode 

Island filed post-divorce motions regarding childcustody 

and support orders issued by the Rhode 

Island Family Court. At the time he filed his 

motions neither the parents nor the child resided 

in Rhode Island. Defendant father argued that 

the Rhode Island Family Court was vested with 

jurisdiction because the parties had stipulated in 

their marital settlement agreement that Rhode 

Island would retain exclusive jurisdiction over 

the matter. However since none of the parties 

resided in Rhode Island, the Court determined 

that Rhode Island courts lacked exclusive 

continuing jurisdiction under R.I. Gen. Laws § 

15-14.1-14(a)(2). Sidell at 508.The Sidell Court 

concluded a forum-selection clause does not 

confer a court with subject matter jurisdiction 

when such jurisdiction is otherwise absent. Id. 

However, in Hogan, the Rhode Island Supreme 

Court noted there are situations where a court 

is vested with subject matter jurisdiction and 

“an enforceable forum-selection clause…settles 

the proper venue for the cause and prevents 

‘a party that has agreed to be bound… [from… 

assert[ing] forum non conveniens as a ground 

for dismissing a suit brought in the chosen 

forum.’” Id at 507 (quoting American Biophysics 

Corp. v. Dubois Marine Specialties, 411 F.Supp. 

2d 61, 62 (D.R.I. 2006)). 

In vacating the Family Court’s decision in Hogan, 

the Supreme Court, noted that the trial justice 

overlooked Father’s testimony that the forumselection 

clause had been a predominant factor 

in his agreement to allow his children to move 

to Ireland with their mother and that the parties 

had entered into the agreement in anticipation of 

the relocation. 

The Supreme Court also noted that the trial 

justice failed to address the high value that is 

conferred on judgments by consent. Further, 

based on the dearth of information available, 

the Supreme Court concluded that the hearing 

justice improperly determined that the seventh 

factor – “the ability of the court of each state 

to decide the issue expeditiously and the 

procedures necessary to present the evidence” 

weighed equally in favour of Ireland and Rhode 

Island. R.I. Gen. Laws §15-14.1-19(b)(7); UCCJEEA 

§207(b). 

The Rhode Island Supreme Court remanded the 

matter back to the trial court, with the unstated 

implication that the trial court will retain 

jurisdiction. 

OTHER CASES –FORUM- 

SELECTION CLAUSE 

In Friedman v. Eighth Judicial Dist. Court of State, 

ex. Rel, 127 Nev. 842, 844 (2011), the Nevada 

Supreme Court declined to exercise jurisdiction 

over an interstate custody dispute in favour 

of California. In Friedman, the parties had 

stipulated in their divorce decree that Nevada 

would have exclusive jurisdiction over future 

child custody disputes. When the dispute arose, 

both parties and their children had moved to 

California. The Court concluded the parties’ 

agreement to confer jurisdiction on a court 

that otherwise would not have jurisdiction was 

ineffective. Id. at 850. 

In Horgan v. Romans, 366 Ill.App.3d 180 (2006), 

the Appellate Court of Illinois, First District, 

Kristin Barkett Pettey 

Shareholder, Co-Chair of the Healthcare Group at Roberts, Carroll, Feldstein & Peirce 

T: +1 401 521 7000 

Email: Kpettey@rcfp.com 

Fourth Division, declined jurisdiction despite 

the parties’ forum-selection agreement and 

reasoned to allow such an agreement to trump 

the other factors to be balanced under the 

UCCJEA would contradict the statutory language 

of section 207 of the Act. Id at 185. 

In S.K.C. v. J.L.C., 94 A.3d 401, 418 (Pa. 2014), a 

Pennsylvania Superior Court held that a forumselection 

clause may not be considered when 

determining whether a court retains exclusive, 

continuing subject matter jurisdiction. Id. 

CONCLUSION 

A forum-selection clause and the circumstances 

surrounding its inclusion in a marital settlement 

agreement are among the factors to be 

considered when determining which of two 

competing forums is more appropriate and 

whether one is inconvenient relative to a child 

custody determination. Although some courts 

have afforded what appears to be greater weight 

to such agreements, forum-selection agreements 

alone are not dispositive and must be weighed 

against other factors and circumstances when 

the dispute arises. 

Kristin has over 18 years of civil litigation experience. She has successfully represented 

clients in state and federal courts in Rhode Island and Massachusetts and has tried 

numerous jury and bench trials, with several favourable verdicts. In addition to her 

courtroom practice, Kristin has experience with alternative dispute resolution, including 

mediation. Prior to joining Roberts, Carroll, Feldstein & Peirce, Kristin managed her own 

law office and handled a wide variety of litigation and transactional matters, specialising 

in domestic relations. 


Forensic Accounting 

Quantum awards in international arbitration – 

how can arbitrators and experts get it right? 

By Gervase MacGregor, 

Andrew Maclay 

justify his own model rather than relying on the 

opposing expert to understand and explain it. 

As quantum awards have followed particular 

trends, such as increasingly being based on 

Discounted Cash Flow (DCF) and a Discount 

rate, based on the Capital Asset Pricing 

Model formula, so arbitrators have learnt the 

terminology that quantum experts use and have 

often tried to adjust the models themselves. 

However, it is still the quantum expert’s 

responsibility to explain in simple terms why 

they have adopted this or that methodology 

for calculating the quantum in a dispute, and to 

explain all the inputs and calculations in their 

model. 

The responsibility of arbitrators 

In their turn, given that they are making an 

award that may mean the payment of hundreds 

of millions of dollars from one company to 

another or from a country and its taxpayers to 

a company, arbitrators have a responsibility of 

ensuring that the quantum section of their award 

is properly calculated and is economically robust. 

types of error may arise – for example: 

(a) arithmetical errors that are apparent on the 

face of the award itself; 

(b) computational errors that arise where the 

arbitrators have calculated their own award by 

taking the quantum experts’ calculations and 

making their own changes; or 

(c) conceptual errors that arise where the 

arbitrators have recalculated the award 

themselves, but have misunderstood or 

overlooked some fundamental concept in the 

quantum experts’ reports. 

Clearly there can be disagreements between 

experts, or between one expert and the tribunal, 

on either the calculations or the economic 

theory, and the losing expert may complain that 

these are errors – but, if one expert has argued 

credibly for one methodology or valuation 

technique and the tribunal finds in his favour 

and against the other side, this is not something 

we refer to here as an error. 

Forensic accountants sometimes describe their skill and raison d’être as being to 

simplify complex accounting concepts for dispute resolution lawyers.Yet, at the 

recent ICCA commercial and investment arbitration conference, some of the 

world’s leading arbitrators said that they really found quantum experts’ reports 

very difficult to understand. 

Furthermore, it has been stated that the process 

of scrutinising draft arbitration awards at the ICC 

picks up errors in the calculation of damages in 

up to 40% of draft awards. 

As quantum experts have become a normal 

part of clients’ teams in international arbitration 

cases, what can be done to improve the situation 

as well as get awards right? 

The responsibility of quantum experts 

As quantum experts who regularly act in 

international arbitration, our view is that experts 

should have the responsibility of making their 

reports understandable and as simple as 

possible for both the lawyers on both sides and 

the arbitrators. How can we complain that an 

arbitration tribunal has made a mistake in its 

award simply because the tribunal could not 

understand the reports? 

For example, can a tribunal really be expected 

to understand 800 pages of spreadsheets in 

pdf format with no explanation that states 

the purpose of each page? It must be the 

responsibility of the expert to explain and 

We respect the fact that arbitrators do not tend 

to be accountants, and so they can be excused 

for finding the legal aspects of an award more 

interesting than the quantum element, and they 

can also be excused if they do not articulate the 

quantum section of their award in the same way 

that a forensic accountant might use. 

However, the parties surely have a right to expect 

that the award should be properly calculated 

and based on a logical and coherent argument, 

which includes the calculation of any damages 

awarded. Given the current dissatisfaction in 

some quarters with the Investor State Dispute 

Settlement System (“ISDS”), this could indeed 

provide an additional (and unnecessary) reason 

for dissatisfaction with ISDS in general. 

Types of quantum errors in 

arbitration awards 

Far be it from us to point to any awards which 

include errors, but in our experience, various 

Fortunately, we are not aware of any examples 

of type (a) errors, and this is the sort of error that 

should be picked up by review procedures such 

as the ICC’s scrutiny process; it is also the sort 

of error that is referred to as “manifest error” in 

expert determinations, and is extremely rare. 

However, it is the type (b) and (c) errors we want 

to focus on below, and to discuss possible ways 

in which tribunals could avoid them. 

Computational errors 

In the English High Court, it is common for 

judgments to be submitted to the parties’ 

counsel immediately prior to publication, to 

enable them to correct any factual inaccuracies – 

such a mechanism could be used for the parties 

to review an arbitration award and correct for 

any computational error. 

Alternatively, we acted in one case where the 

judge gave the parties and their quantum 

experts a half hour recess to agree on the 


Forensic Accounting 

quantum number between them – as by this 

stage both quantum experts had each other’s 

models on their laptops we were able to come to 

an agreed number. 

A principal argument put forward for not letting 

the parties or their quantum experts to check 

the award before it was finalised is that the 

tribunal has to be seen as the final arbiter of the 

case – and any submission of a “draft” award to 

the parties risks being taken by the party as an 

opportunity or a necessity for them to produce 

further submissions to argue their case after 

evidence has closed. 

However, if the tribunal is absolutely clear that 

the parties are only invited to comment on 

the arithmetical accuracy and logic of the draft 

award, that should be less of a problem. This 

process would have been very useful in one 

particular award that we have seen where the 

tribunal simply copied the wrong sequence of 

ten cells in a spreadsheet into its final award 

calculation. 

Had the parties seen the draft award in advance, 

both parties’ experts ought to have identified this 

and reached an agreement for the tribunal as to 

which were the correct cells to copy. 

In our experience, it is becoming increasingly 

common for the tribunal to request the experts’ 

models in electronic form; this is done to enable 

the experts to save time and costs by testing 

each other’s models and thus being able to 

point out any errors before the hearing, and 

also so that the tribunal itself can take away the 

model for its deliberations, understand it and 

make appropriate modifications to it in order to 

generate a quantum number that is in line with 

the award on the merits. 

In theory, a younger generation of arbitrators 

is likely to have more experience of using Excel 

spreadsheets so they can manipulate the models 

themselves, but in practice, the models that we 

quantum experts use in our DCF calculations are 

still rarely simple enough for non-accountants to 

edit. A tribunal recently took us up on our offer 

to agree on a model with the opposing expert 

for the tribunal to use in coming to its award – 

but, even though less than ten accounting items 

remained in dispute, it was not easy to design a 

foolproof model for the tribunal to use. In this 

case, it was already simpler because the tribunal 

had directed us to prepare a joint statement, 

and that in itself had considerably narrowed the 

number of items remaining in dispute. 

Conceptual errors 

With respect to Russia’s challenge to the PCA 

award on the Yukos case, Russia’s expert seems 

to have been prepared to accept the tribunal 

finding in favour of the claimants on quantum 

if that finding had been based on sound 

economic argument – but he pointed out that 

what he found troubling was where the tribunal 

adopted its own non-standard method, which 

he considered to be based on flawed economic 

theory that would not have been accepted by 

either side’s quantum expert. 

This type of “error” is more difficult to deal with, 

as it is not simply arithmetical, but arises from a 

tribunal either straying outside its expertise, or 

deciding that it has a novel insight into economic 

theory that may not be supported by any body 

of economists or forensic accountants– even 

though if an expert was to adopt such a nonstandard 

theory, his report could justifiably be 

attacked for being outside of generally accepted 

accounting/economic/valuation parameters. 

Probably, the answer to this type of “error” 

is that tribunals simply need to be extremely 

careful when they arrive at quantum awards that 

are outside the parameters of the calculations 

put forward by the two opposing experts. 

It may not be unreasonable for a tribunal to 

award quantum on a basis that was not pleaded 

– but it is taking risks when it chooses a basis 

that was not tested at the hearing. 

Possibly one radical solution that would assist 

tribunals to avoid these conceptual errors would 

be more use of tribunal-appointed quantum 

experts or a form of tribunal quantum secretary, 

who would be able to check the tribunal’s 

calculations and advise on the accuracy and 

the logic of the tribunal’s deliberations in 

advance – or even the appointment of a forensic 

accountant as the third member of the tribunal, 

along the lines adopted by the UNCC Panels a 

decade ago. 

This, of course, raises other hot topics such as 

the role of a tribunal secretary – but is worthy of 

consideration in a situation where the quantum 

Gervase MacGregor 

Head of Forensic Services at BDO LLP 

T: +44 (0)20 7893 2665 

Email: gervase.macgregor@bdo.co.uk 

Gervase MacGregor is Head of Forensic Services at BDO. He has a Bachelor’s degree in geology from the 

University of Liverpool and a Master’s degree from HEC in Paris. He is a Chartered Accountant and a 

Certified Fraud Examiner. He joined BDO in 1982, qualified in 1986, was made a partner in BDO in 1991 

and became head of the London based Litigation Support and Forensic Accounting Department in 1994. 

His first forensic investigation, in 1985, was into a contested takeover by a client of his firm, Caparo Plc. His 

work into accounting irregularities gave rise to the Caparo case on auditors’ liability. 

He has a particular expertise in valuation and damages disputes and share purchase agreement disputes 

in the energy sector. He has given evidence in the High Court, in international arbitrations and before select 

committees of the UK Parliament. 

Andrew Maclay 

Forensic Accountant at BDO LLP 

T: +44 20 7893 3487 

Email: andrew.maclay@bdo.co.uk 

at stake is hundreds of times greater than the 

cost of a tribunal appointed expert or secretary. 

The ICC’s vetting procedures 

And one final thought –if the ICC’s scrutiny 

procedures are really picking up quantum errors 

in up to 40% of awards before they are issued, 

this scrutiny procedure is to be applauded – but 

maybe the other arbitral institutions should 

consider adopting a similar procedure, or even 

employing a forensic accountant to do the 

scrutinising in-house. 

www.bdo.co.uk 

Andrew Maclay is a forensic accountant who has specialised in all aspects of Forensic Accounting since 

1996. He has an MA in Economics from the University of Cambridge. 

He is a Chartered Accountant, a Certified Fraud Examiner and an accredited Accountant Expert Witness. 

He specialises in the quantification of damages in international arbitration, and has worked on disputes 

in many jurisdictions, particularly France, Switzerland, West and East Europe, Africa and the Middle East. 

Between 1991 and 1994, he worked in Burundi, Africa and is fluent in French. 

He has given evidence in international arbitration tribunals, the High court, a criminal court and by way of 

deposition in US proceedings. 


Mitigating Environmental Risks in M&A 

Environmental Legal Risk in Mergers 

and/or Acquisitions 

By Humberto Celis Aguilar Alvarez 

extinguished. Subsisting are solely real 

liabilities, procte rem, as, for example, soil 

contamination. 

Therefore, environmental liability pursue 

the item, that is, the property. 

soil contamination, it does not deal with 

the scope and validity of the environmental 

permits required to operate nor with the 

risk of revocation and/or closure thereof. 

• Measurement of Risk and Liability 

It is of major importance to review the 

To resolve the environmental legal-risk 

possibility of assigning the rights of 

factor of operations, it is essential to do an 

the corresponding permits, licenses or 

exhaustive legal review of the permits the 

concessions so as to validate their transfer 

company and/or industry needs to operate. 

before the legal personality of the corporate 

entity in charge thereof is terminated. 

This will allow us to prepare an integral 

strategy, which, on the one hand, allows 

Once having distinguished between the 

us to reliably measure environmental 

modalities of transaction in question, I 

legal risk, and, on the other hand, with this 

list below the legal actions to be reviewed 

hard data, leads to an integral strategy of 

so as to carry out precise and proper 

regularization, should such be necessary. 

environmental due diligence. 

III. Analysis of the Legal 

Actions to be Follower 

• Measurable Costs 

After all is said and done, an integral legal 

report must provide us with the: i) legal 

• Ad Hoc Check List 

risk of the operation; ii) legal liability of the 

parties; iii) parameters of the fines and/ 

It is quite common to see that the majority 

or administrative sanctions that might 

I. Background 

• Purchase-Sale of Stocks 

of our colleagues use standard forms 

applying to all merger and acquisition 

be levied for existing environmental 

irregularities; iv) approximate costs of the 

operations, thereby committing a big 

regularization of the company. 

As a consequence of the promulgation 

of Environmental Laws in México over 

the past five years, the topic of risk and 

In this case, past, present and future 

environmental liability is acquired fully by 

the purchaser, independently of the fact 

mistake, given the fact liability for the hotel 

industry is not the same as for the chemical 

industry. 

IV. Conclusions 

environmental liability has become a major 

that liability for the seller may be agreed to 

• The growing legal regime of 

issue of merger and acquisition operations. 

for past irregularities, such as the case of 

It is our opinion that a specific checklist 

environmental liability in Mexico 

soil contamination. 

must be worked out for the industry in 

makes it essential to do an 

Moreover, in this type of operation, it 

question. 

exhaustive review of compliance in 

is crucial to take into account the very 

Inasmuch as the legal personality of the 

the area applicable to all mergers 

nature of the transaction in question so 

corporation remains intact and, therefore, 

• Study Phase 1 vs. Legal Review 

and acquisitions. 

as to fully understand the risk and liability 

the new owner shall be liable for the facts 

corresponding to each project. 

and/or omissions implied by violations. 

In particular, it is often used for the parties 

• It is crucial to fully understand the 

II. Modalities 

• Purchase-Sale of Assets 

involved in this type of transaction to 

measure environmental risk by solely 

carrying out a Phase 1 study. The problem 

type of modality of the transaction 

in question. 

Basically, we have two main types of 

In this case, personal liability ends since 

lies in the fact that, though it is true the 

• An exhaustive legal review is 

modalities: A) the purchase-sale of stocks 

it is not acquired by the corporation 

aforementioned reports deals with the risk 

fundamental to measuring legal 

and B) the purchase-sale of assets. 

and, consequently, legal personality is 

level of the company´s operation vis-à-vis 

risk, as well as the scope of the 


Mitigating Environmental Risks in M&A 

civil, environmental, administrative 

and/or criminal liability of the 

parties involved in the transaction. 

• The elaboration of a report at the 

level of compliance and limit of 

environmental liability is essential, 

as are parameters of the cost of 

regularization. 

• Finally, in the interest of avoiding 

lawsuits brought for unreviewed 

defects and unnecessary risk in 

mergers and acquisitions, the 

involvement of an environmental 

expert with more than 20 years 

knowledge and proven 

Structuring European M&A activity: 

why Gibraltar? 

By Ian Felice, 

Tania Rahmany 

• In the case, contamination is 

found in the site, there must be ex 

profeso clauses within the contract. 

Humberto Celis Aguilar Alvarez 

Managing Partner at Celis Aguilar Álvarez y Asociados 

T: +52 55 52 51 0775 

Email: hcaguilar@hcambiental.com 

Humberto Celis, a cutting-edge expert in energy, environmental, natural resources law, 

and areas thereof related, has been in the business for over 25 years. His work ranges 

from regulatory compliance, liability counselling, dispute resolution, litigation, class 

actions, enforcement and response to corporate, real estate transactions, climate change, 

green markets, oil/gas, power generation and renewables. 

The European M&A market saw record trends in 

2015, with Q4 2015 being the highest ever quarter 

for deal value in Europe, exceeding €420billion 1 . A 

weakening euro resulted in strong US investment 

playing an important role, and amounting to over 

US$ 208 billion. This seems to have particularly 

fuelled European M&A, which saw deal values 

increase 40% in the first quarter of 2016, 

compared to the same period in 2015, despite 

uncertainty in Europe in the lead-up to the UK 

referendum on retention of its EU membership 2 . 

The increasingly international nature of 

transactions is evidenced by the fact that cross- 

1 Deloitte“Impact of the EU referendum on M&A activity in the 

UK” accessed on 5th August 2016 on https://www2.deloitte.com/ 

content/dam/Deloitte/uk/Documents/international-markets/deloitte-uk-impact-of-the-eu-referendum-on-ma-activity-in-the-uk. 

pdf 

2 Ibid 

border M&A represents significant proportions of 

overall activity. The key challenge in structuring 

deals of this nature is to minimise costs for 

the purchaser, both in terms of professional 

fees and importantly, tax liabilities. Gibraltar 

provides unique attributes which make it an ideal 

international financial centre for structuring M&A 

transactions. 

The recent decision of the UK to leave the EU will 

affect Gibraltar, which depends on the UK’s EU 

status for its own membership. While this has 

inevitably created a period of uncertainty, the 

EU methodologies discussed in this article will 

certainly remain available until such time as Article 

50 of The Lisbon Treaty is triggered by the UK 

government and EU law ceases to be applicable to 

the UK. 


Mergers & Acquisitions 

1. Membership of the EU 

exchange regimes, resulted in Gibraltar scoring 

and no withholding tax is imposed on the 

an additional cost to a purchaser. Given that 

Companies looking to enter into the European 

“largely compliant” in its review by the OECD. This 

payment of interest or dividends. Interest 

cancellation schemes were the overwhelmingly 

single-market can use Gibraltar as a gateway to 

reputation facilitates dealings with third parties, 

income is generally not taxable, unless 

preferred structure for conducting high value 

Europe. In contrast with the other international 

ensuring lack of transparency does not hinder the 

it is inter-company loan interest that is 

acquisitions, the closure of this loophole has 

financial centres, it is often compared to, such as 

business. 

received by or accrues to a company and is 

resulted in a significant increase in costs involved 

Jersey or Guernsey, Gibraltar’s membership of 

the EU enables a Gibraltar company to passport 

services throughout Europe at low cost, with 

the support of a cooperative, easily accessible, 

responsive and business-focused regulator. 

These factors make Gibraltar an attractive location 

for inbound European M&A activity from the US 

and Asia. 

2. Flexible company law regime 

for modern-day transactions 

and business-focused tax laws 

• Corporate law and tax regime 

Gibraltar overhauled its Companies Act 

in 2014, to include some features which 

make Gibraltar companies attractive 

for structuring acquisition vehicles and 

in excess of £100,000 p.a. Furthermore, the 

transfer of shares in a Gibraltar company 

is not subject to any tax or duty, unless the 

company whose shares are transferred 

holds Gibraltar real estate. 

• Gibco as an investment vehicle 

Gibraltar Private Limited companies are 

able to convert to public companies, as well 

as a number of different forms. The shares 

in an acquisition. While the rate of stamp duty 

in the UK is currently only set at 0.5%, this can 

amount to a significant quantity in a high-value 

M&A deal. Purchasers of UK businesses may 

therefore consider whether the stamp duty saving 

could be retained by using Gibraltar to structure 

the deal. 

The UK prohibition on cancellation schemes does 

not prevent a cancellation scheme of arrangement 

A Gibraltar vehicle could also be used for the 

facilitating M&A activity. Gibraltar corporate 

of Gibraltar companies have been listed on 

from being used to insert a holding company over 

structuring of deals involving other EU member 

vehicles enjoy the flexibility of the English 

international recognised stock exchanges, 

the target company. It is possible therefore, to 

state companies, which is facilitated by the fact 

common law; a legal regime which is widely 

such as the London Stock Exchange. The 

insert a Gibraltar holding company over the UK 

that Gibraltar has transposed the Cross Border 

used and preferred by businesses around 

fact that capital gains are not taxed makes 

target, by cancelling the shares in the UK company 

Merger Directive (“the CBMD”). 

the world. 

an IPO for institutional investors and private 

in consideration for issuing to the shareholders, 

equity houses to be attractive. 

new shares in a Gibraltar company which will 

The CBMD facilitates cross-border M&A activity 

A Gibraltar company only requires one 

hold shares in the target. A purchaser could then 

for limited companies by providing a simple 

director and one secretary (which can be 

It is also possible for Gibraltar companies 

acquire the shares in the Gibraltar company by 

framework drawing largely on national laws 

corporate entities), with no requirements 

to return capital to shareholders (e.g., 

way of a share transfer. 

applicable to domestic mergers. This avoids the 

for agents or resident directors (although 

by delivering redemption proceeds on a 

sometimes prohibitively high costs of cross-border 

the location of management and control can 

redemption of the shares) as opposed to 

The shares of a Gibraltar company with a share 

M&A deals, as well as avoiding the winding up 

determine the company’s tax residence). 

distributing profits by way of dividend.The 

register maintained outside the UK are not subject 

of the target company. A Gibraltar company can 

There is no limit on the number of 

fund industry in Gibraltar has been growing 

to stamp duty in the UK. In Gibraltar, no stamp 

merge with a company registered in any other EU 

shareholders a company can have, which 

at a rapid pace and continues to expand. 

duty is payable on shares (unless the transaction 

member state. Interestingly, the CBMD does not 

enables a Gibraltar company to be funded 

There are many types of fund in Gibraltar, 

involves real estate located in Gibraltar). In an 

operate between Gibraltar and the UK, which are 

easily with a large share capital, which would 

including private funds, Experienced 

increasingly cost-conscious market, this can 

not deemed to be the separate EU Member States 

be subjected to a fixed capital duty of only 

Investor Funds (EIFs), Non-UCITS Retail 

amount to a significant saving for the purchaser. 

for this purpose. The same result can be obtained, 

£10. It is also possible to have different 

funds and protected cell companies. This 

however, by undertaking two cross-border 

share classes, such as redeemable shares, 

makes Gibraltar a serious option for basing 

The proposal is illustrated below: 

mergers, one between the Gibraltar company 

or shares with preferential rights to dividend 

investment funds. 

and a company registered anywhere in the EU, 

and another between that company and the UK 

company. 

and/or a return of capital on a winding up. 

There are no minimum capital requirements 

and share capital can be denominated in 

3. Mergers and schemes of 

arrangement 

1. Shares in UKCo cancelled, in consideration for 

the issuing of shares in Gibraltar HoldCo 

Gibraltar’s EU membership and first class 

any lawful currency. Shares can be issued 

Mergers are possible for public companies, 

regulatory regime means that holding structures 

per any value and at a premium. Nominee 

and the Companies Act 2014 provides a 

or special purpose vehicles in Gibraltar will be 

shareholdings are also permitted.The 

framework for reconstructions and schemes 

fully compliant with the standards expected by 

the European Commission and applicable tax 

laws. This, coupled with Gibraltar’s adoption of 

EU standards of administrative co-operation in 

the field of taxation and other tax information 

taxation of companies are relatively simple, 

and also facilitate business needs. All 

companies are chargeable on taxable profits 

accrued and derived in Gibraltar, at a fixed 

rate of 10%. Capital gains are not taxed, 

of arrangement. The recent prohibition on 

cancellation schemes of arrangement in the UK 

(by virtue of the Companies Act (Amendment of 

Part 17) Regulations 2015) has resulted in stamp 

duty payments on the transfer of shares being 


Mergers & Acquisitions 

2. BuyerCo purchases shares of Gibraltar HoldCo. 

be utilised. Similarly, after completing an M&A 

6. Conclusion 

services, gaming, shipping and tourism. 

No stamp duty is payable in the UK on shares in 

Gibraltar companies and no stamp duty on shares 

in Gibraltar. 

transaction, the new business may consider 

redomiciling to Gibraltar to take advantage of the 

competitive and flexible taxation and legal regime. 

Companies registered in any of the following 

jurisdictions may redomicile into Gibraltar: 

Any of the EEA States, Anguilla, Bermuda, British 

At a time where clients are more costconscious 

than ever, structuring a merger or 

acquisition effectively, while keeping costs and 

tax-liabilities at a minimum is key. Gibraltar 

offers a variety of mechanisms for M&A 

deal structures, as well as post-transaction 

corporate group structuring. 

Despite the uncertainty and instability resulting 

from the UK’s decision to exit the EU, the legal 

matrix in which the market operates remains 

unchanged. Following 2015 as a record year 

in the European M&A market, 2016 may 

see Gibraltar featuring increasingly on the 

radars of M&A professionals, indicating that 

notwithstanding its small size, Gibraltar has a 

Antarctic Territory, British Indian Ocean Territory, 

Cayman Islands, Falkland Islands, Guernsey, Isle of 

Man, Jersey, Montserrat, Pitcaim, St. Helena, Turks 

Gibraltar boasts a diversified economy which 

is rapidly growing in sectors such as financial 

lot to offer. 

and Caicos Islands, British Virgin Islands, States 

which are members of the British Commonwealth, 

Liberia, Panama, Singapore, Switzerland, Hong 

Kong and the USA. 

In addition, there would be no tax on the 

dividends received from the UK target to the 

Gibraltar HoldCo, and no withholding tax on 

dividends paid from Gibraltar HoldCo to the 

BuyerCo. Corporation tax would only be on profits 

accrued and derived in Gibraltar, at a flat rate 

of 10%.Furthermore, the lack of VAT provides 

significant savings on professional fees. 

4. Redomiciliation 

Gibraltar law permits redomiciliation of companies 

registered in a number of other countries to 

Gibraltar, as well as the redomiciliation of Gibraltar 

companies elsewhere. This can be vastly helpful 

in the context of M&A transactions. In the above 

example, for instance, companies incorporated 

and registered in jurisdictions which do not 

recognise the scheme of arrangement, who wish 

to take advantage of the benefits structuring the 

acquisition in this way can provide redomicile 

under the Companies Act 2014. Once redomiciled 

to Gibraltar, the scheme of arrangement 

provisions under Gibraltar corporate law can 

The arrangements are reciprocal, so a Gibraltar 

company is also able (subject to local laws) 

to redomicile into any of the above-listed 

jurisdictions. 

Upon a redomiciliation, a company continues 

in uninterrupted existence, so the assets and 

liabilities, rights and obligations of the company 

remain as they are in the original state, which 

further facilitates post-acquisition synergies. 

5. SocietasEuropaeas 

The Companies Registrar in Gibraltar recognises 

and registers SocietasEuropaeas, which also 

facilitates cross-border M&A activity.. Such entities 

are able to transfer their registered office from 

one EU member state to another, without having 

to comply with the more onerous procedure to 

migrate a company, which involves the transfer of 

assets and liabilities, dissolutions and 

re-incorporations. 

A SocietasEuropaeas can be formed by a merger 

between two public companies in different EU 

Member States. This may be of particular benefit 

to companies in the gaming sector, as many of the 

largest providers in the gambling market operate 

out of Gibraltar. 

Ian Felice 

Partner at Hassans 

T: +350 200 79000 

Email: ian.felice@hassans.gi 

Ian Felice commenced work with Hassans in 1999 and is a Partner of the Corporate 

and Commercial Team. During his time at Hassans, Ian has become deeply involved in 

transactional work relating to the use of Gibraltar-based structures, principally for UK 

and European commercial property investments, and regularly advises on corporate 

restructuring and acquisition, Joint Venture work and on the floatation of Gibraltar 

companies on recognised Stock Exchanges. 

An LLB (Hons) Graduate from the University of Nottingham, Ian completed his Bar 

Vocational Course at the Inns of Court School of Law in London. A member of the 

Honorable Society of the Middle Temple, Ian was called to the Bar in England and in 

Gibraltar in 1999 and in the BVI in 2010. 

Tania Rahmany 

Trainee Solicitor at Hassans 

Tania Rahmany joined Hassans as a Trainee Solicitor in October 2015 and is currently 

undertaking a seat in the firm’s Corporate & Commercial Team. She is an LLB graduate 

of Queen Mary College, University of London, and completed an LLM LPC in International 

Legal Practice at the University of Law, Guildford. 


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