Lawyer Issue - December 2016

DECEMBER 2016 

MANAGING 

ENVIRONMENTAL 

RISKS IN M&A 

The complex 

environmental regulatory 

regime in the United 

States can raise a variety 

of legal and financial risks 

in real estate or corporate 

acquisitions. 

BANKING REGULATION 

IN INDIA - 

Since 2014, India has seen 

a spate of changes centred 

on improving the banking 

regulatory environment 

in India and trimming the 

proverbial “fat” in the 

system. 

THE HAGUE 

CONVENTION RETURN 

RULE? 

The Hague Convention 

Treaty regarding the Civil 

Aspects of International 

Parental Abduction is 

currently being threatened 

in the Unites States

Contents 

Contact 

www.lawyerissue.com 

More litigants in person a LASPO legacy . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 

Croatia: Tax Reform to Promote Economic Goals . . . . . . . . . . . . . . . . . . . . 9 

Protection of assets or tax evasion? Recent trends of 

Russian court practice in light of the deoffshorisation policy . . . . . . . . . 12 

The Fate of Pharma Patents in U.S. Inter Partes Review Proceedings . . . 16 

An exception to swallow the Hague convention return rule? . . . . . . . . . 22 

Geographical Indications In Sri Lankan Law . . . . . . . . . . . . . . . . . . . . . . . . 25 

Immigration – Indian Business and Employment Law Updates . . . . . . . . 29 

Tips for effective drafting and enforcement of restrictive covenants . . 34 

Evaluating and Managing Environmental Risk in Real Estate 

and M&A Transactions in the United States . . . . . . . . . . . . . . . . . . . . . . . 41 

Counselling Early Stage Companies: 

Advance Preparation for The Exit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 

Recreational Marijuana’s Economic Advantages. . . . . . . . . . . . . . . . . . . . 53 

Banking Regulation in India – In The Midst of 

A Paradigm Shift or Regulator Interrupted? . . . . . . . . . . . . . . . . . . . . . . . 58 

Navigating through Malta’s Unrivalled Potential . . . . . . . . . . . . . . . . . . . . 64 

Aspects to Consider when Closing a Merger in Venezuela . . . . . . . . . . . 68 

The Right to Information Act No. 12 of 2016 of Sri Lanka . . . . . . . . . . . . 73

Lawyer Issue 


More litigants in person a LASPO legacy 

Joyti Henchie 

As virtually everyone in the legal profession will recall, 

warnings were sounded at every stage of the introduction 

of Part 1 of the Legal Aid, Sentencing and Punishment 

of Offenders Act 2012. LASPO would, many lawyers 

argued, deny access to justice for many individuals who 

might have wished to pursue civil litigation of some sort. 

A month ahead of implementation the 

following year, the Law Society summarised 

the changes in these terms: “On Monday 1 

April 2013, the Legal Services Commission will 

be replaced by the Legal Aid Agency, and the 

cuts imposed by the Legal Aid, Sentencing and 

Punishment of Offenders Act 2012 will take 

effect. LASPO implements substantial cuts to 

civil legal aid. The details of what remains in 

scope can be found in the LASPO Schedule 1.” 

The Law Society’s measured summary 

contrasted with the sense of outrage widely 

felt across the profession. For so many of 

us, access to justice is a basic tenet of the 

legal system and in effect to exclude people 

because they do not have the financial 

resources to pursue a case unaided seems 

in conflict with that, although that does not 

mean we can all work pro bono! 

My own area of family law was among 

those affected by LASPO’s massive scaling 

back of legal aid. This was clearly bad 

news for many future clients and of course 

had implications for my firm’s human 

and financial resources, as it was usual 

for us to be handling several cases within 

the affected areas of family law. We very 

soon had to adapt ourselves to the new 

arrangements. 

Family law legal 

aid guidelines 

The newly created Legal Aid Agency was 

quick to provide guidelines, which included: 

“One of the key changes introduced by LASPO 

is that legal aid for most children and finance 

matters in private family law cases will only 

be available where a client has specific 

evidence in relation to domestic violence or 

child protection. The evidence that is required 

in order for an application for legal aid to be 

made in these matters is prescribed in the 

Civil Legal Aid (Procedure) Regulations 2012 as 

amended. Regulation 33 deals with evidence 

relating to domestic violence and Regulation 

34 with evidence relating to child protection. “ 

This all amounted to much more than 

raising the bar as regards qualification 

for legal aid; it was more like asking us 

to participate in the pole vault with only 

occasional access to a pole. Like colleagues 

in other areas of my firm and across the 

profession, I was driven to wonder what 

the draconian cutbacks were expected to 

achieve. It was, in essence, all about the 

money. 

A paper later presented to a Commons 

Select Committee inquiry explained the 

rationale thus: “In 2010 the incoming 

Government developed plans to cut public 

spending significantly. The Ministry of Justice 

(MoJ) was required to find budget cuts of 

around £2 billion from an overall budget of 

£9.8 billion. Part 1 of the Legal Aid, Sentencing 

and Punishment of Offenders Act 2012 was 

intended substantially to reduce the civil 

legal aid budget by removing whole areas of 

law from scope and changing the financial 

eligibility criteria. The LASPO scheme was 

introduced alongside other policy changes 

including a reduction in the fees paid to 

providers. 

“In the final Equality Impact Assessment 

accompanying the Bill the Ministry of Justice 

set out that its objectives for the proposed 

legislation were to: discourage unnecessary 

and adversarial litigation at public expense; 

target legal aid to those who need it most; 

make significant savings in the cost of the 

scheme; and deliver better overall value for 

money for the taxpayer.” 

Cases fell by the wayside 

Transitional arrangements provided for 

legal aid to continue in pre-LASPO cases 

that probably would not have qualified 

post-LASPO, but for the past three years or 

so we have been learning to live with the 

new legal aid regime. Regrettably, many 

sound cases across many areas of civil law 

must have fallen by the wayside due to the 

denial of legal aid since April 2013. 

In my family law work, like many others 

no doubt, with the reduction in availability 

of legal aid we are seeing more litigants in 

person. This is an understandable reaction 

in situations where litigants do not have or 

4 | LawyerIssue 5



are not willing to put up the funds needed 

Often the solicitor acting for a paying party 

to scope of legal aid, two stand out as 

I have already touched upon the multiple 

to pursue a case through the courts. Their 

will do things to keep matters on track 

particularly relevant here, as one relates 

disadvantages of self-representation and 

perception is that the DIY approach will 

even if there is no obligation on them. 

to ‘the litigant’s ability to present their own 

colleagues across all areas of the profession 

save them money without detriment to the 

They have to lodge bundles with the court. 

case’ and the other to ‘the availability of 

need little introduction to the benefits of 

outcome. In a few cases they may be right. 

Usually the onus is on the applicant but if 

other routes to resolution’. 

mediation in many cases. I can only speak 

As any legal professional knows, there 

is a raft of procedural issues involved in 

preparing and presenting a case to the 

court. A litigant in person invariably does 

not know what to do to prepare a case and 

there is every likelihood that they will fail to 

comply with court timetables and they may 

the applicant is a litigant in person it falls to 

the respondent to do, involving more cost, 

and they also have to provide the litigant 

in person with a full copy. The solicitor may 

incur further costs repeatedly chasing when 

the litigant in person overshoots court 

timetables. 

To quote the submission: “The litigant’s 

ability to present their own case: 

considerations included the type of forum 

in which the proceedings are held, whether 

they are inquisitorial or adversarial, whether 

litigants bringing proceedings were likely 

to be from a predominantly physically or 

for family law disputes, but avoiding the 

mounting costs of going to court when a 

similar outcome could be achieved in less 

formal, less adversarial surroundings is 

almost always preferable. 

That is not to say that mediation is 

guaranteed to be an easy route to an 

attend court unprepared and so jeopardise 

In my personal experience it is also likely 

emotionally vulnerable group. 

amicable settlement. It does need to be 

the effectiveness of the hearing. 

The courts clearly have to treat litigants 

in person in a fair and reasonable way, 

so will often spend time in hearings 

explaining things to them. I totally accept 

that someone unable to finance legal 

representation should be permitted to 

represent themselves and to be assisted 

by the court as appropriate. After all, it is 

not fair if a father cannot see his child just 

because he cannot afford legal costs and 

cannot get help with funding. LASPO has 

left him with no choice. 

Counterparty cost impact 

Whilst supporting the right to selfrepresentation, 

I have to note that 

this approach is not just potentially 

that a litigant in person, in the absence of 

sound legal advice, is less likely to take a 

pragmatic approach and to compromise 

or agree. So, settlement is far less likely to 

be achieved at a relatively early stage of 

the proceedings. Prolonged, contentious 

cases are of course the most expensive for 

everyone involved; they can also be the 

most stressful and upsetting for the parties 

and for other family members. 

All of this prompts the question of whether 

LASPO, beyond slashing expenditure on 

legal aid, was intended to lead to greater 

resort to self-representation or whether 

this has been an accidental consequence. 

If the former, I tend to think that the aim 

of reducing the number of cases reaching 

court by means of accessing alternative 

dispute resolution options also loomed 

large in the legislators’ minds. 

“The availability of other routes to resolution: 

in determining the priority for certain types of 

case, we considered whether people might be 

able to access other sources of advice to help 

resolve their problems, avoiding the need for 

court proceedings.” 

From this I have to conclude that the 

expected consequences of withdrawal of 

legal aid, in addition to the inevitable result 

that some justifiable actions would never 

get off the ground, did indeed include a rise 

in the number of litigant in person cases 

and a rise in the role of mediation and 

alternative dispute resolution methods. 

Mediation v. 

Self-representation 

effective, and to be effective both parties 

need to be committed to the process. With 

that and some goodwill on both sides, a 

resolution that both can accept as fairly 

arrived at (and thus unlikely to differ greatly 

from what they might expect at the end of a 

long court battle) is within grasp. 

disadvantageous for the litigant in person 

but also for the opposing side. 

Having a litigant in person on the other 

side can increase costs for a paying party 

and cause huge delays. Inept preparation, 

missing of court deadlines and poor 

presentation in court can all add to the time 

and costs of the case for the represented 

party. 

What drove 

LASPO aid cuts 

To determine the thought processes behind 

LASPO Schedule 1, it is helpful to return to 

the Select Committee inquiry submission. 

Among the factors said to have guided the 

Ministry of Justice’s decisions on changes 

There is no doubt in my mind that, to the 

extent that the 2013 withdrawal of legal 

aid for many family law cases leads one or 

other party to seek a less costly alternative 

to professional legal representation in 

court, the better solution is likely to be 

mediation rather than self-representation. 

Sources of quotes: 

https://www.lawsociety.org.uk/support-services/advice/ 

articles/legal-aid-changes-key-information-and-advice/ 

www.gov.uk/government/uploads/system/uploads/ 

attachment_data/file/345515/legal-aid-evidence-for-private-family-law-matters.pdf 

www.publications.parliament.uk/pa/cm201415/cmselect/cmjust/311/31104.htm 




Joyti Henchie 

Partner and Head of Family department at Attwaters Jameson Hill 

Croatia: Tax Reform to Promote Economic Goals 

Tamara Jelić Kazić 

T: +0203 871 0009 

Email: joyti.henchie@attwaters.co.uk 

I purely specialise, and have a wealth of 23 years’ experience, in family law including: divorce and separation, financial 

settlements cohabitation, and child protection, to name but a few. 

I am an accredited member of the Law Society Family Law Advanced Scheme and Family law scheme and was member of the 

Children Panel for 13 years. I am also an accredited specialist with Resolution. I am a trained Collaborative Lawyer. 

I am ranked in the region’s ‘first tier’ of family lawyers in Chambers and Partners 2015 and was listed in 2014 as a ‘notable 

practitioner’. I was recently admitted to the exclusive Leading Lawyer Global 250 list. 

As the Croatian Government announced tax reform 

and sent several amendments of the tax legislation to the 

Parliament procedure, it is likely that 2017 will bring 

significant changes to the Croatian tax system 1 . The 

two main objectives of the reforms are: increasing the 

sustainability of the general state debt and promotion 

of growth and employment in the Croatian economy. 

The aim is to reduce the overall tax burden, to promote 

the competitiveness of the economy and to introduce a 

sustainable and simple tax system that may be supported 

by cheaper tax administration. 

1 This Article is prepared under the assumption that the Parliament will adopt changes of laws as currently proposed 




In the corporate profit tax sphere, the 

general tax rate will be reduced to 18%, 

while the lower rate of 12% will apply 

to taxpayers with annual turnover up 

to TEUR 400. The popular incentive (tax 

exemption) for reinvested profit is being 

abandoned and regional and other tax 

related incentives are kept only under the 

Investment Promotion Law. 

In order to combat illiquidity and insolvency 

of the private sector, the proposal aims to 

reduce the share of non performing loans 

in the finance sector by introducing one 

time measure to write off bad and doubtful 

debts with the relevant cost being fully tax 

recognized. 

Obstacles to the development of foreign 

and domestic investment should be further 

eliminated by introducing the possibility 

to sign the advance pricing agreements. 

Further details are also introduced with 

respect to interest applied in the related 

party financing. 

In the personal income tax sphere, the 

increase of the tax-free allowance and the 

reduction of the top tax rate is aimed to 

reduce the overall personal income tax 

burden, allowing Croatia to be a more 

competitive environment for highly skilled 

personnel and professionals. At the same 

time, the reform introduces social security 

liabilities to specific non-employment types 

of income as well as synthetic taxation 

of other income (leading to more fair 

participation in the overall tax / social 

security burden). 

In the VAT system, VAT rate on certain 

goods and services (e.g. electricity supply) is 

reduced from 25% to 13%, while increased 

from 13% to 25% for example on hospitality 

services (but not for tourism and hotel 

accommodation services generally, which 

will continue to apply reduced VAT rate of 

13%). As of 2018, both VAT rates will be 

reduced: to 24% and 12% respectively. 

Threshold for entering the VAT system 

is increased to TEUR 40. Billing method 

(as opposite to payment method) will be 

applied for VAT due at import of high value 

machinery and equipment. 

Amendments to the VAT Law also address 

VAT treatment of transfer and utilization of 

value-coupons. 

Further liabilities are introduced to 

taxpayers who participated in Carousel 

fraud or similar fraudulent activities where 

VAT obligation remained unsettled as well 

as to taxpayers who did not pay to the 

supplier at least the amount of VAT charged 

for the supply received in the prescribed 

deadlines. 

Changes are introduced also with respect 

to the tax procedures, whereas the 3-year 

relative statute of limitation is abandoned 

and a single 6-year statute of limitation is 

introduced. The tax inspections, however, 

will be allowed only within 3 years from the 

commencement of the statute of limitation. 

Deadline for correction of the tax return is 

prolonged from 1 to 3 years. 

The above represent only a high-level 

overview of most significant changes to 

the Croatian tax system, while details and 

several other types of fiscal liabilities are 

not addressed. 

The entrepreneur community in Croatia 

would really like to see the reduction in 

overall tax burden and promotion of the 

competitiveness of the Croatian economy, 

through assertive strategies and the muchneeded 

predictability of economy. It, 

Tamara Jelić Kazić 

however, remains to be seen whether the 

new tax reform and its many specifics, such 

as increased amounts of tax-deductible 

entertainment expenses, deductible input 

VAT on cars, elimination of exemption for 

first property acquisition while reducing 

of real estate transfer tax rate from 5% to 

4%, are indeed the real answer to Croatian 

economic challenges. 

Partner (Zagreb at Law Firm Bardek, Lisac, Mušec, Skoko d.o.o. in 

cooperation with CMS Reich-Rohrwig 

T: +385 1 4825 600 

Email: tamara.jelic-kazic@bmslegal.hr 

Tamara advises clients from various industrial sectors regarding tax implications of international transactions, application of 

treaties on avoidance of double taxation, restructuring of companies and indirect taxation. Tamara is especially experienced 

in advising clients with regard to tax aspects of doing business in Croatia, transactional strategies within M&A procedures, 

and regulatory projections re potential investments, in particular in the context of gas and oil offshore and onshore 

exploration in Croatia.She is an attorney-at-law with the qualification for the UK certified accountant from the Association of 

Chartered Certified Accountants (ACCA). She has close 




Protection of assets or tax evasion? Recent 

trends of Russian court practice in light of the 

deoffshorisation policy 

tax planning within the BEPS plan, each year the tax 

authoritieshavemoreandmoreinstrumentsforexercising 

control over transactions. 

Anastasya Kuzmina 

The deoffshorisation of the Russian economy that started 

in 2014, introduced a new reality for Russian business, 

which requires adaptation by way of revising business 

structuring schemes that have been used for years. 

Within the framework of the battle against tax evasion, 

the government is establishing new rules aimed at the 

prevention of profit related to Russian assets being taken 

abroad. This provided, considering the international 

policy, according to which all countries of the world 

should be engaged in a joint battle against aggressive 

Many precedent decisions for taxpayers 

have been made by Russian courts in the 

last year, reflecting new approaches in 

the law enforcement practice, including 

approaches to using international treaties. 

In particular, analysis of court decisions 

shows intensification of the trend in 

restricting benefits under double tax 

treaties (hereinafter the “DTTs”). 

This is due to the fact that the courts began 

to actively use the doctrine of a beneficiary 

or entity actually entitled to income, which 

was entered into the Russian tax law at the 

end of 2014, and as a result the practice 

turned to a notable extent against the 

taxpayers. The so-called conduit structures, 

in other words, transit companies which 

are actually entitled to benefits under 

international agreements (DTTs), but have 

no actual right to income, may be said to 

have become victims of the government 

policy. In the event such a structure is 

revealed, the tax authorities and courts 

acknowledge the use of benefits under 

the respective DTTs as unjustified and 

insist on payment of tax in Russia if the 

ultimate beneficiaries are unknown or are 

located in jurisdictions which do not have 

international agreements with Russia. 

It is worth noting that in order to make a 

decision as to who the entity that actually 

controls the assets is, tax authorities assess 

the economic nature of transactions on 

transferring assets and define a taxpayer’s 

rights and obligations in terms of the true 

economic purpose of the transaction (in the 

inspector’s judgement). The problem is that 

such assessment can be rather subjective 

and can disregard or ignore objectives of 

the business on protecting its assets. As 

a result, even though under the law it is 

the tax authority’s responsibility to prove 

that a scheme was created for receiving 

unjustified tax benefits, in such disputes 

the taxpayer also has to collect sufficient 

evidence in order to prove reasonable 

economic grounds for transferring assets 

to a particular company, as well as to 

substantiate the entire ownership legal 

structure in general. 

Meanwhile, court practise shows that 

simple arguments regarding the multistage 

scheme for transferring shares being 

created for protecting them against 

being seized unlawfully, are insufficient 

for justifying a company’s position. For 

example, in one of the most high-profile 

cases this year on a complex share holding 

structure in a Russian company, the 

tax authorities assessed the following: 

aggregate of actual relations within the 

entire group of foreign companies, the 

interdependency between all members 

of the group and the rights of owners 

holding Class A and Class B shares. The 

tax authority, having analysed the said 

circumstances, determined that the Cyprus 

company was a formal/technical one to 

which the assets were transferred, and the 

BVI entity was the one with actual control 

over the shares. 

As a result, the tax authority, and later 

the court, arrived at a conclusion that 

the Russian company has not fulfilled its 




obligations of a fiscal agent and has not 

paid taxes to the Russian state budget on 

the foreign organization’s income received 

from sources in Russia in form of property 

divided in transactions among foreign 

companies to the benefit of companies on 

the British Virgin Islands which do not have 

a DTT with Russia. 1 

At the same time, the tax authority and 

court also referred to “the actual goal 

pursued by the taxpayer when conducting 

disputable operations,” which according to 

the conclusion of the tax inspectorate was 

solely that of transferring the property to an 

offshore company and of tax evasion. It is 

worth noting that this scheme of creating a 

holding company for better legal protection 

of assets did not violate legislation in force 

during the time period being inspected. 

Therefore, the decision of the tax authority 

and court was not based on any legal 

regulations, but only on the court concept 

of “unjustified tax benefits,” which is 

interpreted more and more broadly each 

year. 

As the main argument in court, the tax 

authorities use the legal position of the 

Russian Supreme Commercial Arbitration 

Court that tax benefit can be recognised 

as unjustified, in particular, in casesfor tax 

purposes when transactions are registered 

not in accordance with their true economic 

essence or operations are included that 

are not supported by reasonable economic 

or other grounds (business purposes). 2 

1 Resolution of the Commercial Arbitration Court for 

North-West Circuit dated 15 March, 2016 on case 

No.А13-5850/2014. 

2 Decree No.53 “On Commercial Arbitration Courts’ 

assessment of grounds for a taxpayer receiving tax 

benefit as to being justified” of the Plenum of the 

Russian Supreme Commercial Arbitration Court dated 

12.10.2006 

The broad interpretation of this position 

eventually leads to taxes on a transaction, 

which are paid in a reduced amount or are 

not paid at all (which is lawful from a formal 

perspective), being by default recognised by 

the supervisory authorities as an unjustified 

tax benefit. 

The case described above confirms that 

the redistribution of Russian assets 

among foreign structures is now under 

the scrutiny of the tax authorities which 

are very sensitive to Russian companies 

being owned using offshore companies. At 

the same time, it is necessary to take into 

account that irrespective of the fact that 

the deoffshorisation policy was adopted 

in 2014, and the respective concepts were 

introduced into law and became applicable 

from 2015, the courts acknowledge the 

right of the tax authorities to determine 

the tax consequences after identifying the 

beneficiary of income for periods before 

2015, when such notion did not yet exist in 

the tax law. 

It should be noted that pursuant to the tax 

legislation, the depth of a tax inspection 

is restricted by a three-year period. 

Meanwhile, the regulatory authorities 

are entitled to go beyond these limits 

and inspect the taxpayer’s actions for the 

preceding 10 years within the framework 

of criminal cases initiated in respect to tax 

crimes. 

It is important to note that due to the 

changes in the criminal procedure laws 

in 2014, the law enforcement bodies got 

an opportunity to initiate criminal cases 

independently without the need to obtain 

results of tax inspections performed by 

territorial tax inspectorates. Based on 

information of the General Prosecutor’s 

Office and investigating agencies, after the 

said changes, and after the police were 

matter of an inspection conducted by 

once again granted the powers to perform 

the investigating agencies for a period 

investigative activities on tax crimes, the 

exceeding 3 years. 

number of tax evasion criminal cases 

increased approximately by 68% in 2015, 

Considering the court practise being 

as compared to 2014, and it seems that the 

formed, the trend of inspecting companies 

figures in 2016 will not decline. 

whose assets are owned by foreign 

structures, as well as the development of 

Such frightening statistics mean that 

cross-border exchange of tax information, 

companies adopting decisions on using 

companies need to assess all existing 

offshore entities when building crossborder 

business structuring schemes are 

economic reality and, if needed, to revise 

tax risks within the conditions of a new 

under risk. And at the same time, such 

their business structure. 

business decisions can become the subject 

Anastasya Kuzmina 

Senior Associate at Capital Legal Services International LLC 

T: +7 (812) 346 7990 

Email: akuzmina@cls.ru 

Anastasya Kuzmina is a Senior Associate at the St. Petersburg office of Capital Legal Services and is a member of the work 

group providing support for clients in litigation, as well as real estate transactions. 

Anastasya works on projects tied to protecting interests of clients in disputes with state authorities, including mainly tax and 

customs disputes, as well as disputes on contesting cadastral value of land and buildings. 

Anastasya joined Capital Legal Services in 2010 as a team member of the tax and litigation departments. In the time of her 

work with the company, Anastasya has implemented several projects tied to successful representation of clients in court 

disputes, as well as pre-trial settlement. 




The Fate of Pharma Patents in U.S. 

Inter Partes Review Proceedings 

Janice Ye, Jason A. Lief and Jason Kanter 

The Fate of Pharma Patents in U.S. Inter As part 

of the 2011 America Invents Act, 1 the United States 

Congress created a new process for challenging 

the validity of issued U.S. patents in the Patent 

Office (before the Patent Trial and Appeal Board 

–“PTAB”). Known as an Inter Partes Review 

(“IPR”), this process allows third parties to pursue 

a “mini-trial” against the validity of the patent at 

issue based solely upon prior art. 

This article reviews the IPR process as compared with a federal district court trial 

on validity, surveys how pharma patents have been faring in the IPR realm, and 

1 Pub. L. No. 112-29, 125 Stat. 284 (2011) (also referred to as the “AIA”). 

highlights our team’s recent win before 

the PTAB regarding a pharmaceutical 

formulation patent that was challenged as 

allegedly obvious. 

I. Background 

The branded pharmaceutical industry relies 

on patents to provide a period of exclusivity 

for innovative medicines and thus justify 

their large and often risky expenditures 

on research and development. As a result, 

the branded pharmaceutical industry has 

championed the importance of patents. In 

contrast, the fast-moving technology and 

electronics industries have often expressed 

concerns about costly patent litigation. 

These concerns have been magnified by the 

advent of “Non-Practicing Entity” litigants 

(otherwise known as “NPEs” or more 

colloquially “patent trolls”). These trolls, who 

make no products, use patents they own to 

seek damages from alleged infringers as a 

business model. 

In response to these concerns, Congress 

enacted the IPR process as a supposedly 

quick and inexpensive way for the public 

to challenge the validity of patents in the 

United States Patent Office. 

A. Summary of The IPR 

Process 

In broad overview, the IPR process provides, 

inter alia, for: 

1. an initial request for review from a 

“Petitioner” (who can be anyone) stating 

the reasons for alleged patent invalidity 2 

2 35 U.S.C. §§ 311 and 312. 

2. an optional preliminary response from 

the Patent Owner stating why a review 

should not be initiated; 3 

3. a decision from the PTAB regarding 

whether to institute a review of the 

patent, which requires a determination 

that there is a reasonable likelihood that 

the petitioner would prevail with respect 

to at least one of the claims; 4 

And, if the review is initiated: 

4. a short period of limited “discovery” 

where experts may be deposed; 5 

5. a more substantive response by the 

patent owner – which can include 

argument about the prior art, expert 

declarations and evidence of commercial 

success; 6 

6. a short (half day or so) hearing 

(“trial”); 7 and 

7. an ultimate determination within a 

statutory period of one year. 8 

Although rare, the Patent Owner may 

amend its claims 9 in an attempt to avoid 

invalidity. 

B. Differences From Federal 

Court Invalidity Proceedings 

3 35 U.S.C. § 313; 37 C.F.R. § 42.107. 

4 35 U.S.C. § 314; 37 C.F.R. § 42.108. 

5 35 U.S.C. § 316(a)(5); 37 C.F.R. § 42.51. 

6 35 U.S.C. § 316(a)(8); 37 C.F.R. § 42.120. 

7 35 U.S.C. § 316(a)(10). 

8 35 U.S.C. § 316(a)(11). 

9 35 U.S.C. §§ 316(a)(9), 316(d); 37 C.F.R. 42.121. 




IPRs differ from federal district court cases 

statute to initiate and pursue an IPR. It has 

Case in point: IPR No. 2015-00988, Coalition 

of large amounts of mesalamine – slowly 

on validity in several key aspects, including: 

been speculated that they may be using 

for Affordable Drugs II, LLC v. Cosmo 

and in the right place in the colon. 

(a) who may attack the validity of the patent 

(anyone may petition for an IPR versus only 

those with “standing” in district court); 

(b) the standard of proof required 

to invalidate the patent (a mere 

“preponderance of the evidence” in an IPR 

versus the higher standard of “clear and 

convincing evidence” in district court); 10 and 

(c) the way the patent claims will be 

construed (“broadest reasonable 

construction” in an IPR versus a narrower 

construction in the district court). 11 

These differences arguably make the IPR a 

forum where patent invalidity is more likely 

to be found than in district court. 

C. The New 

“IPR Patent Trolls” 

Ironically, the IPR procedure that was 

created in part to tame patent trolls has 

engendered a whole new type of patent 

troll – those without standing in federal 

court that seek to use the IPR process 

to gain financial reward. These new “IPR 

patent trolls” are not business competitors 

to the patent owner. Instead, they are 

third parties (including hedge funds and 

related entities) that are empowered by the 

10 See 35 U.S.C. 316(e) (“In an inter partes review 

instituted under this chapter, the petitioner shall have 

the burden of proving a proposition of unpatentability 

by a preponderance of the evidence”) and Cuozzo Speed 

Techs., LLC v. Lee, 136 S. Ct. 2131, 2144 (2016) (“the 

burden of proof in inter partes review is different than in 

the district courts: In inter partes review, the challenger 

(or the Patent Office) must establish unpatentability ‘by 

a preponderance of the evidence’; in district court, a 

challenger must prove invalidity by ‘clear and convincing 

evidence.’”). 

11 See Cuozzo Speed Techs., 136 S. Ct. at 2142 (claims 

interpreted in broadest reasonable manner for an IPR). 

that power to seek financial gain by either 

shorting the stock of the patent owner or 

obtaining some other financial settlement. 

II. The Statistics 

Since the AIA’s enactment, the Patent Office 

has received over 5,000 Petitions to review 

patents. 12 

As of August 2016, 3,529 petitions have been 

completed, with 1,807 of those instituted. Of 

those instituted, Petitioners have invalidated 

around 70% of all challenged claims. 13 

With respect to biotechnology and 

pharmaceutical patents, there have been 

331 petitions, 207 of which have been 

instituted. 14 Among biotechnology and 

pharmaceutical patents, the invalidation 

rate has been approximately 45%. 15 

III. A Pharma 

IPR Win at the PTAB 

Despite the statistics and the lower standard 

of proof for invalidity, patent owners can 

and do win IPRs. 

12 Patent Trial and Appeal Board Statistics, last updated 

August 31, 2016, available at https://www.uspto.gov/ 

sites/default/files/documents/2016-08-31%20PTAB.pdf. 

13 Id. This excludes instituted IPRs that were terminated 

prior to a final decision from PTAB. 

14 Id. 

15 M. Grewal, J. Hill, and K. Zalewski, “Trends in Inter 

Partes Review of Life Sciences Patents,” 92 BNA’s Patent, 

Trademark & Copyright Journal 3 (June 17, 2016). 

Technologies Ltd. 

In this IPR, an entity formed by hedge fund 

manager Kyle Bass and his associates – that 

otherwise would not have had standing 

in federal court – brought a petition to 

initiate an IPR and invalidate U.S. Patent No. 

6,773,720 (“the ’720 patent”) in the Patent 

Office. 

A. The Invention 

of the ’720 Patent 

The ’720 patent is directed to an orallyadministered, 

controlled release formulation 

of the drug mesalamine. Mesalamine 

treats ulcerative colitis – an inflammatory 

condition of the large intestine. Mesalamine 

provides its therapeutic benefit at the site 

of inflammation on the interior surface 

of the large intestine. It does not provide 

therapeutic benefit when absorbed 

systemically into the bloodstream. 

Thus, one challenge to making an effective 

mesalamine oral treatment is that it must 

release drug in and throughout the colon – 

bypassing the stomach and small intestine 

– and it must maintain relatively even or 

“controlled” drug release along the length of 

the large intestine. An added dilemma for 

the formulator is that oral dosage forms of 

mesalamine must contain large amounts 

of the drug to be of benefit (over 1 gram) – 

leaving little space for excipients. Yet, it is 

the excipients that are necessary to control 

the release of the mesalamine. 

Working within these constraints, the 

inventors of the ’720 patent created a 

two-matrix formulation that uses minimal 

amounts of excipients to control the release 

B. The Petitioner’s Challenge 

The Petitioner’s challenge to the validity 

of the ’720 patent turned on two prior art 

references – the Leslie reference from over 

23 years before the invention of the ’720 

patent that did not mention mesalamine 

and the Groenendaal reference from 10 

years before the invention. Although neither 

of these references referred to each other 

or spoke about a two-matrix formulation, 

Petitioner argued that there would have 

been a general motivation to combine 

the two references (simply because they 

both involved controlled release) and once 

combined the elements of the ’720 patent 

would be readily revealed. 

C. The PTAB’s Analysis: 

No Invalidity 

Although the PTAB did grant the initial 

request for review, after full consideration of 

the developed record, the PTAB concluded 

that the Petitioners had not proven invalidity 

by a preponderance of the evidence. 

In coming to that conclusion, the PTAB 

considered numerous distinctions from the 

prior art, including whether the particular 

chemical class of “waxes” called for in the 

challenged claims were disclosed in the 

prior art. The Board rejected the Petitioner’s 

broad statements that the prior art 

disclosed “waxy” materials and distinguished 

those from the actual “waxes” recited in the 

claim. The PTAB also found an absence of a 

motivation to combine the references; and 

also noted the complexity of formulation 

science – as conceded by Petitioner’s 

expert during deposition. Further, the PTAB 

credited the commercial success of the 




patented invention as an objective indicia of 

non-obviousness. 

D. Take Home Lessons 

There are many take home lessons from the 

experience. 

First and foremost, IPRs involving 

pharmaceutical patents can be won by 

patent owners. In many ways that should 

not be a surprise. The pharmaceutical 

and chemical sciences have repeatedly 

been recognized to be complex and 

unpredictable 16 – hallmarks of nonobviousness. 

Second, identifying clear differences 

between the prior art and the claimed 

invention – and buttressing those 

differences with solid evidentiary proof in 

terms of literature and expert testimony 

– can help the PTAB understand why a 

claimed invention truly is different. 

Third, although some IPR decisions seem 

to discount commercial success and other 

objective indicia of non-obviousness, this 

form of evidence should not be ignored 

by patent owners. When presented to the 

PTAB, it can prove helpful. 

Fourth, as the IPR process unfolds, patent 

owners should not recoil from reiterating 

arguments that were apparently rejected at 

the initiation stage. The PTAB seems willing 

16 See, e.g., Eisai Co. Ltd. v. Dr. Reddy’s Labs., 533 F.3d 

1353, 1359 (Fed. Cir. 2008) (“To the extent an art is 

unpredictable, as the chemical arts often are, KSR‘s focus 

on [ ] ‘identified, predictable solutions’ may present a 

difficult hurdle because potential solutions are less likely 

to be genuinely predictable”); Abbott Labs. v. Sandoz, 

Inc., 544 F.3d 1341, 1351 (Fed. Cir. 2008) (extended 

release formulation not obvious: “difficulties in predicting 

the behavior of any composition in any specific biological 

system.”); Eli Lilly & Co. v. Generix Drug Sales, Inc., 460 

F.2d 1096, 1104 (5th Cir. 1972) (paraphrasing Churchill, 

the court noted that chemical compounds present a 

“riddle wrapped in a mystery inside an enigma”). 

to reconsider its initial views when new 

information is presented. 

Fifth, one of the complexities of an IPR 

proceeding is that the witnesses are not 

actually observed at trial by the PTAB 

judges. While excerpts of deposition 

testimony are cited in briefs, there is no 

live testimony. For this reason, deposition 

testimony should strive to elicit clear 

admissions and important points from the 

other side’s experts. 

From the perspective of the petitioner, a 

claim of invalidity should be based upon 

prior art that is as close to the patented 

claim as possible. Where one needs to 

stretch the prior art’s disclosure to simulate 

the claim, proof of invalidity is likely lacking. 

IV. Parting Thoughts 

As with many “solutions” to problems in 

the law, the IPR solution to supposedly 

“weak” patents and “patent trolls” has 

created concerns of its own. A procedure 

that permits important issued patents to 

come under attack, under a lower standard 

of proving invalidity, has the very real 

potential to weaken the patent system 

and discourage investment in important 

new research. Whether Congress should 

maintain the lower “preponderance of the 

evidence” standard for IPRs is a topic that 

should be discussed and debated. However, 

as things currently stand, the Patent Office 

has the important task of balancing the 

concerns raised by so-called “weak” patents 

with the goals of the patent system itself – 

promoting research and innovation. 

Jason A. Lief 

Partner at Frommer Lawrence & Haug LLP 

T: +1 (212) 588 0800 

Email: jlief@flhlaw.com 

Jason A. Lief, a partner in the New York office of Frommer Lawrence & Haug LLP, has a significant twenty-year track record 

of successfully representing clients in several dozen major patent and intellectual property litigations. He has developed 

a reputation for courtroom excellence – conducting informative direct-examinations, pointed cross-examinations and 

presenting winning oral arguments. During his career, he has addressed all of the major issues that litigants face in patent 

cases, including infringement, validity and enforceability. He has argued before the US Court of Appeals for the Federal 

Circuit as well as before numerous federal judges and juries throughout the United States and has also made appearances in 

foreign courts pursuant to the Hague Convention. 

Jason Kanter 

Associate at Frommer Lawrence & Haug LLP 

T: +1 (212) 588 0500 

Email: jkanter@flhlaw.com 

Jason Kanter works in the New York office of Frommer Lawrence & Haug and focuses primarily on Hatch-Waxman litigation. 

Much of his work is focused on case preparation involving the firm’s clients. With a deep background in the life sciences, Mr. 

Kanter has a particular expertise in the “science of law” and how changes in science impact the law. He examines variations 

within the intersection of science and law to determine how they impact a client’s case. Mr. Kanter is also a patent agent 

and is part of the firm’s patent prosecution practice. With an award winning education, Mr. Kanter thrives in the firm’s 

entrepreneurial environment that calls on all employees to leverage their unique skills and expertise for the full benefit if its 

clients. 

Janice Ye 

Associate at Frommer Lawrence & Haug LLP 

T: +1 (212) 588 0800 

Email: jye@flhlaw.com 

As an associate in the firm’s New York office, Janice Ye focuses her practice on pharmaceutical patent litigation under 

the Hatch-Waxman Act. She also has developed experience in other areas of antitrust and patent litigation. Throughout 

her practice, Ms. Ye integrates her diverse regulatory and business development background in the medical device and 

pharmaceutical industries to provide practical solutions for clients. Ms. Ye earned her J.D. at Boston College Law School, 

where she served as an Articles Editor for the Boston College Law Review and as president of the Intellectual Property & 

Technology Forum. 




An exception to swallow the Hague convention 

return rule? 

Fahi Takesh Hallin 

or retained in a contracting country may, 

through a Hague Convention proceeding, 

obtain an order returning the minor child to 

his/her country of habitual residence. 

The text of the Hague Convention sets forth 

three clear requirements for the return of 

the minor child. As a general summary, 

these are: 

as to determine which parent should be 

the primary or sole custodial parent, is 

irrelevant to a Hague Convention matter: 

“. . . [T]he judicial or administrative authorities of 

the contracting state to which the child had been 

removed or in which it has been retained shall 

not decide on the merits of rights of custody . . . 

[Emphasis added.]” 

The 1980 Hague Convention Treaty regarding the Civil 

Aspects of International Parental Abduction (“Hague 

Convention”) is currently being threatened in the Unites 

States under a proposed new amendment to the United 

States’ version of the Hague Convention, which proposal 

wouldstopnumerousreturnsofabductedchildrentotheir 

countries of habitual residence. 

Any proposed new legislation which 

attempts to widen one of the exceptions 

to the rule that abducted children must be 

returned home is extremely concerning. 

Expanding the exceptions to having to 

return abducted children to their home 

countries may so weaken the enforceability 

of the treaty, as to nearly stop the 

enforcement of the Hague Convention 

treaty in the United States. 

By way of background, pursuant to the 

Hague Convention ( 42 U.S.C. 11601, et seq.), 

a left-behind parent whose child has been 

abducted by another parent and taken 

1. That the child was a habitual resident of 

the state from which he/she was taken; 

2. That the child was wrongfully removed 

from the state by the abducting parent, 

meaning that the non-abducting parent 

had parental rights which he was 

actually exercising at the time of the 

abduction; and 

3. That the case does not fall into any 

exceptions. These limited exceptions 

are: 

a. That the non-abducting parent was 

not actually exercising his custodial 

rights, or consented to the removal 

and/or retention of the child; 

b. “There is a grave risk that his or 

her return would expose the child 

to physical or psychological harm 

or otherwise place the child in an 

intolerable situation”; or 

c. That the Hague Convention 

proceedings were commenced more 

than one year from the date of 

abduction/retention. 

Importantly, as set forth in Article 16 of The 

Hague Convention, a Hague Convention 

proceeding is per se, not a custody 

proceeding, and any request by either 

parent for a custody determination, such 

This directive is not only expressly stated in 

the text of The Hague Convention but has 

been repeatedly upheld in the United States 

and other courts hearing Hague Convention 

cases. In Nunez-Escudero v. Tice-Menley, 

(1995) 58 F.3d 374, 8th Cir., for example, the 

court stated unequivocally: 

“We instruct the court not to consider evidence 

relevant to custody or the best interests of the 

child.” Id. At 378. 

Unfortunately, instead of following, the 

relatively simple dictate of the Hague 

Convention to return children to their 

countries of habitual residence rather 

than make a determination as to which 

parent a child is better of living with, Hague 

Convention Courts have often taken into 

consideration claims of domestic violence 

by abductors as an exception to the return 

rule. 

However, this debate is not about leaving 

victims of domestic violence without 

protection, and attempting to justify 

this Amendment by focusing on victims 

of domestic violence is a “red herring”. 

Indeed, a victim of domestic violence 

who abducts a child and loses a Hague 

Convention matter need not return to the 

previously violent relationship or to the 

previously shared home in the country of 

habitual residence. He/she has every right 

to protection from the other parent whom 




she/he claims is abusive, and to ask a court 

for custody based on the other parents’ 

behaviour-and all of this should take 

place in the home court, rather than stop 

the return of the child his/her country of 

habitual residence. 

The focus of the “grave risk of harm” 

exception to the Article 13 exception to 

returning the children is on the children 

themselves rather than on their parents. 

A victim of domestic violence will have 

the right to obtain all the benefits and 

protections of the legal system in the 

country of habitual residence including 

police assistance, obtaining restraining 

orders, and the like. If he or she would 

not have such protections, the focus of 

the Hague Convention’s hearing would 

be on determining whether the country 

of habitual residence has such working 

assistance systems in place. 

Indeed, the focus, as clearly set forth 

in the Hague Convention treaty itself 

is not exposing the child to physical or 

psychological harm or otherwise placing the 

child in an intolerable situation. 

Any domestic violence claims should 

be litigated in the country of habitual 

residence, the only country which is allowed 

to make a custody determination. Any 

amendment to the Hague Convention in the 

United States which would add domestic 

violence as an additional Article 13 

exception, to be litigated in the abductedto 

location would blur the line between 

making a custody determination (which only 

the country of habitual residence may do 

per Article 16) as opposed to determining if 

a child was wrongfully abducted from his/ 

her country of habitual residence. 

The purpose of the Hague Convention 

per its Article 1 is: “to secure the prompt 

return of children wrongfully removed to 

or retained in any Contracting State.” Per 

the literal words of Article 1 of the treaty, 

the return is per se and on its face not being 

made “to the other parent”, but to the 

country of habitual residence. 

Geographical Indications In Sri Lankan Law 

Anomi Wanigasekera 

Chapter XXXIII of the Intellectual Property Law No. 36 

of 2003 makes provision for the protection of geographical 

indications. 

Fahi Takesh Hallin 

Partner at Harris Ginsberg LLP 

T: +1 310 444-6333 

Email: fhallin@harris-ginsberg.com 

Fahi Takesh Hallin specializes in family law, a partner at HARRIS . GINSBERG LLP. Her specialty includes celebrity and 

high net worth clients, dissolution of marriage, complex property issues, child custody, international family law, Hague 

abductions, and pre-marital agreements. She has served as a Judge Pro Tem for the Superior Court, and conducts mediations 

for the Court. She has been named a Superlawyer for ten consecutive years, one of the Top Women Attorneys in Southern 

California since 2012, and a Best Lawyer in America for the last several years. She writes and lectures frequently, and 

appears on television and other media as a family law expert. 

Geographical Indications (GI) are off shoots 

of indications of source and appellations of 

origin which were first accorded recognition 

in the Paris Convention. Indications of 

source is a broad concept and designates 

a country or place situated in that country 

from where the particular product in 

question originates. Accordingly expression 

such as made in Sri Lanka would fall into 

this category. 

Appellations of origin is a geographical 

names of a country or place in that 

country. The product just necessarily have 

its characteristics and quality linked with 

the geography of the place by way of for 

instance agro climatic conditions and 

human factors. 

Geographical indications are indications 

identifying a particular good as originating 

in a country or locality in that country. The 

quality of characteristics or reputation of 

such goods must be essentially attributable 

to the geographic origin. Definitions would 

include not only geographical names but 

also any non-traditional names which have 




acquired significance. Ceylon Tea would fall 

5. Agreement on trade related aspects of 

(3) In the case of homonymous geographical 

Several exporters have pointed out to the 

into this category. 

intellectual property right 1995. 

indications for goods including an agricultural 

Government that when seeking protection 

There are has been no uniform approach 

by various countries in respect of 

protection of geographical indications. 

Some countries have enacted specific “sui 

generics” to protect GI’s. Other protect GI’s 

under existing laws and still others afford 

protection by a combination of both. For 

protection of GI’s Unfair Competition, 

Consumer Protection Laws protecting 

tradenames and marks and passing off and 

laws relating to false and misleading trade 

practices would also be relevant. 

As far as international treaties and 

agreements are concerned the protection 

of GI’s are concerned they began with 

the Paris Convention for the protection 

of industrial property in 1883 where 

protection was afforded to appellations 

of origin. In the recent past the TRIPS 

Agreement the WTO afforded protection 

of GI’s by promoting a standard definition 

of GI’s and prescribing certain minimum 

standards by which they should be legally 

protected by all WTO member States. 

Some of the more important international 

agreements relating to GI’s are – 

1. Convention for the protection of 

Industrial property 1883 

2. Madrid Agreement for the repression of 

false or deceptive indications of source 

on goods 1891 

3. General Agreement on tariffs and trade 

(GATT) 1947 

4. Lisbon Agreement for the protection 

of appellations of origin and their 

Section 161 provides as follows – 

“(1) Any interested party shall be entitled to 

prevent - 

• the use of any means in the designation 

or presentation of goods that indicates 

or suggests that the goods including an 

agricultural product, food, wine or spirit 

in question originates in a geographical 

area other than the true place of origin 

in a manner which misleads the public 

as to the geographical origin of goods; 

or 

• any use of a geographical indication 

which constitute an act of unfair 

competition within the meaning of 

section 160; 

• the use of a geographical indication 

identifying goods including an 

agricultural product, food, wine or spirit 

not originating in the place indicated by 

the geographical indication in question 

or identifying goods not originating in 

the place indicated by the geographical 

indication in question, even where the 

true origin of the goods is indicated 

or the geographical indication is used 

in translation or accompanied by 

expression such as kind, type, style or 

imitation or the like. 

(2) The protection accorded to geographical 

indications under sections 103, 160 and 161 

shall be applicable against a geographical 

indication which, although literally true as 

to the territory, region or locality in which 

the goods originate, falsely represents to the 

product, food, wine or spirit, protection shall 

be accorded to each indication, subject to the 

provisions of subsection (2) of this section. 

The Minister in case of permitted concurrent 

use of such indications, shall determine by 

prescribed practical conditions under which 

the homonymous indications in question will 

be differentiated from each other, taking into 

consideration the need to ensure equitable 

treatment of the producers concerned and 

the protection of consumers from false or 

deceptive indications. 

(4) The Court shall have power and jurisdiction 

to grant an injunction and any other relief 

deemed appropriate to prevent any such use 

as is referred to in this section. The provisions 

of Chapter XXXV of the Act shall mutatis 

mutandis, apply to such proceedings. 

(5) For the purposes of this section 

“geographical indications” shall have the same 

meaning as in section 101. “ 

At present in Sri Lanka whilst there is a 

provision for the protection of GI’s including 

injunctive relief, the form of registration of 

GI’s is generally in the form of certification 

marks. For instance as far as Ceylon Tea 

is concerned Sri Lanka Tea Board grants a 

certification mark subject to the provisions 

contained in the Intellectual Property Act 

in respect of certification marks. However 

there are other produce of Sri Lanka which 

may not be eligible at present for the grant 

of certification marks because there is no 

authority to grant such rights under the 

provision of Chapter XXIX. 

of Sri Lanka produce in foreign countries 

they find it easier and more convenient if 

Sri Lankan authorities could certify that 

the mark is in fact registered in Sri Lanka 

as a GI. The Spice Council of Sri Lanka 

representing the exporters of spices and 

Export Development Board have constantly 

drawn the attention of the authorities 

that early measurers must be taken in 

this regard. Accordingly the authorities 

have agreed on principle to make interim 

provisions relating to Ceylon Cinnamon and 

certain other products taking into account 

the provisions of Section 204 of the Act 

which enables the Minister from time to 

time to make regulations for the purpose of 

carrying out or giving effect to the principles 

of the Act and sub-section 2 provides that 

without prejudice to the generality of the 

powers conferred by subsection 1 the 

Minister may make regulations in respect of 

the matters referred therein – 

Subsection 2 refers to 8 such matters 

. In terms of section 2 (2) the Director 

General shall be vested with the powers 

of the implementation of the provisions 

of this Act control and superintendence 

of the registration and administration 

of industry designs, patents, marks and 

any other matters as provided by the 

Act and the supervision and control of 

all persons appointed for or engaged in 

the implementation of the provisions 

of this Act. As provisions relating to GI’s 

are contained in Part IX of the Act the 

regulations could be made in respect of 

GI’s as well. Accordingly the Government 

is expected to make regulations for the 

better protection of Ceylon Tea and Ceylon 

international registration 1958 

public that the goods originate in another 

territory. 




Cinnamon. Consideration is also being 

given as to whether a new Act should 

be enacted in respect of registration of 

GI’s. Meanwhile regulations as an interim 

measure referred to are expected to be 

enacted early and this would at least to 

some extent further protect the exporters 

of Ceylon Tea and Ceylon Cinnamon and 

other spices. 

Immigration – Indian Business and Employment 

Law Updates 

Poorvi Chothani, Esq. and Ashwina Pinto 

Anomi Wanigasekera 

Partner at Julius & Creasy 

T: +94 11 2422601 

Email: anomi@juliusandcreasy.lk 

Anomi heads our Intellectual Property Group. She has extensive experience in the full range of enforcement, management 

and transactional matters pertaining to intellectual property law, including representing clients before the National 

Intellectual Property Office, acting for multinationals as well as Sri Lankan conglomerates in respect of infringement actions, 

applying for injunctions and search and/or seizure orders. She also overlooks the drafting and reviewing of contracts and 

advises on regulatory compliance matters. 

In a world that is characterized by globalization and a 

constantmobilityofpeopleacrossborders,countriesareredefining 

policies and enhancing compliance initiatives. 

India has over the past few years seen 

a healthy surge in foreign nationals 

coming to India on employment visas. The 

Government of India through the Ministry 

of Home Affairs deals with all matters 

relating to visa, immigration, citizenship, 

overseas citizenship of India, acceptance of 

foreign contribution as well as hospitality. 

This article elucidates certain important, 

recent changes pertaining to foreign 

nationals in India as well as Indian origin 

foreign nationals. 

Mandatory Reporting of Foreign 

National’s Stay 

The Ministry of Home Affairs (MHA) has vide 

notification dated March 18, 2016 1 made 

it mandatory to report the stay of foreign 

nationals on the premises by a landlord. 

This has been a requirement for several 

years but has not been enforced strictly 

prior to this. 

1 http://egazette.nic.in/WriteReadData/2016/168653.pdf 

(Accessed on November 20, 

2016) 




Foreign nationals in India are under 

heightened scrutiny regarding their entry 

and stay in the country. Thus, the MHA has 

emphasized the mandatory requirement 

for hotel, guest houses, hostels, and private 

homes among others, to report the arrival 

and stay of any foreign national, within 24 

hours of arrival at their premises. Rented 

accommodation falls within the ambit of 

‘hotel’ specified under this notification. 

An online application in this regard has 

been made applicable. This reporting 

requirement is separate from the police 

verification that needs to be completed 

prior to registering at an FRRO/FRO or 

applying for a visa extension at an FRRO/ 

FRO. 

Landlords also must register online and 

then generate Form C for each of its foreign 

national tenants. To limit the liability of 

the landlord it is imperative that they also 

report the departure of any foreign national 

from their premises and the foreign 

national is required to sign the Annexure to 

the Order Form. 

Reporting the Repatriation 

of Foreign National 

Employees 

During the course of employment, in 

case the employer wants to withdraw the 

“undertaking for good conduct” the employer 

is required to visit the office in person along 

with the foreign national to report and record 

the withdrawal. This is likely to happen when 

the employee has been found to violate 

some law or when the employee wishes to 

change his employer etc. 

The MHA has published a notification 

making it mandatory for employers to 

report the termination and/or departure of 

all foreign nationals working in India. Please 

note that this applies to all foreign national 

employees whether they are required to 

register or not. 

Investment Related 

Residence Rights 

years. The foreign investor will be entitled to 

own one residential property and the spouse 

will be allowed to work or study here. This 

scheme will however not be made available 

to Pakistani or Chinese nationals. 

An official statement issued states, 

“Permanent residence status will serve 

as a multiple entry visa without any stay 

stipulation and holders will be exempted 

from registration requirements. They will 

be allowed to purchase one residential 

property for dwelling purpose. Spouse 

and dependents will be allowed to take up 

employment in private sector (in relaxation 

to salary stipulations for employment 

visa) and undertake studies in India”. The 

statement further added that the fund 

will help to benefit domestic companies’ 

business expansion and grant access to 

cost competitive supply chains in addition 

to helping them integrate with global 

production networks. 

Further, under current regulations 

most foreign nationals could qualify for 

naturalization as Indian citizens after 

under Indian systems of medicine’ thus 

expanding the list of permissible activities 

for an E-Tourist Visa. 

A foreign national may apply for a tourist 

visa for the purposes of recreation, 

sightseeing, casual visit to meet friends 

or relatives or attending a short-term 

yoga programme while a foreign national 

whose sole objective of visiting India is 

recreation, sightseeing, casual visit to meet 

friends or relatives, attending a short-term 

yoga programme, short duration medical 

treatment including treatment under Indian 

Systems of medicine or casual business visit 

may apply for an E-Tourist Visa. 

It is pertinent to note that the main 

difference between a Tourist Visa and an 

E-Tourist Visa is that while an E-Tourist 

Visa must be applied online minimum four 

days prior to the date of travel. This visa is 

issued with a validity of a period of 30 days 

and may be used twice in a calendar year. 

Whereas, a Tourist Visa has to be obtained 

from the concerned Indian Mission prior 

to arrival in India and the duration of stay 

It is imperative for foreign nationals to 

register with the FRRO/FRO concerned 

having jurisdiction over the place where 

he or she intends to stay within 14 days 

of arrival when they are visiting India long 

term (more than 180 days) on a Student 

Visa, Employment Visa, Research Visa or 

Medical Visa. Pakistani nationals however 

must register with the concerned FRRO/ 

FRO within 24 hours of their arrival. Usually, 

the entity that sponsors the visa is required 

to submit an undertaking to the FRRO/FRO 

on behalf of the foreign national “to ensure 

good conduct of the foreign national during 

his/her stay in India.” No registration for 

The Government of India has decided to 

woo foreign investors with permanent 

residency rights and to provide financial 

support to facilitate trade with South– 

East Asian countries including Cambodia, 

Vietnam, Laos and Myanmar through the 

Export Import Bank of India to investors 

who bring a minimum of about USD 1.5 

million in 18 months about USD 3.6 million 

in 36 months and generate at least 20 jobs 

every year 2 . 

The permanent residence status to foreign 

investors is expected to be for a period of 20 

staying in India for 12 years in qualifying 

long term status subject to certain criteria. 

Expanded use of eVisas 

With an eye to make Indian yoga and its 

age-old medicine system accessible to all 

nationals, the Government of India has 

decided to include ‘attending a short-term 

yoga programme’ to its existing list of 

permissible activities under Tourist and 

E-Tourist Visa 3 . The Government has also 

included ‘short duration medical treatment 

differs on a case to case basis. 

Grant of Citizenship 

Made Easier for Certain 

Pakistan Nationals 

A proposal has been put forth to simplify 

the procedures to grant Indian citizenship 

to minority Hindus from Pakistan 4 . Under 

the proposal, such Pakistani nationals 

staying in India on a Long-Term Visa will be 

permitted to open bank accounts with prior 

minors below the age of 16 is required. 

2 http://www.livemint.com/Politics/LQtHJFnhpg9YggO9fFd9IN/India-said-to-consider-Rs10-crore-residencevisa-to-lure-inv.html 

(Accessed on November 21, 2016) 

3 http://mha1.nic.in/pdfs/MaterialTV_02062016_01.pdf 


4 http://mha1.nic.in/pdfs/LTVFacilities_230816.pdf 





RBI approval, subject to certain conditions, 

The deadline for the conversion of the cards 

exempt from the new biometric enrollment 

Disclaimer: The contents of this publication 

to buy property, obtain a Permanent 

has been extended several times since 

requirement. 

are not a comprehensive consideration of 

Account Number (PAN) and Aadhar 

Number, will be given permission to take up 

self-employment or for doing business. 

The Collectors or District Magistrates of the 

following 18 districts will be empowered 

to grant citizenship to such individuals at 

heavily discounted fees: 

implementation of the scheme to give more 

time to PIO card holders to submit their 

applications for registration as an OCI card 

holder. The previous deadline was June 30, 

2016. 

Biometrics in London 

It may thus be noted, that 2016 has seen a 

growth by 6.8% of foreign arrivals in India 

due to a series of initiatives taken by the 

government including the online visa facility 

which has now been extended to over 100 

countries and other visa reforms whose 

impact is now being felt. 

the subjects discussed and are designed to 

provide preliminary, general information. 

Readers should not conclusively rely on the 

information as legal advice and should seek 

independent counsel before any action is 

taken with respect to these or other specific 

issues. 

• Raipur in Chhattisgarh; 

• Ahmedabad, Gandhinagar, Rajkot, 

Kutch and Patan in Gujarat; 

• Bhopal and Indore in Madhya Pradesh; 

• Nagpur, Pune, Mumbai and Thane in 

Maharashtra; 

• West Delhi and South Delhi in The 

National Capital Territory; 

• Jodhpur, Jaisalmer and Jaipur in 

Rajasthan; and 

• Lucknow in Uttar Pradesh 

PIOs to OCIs 

The High Commission of India in London 

announced by way of a press release on 

August 5, 2016 6 that applicants for seven 

visa categories but not including business 

or tourist visas are required to register their 

bio-metric data effective August 19, 2016. 

Individuals applying for any of the visas as 

set out below at the Indian Visa Application 

Centers in the U.K. will now be required to 

appear in person and submit bio-metrics - 

finger print data and facial photograph: 

• Employment Visa; 

• Journalist Visa; 

• Research Visa; 

• Student Visa; 

Ashwina Pinto 

Junior Associate at LawQuest 

T: +91 22 4002 0954 

Email: ashwina@lawquestinternational.com 

Ashwina Pinto joined LawQuest in September 2016 and is working as a junior associate. She graduated from the University of 

Mumbai in 2016. 

Poorvi Chothani, Esq. 

Managing Partner at LawQuest 

T: +91 22 4002 0954 

Email: poorvi@lawquestinternational.com 

The Government of India issued a notification 

dated January 9, 2015 regarding the merger 

of the Persons of Indian Origin (PIO) and 

Overseas Citizens of India (OCI) Schemes 5 . 

It stated that all existing PIO card holders 

registered as such under the new PIO card 

scheme of 2002 are expected to apply for an 

OCI card before December 31, 2016. 

• Visit Visa (applicable only to Pakistani 

nationals); 

• Project Visa; and 

• Missionary Visa 

It is pertinent to note that applicants under 

the age of 12 or over the age of 70 are 

Poorvi Chothani, Esq. is the Founder and Managing Partner of LawQuest, an immigration and employment law firm based 

in Mumbai, India. Poorvi’s practice has been focused on immigration law since 2003 and she has more than 30 years of 

experience in dispute resolution, corporate and commercial laws. Poorvi is licensed to practice in India, New York and 

England and Wales. 

Poorvi has been consistently nominated, amongst the world’s leading immigration private practice lawyers in “Who’s Who 

Legal” each year since 2009. She is often quoted in the Economic Times, India’s leading business daily and on radio and 

CNBC-TV 18 and Zee Business News. 

5 http://mha1.nic.in/pdfs/Materialtobeplacedon- 

MHAwebsiteregardingOCI080615.pdf (Accessed on 

November 20, 2016) 

6 http://www.vfsglobal.com/india/uk/pdf/Introduction-of-Mandatory-Biometric-Enrolment.pdf 

(Accessed 

on November 20, 2016) 




Tips for effective drafting and 

enforcement of restrictive covenants 

Wayne J. Positan, Esq and Daniel M. Santarsiero, Esq 

ushered in an era of tremendous conflict in connection 

withtherelationshipbetweenemployerswhoseektohold 

employeesaccountableforagreementsthatcontroltheend 

of the parties’ economic relationship, and the ability of 

employeestoescapetheenforcementofsuchagreements. 

This article will explore the methods used in drafting and 

enforcing restrictive covenants. 

The speed of business in the 21st Century has undoubtedly 

placed tremendous burdens upon employers seeking to 

enforcerestrictivecovenantsinthemodernbusinessworld. 

Intoday’sfast-pacedandhigh-techsociety,tradesecretscan 

be lost with the click of an iPhone camera and customer 

information can be mined from protected databases and 

stolen through the use of an inexpensive flash drive. Often, 

the only protection available to prevent further harm is 

the legal construct known as the restrictive covenant. Yet, 

the restrictive covenant’s status as the great elixir is directly 

linked to its ability to be enforced. The past decade has 

The Basics 

Restrictive covenants in the employment 

context seek to protect business interests of 

a corporation by limiting post-employment 

engagements of an individual or individuals 

who has moved on from the company. As a 

general rule in all jurisdictions, our country’s 

courts will not allow a company to enforce 

restrictions if such enforcement will not 

benefit the legitimate business interests of 

the ex-employer. See, Guardian Fiberglass 

Inc. v. Whit Davis Lumber Co. 509 F.3d 512 

(8th Cir. 2007). This notion stems from 

the fact that our judicial system considers 

restrictive covenants to be a restraint upon 

trade by their nature. This is of course 

balanced against the parties’ inherent 

freedom to enter into a contract, which has 

led courts to a common ground in most 

jurisdictions. In large part, most jurisdictions 

will not issue a blanket prohibition against 

restrictive covenants and will uphold 

restrictive covenants to the extent that: 1) 

the restriction is fair and reasonable and; 

2) protects a legitimate business interest. In 

determining what constitutes a legitimate 

business interest, courts usually identify 

trade secrets, confidential proprietary 

information, goodwill and special training 

as protectable property of the business. 

With these protectable interests in mind, 

it becomes essential for the employer to 

identify how to protect each interest and 

specifically tailor the agreement to meet 

its specific needs. Stated another way, 

there is no “one size fits all” restrictive 

covenant. Business owners and employees 

must narrow their proposed agreements 

to match their specific needs. Doing so 

requires an understanding of the various 

types of agreements that are classified as 

follows: 

Non-Competition Agreements: A Non- 

Competition Agreement prohibits a former 

employee from engaging in an employment 

or ownership affiliation with a competing 

separate entity or group. 

Non-Solicitation Agreements: These 

agreements protect against employees who 

solicit current and or former customers. 

Non-Disclosure Agreements: These 

agreements prohibit the employee from 

utilising and or disclosing trade secrets and 

confidential information belonging to the 

employer. 

Non-Poaching Agreements: Non-Poaching 

Agreements are also commonly referred 

to as “anti-raiding” covenants and bar 




employees from hiring away employees to 

interests. Drafters of restrictive covenants 

as opposed to an unreasonable restraint on 

the longer the restrictive period will be 

join a new entity. 

should take great care in avoiding the 

trade. Through careful craftsmanship of a 

found to be reasonable. By examining the 

Given the various types of restrictions 

available to business owners, it is critical 

at the outset for the drafter to identify, 

with particularity, what specific business 

interests the company seeks to protect. 

After identifying the company’s needs, 

the framework of the agreement may be 

constructed in a manner that avoids the 

common pitfalls that have a detrimental 

effect upon the enforcement of restrictive 

covenants. Aside from these agreements, 

one should be mindful of the separate 

common-law duty of loyalty in many 

jurisdictions which prohibits employees 

from acting in a manner that is contrary to 

the best interests of the employer during 

the employment relationship. 

Effective enforcement 

of restrictive covenants 

begins with the drafting 

of an effectiveagreement – 

what every business owner 

should know: 

When drafting a restrictive covenant, the 

practitioner must always be mindful of 

the notion that courts in all jurisdictions 

historically characterise restrictive 

covenants as a restraint upon trade. 

Because of the judiciary’s conceptual 

concerns over the restraints presented in 

this setting, the drafter must be especially 

mindful of the fact that the agreement 

must be precise in its scope and more 

importantly, should only go as far as 

necessary to protect specific business 

common mistake of creating a covenant 

that will not stand judicial scrutiny on 

account of the overbroad nature of the 

restrictions placed upon the departing 

owner or employee. A hallmark of an 

effective agreement achieves a delicate 

balance between the protection of the 

business’ legitimate interests and fairness 

to the departing individual(s). 

Avoid Broad Geographic 

Restrictions At All Costs 

One of the most critical errors in the 

process of drafting a restrictive covenant 

occurs when a party attempts to inject an 

overly protective limitation on the area in 

which the departing party may operate 

a business. A restrictive covenant must 

be reasonable in its geographic area. 

Generally, this limitation is defined as the 

area where the existing company does 

business. Depending upon the nature of the 

specific business at issue, the geographic 

areas often vary and are best described as 

economies of scale. While there is no brightline 

rule per se, it is generally accepted 

that geographic restrictions contained in 

restrictive covenants can restrict an area 

as small as a few miles as in the case of 

a “mom and pop” business, or can span 

the continent as in the case of a large 

corporation. Because of the uncertainty 

attached to geographic limitations, recent 

strategies in drafting restrictive covenants 

often de-emphasise a detailed geographic 

restriction in favour of protecting 

confidential information and or trade 

secrets. By focusing on the information, not 

the location of the business, the covenant is 

more likely to be found to be a reasonable 

protection of a legitimate business interest 

targeted and precise geographic restriction, 

or alternatively focusing on confidential 

information, (not location), the restrictive 

covenant is more likely to withstand any 

challenge, and will likely be enforceable. 

Avoid Lengthy Periods 

of Restriction 

Because excessive restrictive periods will 

not be enforceable, the drafting of an 

enforceable restrictive covenant requires 

the infusion of a reasonable time period 

controlling the former employee or co- 

adventurer’ conduct toward existing or 

former customers and the handling of 

confidential information. Typically, these 

the types of restrictions: 1) aim to control 

the length of time that an individual must 

refrain from soliciting the employer’s clients 

or customers and; 2) prohibit the use of 

business’ confidential information. With 

regard to the former, the duration and the 

nature of the customer relationship are 

critical factors in determining whether the 

prohibition from soliciting customers is 

reasonable. In these instances, the duration 

of the restriction is generally reasonable 

only if it is no longer that necessary for the 

former employer to put a new employee to 

work as a means to demonstrate his or her 

skill-set in satisfying the former employer’s 

clients and customers. 

In the case of confidential information, 

the focus shifts to the type of information 

being protected, not geography. A key 

consideration in this regard is the length of 

time the information remains confidential 

before it becomes part of the public domain 

or stale and unusable. The longer the time 

the information retains its confidentiality, 

nature of the relationship between the 

customer or client and the identification 

of the of information being protected, the 

period of the restriction set forth in the 

agreement can be gauged appropriately 

which will protect the terms of the 

agreement from collateral attack. 

Identify Whether the 

Agreement Contains Proper 

Consideration 

Because it is a contract, a restrictive 

covenant must have adequate 

consideration (a bargained for exchange) 

for the covenants to be enforceable. The 

most common form of consideration is 

contained in a services agreement, such 

as an employment agreement where 

the owner receives services from the 

employee in exchange for salary. In a 

variety of states, the act of requiring a new 

employee to sign a restrictive covenant 

at the commencement of employment 

as well as conditioning an employee’s 

continued employment upon execution 

of the agreement are considered valid 

consideration. However, the concept 

of employment as consideration is not 

universally accepted in each state and it 

is imperative for the practitioner to be 

aware of the jurisdiction’s treatment of 

employment as adequate consideration. 

For example, New Jersey courts hold that 

employment is valid consideration in a 

restrictive covenant, whereas Pennsylvania 

courts hold that mere continued 

employment is not sufficient consideration 

and will not enforce a restrictive covenant 

absent some additional consideration. 

See, A.T. Hudson, 216 N.J. Super. at 431-32 

(non-compete signed at hire supported by 




adequate consideration) But See, Socko v. 

MidAtlantic Systems of CPA, 105 A.3d 659 

(2014) (holding that continued employment 

is not sufficient consideration to support 

a restrictive covenant under Pennsylvania 

law.) Because of these conflicts of law, 

drafters must be keenly aware of their 

state’s handling of employment as 

consideration to avoid challenge to the 

sufficiency of the entire agreement. 

Be Cautious With Choice of 

Law and Forum Selection 

Provisions 

Choice of law and forum selection clauses 

can present significant risks in the context 

of restrictive covenants because not every 

jurisdiction treats restrictive covenants in 

the same manner. There exists a strong 

possibility that selection of a choice 

of law clause could have unintended 

consequences which prove fatal to the 

enforceability of the agreement. For 

these reasons, parties drafting these 

types of agreements must exercise due 

diligence and familiarize themselves 

with the procedural and substantive law 

of the foreign jurisdiction. For example, 

restrictive covenants are void as a matter 

of law in California except for a small 

number of limited circumstances expressly 

potentially devastating ramifications upon 

the enforceability of the agreement. 

The Importance of 

Confidentiality Agreements 

As mentioned above, a confidentiality 

agreement protecting the company’s 

confidential information is independent of 

the tighter restrictions of non-competes. 

For this reason, it is worthwhile to explore 

the utility in drafting a confidentiality 

agreement in tandem with a restrictive 

covenant insofar as the confidentiality 

provisions may withstand scrutiny when a 

restrictive covenant fails. 

Strategies for enforcing 

your agreement 

Armed with an agreement that adheres to 

the foregoing characteristics and honed 

to the particular laws of the relevant 

jurisdiction; a party seeking to enforce the 

agreement by obtaining a remedy for a 

breach of the agreement can confidently 

pursue an action at law and equity in 

several ways: 

The Injunction 

Money Damages 

Monetary damages may be recovered 

against a former employee who violates a 

valid and enforceable restrictive covenant 

as a means to place the injured party in 

the position it would have been in but for 

the action of the party who breached the 

agreement. In determining the amount 

of damages that may be recovered, 

courts will typically review what the 

expectations of the parties were at the 

time of the agreement and will analyse the 

foreseeability of the harm caused by the 

breaching party in setting the amount of 

monetary damages. 

Having an agreement that comports with 

the above principals will 

The Blue Pencil Doctrine: 

In many jurisdictions, even where = certain 

portions of the parties’ agreement may 

be found to be unreasonable, all may not 

be lost. Restrictive covenants containing 

certain unenforceable provisions may still 

be enforced to the extent reasonable under 

the circumstances. In various jurisdictions 

known as “Blue Pencil States”, the courts 

have broad equitable power to grant partial 

enforcement of a restrictive covenant 

both by removing offensive terms and by 

adding limiting language in order to grant 

an employer only that protection which the 

court deems necessary; to protect what 

the court’s deem to be legitimate business 

interests. This principle allows courts to 

redraft an unreasonable restrictive covenant 

to make it reasonable and, therefore, make 

it enforceable based on the equities in the 

case. The doctrine, known as the “Blue 

Pencil Doctrine” is not universal and must be 

analysed on a state by state basis. 

While the restrictive covenant is not the 

perfect elixir on all occasions and in all 

locations, if properly utilised, it can be 

the best line of defence against threats 

to the very existence of a business. 

However, because of the various state by 

state idiosyncrasies associated with laws 

governing the enforceability of restrictive 

covenants, it is fundamentally important 

to familiarise one’s self with the particular 

state law in the jurisdiction at issue and 

not simply assume that the “cookie cutter” 

restrictive covenant will suffice. 

authorized by statute, e.g., where owner 

is selling goodwill of business. California 

Business and Professions Code § 16600. 

Similarly, not all states honor forum 

selection clauses, effectively rendering the 

parties’ intent moot. To avoid the latent 

dangers associated with these provisions, 

it is extremely important for the parties 

to familiarize themselves with relevant 

state law in both choice of law and forum 

selection settings. Otherwise, these 

seemingly innocuous provisions could have 

In a majority of jurisdictions, injunctive relief 

fashioned to prevent further violations 

of a restrictive covenant is available 

under specific circumstances where the 

relief is necessary to prevent irreparable 

harm, meaning that the damage cannot 

be remedied by monetary damages. 

For example, acts such as disclosing 

confidential trade secrets and interfering 

with customer relationships have been 

recognised as conduct that sufficiently rises 

to the level of irreparable harm in various 

state and federal courts. 




Wayne J. Positan, Esq 

Managing Member at Lum Drasco & Positan, LLC 

T: +1 973 403 9000 

Email: wpositan@lumlaw.com 

Wayne J. Positan is the Managing Member of Lum Drasco & Positan, LLC and is an experienced and recognized attorney 

in the areas of labor and employment law (management/defense litigation); commercial litigation, appellate practice and 

alternative dispute resolution matters; perennially listed in Best Lawyers in America, New Jersey Super Lawyers Top 100 (Top 

10 2007-2010, #2 in 2007, 2009), Chambers USA’s “America’s Leading Business Lawyers” (Top Tier Employment Defense 

Attorneys since its inception), New York Magazine Best Lawyers in the Metropolitan New York Area, NJ Monthly Magazine “Top 

Lawyers”, International Who’s Who of Management Labour and Employment Lawyers, Who’s Who in American Law; Who’s 

Who in America; and Who’s Who in Mediation and Arbitration. He is a recipient of the Essex County Bar Association Saiber 

Professional Achievement Award and its “Stars of Essex” Award. He received Professional Lawyer of the Year Awards from the 

New Jersey Commission on Professionalism, nominated by ECBA in 2002 and the NJSBA in 2009. He is AVVO 10/10 Rated and 

Martindale-Hubbell AV Pre-Eminent Rated. He has been Managing Director of Lum, Drasco & Positan LLC since 1990, and 

Chair of its Labor, Employment and Government Group since 1984. The Group has achieved Metropolitan Tier One Ranking 

by Best Lawyers/Best Law Firms/US News and World Report (2014, 2015) for Labor and Employment Litigation, Labor Law- 

Management, and Employment Law-Management. He is a Fellow of the International Academy of Trial Lawyers, The College 

of Labor and Employment Lawyers, Litigation Counsel of America, the New Jersey Academy of Management Lawyers, the 

American Bar Foundation, a member of the Executive Committee of the NJ Fellows of the American Bar, and serves as Co- 

Chair of Fellows of the ABA Section of Litigation. He is a New Jersey Court Approved Mediator, Federal Court Mediator, and 

Essex County Chancery Mediator. 

Evaluating and Managing Environmental 

Risk in Real Estate and M&A Transactions 

in the United States 

Rodd Bender 

Daniel M. Santarsiero, Esq 

Member at Lum Drasco & Positan, LLC 

T: +1 973 403 9000 

Email: dsantarsiero@lumlaw.com 

Daniel M. Santarsiero is a former judicial law clerk to the Honorable John J. Coyle, Jr., J.S.C., Superior Court of New Jersey, 

Civil Division, Warren County Vicinage. He is a member of The American Bar Association Section of Litigation; the New York 

State Bar Association; The New York County Lawyers Association; the New Jersey State Bar Association Civil Practice, and 

Young Lawyers Sections; and the Essex County Bar Association, Litigation and Young Lawyers Sections. Mr. Santarsiero is 

admitted to practice in New Jersey and New York. 

The complex environmental regulatory regime in the 

United States can raise a variety of legal and financial 

risks in real estate or corporate acquisitions. Accordingly, 

lawyers should understand the nature of potential 

environmental liabilities for different transactions, the 

relevant facts, and how to structure environmental due 

diligence tools to provide clients meaningful advice. 




Tailoring Environmental 

Due Diligence to the 

Transaction 

Environmental due diligence is not a “onesize-fits-all” 

activity. The type of transaction, 

and the client’s objectives, often dictate the 

appropriate scope of due diligence. 

Transactions take a variety of forms, such 

as the purchase or lease of real property, 

acquisition of the assets of operating 

businesses or facilities, stock acquisitions, 

corporate mergers and divestitures. In real 

estate acquisitions, primary environmental 

due diligence concerns include identifying 

potential contamination, and either 

protecting against cleanup liability or 

evaluating remediation methods. These 

transactions usually rely on Phase 1 and 2 

environmental site assessments to identify 

contamination, help establish landowner 

liability protections, and assess cleanup 

strategies. Analyzing other environmental 

regulatory constraints on site development 

may also be prudent. 

Conversely, acquisitions of operating 

businesses or facilities, or corporate 

transactions such as stock deals and 

mergers, raise additional environmental 

due diligence concerns. These include 

evaluating the target company or facility’s 

regulatory compliance status, the 

availability of permits to conduct and grow 

the business, and capital and operating 

costs needed to achieve compliance, 

implement permit conditions, and satisfy 

other environmental requirements. 

For these deals, evaluating regulatory 

compliance and permitting issues may 

be equally, if not more, important than 

contamination concerns. 

Superfund Liability 

and Defenses 

In the U.S., fear of liability for contaminated 

property is largely driven by the 

federal Comprehensive Environmental 

Response, Compensation and Liability 

Act of 1980 (“CERCLA” or “Superfund”). 

CERCLA establishes four categories of 

parties liable for the release or threat of 

release of hazardous substances into the 

environment, including current facility 

owners or operators, former owners or 

operators at the time of disposal, those who 

arrange for hazardous substance disposal 

at a facility, and those who transport 

hazardous substances to a facility for 

disposal. Superfund liability can be severe, 

as it is retroactive, strict (i.e., regardless of 

fault), and joint and several. 

Moreover, CERCLA offers only very limited 

defenses for landowners. The most useful 

of these is the bona fide prospective 

purchaser (“BFPP”) defense. This provision 

allows prospective purchasers to acquire 

facilities that the purchaser knows to be 

contaminated while avoiding Superfund 

liability. To establish the defense, the 

purchaser must satisfy several conditions. 

Pre-acquisition conditions include taking 

title to the facility after January 11, 2002 

and after all disposal occurred; making “all 

appropriate inquiry” into the former uses 

and ownership of the facility consistent 

with good commercial and customary 

standards; and not being a potentially liable 

party or affiliated with such a party through 

certain relationships. The purchaser must 

also comply with several post-acquisition 

requirements, including making legally 

required notices; taking reasonable steps 

to stop continuing releases, prevent future 

releases, and limit exposure; cooperating 

with persons performing remediation; 

complying with any land use restrictions 

or institutional controls; and responding 

to governmental information requests. 

(Tenants may also utilize the BFPP defense 

in certain situations.) 

Although the BFPP defense provides a 

valuable tool to protect against Superfund 

liability when obtaining contaminated 

property, the defense does not protect 

against potential liability under other 

federal or state environmental statutes. It 

is also not a defense to claims under other 

liability schemes such as tort, occupational 

safety and health laws, or breach of 

contract. 

All Appropriate Inquiry 

(“AAI”) – Phase 1 

Environmental Site 

Assessments 

While all of the statutory requirements 

must be satisfied to support the BFPP 

defense, the primary objective of 

environmental due diligence in the U.S. 

involves performing AAI. In 2005, the 

U.S. Environmental Protection Agency 

(“EPA”) published a rule, 40 C.F.R. Part 312, 

establishing the regulatory requirements 

for AAI. In coordination with EPA, the 

standard-setting organization ASTM 

International revised its existing standard 

for Phase 1 environmental site assessments 

(“ESAs”) to comport with the Rule. In 

practice, purchasers seeking to perform 

AAI do so by following the ASTM Phase 1 

standard (currently E1527-13). 

Phase 1 ESAs are non-invasive property 

investigations that seek to identify and 

document recognized environmental 

conditions (“RECs”) indicating a release or 

threat of release of a CERCLA hazardous 

substance (or petroleum, which is not 

regulated by CERCLA). Unlike Phase 2 

investigations, Phase 1 ESAs do not include 

sampling and analysis of environmental 

media. In addition to establishing one of 

the CERCLA BFPP defense conditions, a 

Phase 1 ESA (perhaps combined with Phase 

2 testing) may also provide insight into 

possible common law and toxic tort risks 

posed by acquiring property, should the 

investigations identify contamination that 

could impact residential neighborhoods, 

potable water sources, or other sensitive 

receptors. 

Most AAI tasks must be undertaken by 

an “environmental professional” meeting 

certain qualifications, or someone under 

his or her direct supervision. Basic Phase 

2 elements include interviews with the 

current site owner, any occupiers likely to 

handle hazardous substances, state or local 

government officials, and potentially others; 

review of historical information sources 

(e.g., aerial photographs, fire insurance 

maps, land title records, and building 

permits) dating back to the earlier of 1940 

or the property’s earliest developed use; 

review of federal, state and local regulatory 

agency records involving the property and 

other sites within defined search radii; 

and visual inspection of the property and 

of adjoining properties. In addition, the 

standard calls for certain information 

from the user of the Phase 1 (typically the 

prospective purchaser), such as a review of 

title and judicial records for environmental 

cleanup liens and activity and use 

limitations; any specialized knowledge 

the user may have of the property and 

surrounding area; and whether the 

purchase price reflects any discount 




for contamination. The environmental 

professional must document the evaluation 

in a written report containing, among other 

things, the professional’s opinion as to 

whether conditions indicative of a release 

or threatened release exist, and a list of any 

data gaps and their significance. 

Although Phase 1 ESAs have become 

extremely commonplace in environmental 

due diligence, a few important points 

are worth noting. First, to satisfy the AAI 

rule a Phase 1 must be completed no 

sooner than one year prior to property 

acquisition, and certain elements must be 

completed or updated within six months 

before acquisition. Also, remember that 

Phase 1 ESAs are designed to identify 

potential contamination, and do not 

evaluate other environmental issues 

(e.g., the presence of asbestos or leadbased 

paint in buildings, mold damage, 

or wetlands and other natural constraints 

on site development) unless expressly 

added as “non-scope” items. In addition, 

given increasing scientific knowledge 

and regulatory concern regarding the 

potential for certain contaminants (such 

as those associated with petroleum and 

chlorinated solvent releases) to volatilize 

and enter occupied structures in vapor 

form, a 2013 update to the ASTM Phase 1 

standard now requires evaluating the vapor 

intrusion pathway as part of identifying 

RECs. Finally, as mentioned above, the BFPP 

defense requires more than satisfying AAI; 

the purchaser must meet several postacquisition 

conditions as well. 

Phase 2 ESAs – Evaluating 

Contamination and other 

Due Diligence Concerns 

When a Phase 1 ESA identifies one or 

more RECs at a property, the next step 

often involves performing invasive “Phase 

2” testing to confirm the presence and 

extent of any contamination. Information 

from Phase 2 ESAs can serve several due 

diligence purposes, including deciding 

whether to proceed with or terminate the 

transaction; identifying post-acquisition 

tasks to satisfy the BFPP “reasonable 

steps” condition; allocating environmental 

responsibility through contract provisions 

such as purchase price adjustments, 

indemnities, cleanup obligations, and 

environmental insurance; developing 

remediation strategies and cost estimates 

to obtain liability protection through federal 

or state voluntary “brownfield” cleanup 

programs; and identifying natural or other 

constraints to site development. 

Given their varying objectives, Phase 

2 ESAs, unlike Phase 1 investigations, 

typically do not follow a single protocol. 

A Phase 2 investigation may involve one 

or more of several elements, such as 

collecting samples of soil, groundwater, 

soil gas, indoor air, or other environmental 

media for laboratory analysis; searching 

for underground tanks, vaults, and other 

subsurface structures using geophysical 

techniques; evaluating the presence and 

extent of environmental conditions inside 

structures such as asbestos-containing 

materials, lead-based paint, mold, and 

radon; and identifying potential site 

development constraints such as wetlands, 

endangered species, and cultural or historic 

resources. 

Phase 1 and 2 ESA 

Practical Considerations 

To protect their interests, both parties in a 

real estate or corporate transaction should 

negotiate access provisions governing the 

performance of Phase 1 and 2 ESAs during 

due diligence. These provisions should 

cover issues including, at a minimum, 

submission of a work plan for owner 

approval; permissible entry times, pre-entry 

notice requirements, and non-interference 

with ongoing site operations; restoration 

of any property damage; compliance with 

applicable law and proper disposal of any 

investigation-derived waste; provision of 

split samples, test results, and reports 

to the site owner; and insurance and 

indemnification related to liability arising 

from the investigations. 

Access provisions should also address 

confidentiality of environmental due 

diligence results. Generally, owners require 

buyers to keep due diligence data and 

reports confidential, but buyers should seek 

certain exceptions including the ability to 

share results with lenders, counsel, and 

other due diligence team members (who 

may also be required to keep the results 

confidential), and to make disclosures if 

required by law (in which case the owner 

will want to control the reporting process). 

Aside from access and confidentiality 

issues, parties planning to perform Phase 1 

and 2 ESAs should keep a few other points 

in mind. First, although Phase 1 and 2 ESAs 

can be performed concurrently, it is better 

to use Phase 1 results to develop the Phase 

2 scope. Also, take care when identifying 

and retaining an environmental consultant 

for the due diligence team. Phase 1 and 

2 investigations can vary significantly 

in scope and extent, and therefore 

potential consultants and firms should be 

evaluated for the necessary experience 

and skills appropriate to the type of 

site and anticipated tasks. In addition, 

carefully review and negotiate consultant 

proposals regarding cost structure, markup 

of subcontractor and other expenses, 

anticipated timing for deliverables, and 

“boilerplate” terms and conditions such as 

insurance coverages, indemnity provisions, 

limits on liability, and confidentiality. 

Evaluating Regulatory 

Compliance in Acquiring 

Ongoing Operations 

In addition to assessing potential 

site contamination and development 

constraints, acquisition of an active 

facility or business requires evaluating 

the target’s compliance status with 

environmental regulatory requirements. 

These evaluations typically include issues 

such as whether the business or facility 

holds all permits and other approvals 

necessary to continue operations; whether 

these authorizations can or will need to be 

transferred as part of the transaction; and 

whether the business or facility currently 

has any significant noncompliance, or a 

history of noncompliance, with regulatory 

requirements or permit conditions (as 

evidenced by notices of violation, penalty 

assessments, administrative or judicial 

orders, consent decrees, etc.). 

Depending on the type of operation, 

regulatory programs to evaluate for 

compliance issues may include, among 

others, air pollution control, wastewater 

and stormwater discharges, solid and 

hazardous waste management, emergency 




planning and community right-to-know 

reporting, management of storage tanks, 

use of pesticides, and maintenance and 

removal of asbestos-containing building 

materials. Information on a business or 

facility’s compliance status may be found 

by reviewing facility and agency files, 

interviewing the target’s environmental 

health and safety personnel, and searching 

agency on-line databases. In addition to 

identifying regulatory noncompliance 

issues, the due diligence effort should also 

attempt to estimate the potential costs of 

bringing the business or facility back into 

compliance. 

Wrapping Up 

Environmental due diligence in real estate 

and corporate transactions can be a 

complex and time-consuming task. To make 

this process as efficient and productive as 

possible, tailor the scope of the diligence 

effort to the type of transaction, the client’s 

objectives, and the time and resources 

available to complete the process before 

closing. Assembling a qualified and 

experienced team of technical and legal 

professionals to lead the diligence effort 

can help ensure that the client goes into 

a transaction with eyes wide open to 

potential environmental pitfalls. 

Counselling Early Stage Companies: 

Advance Preparation for The Exit 1 

Thomas K. Cox and Robert J. Schaul 

Rodd Bender 

Partner at Manko Gold Katcher Fox LLP 

T: +1 484 430 2317 

Email: rbender@mankogold.com 

Rodd has concentrated on transactional and compliance counseling since joining Manko Gold Katcher Fox LLP, an 

environmental and energy law practice, in 1997. He has extensive experience structuring environmental due diligence for 

real estate and business transactions, negotiating environmental provisions in contract documents, and advising clients 

on satisfying state and federal cleanup programs and property transfer laws consistent with business objectives. Rodd has 

also counseled companies on complex regulatory programs such as hazardous waste management, release and right-toknow 

reporting, storage tank operations and corrective action, spill prevention and countermeasures, and polychlorinated 

biphenyl use and cleanups. His work has included providing legal oversight for regulatory compliance audits, and 

representing clients to resolve government enforcement actions. 

Representing early stage, high-growth companies often 

involves supporting a team of entrepreneurs to take a 

business from an idea, through commercial launch and 

market penetration, to a successful exit, often through 

an acquisition by a strategic or financial purchaser. 

The speed and intensity of the client’s activity can be 

tremendous. Under the pressure of achieving critical 

product development or revenue milestones – often 

driven by the client company’s investors – management 

will sometimes forego certain basic contracting, human 

resources andcapitalisation management measures. 

1 Copyright © 2016 McCarthy Duffy LLP. All rights reserved. 




Unfortunately, these short cuts will surface during the 

exit transaction, where the acquirer’s due diligence on the 

target company will spot these shortcomings in order to 

identify potential risks as well as opportunities to revalue 

the target company’s assets and business and reduce the 

purchase price. The attorney representing the early stage 

companycanstreamlinetheexittransactionandminimise 

adverse due diligence discoveries by helping the client 

institute the following four relatively simple disciplines 

at the company’s outset (or at least at the outset of the 

counsel’s engagement), well in advance of any merger and 

acquisition considerations. 

a. Protect and Preserve Company 

Intellectual Property. For many early 

stage companies, intellectual property 

assets can represent the core of the 

company’s value at exit. Those assets, 

of course, are generated by employees 

and contractors working on behalf 

of the company. In the course of the 

company’s history, employees and 

independent contractors come and go. 

However, sophisticated acquirers will 

often probe the target company’s files 

for potential intellectual property “leaks” 

or gaps – situations where employee or 

contractor inventions or developments 

may not clearly belong to the target 

company. 

The simple but often neglected solution to 

this due diligence red flag is drafting and 

religiously using a standard employment 

agreement or independent contractor/ 

consultancy agreement with all new 

employees and service providers. These 

standard agreements should contain the 

following basic covenants: 

i. Confidentiality: Provisions prohibiting an 

ii. 

employee or independent contractor 

from disclosing or otherwise using the 

company’s confidential information 

both during the relationship and for 

multiple years beyond the term of the 

agreement. 

Invention Assignment: Provisions 

indicating that all “inventions, 

original works of authorship, trade 

secrets, concepts, ideas, discoveries, 

developments, improvements, 

combinations, methods, designs, 

trademarks, trade names, software, 

data, mask works, and know-how, 

whether or not patentable or registrable 

under copyright, trademark or 

similar laws” developed during the 

term of employment or contractor 

service belong to the company. This 

covenant should similarly include an 

acknowledgement that all copyrightable 

material is a “work made for hire.” Note 

that company counsel should confirm 

the impact of the applicable state laws 

on these covenants. For example, the 

“work made for hire” clause should be 

excluded from independent contractor/ 

consultancy agreements governed 

by California law, as California law 

dictates that individuals subject to 

this type of covenant in a services 

agreement may be deemed employees 

under the California Labour Code . 

Avoid the temptation to limit company 

ownership of employee or contractor 

developments to only those generated 

“on company time” or “using company 

resources.” This limitation will only 

act to invite ownership ambiguity – 

an unnecessary impediment in the 

acquisition due diligence process. 

iii. Pre-existing Intellectual Property 

Disclosure and Licenses: Provisions 

obligating employees or contractors 

utilising pre-existing intellectual 

property in their work for the company 

to (i) clearly identify the pre-existing IP 

and (ii) grant the company a perpetual, 

transferrable license to use, in the 

course of its business, any relevant preexisting 

IP included in works created 

by the employee or contractor for the 

company. 

b. Facilitate Shareholder Decisions. 

The decision to exit the business will 

naturally require the approval of 

both the Board of Directors and the 

shareholders of the company. Minority 

shareholders who are no longer 

associated with the business, or who 

have a different perspective on the 

company’s direction and objectives, can 

seek appraisal rights, demand certain 

concessions, or take other steps to 

block or disrupt the transaction. While 

reverse merger structures can be used 

to minimise the disruption caused by 

dissenting minority shareholders, these 

structures increase both transaction 

costs and the potential liability to the 

target company. 

The pre-emptive solution here is a basic 

shareholder agreement, prepared and 

negotiated when the early stage company’s 

shareholder base is relative small and 

cohesive. The shareholder agreement 

should include the following elements: 

i. Dragalong Rights. Terms requiring 

minority shareholders to support and 

vote with the majority on fundamental 

company decisions, including a vote 

to sell the company and/or waive of 

appraisal rights. 

ii. Buy/Sell Arrangements. Structures that 

ensure that the equity interests of 

disaffiliating shareholders are (or can 

be) repurchased by the company or the 

remaining shareholders; 

iii. Joinder Provisions. Requirements 

that all new shareholders (including 

those acquiring their equity interests 

through the conversion of debt) 

become signatories to the shareholder 

agreement. 

c. Simplify Contract Assignment. A 

major factor in the acquired business’ 

valuation is the status of its contractual 

relationships with customers, vendors, 

strategic partners and other third 

parties, and how easily an acquirer 

can continue to take advantage 

of those contracts following the 

acquisition. Contracts that include 




non-assignability clauses – provisions 

iii. Reasonableness Standard. As a fallback, 

As with the other sets of issues described 

iii. Automate the Effect of Certain Equity 

requiring counterparty’s consent prior 

incorporate a requirement that the 

in this article, the preventive solutions 

Incentive Plan Triggers. For example, 

to assignment – can greatly obstruct this 

counterparty’s consent to a contract 

are straightforward and, in most cases, 

if a company’s restricted stock plan 

transition, particularly if the transaction 

assignment may not be “unreasonably 

inexpensive: 

provides for the buyback of unvested 

is structured as an asset sale (vs. a stock 

sale or merger). At best, these clauses 

can delay a closing while the target 

company pursues the counterparty’s 

consent, who may see an opportunity 

to extract a contractual concession 

from a vulnerable target. At worst, the 

target company’s inability to obtain a 

counterparty’s consent may result in the 

termination or rejection of the contract 

by the acquirer, which can reduce the 

target company’s valuation. 

withheld.” While this does not eliminate 

the need to secure the counterparty’s 

consent, it will impose a baseline legal 

standard which may facilitate the 

assignment negotiation. 

d. Maintain Good Corporate Capitalisation 

Hygiene. While cases of mystery 

shareholders appearing at the closing 

of an acquisition transaction are rare, 

confusion over the accuracy of the 

capital structure of the target company, 

as well as the identification of non- 

i. Comply With Applicable Federal and State 

Securities Laws in Securities Offerings: 

Most states and the SEC have numerous 

exemptions allowing early stage 

companies to issue securities without 

the need for a formal registration. 

The exemption process, however, 

often requires the issuing company 

to file a registration exemption with 

the appropriate securities regulator. 

Failing to file a registration exemption 

may not require the company 

shares if the employee terminates, 

the company’s repurchase of those 

unvested shares should occur 

automatically. Relying on the affirmative 

action of the company (and potentially 

the memory, or filing system, of the 

company’s executives) can result in 

inconsistent equity incentive plan 

operation and unintended equity 

ownership. 

iv. Create Pro Forma Models to Reflect the 

Terms of Convertible Securities. Going 

Since non-assignability clauses are often a 

compliance with securities laws, can 

to register its shares, but it may 

through the exercise of translating 

standard part of the “boilerplate” sections 

materially disrupt an exit transaction. 

prevent the company from utilising a 

the terms of convertible securities – 

of many agreements, and since solving 

Common causes of capitalisation 

“safehabour ” in future transactions, 

particularly where different securities 

the anti-assignment clause problem once 

problems most often relate to (i) failing 

including an exit transaction with 

are issued at different times to multiple 

the contract has been signed is difficult, if 

to either register or file a registration 

another private company. Filing the 

parties – will help pressure test the 

not impossible, company counsel should 

exemption with the Securities and 

necessary registration exemption forms 

conversion terms and validate that they 

help the client implement the following 

Exchange Commission and/or state 

will not only help ensure securities 

function as intended. 

prophylactic measures at the outset of the 

negotiations: 

i. Removal: Generally, the absence of a 

non-assignability clause in a contract 

allows both parties to assign the 

contract freely. 

ii. Change of Control Carve-Out: An 

exception that eliminates the need 

for the counterparty’s consent when 

the contract is assigned to a successor 

organization in the event of a merger, 

spin-off, or other reorganization, or 

any sale to any entity which buys all or 

substantially all of the assigning party’s 

assets, equity interests or business 

can eliminate the issue in an exit 

transaction. 

authorities in connection with the 

sale of private securities issued by 

the target company to early investors, 

which are usually friends and family, (ii) 

issues involving the company’s equity 

incentive plan, including unsigned 

documents, unclear vesting schedules, 

and uncertain stock repurchase 

provisions and exercise; and (iii) 

overlapping and conflicting convertible 

securities, including securities with 

conflicting conversion terms or circular 

conversion formulas. Many buyers will 

avoid assuming any risks associated 

with an ambiguous capital structure or 

improperly issued shares, preferring 

instead to let the target company 

identify and resolve discrepancies 

before closing. 

ii. 

law compliance; it will also provide 

assurance to a potential acquirer that 

these registration exemptions will 

remain in effect in future transactions. 

Invest in a Commercial Cap Table 

Management Software. There are a 

number of quality, low cost software 

solutions on the market that can help 

track and automate company cap tables 

and “date-stamp” capital structure 

changes, in order to allow for a simple 

analysis of capitalisation changes and 

confirmation of issuances. 

The foregoing measures, designed to 

minimise exit disruption, are neither 

difficult nor time-consuming. In fact, the 

most difficult task is often convincing 

the client company to expend the time, 

effort and resources to implement these 

disciplines, even years in advance of 

a potential exit. As noted above, it is 

ultimately time and energy well spent. 




Robert Schaul 

Associate Attorney at McCarthy Duffy LLP 

Recreational Marijuana’s Economic Advantages 

Anne van Leynseele 

T: +1 312 726 6395 

Email: RSchaul@mccarthyduffy.com 

Robert Schaul is an associate attorney at McCarthy Duffy LLP. His practice primarily focuses on corporate, private investment 

and financing matters, including representing start-ups, private equity investors and domestic and international corporations 

with organizational and capital formation and structure, corporate governance, private placement offerings, mergers, stock 

and asset acquisitions and dispositions, commercial and private financings and compliance and administrative issues. 

Thomas K. Cox 

Partner at McCarthy Duffy LLP 

T: +1 312 726 0355 

Email: tcox@mccarthyduffy.com 

Leveraging his experience as a Managing Director and Principal of three private investment firms and as an executive 

with two venture and private equity-backed companies, Tom brings a unique perspective to his practice, which focuses 

on serving the needs of privately-held businesses, their executives, and their investors. In particular, he works closely with 

emerging and growth-oriented businesses in initial organizational, structural, and shareholder activities and board matters, 

equity incentive plan development and implementation, general corporate, commercial, and real estate activities, supplier 

relationships, and general regulatory compliance matters, particularly in the healthcare industry. He regularly supports the 

legal and business needs of both early stage and middle market firms in connection with equity and debt financings, joint 

ventures, mergers, acquisitions, and divestitures. Representative clients range from start-ups licensing novel technologies 

from universities to multi-national, private equity-backed businesses. Tom has led or participated in over 30 venture and 

private equity investments as a principal investor over his career, and he continues to serve as a member of the Board of 

Directors of several public and private companies. 

As Seattle City Attorney Pete Holmes has famously touted, 

marijuana prohibition and the war on drugs has failed. 1 

Evidence does not suggest that the War on Drugs reduced 

drug-use rates or drug dependency. 2 At any given time, 

there are at least 137,000 men or women locked in prison 

or held in jail on drug possession charges, according to 

the ACLU and Human Rights Watch. 3 Additionally, the 

ACLU and Human Rights Watch report, citing FBI data, 

1 Pete Holmes has been recorded claiming that the war on drugs has failed, and that Seattle and Washington generally 

has shown that legalized marijuana is a better way, both at Hempfest 2011, and more recently at the King County Bar 

Association new attorney Swearing-in ceremony in 2016. 

2 Tess Borden of Human Rights Watch: Interview 

3 http://www.nola.com/crime/index.ssf/2016/10/police_arrest_more_people_for.html 




suggeststhatpoliceandlocallawenforcementnationwide 

make more arrests for marijuana possession alone than for 

all violent crimes combined. 4 The local evidence suggests 

the same; in the first two years, law enforcement saw a 

decrease in work load anecdotally attributed to lack of 

those possession arrests, and now the Washington State 

courts are seeing the same. 

The Washington recreational marijuana 

market has now been in effect for three 

years, and while the law has changed 

rapidly during that time, the economic 

benefits have clearly proven themselves. 

As the Washington and Colorado markets 

expanded, being the first two states to 

legalize adult and recreational use of 

marijuana products, other states began to 

take notice of how lucrative the legalized 

marijuana market could be, as both 

Washington and Colorado generated nearly 

70 million dollars in tax revenue alone in 

each their first complete fiscal years. 5 It is 

clear that recreational marijuana turned 

the tide of the War on Drugs, and forced 

it to become an economic benefit that is 

becoming increasingly enticing to the rest 

of the nation. 

Washington State’s 

Weed Economy 

While Initiative 502 was voted for in 

November of 2012, the first Washington 

state producer and processor licenses 

4 https://www.hrw.org/report/2016/10/12/every-25-second 

s/human-toll-criminalizing-drug-use-united-states 

5 http://lcb.wa.gov/marj/dashboard; https://www.colorado.gov/revenue 

were not issued until March 5, 2014. 6 In the 

2014 fiscal year 7 , a total of 279 producer/ 

processor licenses were issued, and the 

Washington State Liquor and Cannabis 

Board (WSLCB) only generated 1.78 million 

dollars in total marijuana related income, 

which is impressive for how small the 

industry was, and for only 3 months of 

revenue generated during that fiscal year. 8 

The 2015 fiscal year, however, as the first 

complete fiscal year after legalization, 

showed real promise for the legalized 

marijuana industry: total shelf price 9 sales 

generated nearly $260 million dollars, and 

generated $64.63 million dollars in tax 

revenue alone, as well as $1.08 million in 

just licensing fees and other related costs 

while the state was operating at only a 25% 

excise tax. 

The 2016 fiscal year for Washington 

compounded on industry success, nearing 

$1 billion dollars of total shelf price sales, 

and created a total tax obligation of almost 

6 http://www.liq.wa.gov/publications/annual_report/2014-annual-report-final-web.pdf 

7 Please note that the WSLCB’s fiscal year runs from 

July 1 to June 30. 

8 http://www.liq.wa.gov/publications/annual_report/2014-annual-report-final-web.pdf 

9 The WLSCB considers shelf price as sales price and 

tax combined 

$186 million. 10 Much of this increased 

tax revenue can be attributed to the 

implementation of Senate Bill 5052 and 

House Bill 2136 in July of 2015, which, 

among other things, changed the state 

excise tax from 25% to 37% at the point of 

sale, and merged the less regulated medical 

marijuana market with the regulatory 

system established by I-502. 

As of October 12, 2016, the WSLCB 

has issued 172 producer licenses, 894 

producer/processor licenses, 131 processor 

licenses, and 445 retail licenses, which 

have combined to generate nearly $500 

million dollars of total sales in less than four 

months. 11 It stands to reason, then, that 

the Washington market will generate well 

more than $1 billion dollars in total sales, 

leaving the state with (if sales in Washington 

remain on this course for the rest of the 

year), with around $300 million dollars of 

tax revenue for this year alone. 12 

Washington is not the only state that has 

had incredible success with regulated 

marijuana. Colorado has seen similar sales 

numbers creeping on $1 billion dollars a 

year and generating around $70 million in 

tax revenue in 2015. With five states voting 

on recreational legalization and 4 voting 

on medicinal legalization this November, 

it is clear that the legalized marijuana 

market will be a multibillion dollar industry 

nationwide, and the lure of tax revenue 

in the hundreds of millions seems to be 

convincing even the most historically 

conservative states that legalization is not 

10 http://lcb.wa.gov/marj/dashboard 

11 http://lcb.wa.gov/marj/dashboard; accessed October 

14, 2016. 

12 http://lcb.wa.gov/marj/dashboard 

only valuable economically, but is a better 

system than prohibition. 13 

A Better Way 

With the plethora of tax money created 

by the legalization market, grander steps 

toward reducing youth access to drugs, 

education, and crime have occurred in 

the last three years than the strategies 

implemented by the war on drugs. 

According to the I-502 Fiscal Note 14 

produced by the state, over the five years 

from the implementation of I-502 in 2012 

to 2017, only $5 million dollars will be used 

by the WSLCB for program administration, 

whereas $44 million is to be dedicated to 

marijuana public health education, $68 

million on youth drug prevention, and a 

staggering $244 million on health care. 

In fact, the state estimates that the funds 

generated could provide for services for 

up to 600,000 patients per year, and could 

cover a five-year average for insurance for 

83,000 enrollees.” 15 

Legalization has also had significant impacts 

on the reduction of crime: According to 

Washington State Administrative Office 

of the Courts, court filings for low level 

marijuana offenses for adults over 21 

has dropped 98% since the approval of 

13 California, Arizona, Maine, Massachusetts and Nevada 

are voting on recreational use, and Arkansas, Florida, 

Montana and North Dakota are voting on medicinal 

marijuana provisions. 

14 The I-502 Fiscal Note uses projected numbers and 

estimations based on the data available at the time to 

project budgets through 2017, so based on the success 

of the industry, these numbers could be even larger at 

present. 

15 http://vote.wa.gov/guides/2012/I-502-Fiscal-Impact. 

html 




I-502. 16 Additionally, according to the Crime 

in Washington Report compiled by the 

Washington Association of Sheriffs and 

Police Chiefs, marijuana law violations 

decreased 63%, and the number of 

marijuana related convictions has dropped 

81%. 17 Legalization of marijuana has not 

merely freed up police enforcement and 

the courts however; violent crime declined 

by 10% statewide, and the murder rate 

decreased by 13%. 18,19 Youth access and use 

rates have also remained steady, despite 

legalization, and traffic fatalities involving 

marijuana reported by Washington Traffic 

Safety Commission have seen a 4% 

decrease. 20 

As regulation in Washington becomes 

increasingly robust and license standard 

enforcement becomes more effective, these 

numbers should continue to decline and 

profits from the industry should continue 

to rise. While the market may eventually 

level out, the sky seems to be the limit, 

as the WSLCB plans to continue to accept 

applications for new businesses. 

Washington’s first three years of legalized 

marijuana has certainly had its struggles 

(Washington remains the most highly 

regulated of all the states that have 

legalized recreational marijuana) but above 

all else, it seems that Washington voters 

may be right; legalization is a better way 

than prohibition, and the Washington 

economy proves that recreational 

marijuana has turned the War on Drugs 

into a very convincing economic equation. 

Anne van Leynseele, founder of NWMJ Law, 

led the evolution of what legal services 

were needed in the newly formed cannabis 

industry and identified how to best use her 

business and legal abilities. A critical step 

was partnering with noted cannabis trial 

lawyer, Aaron Pelley. Their complimentary 

practices brought together the power 

of both litigation and transactional law 

experience and diversified what NWMJ 

Law now provides. Anne shares the 

responsibility with a great team of lawyers, 

each of them skilled in their own practice 

areas. 

Anne van Leynseele 

Founding Partner at Northwest Marijuana Law 

T: +1 844 873 6965 

Email: anne@nwmjlaw.com 

Anne van Leynseele, with a JD and an International MBA, is the consummate corporate cannabis lawyer. Anne views legal 

issues through a commercial lens and becomes a trusted legal and business advisor to her clients. 

Before founding NWMJ Law, Anne was an attorney advisor in Washington DC in another highly regulated industry, Health 

Care law focusing on adjudication review. Previously she was also a business management consultant specializing in 

commercial transactions and process efficiency. 

Anne is passionate about helping cannabis businesses and organizations maximize productivity by assisting them in 

understanding and complying with the fast-paced changes happening in Federal and State laws, regulations, and policy. She 

spent four years as a federal attorney advisor of health care policy in Washington DC; upon her return to Washington State 

she jumped into passing a State law regarding patient record confidentiality. On a daily basis, Anne applies her business 

acumen and regulatory knowledge to encouraging best business practices in the burgeoning cannabis industry. 

16 https://www.drugpolicy.org/sites/default/files/ 

Drug_Policy_Alliance_Status_Report_Marijuana_Legalization_in_Washington_July2015.pdf 





19 It is important to note, however, that the data does 

not establish causation, but it is significant evidence that 

legalization of marijuana did not increase crime rates, as 

opponents to legalization seemed to believe it would. 


Drug_Policy_Alliance_Status_Report_Marijuana_Legalization_in_Washington_July2015.pdf; 

http://www.ofm. 

wa.gov/reports/marijuana_impacts_2015.pdf 




Banking Regulation in India – In The Midst of 

A Paradigm Shift or Regulator Interrupted? 

Aditya Bhargava and Sawant Singh 

Since 2014, India has seen a spate of changes centred on 

improving the banking regulatory environment in India 

and trimming the proverbial “fat” in the system. 

To its credit, the Reserve Bank of India 

(RBI) identified the upcoming crisis on 

non-performing assets (NPAs) in the 

banking system, and compelled Indian 

banks to recognise and to provide for 

faulty loans – bitter medicine which 

initially hurt banks’ profit margins, but 

which markedly strengthened their 

ability to absorb losses from bad loans. 

The RBI has also made various moves 

to diversify the pool of financial sector 

entities – some of its measures include 

allowing diversified bank licensing for the 

first time in the form of payment bank 

licenses (banks which cannot provide loans, 

have restrictions on accepting deposits, 

and whose primary function is to enable 

processing of payments) and small finance 

bank licenses (banks which provide basic 

banking services and which are intended 

to improve penetration of banks into the 

unbanked portions of India). In a departure 

from a previously unsaid and uncodified 

understanding, the RBI has also issued 

guidelines allowing granting of universal 

bank licenses “on tap” as opposed to 

previous instances where banking licenses 

were granted only once every few years. 

The RBI has also taken steps to reduce the 

dependence of providing finance on the 

banking system and has taken steps to 

improve the bond market in India (which 

is still at a nascent stage of development). 

The measures taken include allowing 

foreign portfolio investors (FPIs) to invest in 

unlisted debt securities, issuing a discussion 

paper on partial credit enhancements of 

bonds (followed by guidelines on partial 

credit enhancements and an amendment 

to these guidelines to increase limits for 

participation by banks), and issuing a 

discussion paper on making borrowing 

by large borrowers more expensive thus 

incentivising such borrowers to access the 

bond market. This article will consider some 

of the regulatory measures taken by the 

RBI to improve India’s banking regulatory 

environment. 

Framework for Revitalising 

Distressed Assets 

One of the first regulatory moves that 

signaled a change in the approach of the 

RBI was the issuance of the “Framework 

for Revitalising Distressed Assets in 

the Economy” (the Framework). The 

Framework was issued on 30 January, 2014 

and followed the issuance of a discussion 

paper in December 2013 on tackling the 

growing incidence of NPAs in the Indian 

financial system. The measures prescribed 

by the Framework include continuous 

monitoring and classification of accounts at 

various levels of “stress”, and the formation 

of a joint lenders’ forum (JLF) for early 

resolution of a stressed account before 

it turns into an NPA. As part of banks’ 

continuous monitoring obligations under 

the Framework, banks’ now have to identify 

accounts that show “incipient stress” as 

special mention accounts (SMAs), and also 

classify such accounts as: (a) SMA-0, where 

principal or interest payment is not overdue 

for more than 30 days, (b) SMA-1, where 

principal or interest payment is overdue 

between 31 and 60 days, and (c) as SMA- 

2, where principal or interest is overdue 

between 61 and 90 days. 

As soon as a borrower’s account is classified 

as SMA-2, its lenders will need to come 

together to form a JLF if the aggregate 

exposure to the borrower exceeds INR 1 

billion (USD 14.97 million approx.). Banks 

also have the option of forming a JLF 

when the aggregate exposure is below 

INR 1 billion (USD 14.97 million approx.) 

and the account is not reported as SMA-2. 

Borrowers too can request that lenders 

form a JLF on the grounds of “imminent 

stress”. 

The aim of constituting a JLF is to explore 

various options to resolve a stressed 

account and to formulate a corrective 

action plan (CAP). The resolution options 

for a CAP formulated by a JLF include 

obtaining specific commitments from the 

borrower to regularise its account so that it 

does not become an NPA, restructuring the 

borrower’s account, and initiating recovery 

proceedings against the borrower. 

Timelines for 

Regulatory Approvals 

The Financial Sector Legislative Reforms 

Commission (FSLRC) was constituted under 

the chairmanship of retired Supreme Court 

justice BN Shrikrishna, to comprehensively 

review, rewrite and clean up the laws 

governing India’s financial system “to bring 

them in tune with current requirements“. The 




FSLRC submitted its report to the Central 

bonds by way of credit facilities and 

and 12 months in certain cases. Similarly, 

facilitate a change in management and 

Government in March 2013. One of the 

liquidity facilities (and not by way of a 

guidelines for the restructuring of advances 

exit from exposure to such borrower. The 

non-legislative recommendations of the 

bank guarantee). On 24 May, 2014, the RBI 

by NBFCs were only issued in January 2014. 

intent behind the SDR scheme is to resolve 

report of the FSLRC was that all financial 

sector regulators should move to a timebound 

approvals process for providing 

permissions to conduct business as well 

as for the launch of new products and 

services. 

Following this recommendation, and in a 

bid to demystify the inner workings of the 

RBI and to increase transparency, on 23 

June 2014, the RBI released timelines within 

which its approval could be expected for 

matters such as licences for private banks, 

the issuance of licences to non-banking 

financial companies (NBFCs) and external 

commercial borrowings (ECBs) not covered 

under the automatic route. In parallel, 

the RBI also placed a “Citizens’ Charter” 

on its website, providing timelines within 

which various departments would be able 

issued draft guidelines allowing banks to 

provide PCEs to corporate bonds issued by 

companies and special purpose vehicles 

for financing infrastructure projects. On 24 

September, 2015, the RBI issued guidelines 

on banks providing PCEs for corporate 

bonds issued for a project. These guidelines 

allow banks to offer PCE (in aggregate) up 

to 20% (twenty percent) of the bond issue 

size in the form of a non-funded irrevocable 

contingent line of credit. This limit has been 

raised to 50% of the bond issue subject to 

a limit of 20% for each bank. The providing 

of PCEs (together with the enhancement 

of limit) is intended to increase the credit 

ratings of lesser rated issuers and special 

purpose vehicles, and make bonds offered 

by them more attractive for bond market 

investors. 

In November 2014, the RBI overhauled the 

regulatory framework for NBFCs bringing 

about many seminal changes in the way 

NBFCs conduct business. While some are 

transitional – for instance, the declaration 

of assets as non-performing after 90 days 

will only commence from 2018 – others 

had earlier application, such as 31 March, 

2015 for the tightening of the application 

of the “fit and proper criteria” for directors 

of systemically important NBFCs. Enhanced 

corporate governance disclosures, such as 

registrations/licences obtained from other 

financial sector regulators, penalties levied 

by any regulator, extent of financing of 

parent company products, and details of 

securitisation and assignment transactions, 

are now required from all non-deposittaking 

systemically important NBFCs and all 

borrowers which cannot be turned around 

due to inherent operational and managerial 

inefficiencies. 

The SDR scheme requires the scheme of a 

JLF to include provisions in the agreement 

with a borrower for conversion of the 

restructured debt into equity if prescribed 

conditions are not fulfilled. The JLF must 

obtain all appropriate authorisations for 

such conversion upfront at the time of 

restructuring of the borrower. Further, 

conversion of debt into equity must result 

in the JLF holding at least 51% of the 

shareholding of the borrower and such 

conversion must take place within 30 days 

of the review being conducted by the JLF 

for the borrower’s non-compliance with 

the conditions prescribed by the JLF. The 

detailed prescriptions of the SDR scheme 

to provide services for matters such as 

permission for waiver of forms for exports 

and overseas investment not covered under 

the automatic route. The timelines provided 

vary from seven days for trade credits 

under the approval route, to one hundred 

and eighty days for compounding of 

contraventions under the (Indian) Foreign 

Exchange Management Act, 1999. 

Partial Credit 

Enhancements 

In the Second Quarter Review of Monetary 

Policy 2013-14, the RBI observed that 

the lack of depth and liquidity in India’s 

corporate bond market is leading to 

“significant dependence on bank financing“. 

The review proposed the issuance of 

guidelines to allow banks to offer partial 

credit enhancements (PCEs) to corporate 

Overhauling 

NBFC Regulations 

The global financial crisis of 2008 turned 

a stark spotlight on “shadow banking”. 

Minimisation (if not removal) of the risk 

posed by these entities to the financial 

system came into sharp focus. Shadow 

banking, in rudimentary terms, can be 

described as the exposure of non-regulated 

financial entities to the financial system. 

In India, the activities of NBFCs which 

traditionally enjoyed “light touch” regulatory 

oversight became an increasing cause 

for concern. The regulatory advantages 

enjoyed by NBFCs over banks also led to 

concerns of “regulatory arbitrage”. For 

instance, while banks had to declare an 

asset as “non-performing” at the end of 90 

days, for NBFCs this period was 180 days 

deposit-taking NBFCs. 

While criticised in some circles as 

disadvantaging NBFCs, the overhaul of the 

regulatory regime for NBFCs was largely 

welcomed in industry circles. The alignment 

to a large extent of regulations applicable to 

NBFCs and banks has markedly reduced the 

possibility of regulatory arbitrage that may 

have led to systemic financial instability. 

Strategic Debt 

Restructuring 

As a follow-up to the Framework and the 

JLF-CAP mechanism, through its circular of 8 

June, 2015, the RBI introduced the “Strategic 

Debt Restructuring” (SDR) scheme, to allow 

banks to convert a part of their debt to a 

delinquent borrower into equity so as to 

also include the price at which conversion 

of the debt into equity must take place. 

Rupee Denominated Bonds 

The report of the Committee to Review 

the Framework of Access to Domestic and 

Overseas Capital Markets submitted in 

February 2015 included a recommendation 

that the market for local currency 

denominated bonds should be encouraged 

as it provides an alternative source of 

debt financing for private and public 

sector borrowers which does not expose 

them to currency fluctuation risk. The 

report also rationalised that by reducing 

currency mismatches and lengthening the 

duration of debt, such bonds could also 

augment financial stability. In its bi-monthly 

monetary policy statement of 7 April, 

2015, the RBI mentioned that it intended 




to allow Indian bodies corporate to raise 

ECBs through Rupee Denominated Bonds. 

This was followed up by the release of the 

draft framework for the issuance of Rupee 

Denominated Bonds on 9 June, 2015 for 

public comments. 

The RBI notified the framework for the 

issuance of Rupee Denominated Bonds 

under the overall ECB framework on 

29 September, 2015. While the draft 

framework had received a lukewarm 

reception, the notified framework received 

a warm welcome as it appeared to have 

rectified many shortcomings of the draft 

framework. For instance, the notified 

framework allows all bodies corporate 

including real estate investment trusts 

and infrastructure investment trusts 

to raise debt under the ECB policy by 

issuing rupee denominated bonds. The 

only end-use restrictions in the notified 

framework are that funds raised cannot be 

used for real estate activities (other than 

for development of integrated township/ 

affordable housing projects), capital 

market and domestic equity investment, 

activities prohibited under the foreign direct 

investment policy, on-lending for any of the 

above, and the purchase of land. Further, 

the only all-in-cost restriction is that the 

all-in-cost should be “commensurate with 

prevailing market conditions“. 

The framework on Rupee Denominated 

Bonds was further liberalised by the RBI 

through its circular of 13 April, 2016, which 

reduced the minimum maturity for Rupee 

Denominated Bonds from 5 years to 3 

years. 

Conclusion 

It is possible to attribute some of the steps 

that the RBI has taken since 2014 to the 

dynamism of former Governor Raghuram 

Rajan. However, due care should be taken 

on this count, as the RBI has previously 

shown itself to be proactive (albeit 

somewhat conservative). It is quite possible 

that these steps were already in the offing, 

and were merely accelerated due to the 

presence of Governor Rajan. 

This article covers only a few regulatory 

moves that have been made by the RBI 

and is not exhaustive. There are also 

many background steps and relatively 

minor regulatory tweaks that the RBI 

has made to operationalise these steps. 

For instance, along with the government 

and the Securities and Exchange Board 

of India, the RBI is also considering 

measures for improving the secondary 

market for bonds (by making bondtrading 

easier) and also the tertiary market 

for bonds (by introducing/improving 

existing instruments such as the GMRA). 

Notably, as part of a shift in the regulatory 

rulemaking mindset, the RBI appears to be 

shifting from prescriptive rulemaking to 

a mix of principle-based and prescriptive 

rulemaking, thereby more closely aligning 

itself with regulatory rulemaking in more 

developed economies. 

While these steps have stoked a quiet 

revolution in the banking regulatory 

environment in India, much still remains to 

be achieved. We watch and we wait. 

Aditya Bhargava 

Principal Associate at Phoenix Legal 

T: +91 22 43408500 

Email: aditya.bhargava@phoenixlegal.in 

Phoenix Legal is one of India’s foremost full service law firms, offering an extensive range of transactional, regulatory, 

advisory and dispute resolution services. We advise a diverse clientele which include domestic and international companies, 

banks and financial institutions, funds, promoter groups and public sector undertakings. 

Sawant Singh 

Partner at Phoenix Legal 

T: +91 22 43408500 

Email: sawant.singh@phoenixlegal.in 

Sawant Singh focuses on Phoenix Legal’s banking and finance practice. 

Over nearly two decades, Sawant has built areas of expertise around private equity, project finance, securitisation, asset 

reconstruction, consortium banking, domestic and external commercial borrowings and debt restructuring. He also advises 

clients on a host of corporate and commercial, labour/employment and real estate issues. 

According to Chambers and Partners, Sawant Singh “is one of India’s most in demand banking practitioners”. Clients 

praise his solution focused and practical approach in addition to his very calm demeanour, a huge plus in high stakes 

negotiations.” 

Sawant built a considerable portfolio around cutting edge work in the banking and finance domain. 




Navigating through Malta’s Unrivalled Potential 

Danielle Hermansen 

Danielle Hermansen, of PKF Malta, discusses recent 

developments in the insurance market and latest event for 

promoting Malta, as a domicile of choice for European 

Captives in October 2016 - New York, the success of the 

industry’slatesteventsandwhatessentialelementsremain 

talking points across the financial landscape 

What was the event and 

why was it held? 

PKF Malta sponsored a Captive Owners 

Summit on 31 October 2016, being the 

third initiative in its kind this year in New 

York. This event was one of a series of 

events in the PKF Malta calendar with 

the aim of promoting Malta as a domicile 

of choice. This Captive Owners Summit, 

organised by Captive Review, is a highly 

exclusive learning and networking event for 

US-based leading captive owners. It offered 

a unique opportunity to network and share 

ideas with industry peers in a safe and 

intimate environment where insurance 

buyers are proficient and lead the content. 

The event was hosted at the prestigious 

Essex House, where an innovative approach 

to networking was introduced, having 

delegates attending a series of in-depth 

roundtable sessions. PKF Malta was invited 

to host the “Writing European Risk Through 

a Captive” during the full day event. The 

event was spread over 15 topics, for which 

PKF Malta had the privilege of hosting two 

round tables featuring European Risks. 

Other sought after topics included “Using 

Your Captive As a ProfitCentre ”, “Self- 

Procurement Taxes and Re-domestication 

Pressures” and “Bringing Multi-national 

Employee Benefits Into Your Captive”. 

How successful 

was the event? Why? 

The round table linked to Writing European 

Risks, having the author as the speaker, 

discussed a number of pertinent points 

connected with insuring European risks. 

This pointed to a long list of benefits of 

Malta as a domicile of choice in Europe 

in particular in view of its Protected Cell 

Companies Legislation. Both roundtables 

where successful and in-depth discussions 

centred on how Cells may be used. Most 

of the Captive Owner representatives 

present were still in-tuned on using 

fronting arrangements for their European 

risks. Many where pleased to learn of 

an alternative solution to using fronters, 

namely that of creating insurance Cells in 

Malta to satisfy this purpose. Some were 

curious to know what they should look 

out for and finally what the benefits would 

be for them if they consider Malta. With 

fronting arrangements becoming more 

onerous and fronters in Europe becoming 

more choosy following Solvency II, this was 

seen as a viable option. 

Did Solvency II 

discussions feature 

in the Round Tables? 

Solvency II was a heated topic amongst 

participants at the summit, surfacing 

repeatedly during both roundtables, 

including a discussion on the future 

ramifications of Brexit. Solvency II is the 

result of a decade of anticipation to the 

European Union’s harmonisation of laws 

governing the insurance industry. The new 

regime came into force in January 2016, 

with insurance companies across the EU 

having to submit their Day 1 and QRT 

Reporting to their respective regulators. 

It is accepted that insurers and insurance 

managers invested in human resources 

in order to embrace this new regime, 

while finding a way to justify the costs 

of implementing an internal model or 

alternatively scale down to the standard 

model. Once the emphasis on the new 

regulatory regime is fully embraced it is 




expected to become second nature to the 

day to day workflow, then one hopes that 

the benefits of solvency II will start being 

appreciated even more. One hopes that the 

risk based approach of solvency II will act as 

a catalyst for risk managers overseeing how 

capital is best allocated and hence more 

aligned to underwriting criteria. 

What other main topics 

featured in discussions? 

Cyber risk was by far the most sought after 

topic of the day so that industry specialists 

offered their experiences on how best to 

handle this risk. While the majority noted 

that insurance was in place, they all agreed 

that the limits in place are by far too low 

to cover an actual full scale event. The 

debate evolved on the need for the risk 

managers to first see how they evaluate the 

cyber risk policy, then approach reinsurers 

accordingly, this albeit representing the 

ideal scenario achieved by some, possess 

better leverage in their negotiations with 

their reinsurers. 

How would you describe 

the overall experience of 

the Summit? 

This event was well received and attracted 

a gathering of US-based risk and insurance 

professionals playing an integral role in 

directing their corporate captive. The event 

also attracted heads of State like the State 

of Vermont and Consultants and Risk 

Management specialists such as Spring and 

Beecher Carlson. More importantly, it also 

gave the opportunity for participants to 

meet a number of Captive Owners, Fortune 

Global 500 list, some in the top 100 list, 

who shared their invaluable experiences 

and innovation utilised in their Captives. 

Without any doubt, with the collaboration 

of Finance Malta, this event served as a 

platform to raise the profile of Malta as an 

insurance domicile, to establish leads of 

interest to set up in Europe and to create 

new contacts within the market. PKF Malta 

are pleased that the event created interest 

in placing Malta squarely on the radar 

considering the merits of other European 

options. 

Part of the services PKF Malta offers 

includes a core Internal and External 

Audit service to the insurance industry, 

so we work closely with specialised 

service providers within the local industry. 

Being an integrated member firm of PKF 

International, we also work closely with 

120 offices to deliver specialised technical 

solutions to the local insurance industry. We 

have the ability to give a tailor-made service 

which goes beyond mere compliance to 

provide a whole range of flexible services, 

the likes of which larger consultancies may 

find harder to achieve. 

Earlier this year, PKF staff also attended 

the SIFMA - Insurance and Risk Linked 

Securities Conference in New York, taking 

the opportunity to discuss further the 

emerging trend concerning the ILS market 

in an effort to expand their products to 

cater for a more diverse range of cedents 

such as Captives. It goes without saying 

that the ILS provides a means by which 

the Captive may now also transfer its 

catastrophe risks, other than solely relying 

on the traditional reinsurers. This vehicle 

is still gathering momentum, in the same 

opportunities for growth in US market are 

way that the non-traditional use of ILS’s 

ripe for Malta in its policy to partake of the 

for embryonic cat risks such as cyber risk 

growing market. 

and operational risk. It is evident that 

Danielle Hermansen 

Director at PKF Malta 

T: +356 21 493 041 

Email: dhermansen@pkfmalta.com 

Danielle Hermansen ACII Chartered Insurance Risk Manager, Mgt (Maastricht), is an Insurance Specialist at PKF Malta. She 

has been in the insurance industry for 15 years, working both as an underwriter, broker and insurance manager, specializing 

in commercial business. She has more recently worked in the captive insurance management industry and is an ACII 

Chartered Insurance Risk Manager. 




Aspects to Consider when Closing 

a Merger in Venezuela 

Miguel Velutini, Reinaldo Hellmund and Carlos Martínez 

Venezuela is currently going through a very complex 

situation in which the climate for doing business has 

become difficult for all parties involved in any part of the 

economic process. 

The regulatory burden for entities doing 

business in the country is very high, and 

companies are required to be registered, 

keep in place records and processes in a 

vast amount of governmental entities, a 

fact that requires the commitment of a 

substantial amount of resources and time 

for each entity that exists and operates 

in the country. As a consequence of the 

foregoing, many businesses that were 

structured with various legal entities for 

different reasons, including tax and liability 

mitigation, have opted to downsize their 

operations by merging their subsidiaries 

into one or some few entities, in order to 

have fewer structures to operate. 

The reality described above also permeates 

into the complexities of successfully 

completing a merger in Venezuela, where 

a number of filings must be made in order 

to perform the legal steps required to close 

a merger. In such regard, the process of 

completing a merger will require proper 

organization, planning and will typically 

last for approximately 6 months before it 

will be completed. 

From a legal standpoint, the decision to 

merge two companies shall be adopted in 

the shareholders’ meeting, a meeting that 

would discuss how both entities should 

be merged. The Articles of Incorporation 

of the companies often contain special 

quorum and voting requirements in order 

to approve a merger, but if the Articles of 

Incorporation are silent, the decision shall 

be adopted in a meeting where 75% of 

the shares representing the total capital is 

present and with the affirmative vote of at 

least, half of the shareholders attending the 

meeting 1 . 

The companies to be merged shall enter 

into a “merger agreement” which shall be 

executed by authorized representatives 

of both parties. The merger agreement 

must set forth the terms and conditions 

of the merger, such as specifications that 

could lead to the survival of the entity, and 

conditions that could cease the entities’ 

existence, as well as any other matter that 

may be relevant. Even though the law 

does not specifically require it, commercial 

registries require that the merger 

agreement should be notarized. 2 

Financial statements of both companies 

dated on the date of the merger shall be 

prepared and presented to the commercial 

registry together with the notarized merger 

agreement and the shareholders meetings 

of both companies approving the merger. 

1 Article 280 of the Venezuelan Code of Commerce. 

2 Based on an Article 23 of Resolution Number 19 of 

the Ministry of Interior, Justice and Peace dated January 

13, 2014 

It is important to point out that the 

registration processes before the 

Commercial Registries are frequently 

delayed for many reasons, including the 

fact that Commercial Registries often 

request changes to be made on the 

documentation that has been presented, to 

the form in which documents are presented 

or in the supporting documents that shall 

be filed. These requirements changes 

from one Commercial Registry to another. 

Therefore, the timing of the merger is an 

important issue and so, it is very crucial to 

go beforehand to the Commercial Registry 

with much anticipation as possible, so as to 

understand the requirements established 

by the Commercial Registry in which the 

specific merger documentation will be 

registered. 

Once the shareholders meetings are 

registered in the Commercial Registry 

or registries the merger agreement 

shall be published in an authorized legal 

publication. In practice, the shareholders 

meetings approving the merger are also 

published. 

The merger will not be effective until a 

3-month period which will be counted 

from the date on which the publication 

previously indicated has been made. The 

Commercial Code establishes that the 

merger may be closed before such period 

if evidence of payment of the company’s 

debts or the approval of all creditors is 

evidenced. However, this is very unusual 

since in practice, there are just too many 

potential creditors for any given company, 

and the 3-month period is seen in practice 

as almost mandatory without exception. 

During the 3-month period indicated 

before, any creditor can oppose the merger, 

which if done, will suspend the merger until 




the suspension is lifted through a definitive 

judicial decision. 

Once the 3-month period elapses without 

any opposition from the creditors of 

the merging companies, the merger 

may become effective and the surviving 

company shall assume all rights and 

liabilities of the company that ceases to 

exist. In such manner, most practitioners 

and authors assume the position that 

the surviving company is the universal 

successor of the company which ceases to 

exist. 

Once the merger becomes effective, 

many notices to all kind of governmental 

entities shall be made. In such regard, 

the Tax administration shall be notified of 

the merger within one month from the 

date the merger became effective. Also, 

an income tax return shall be filed for the 

“short” fiscal period of the entity that is 

extinguished and that will end on the date 

the entity ceases to exist. 

the surviving entity as successor of the 

entity that ceased to exist. 

Another matter that shall be dealt with 

much care is the labour situation of 

employees of the company that ceases to 

exist. In such regard, prior to the merger, 

a strategy and plan shall be decided and 

implemented setting forth the steps and 

timing that will be taken vis a vis the 

employees of the company that will cease 

to exist. The company shall determine if it 

will carry out a procedure of notification 

of “change of employer” where notices 

of the change of employer are given to 

both employees of the company that will 

cease to exist and labour administrative 

authorities, indicating that the surviving 

company shall be the new employer of the 

employees of the company that will cease 

to exist. Employees that do not wish to 

continue as employees of the new surviving 

company may as well leave the company 

and request severance payment as if the 

company terminated them. 

Miguel Velutini 

Junior partner at Rodriguez & Mendoza 

T: +58 (212) 285 4944 

Email: mvelutini@romen.com 

Mr Velutini specialises in the areas of corporate law, oil and gas, project finance, mergers and acquisition, foreign 

investment, banking and secured transactions. 

Mr Velutini has participated as counsel to various companies in the restructuring and re-financing of their debt; as counsel 

to the lenders and sponsors in the structuring and implementation of various financing agreements in Venezuela in the oil 

and gas sector; as counsel to both buyers and sellers in the acquisition, sale and spin-off of various companies and divisions 

of companies in Venezuela; as counsel in the negotiation of various infrastructure joint venture agreements. In addition, Mr 

Velutini actively counsels various clients in their day-to-day operations in Venezuela. 

Mr Velutini received his JD from Andrés Bello Catholic University, Venezuela in 1998 and his LLM from Duke Law School in 

2000. He was admitted to the Caracas Bar in 1998. 

Reinaldo Hellmund 

Senior partner at Rodriguez & Mendoza 

T: +58 (212) 285 4944 

Email: rhellmund@romen.com 

In addition, all governmental entities in 

which the company that ceases to exist 

is registered (such as the social security 

administration, apprenticeship programs, 

housing and other parafiscal entities) shall 

be notified of the merger so that their 

records may be properly updated to reflect 

Mr Hellmund specialises in the areas of corporate law, oil and gas, project finance, financing and lending transactions, 

secured transactions, merger and acquisition foreign investment. 

Mr Hellmund has represented several international oil companies in their business in Venezuela, including structuring 

of association agreements for extra heavy crude oil, gas, pipelines projects and operation agreements. Mr Hellmund has 

represented lenders, underwriters and project sponsors on several of the most important financing, oil & gas and project 

finance transactions seen in Venezuela. 

Mr Hellmund has participated as counsel to various companies in the restructuring and re-financing of their debt; as counsel 

to the lenders and sponsors in the structuring and implementation of various financing agreements in Venezuela in the oil 

and gas sector; as counsel to both buyers and sellers in the acquisition, sale and spin-off of various companies in Venezuela; 

as counsel in the negotiation of various infrastructure joint venture agreements. In addition, Mr Hellmund actively counsels 

various clients in their day-to-day operations in Venezuela. On many different oil projects acted as a counsel to the sponsors 

and the project, which included the negotiation and acquisition of properties, pipelines, project and port facilities including 

pipeline agreements and EPC’s construction and supply. 

Mr Hellmund received his JD from Andrés Bello Catholic University, Venezuela in 1983. He was admitted to the Caracas Bar in 

1983. 




Carlos Martínez 

Junior partner at Rodriguez & Mendoza 

T: +58 (212) 285 4944 

Email: cmartinez@romen.com 

The Right to Information Act No. 12 

of 2016 of Sri Lanka 

Sudath Perera 

Mr Martinez specialises in the areas of corporate, foreign investment, oil and gas, merger and acquisition, banking and 

environmental laws and regulations. 

Mr Martinez has participated as counsel in several oil and gas projects; as counsel to the lenders and sponsors in the 

structuring and implementation of various financing agreements in Venezuela in the oil and gas sector; as counsel to both 

buyers and sellers in the acquisition and sale of various companies in Venezuela; as counsel in several capital market 

transactions, as counsel in the preparation of environmental compliance protocols for oil, gas and food companies; as 

counsel in the preparation of civil and commercial contracts. In addition, Mr Martinez actively counsels various clients in 

their day-to-day operations in Venezuela. 

Mr Martinez received his JD from Andrés Bello Catholic University, Venezuela in 1995 and his LLM from Cornell Law School 

in 2003. He was admitted to the Caracas Bar in 1995. Mr Martinez is a former professor of banking law and regulations at 

Andrés Bello Catholic University, Venezuela. 

The fight for responsible accountability, good governance 

which is against corruption can only be strengthened if the 

information held by responsible authorities is more readily 

available. The result of relaxing the obstructing tight 

mechanisms that prevent the access of information would 

create a more transparent system of administration. 

It is remarkable and broadly accepted 

by legal academics that the true essence 

of democracy can be achieved by the 

declaration of “Right to Information” to 

the public. The scrutiny of such is notably to 

maintain a more democratic system in the 

country whilst entertaining the true spirit of 

transparency. 

Sri-Lanka, having face a 30 year conflict 

of war and a rather traumatic era left the 

purported ‘right to information’ under the 

Constitution of Sri Lanka (Article 14A of the 




Constitution of Sri Lanka 1978), restricted to 

LDO Number 23/2003) which however, 

whilst deciding the case of Environmental 

Disclosure of such information could 

an article engraved in the Constitution until 

failed to conclude positively. 

Foundation Limited v Urban 

harm the economy of the country. Denial 

2016. One may argue that the Constitution 

prevails over any other legal document. 

In a practical approach, however, the 

right will remain to be a grey area as the 

abovementioned article would entail an 

exhaustive list of laws relating to same. 

The absence of a legally binding document 

guaranteeing the right to information would 

leave a lacuna in the context of justice. 

Therefore, the enforceability of the right 

Furthermore, this principle was also 

encrypted under Article 19 of the 

International Covenant on Civil and 

Political Rights and Article 19 of the 

Universal Declaration of Human Rights 

which recognizes the right and access to 

information where Sri Lanka is a party to, 

with the placement of signature on the 

treaty. 

Development Authority of Sri Lanka 

and others (Galle Face Green Case) 3 . 

He stated that “a bare denial of access to 

official information as contained in P10, 

sent by the UDA, in my view amounts 

to the infringement of the Petitioner’s 

fundamental rights as guaranteed by 

Article 14 (1) (a) of the constitution…the 

implicit right of a person to secure relevant 

information from a public authority in 

of information related to trade secrets or 

intellectual property. Providing medical 

records unless consented and permitted to 

by the person in question. Communication 

trails between a professional and 

public authority unless consented to i.e. 

communication between the attorney 

general and public authority. Existence 

of a fiduciary relationship. Information 

which may obstruct the detection of a 

guaranteed by the Constitution will only be 

effective in reference to an act pertaining 

to “Right to Information”. This principle was 

established in the case of Giustiniani v. 

Y.P.F. S.A., a case decided in the territory of 

Argentina, in which the court ruled in favor 

of the plaintiff and further urged the public 

company Yacimientos Petroliferos Fiscales 

to produce a copy of the investment 

agreement related to the exploitation of 

hydrocarbon /oil resources. 

The country although having other 

commitments to look into due to the war, 

yet functioned in ways and means to give 

effect to the United Nations proposed 

Resolution 59 (1) in the year 1946. This 

resolution was further taken up for 

discussion in the year 1995 by the UN 

Commission. Therein, it was stated that 

“Freedom will be bereft of all effectiveness 

if the people have no access to 

information. Access to information is basic 

to the democratic way of life. The tendency 

to withhold information from the people at 

large is therefore to be strongly checked.” 1 

To give effect to the abovementioned 

resolution, Sri Lanka attempted to 

formulate a concrete ground for RTI in mid 

1990’s (Legislative Draftsman’s Department, 

On realizing the importance of such a right 

in existence, Sri Lanka, a country that looks 

over the democratic system, began the 

process of documenting the fundamental 

right. After several attempts of passing 

draft Right to Information Bills over the 

years, in August 2016, the Bill of Right to 

Information (“RTI Bill”) was passed with 

the view to provide a more centralized 

transparent system of governance. The 

RTI Bill was brought to the attention of the 

Parliament in the midst of March 2016. 

The sole purpose of promoting the Bill, 

as stated in the preamble of the RTI Bill, 

was to structure “a society in which the 

people of Sri Lanka would be able to more 

fully participate in public life through 

combating corruption and promoting 

accountability and good governance” 2 . 

The recognition of the absence of the right 

was further highlighted with the inception 

process for the 19th Amendment to the 

Constitution as a fundamental right. 

Supporting the views enacting the RTI, the 

Center of Law and Democracy assessed the 

RTI to be the 7th strongest in the world. 

The prime need for the establishment 

of this fundamental piece of legislation 

was opined by Chief Justice Sarath N Silva 

respect of a matter that should be in the 

public domain”. 

However, the urge for the Right Information 

dates back to 1984 which was derived from 

the case of Visuvalingam v. Liyanage 

where it was held that the need for easy 

access to information was needed to be 

reckoned as the right to information from 

many sources was possible 4 . Therefore, 

it was prominently noted that the 

documentation of the right through an Act 

was essential to make the system of justice 

more approachable. 

The RTI Act provides an absolute right and 

gives effect to the constitutional right of 

every citizen to access information under 

Section 3 of the RTI Act. Nevertheless, the 

granting of the right was on the other hand, 

followed with limitations. These limitations 

are in the form of a comprehensive list as 

stated under Section 5 of the RTI Act. 

The limitations stipulated in the RTI 

Act include that the denial to access 

information may arise the personal 

information in concern has no public 

activity or interest. Disclosure of 

information is a threat to national security. 

crime. Exposure of identity of a confidential 

source may be revealed. Third party 

does not consent to the disclosure of 

the information. Contempt of court. 

Infringement of parliament privilege. Harm 

integrity of an examination being conducted 

by the Department of Examination. 

Furthermore, in the process of debating 

the RTI Bill in Parliament, concerns and 

proposed changes in order to protect the 

confidentiality of sensitive information 

relating to Section 5 of the Act on ‘Denial 

of Information’ were raised. Accordingly, 

when the Parliament certified the RTI Bill, 

Section 5 of the Act was further expanded 

giving effect to Section 5 (m) whereby ‘if 

information is a cabinet memorandum in 

relation to which a decision has not been 

taken’ the request may be refused. Further, 

Section 5 (n) where ‘the information 

requested to be disclosed is with regard to 

an election conducted by the Commissioner 

of Elections’, which is required by 

the relevant election laws to be kept 

confidential. This was formally engraved in 

the Act as a stance for the public authorities 

to deny disclosure of information. 

Moreover, many concerned parties raised 

their nonconforming views indicating that 

3 (S.C.F.R 47/2014) 

some of these exceptions stated under 

1 2 UN Doc. E/CN.4/1995/32, para. 35. 

2 Right to Information, Gazette, Preamble December 

2015. 

4 1984 

Section 5 were conflicting with the articles 




in the Constitution of Sri Lanka. One 

example of a recent dissimilarity raised to 

concern was the exemption stated under 

Section 5 in relation to denial of disclosure 

of information as it would harm the 

economy. The denial of information related 

to trade agreements as stated under 

Section 5 (v) was noted to be a clause 

conflicting with Article 14, 14A and 15 of the 

Constitution. 

Dr. A.G. Damayanthi Perera, a Specialist 

in Food, Nutrition, an Independent 

Researcher, along with two other Software 

Engineers, raised the issue relating to the 

conflict of Section 5(v) by filing a petition 

in the Supreme Court of Sri Lanka. The 

Petition stated that, a developing country 

like Sri Lanka will find it difficult to tackle the 

challenging concepts in the corporate arena 

when dealing with overseas companies. 

The exceptions to the fundamental rule of 

the right to information was also opined 

by Lord Toulson’s in the case of Kennedy 

v Charity Commission, in which he stated 

that “Judicial processes should be open to 

public scrutiny, unless and to the extent, 

that there are good reasons for secrecy”. 5 

Thus, despite the right of information being 

a fundamental right, the times at which the 

denial to access of information is validly 

construed yet exist in the legal sense. 

It is nonetheless important to note that 

the above limitations could be avoided 

where the request of information is 

very much urgent and as per severe 

circumstances surrounding the necessity of 

such information. This is engraved under 

Section 6 of the RTI Act. Additionally, if the 

disclosure of information is denied by the 

public authorities, the aggrieved party is 

5 Kennedy v. the Charity Commission [2014] UKSC 20 

within the capacity of making an appeal to 

the “Right to Information Commission”- a 

body corporate with perpetual succession 

which will be established in the conformity 

of Part IV of the RTI Act. 

Above all, these flaws are contained 

within the proposed validity of the right 

to information. It is important to note the 

very exceptional advantages. The recently 

passed RTI Act will be a monitor for 

showcasing the reality, whilst making the 

latent motives of a government accessible 

to the public to some extent. 

Many professionals in the arena of law 

supported the RTI Bill coming into force, 

claiming that the ideology of the Bill 

would restructure the transparency of the 

government and public authority dealings. 

Thus, the instances in which the public 

being blindfolded in times of corruption will 

be limited, and the Act will further provide 

the public with an avenue to raise their 

dissenting views and concerns of the same. 

Looking over to our neighboring country, 

India, who enacted the fundamental 

right by way of the Right to Information 

Act 2005, would clear the murky waters 

of how successful the enactment would 

be in Sri Lanka. Dr. Rajesh Tandon made 

positive comments stating that “Since the 

RTI law was introduced, India has seen an 

improvement in governance, dissemination 

of information and involvement of civil 

society in the governance process” 6 . 

However, the challenge in India is that 

acts such as the Official Secrecy Act and 

the Right to Information Act co-exist side 

by side with the right to information laws. 

Accordingly, the enactment of the Right 

to Information Act in India has exposed 

6 http://srilankabrief.org/2015/03/beyond-rti-towardsopen-government-in-sri-lanka/ 

both how it can thrive a country to success 

force in Sri Lanka and consequently needs 

and the possible existence of challenging 

to be rectified by ways and means which 

conflicts to be tackled with. 

will diminish the conflict with the new Act in 

place. 

Similarly, despite the anticipated positivity 

of the Act, a number of challenges remain 

Nevertheless, the Parliament of Sri Lanka, 

when the implementation of the RTI in 

which has the intention of achieving 

Sri Lanka is taken into consideration. 

the promising outcomes of the act, 

For instance, archaic acts, such as the 

certified the RTI Bill with a few proposed 

Establishments Code of Sri Lanka 1971 

amendments on 04th August 2016. 

and the Sri Lanka Press Council Law No. 

Although, the Act will take 6 months to be 

5 of 1973, continue to be in force. The 

in force, the effectiveness and the essence 

existence of such Acts restricts the scope 

of implementing the laws will continue 

of the new Act in place and limits the public to thrive for the aims of providing an 

access to the benefits afforded in terms 

approachable, transparent governance 

of Section 2 and 3 of the RTI Act. One such 

system. All in all, the implementation 

important Act that needs to be brought to 

of a Right to Information Act in Sri 

attention is the Official Secrets Act No. 32 

Lanka is imperative to foster a nation of 

of 1955. The existence of this Act restricts 

transparency, accountability and good 

access to documents that are confidential 

governance and to ensure the rights of 

and documents that contain very sensitive 

the public citizens of the country are 

information. Although, this act is buried 

safeguarded which Sri Lanka believes as a 

and ignored and the terminology is stated 

country driven by democratic principles. 

to be outdated, the Act continues to be in 

Sudath Perera 

Sudath Perera Associates at Founder 

T: +94 11 7559944 Ext: 311 

Email: sudath@sudathpereraassociates.com 

The founder of Sudath Perera Associates and the Managing Partner, Sudath has crafted a unique brand of legal services 

which ensured the success of the Firm since its inception. Today the Firm boasts a strong client base of well-known local and 

multinational companies. 

Sudath was called to the Bar of the Supreme Court of Sri Lanka in 1991. He gained invaluable experience working with 

several senior lawyers, including a leading President’s Counsel of the Colombo Bar. 

In 1995 he became a Partner at Paul Ratnayeke Associates and was instrumental in establishing the litigation, conveyancing, 

labour and employment law, intellectual property and company secretarial divisions within the Firm. His reputation for 

untiring work and his ethic of “never say never” led the Firm’s litigation division to national pre-eminence. 

While setting the standard for litigation practice, Sudath has also acquired broad expertise in conveyancing, energy law, 

immigration, administrative law and intellectual property law with special emphasis on brand protection, anti-counterfeit 

and piracy work. 


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Lawyer Issue - December 2016

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