PRAC MEMBER · PDF file · 2009-03-02The partners of ABNR are pleased to announce the appointment of new partners, Chandrawati Dewi and Luky I. Walalangi, with effect from 1 January

► ALI BUDIARDJO Acts for Government of Republic of Indonesia in 2.2 Billion Global Bond Issuance ► ALLENDE & BREA Advises The Sentient Group in Acquisition of Rincon Lithium ► BAKER BOTTS Advises $579 Million Halliburton and KBR FCPA Settlement ► CLAYTON UTZ Advises Leading Queensland Companies on Successful Capital Raisings ► GIDE LOYRETTE NOUEL Advises on Veolia Transport RATP Development Public Transportation Joint Venture for Asian market

► HOGAN & HARTSON Represents China M and Sharp Point in Sale to Telstra ► KING & WOOD Acts in Turkmenistan Gas Pipeline Project Finance ► MORGAN LEWIS Advises Autonomy in $775 Million Acquisition of Interwoven ► NAUTADUTILH Advises SNS Bank in €2 billion State Guaranteed Bond Issue ► TOZZINI FREIRE Acquisition by Votorantim Celulose e Papel S.A. of shares from Aracruz ► WILMERHALE The Medicines Company Acquires Targanta

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P R A C M E M B E R N E W S

►Ali Budiardjo Announce Partner Appointments ►Allende & Brea Adds Banking Partner; Announce Promotion ►Clayton Utz Boosts Insolvency and Restructuring Team ►Davis Wright Partner Gary Locke Nominated by Obama for US Secretary of Commerce ►Hogan & Hartson Initiates Stimulus Legislation Task Force ►Hoet Pelaez Partner Fernando Pelaez-Pier New IBA President ►Luce Forward Boosts Corporate Securities Practice ►Morgan Lewis Adds to Corporate Investigations and White Collar Crime Practice ►Simpson Grierson Announce Promotions and Additions ►WilmerHale Partner Todd Stern Selected by Clinton as Special Envoy for Climate Change ►AUSTRALIA Development Applications a Trade Practices Act Free Zone Says New South Wales Supreme Court CLAYTON UTZ ►BRAZIL Regulation for the Offering of Securities with Limited Placement Efforts TOZZINI FREIRE ►CANADA Proposed Amendments to Canada’s Competition Laws FRASER MILNER CASGRAIN

►CHINA Elevating Standards China's Newly Amended Patent Law DAVIS WRIGHT TREMAINE ►CHINA Tax Issues Related to IP Transfer of Foreign Enterprise to China Transferee KING & WOOD ►FRANCE New Securities Regulations in Effect GIDE LOYRETTE NOUEL ►JAPAN New Japanese Banking Regulations Open Certain Islamic Finance Transaction to Subsidiaries of Japanese Banks NISHIMURA & ASAHI

►NEW ZEALAND Proposed RMA Amendments SIMPSON GRIERSON

►UNITED STATES ►Private Equity Update - Carried Interest Tax Change in Obama Budget Proposal HOGAN & HARTSON ►Closed End Fund Trustees Sued by Auction Rate Preferred Shareholders MORGAN LEWIS ►New Tax Breaks for Massachusetts Life Science Companies WLMERHALE

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February 2009 e-BULLETIN

The partners of ABNR are pleased to announce the appointment of new partners, Chandrawati Dewi and Luky I. Walalangi, with effect from 1 January 2009. Chandrawati Dewi has been extensively involved in matters relating to foreign investment, capital market, corporate restructuring, mergers and acquisitions, and privatization. Luky I Walalangi has been involved in major financing in Indonesia and a number of major electricity projects in Indonesia, including Paiton Project, Tanjung Jati and Jawa Power.

For more information visit www.abnrlaw.com

Claudio Alberto Cesario has joined Allende & Brea as partner in Banking , Finance and Capital Markets. January 2009. Cesario obtained his law degree from the Universidad de Buenos Aires and has focused his practice on banking and finance matters.

He joined Allende & Brea in 1989 and became a partner of the firm in 1996, providing legal advice to the major Argentine and foreign banks and taking charge of their international deals, with particular emphasis on capital market transactions.

In 1998 he joined Banco Río de la Plata as Chief Manager with the purpose of creating the General Secretary’s Office and the Legal Consultant’s Office. Between 2002 and September 2008 he served at the bank (now d.b.a. Banco Santander Río) as Chief Manager – Corporate and Investment Banking and participated successfully in the major private and public debt restructuring processes. From then on, he has taken part in the most important domestic and international financing and capital market transactions, placing Banco Santander Río as the leader in the corporate segment.

He has also been the Senior Vice-President of Banco Santander Río from 2002 to date, and is currently a regular member of its board of directors. Laura Elena Santanatoglia has been appointed partner in January 2009.

Mrs. Santanatoglia joined Allende & Brea in 2000, focusing her practice on insurance and reinsurance law. She has been actively involved in advising insurance and reinsurance companies, brokers and other clients on regulatory matters within her field of speciali-zation, including brokers and insurance agents agreements, mergers and acquisitions of insurance companies, transfer of portfolios, registration and representation of insurers, reinsurers and brokers before the Insurance Superintendence, among others.

She is a member of the Association Internationale de Droît des Asurances (AIDA), the Insurance Lawyers Club; the Isaac Halperín Insurance Institute and the Bar Association of the City of Buenos Aires (Colegio Público de Abogados de la Ciudad de Buenos Aires). For additional information visit www.allendebrea.com

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Melbourne, 11 February 2009: Keeping pace with the rapid changes occurring in Australia's financial markets, Clayton Utz has further bolstered its restructuring and insolvency capability with the appointment of specialist corporate workouts lawyer Nick Poole as a partner in Melbourne.

Nick brings a wealth of restructuring experience to the firm having worked for nearly 8 years in Mayer Brown JSM's (previously Johnson Stokes & Master) leading Asian restructuring and insolvency practice in Bangkok and then Hong Kong.

Nick's extensive restructuring experience includes advising lenders, bondholders, debtors and insolvency practitioners in connection with all aspects of large, complex cross-border insolvencies, restructurings, workouts and non-performing loan sales.

Recently Nick was the lead partner advising a 27-member bank group in the restructure and then liquidation of the Hong Kong listed Moulin Group of Companies having bank debt in excess of HK$2.4 billion, involving formal insolvency proceedings in 11 jurisdic-tions and the US$600 million disposal of the Group's majority interest in the third largest eyewear retailer in the US. Nick also recently advised major creditors in respect of the liquidation of Oasis Hong Kong Airlines and the bondholders of Bio-Treat Technology Limited following its failure to redeem put bonds with a face value of S$156 million.

Given the current economic climate Nick's extensive Asian restructuring experience will prove invaluable as the number of financially distressed companies and defaults continues to rise.

"Falling commodity prices and the tightening of the credit market has seen the option for stressed companies and their lenders to exit positions through refinancings and asset sales become more difficult. Consequently it is imperative that interested parties are able to formulate and implement appropriate corporate restructurings in a timely fashion. Given the complex and sometimes opaque corporate structures that we are seeing being used, a broad mix of legal skills including in areas such as insolvency, tax, workplace relations, property, mergers & acquisitions and funds management is needed.

"As a leading firm in the Australian market, Clayton Utz not only has the necessary high-level restructuring and insolvency expertise but is able to quickly assemble a multi-disciplinary legal team with the skills needed to advise on major corporate workouts," he said.

Commenting on Nick's appointment, the national head of Clayton Utz' Banking and Financial Services practice, Grant Fuzi, said: "In the current economic climate, Nick's joining the restructuring and insolvency group is very timely and further enhances the broad expertise and capabilities of our national team. "

ENDS

Disclaimer Clayton Utz Media Releases are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this Media Release. Persons listed may not be admitted in all states.

For additional information visit www.claytontuz.com

C L A Y T O N U T Z B O O S T I N S O L V E N C Y A N D R E S T R U C T U R I N G T E A M


FOR IMMEDIATE RELEASE

SEATTLE, FEB. 26, 2009 President Barack Obama formally nominated Davis Wright Tremaine LLP partner (and former Gover-nor of the State of Washington) Gary Locke to join his cabinet as Secretary of the Department of Commerce. Locke has accepted the nomination and will return to public service upon confirmation by the Senate.

Locke joined the national law firm of Davis Wright Tremaine in 2005 after two successful terms as governor. “Gary's leadership of our China practice has been instrumental to its growth and success,” said Norm Page, partner and co-chair of the firm's China prac-tice group. “He has successfully helped American companies sell their products and services internationally, particularly in China, and we are sure that he will bring the same level of commitment and dedication to his important new role helping all U.S. companies grow and create jobs.”

“Gary has been a wonderful colleague and a tremendous asset to Davis Wright,” said Susan Duffy, Partner-in-Charge of the firm's Seattle office. “We know that he will excel as he returns to public service. We are proud of Gary and wish him all the best in his new role.”

Locke began his career in public service in 1976 as deputy criminal prosecutor for King County, Wash. He ascended through sev-eral roles working for the citizens of Washington state, serving as a state representative for 11 years, chief executive for King County for three years, and governor for eight years.

When Locke was elected as Washington state's 21st governor in 1997, he became the nation's first Chinese-American governor. He prioritized strengthening the state's economy, improving transportation, expanding health care, raising academic achievement in public schools, and increasing the accessibility and user-friendliness of state government. He was re-elected in 2000 by an over-whelming margin.

For more information on Locke's appointment, see the Feb. 25, 2009 press release issued by the White House.

About Davis Wright Tremaine

Davis Wright Tremaine LLP is a national full-service law firm with approximately 550 attorneys in nine offices: Seattle and Bellevue (Wash.), Portland, (Ore.), Los Angeles, San Francisco, Washington, D.C., New York, Anchorage (Alaska) and Shanghai, China.

For additional information visit www.dwt.com

D A V I S W R I G H T T R E M A I N E S E A T T L E P A R T N E R G A R Y L O C K E N O M I N A T E D F O R U N I T E D S T A T E S S E C R E T A R Y O F C O M M E R C E


WASHINGTON, D.C.– Hogan & Hartson LLP formally announced the formation of its Stimulus Legislation Task Force, a project of the firm's existing interdisciplinary Infrastructure Working Group. The task force will provide coordinated, comprehensive support and advice to clients with regard to the American Recovery and Reinvestment Act of 2009. The task force has been committed to closely monitoring and analyzing this stimulus legislation on a current and ongoing basis, and will be available to counsel clients regarding all aspects of the legislation and the timely approval and implementation of any related project. "We are pleased to extend this service to our clients and keep them informed about how this bill will potentially affect their industries and businesses," said Washington, D.C. partner Latane Montague, Director of the firm's Infrastructure Working Group. "As a firm, we continually provide our clients with advice regarding impending rules and regulations, and this task force will be a great resource for clients, providing information and guidance resulting from changes brought on by the new administration in these demanding economic times."

For more information about the firm, visit www.hhlaw.com.

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L U C E F O R W A R D B O O S T S C O R P O R A T E S E C U R I T I E S T E A M I N L O S A N G E L E S

John C. Kirkland has joined Luce, Forward, Hamilton & Scripps LLP’s Los Angeles office as a Partner in the firm’s Corporate practice group, focusing on public securities. Kirkland brings 20 years of experience in industries including media and entertainment, technology and life sciences, and will represent companies throughout the Pacific Rim, including Asian corporations seeking listing on U.S. stock exchanges. “With the addition of John to our Los Angeles office, Luce Forward can offer sophisticated corporate securities services on a statewide basis,” said Kurt L. Kicklighter, Luce Forward’s Managing Partner. “His extensive experience leading complex securities transactions furthers our strategic goal to provide a full range of services to our clients in Los Angeles.” Kirkland possesses a strong cadre of expertise in corporate and securities matters, including public offering and private placements of debt and equity securities, public company reporting, venture capital financing, negotiated and contested mergers and acquisitions, proxy contests, tender offers and going private transactions, special committee, audit committee and corporate compliance issues. Additionally, he has strong industry experience in healthcare, international trade and investment, retail and financial services. His robust background will position the Los Angeles office to become more important in one of the most vibrant markets in the state. “Luce Forward is a top California law firm with a solid reputation for representing clients nationwide,” said Kirkland. “I am pleased to bring to the firm my client base of middle market public and private companies, which fits well with the firm’s strategic objective to provide creative and efficient litigation and transactional services.” Prior to joining Luce Forward, Kirkland was a Partner at Dreir Stein Kahan Browne Woods George. He was previously a shareholder at Greenberg Traurig, and began his legal career at Cadwalader, Wickersham & Taft. He is listed in Southern California Super Lawyers and Who’s Who in American Law, and is a recipient of the Wiley W. Manuel Award for Pro Bono Legal Services. Kirkland earned a Juris Doctor degree from the University of California, Los Angeles School of Law, and a Bachelor of Arts degree from Columbia University, New York.

For additional information visit us at www.luce.com


Fernando Peláez-Pier

Prior to joining Hoet Peláez Castillo & Duque , Mr. Peláez-Pier was responsible for setting up the London office of Bomchil, Castro, Goodrich, Claro, Arosemena & Associates and was Director of their Paris and London offices from 1972 to 1976. He was an associate at Goodrich, Riquelme & Associates, Mexico City from 1967 to 1972. In addition to advising governments and major investors such as the Mitsui Corporation and the Washington DC-based International Finance Corporation, Mr. Peláez-Pier has also played a prominent role in commercial litigation. Most recently, he has been involved in a fiercely contested suit between Korean company Samsung and a local distributor, estimated to be worth around US$1 billion. Mr. Peláez-Pier has been an active member of IBA for more than 20 years during which time, he has held various positions with the Section on Business Law, the transition team responsible for restructuring the Association and as IBA Secretary-General and Vice President. For additional information visit www.hpcd.com

H O E T P E L A E Z C A S T I L L O & D U Q U E P A R T N E R F E R N A N D O P E L A E Z - P I E R N E W I B A P R E S I D E N T

Fernando Peláez-Pier commenced his two-year term as President of The International Bar Association effective January, 2009. Mr. Peláez-Pier is a prominent member of the global legal fraternity, and as an expert on inward investment, he has helped several of the largest multinational corporations developing their businesses in Venezuela. He practices in the areas of contract negotiations, mergers & acquisitions, foreign investments, project finance and alternative dispute resolution. He joined Bentata Hoet & Asociados (now Hoet Pelaez Castillo & Duque) in 1977, where he currently leads as one of its Corporate Partners.

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Feature Session: Harvard Forum on Leadership Issues Facing Law Firm Leaders


PHILADELPHIA, PA, Morgan Lewis announced the addition of Colm F. Connolly as a partner in its Litigation Practice, resident in the firm's Philadelphia office. Mr. Connolly, who has served as the U.S. attorney for the District of Delaware since 2001, will focus his practice on corporate investigations and white collar matters. His first day at the firm will be Tuesday, January 20, 2009.

"As corporate investigations increase and prosecutors look closely at white collar activity in a variety of substantive areas—including healthcare, environmental crimes, financial institution crimes, federal procurement, and the Foreign Corrupt Practices Act—Colm's unique experience and insight as a U.S. attorney will be invaluable," said James D. Pagliaro, leader of the firm's Litigation Practice. "We are thrilled to welcome him to the firm."

Morgan Lewis was recently ranked as one of the top global litigation firms and its clients include a number of the world's leading companies. Mr. Connolly will be instrumental in assisting clients with litigation in the Delaware federal courts—a jurisdiction of choice for intellectual property and bankruptcy litigation—and the Delaware Chancery Court, a critically important forum for corpo-rate governance litigation. He joins a litigation team that spans 18 offices worldwide and comprises more than 700 litigators cover-ing a full spectrum of industries.

An honors graduate of Duke Law School and Notre Dame, who also holds a Master's Degree from the London School of Econom-ics, Mr. Connolly began his career as a clerk for Judge Walter K. Stapleton of the U.S. Court of Appeals for the Third Circuit. Following his clerkship, he joined the U.S. Attorney's Office in Wilmington, where he initially gained national attention for the successful investigation and prosecution of a prominent lawyer for the murder of the secretary to the governor of Delaware.

About Morgan, Lewis & Bockius LLP Morgan Lewis is an international law firm with more than 1,500 lawyers in 22 offices located in Beijing, Boston, Brussels, Chicago, Dallas, Frankfurt, Harrisburg, Houston, Irvine, London, Los Angeles, Miami, Minneapolis, New York, Palo Alto, Paris, Philadelphia, Pittsburgh, Princeton, San Francisco, Tokyo, and Washington, D.C. For more information about Morgan Lewis, please visit www.morganlewis.com

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S I M P S O N G R I E R S O N A N N O U N C E S I X P R O M O T I O N S A N D T W O A D D I T I O N S

Simpson Grierson is delighted to announce four promotions to Senior Associate and two promotions to Senior Legal Executive. Liz Gellert joined Simpson Grierson in April 2007 and is based in the Auckland specialist banking and finance litigation team. She provides advice to banks, financial institutions and insolvency practitioners on all aspects of banking, finance and insolvency litigation and dispute resolution. Liz regularly represents clients in the District Court, High Court and Court of Appeal. Charlotte Fox. a specialist construction lawyer, returned to Simpson Grierson in 2008 after four years in London, working for two leading construction law firms. Based in the Auckland construction team, Charlotte provides advice on all stages of construction contracts from reviewing contracts prior to execution to assisting when disputes arise. Andrew Bailey joined Simpson Grierson's Auckland corporate team from the UK in 2007, where he worked for a leading law firm. A specialist corporate lawyer, Andrew advises on and negotiating all aspects of corporate transactions, including mergers and acquisitions, sales, re-organizations, financing and capital raisings as well as general contractual matters. Continued Next Page ►


Matt Conway , a specialist environmental lawyer in Simpson Grierson's local government and environment team in Wellington, joined Simpson Grierson in 2003 and advises on a range of resource management and local government issues for local authorities and infrastructure developers. He has represented clients at Council hearings, Environment Court mediations and Environment Court hearings. Jo Bradford is a senior legal executive in Simpson Grierson's banking & finance practice and works with partner Peter Ferguson in the transaction team on property finance lending transactions - in particular the funding of major developments. She joined the team in 2003 and is involved in all aspects of lending, from preparing and negotiating bank documentation to reviewing supporting documentation. Angela Martin is a senior legal executive in Simpson Grierson's banking & finance practice. She joined Simpson Grierson in 2002 and works closely with the firm's banking clients. Angela advises on range of issues concerning mortgages and securities over land. Simpson Grierson is delighted to announce the arrival of two new senior associates:

Gwendoline Keel has joined Simpson Grierson's commercial team, having previously worked with Brookfields Lawyers in Auckland. Gwendoline specializes in commercial law and specifically helps mid-sized (often family-owned) companies to grow; foreign investors to set up and operate in New Zealand; and companies to navigate the maze of laws governing the selling and marketing of products and services.

Jo-Anne Knight has joined Simpson Grierson’s Auckland commercial litigation team. A specialist in building and construction law, Jo-Anne represents developers, contractors, consultants and local authorities in a broad range of property and construction disputes. She appears regularly as counsel before the courts and at adjudications and arbitrations, as well as engaging in mediation and other forms of alternative dispute resolution. Jo-Anne joins the firm after ten years at Brookfields Lawyers in Auckland. For more information about Simpson Grierson visit us at www.simpsongrierson.com

S I M P S O N G R I E R S O N A N N O U N C E S I X P R O M O T I O N S A N D T W O A D D I T I O N S - C O N T ’ D


February 9, 2009 Secretary of State Hillary Rodham Clinton recently appointed WilmerHale partner Todd Stern as a special envoy for climate change, where he will serve as the chief US negotiator at United Nations talks on climate change. Stern is a partner in the firm’s Regulatory and Government Affairs and Litigation/Controversy Departments, and is vice chair of the Public Policy and Strategy Group. “American leadership is essential to meeting the challenges of the 21st century, and chief among those is the complex, urgent and global threat of climate change,” said Secretary Clinton at a State Department ceremony. Clinton added that Sterns’ appointment sends “an unequivocal message that the United States will be energetic, focused, strategic and serious about addressing global climate change and the corollary issue of clean energy.” In his acceptance of the position, Stern stated “the time for denial, delay and dispute is over” and “the time for the United States to take up its rightful place at the negotiating table is here.” Stern has served as a senior fellow at the Center for American Progress and prior to joining WilmerHale he served in the Clinton administration from 1993 to 2001. In his time with the Clinton administration, Stern was the chief US negotiator at the Kyoto Protocol and coordinated the president's Initiative on Global Climate Change.

For additional information visit www.wilmerhale.com

W I L M E R H A L E P A R T N E R T O D D S T E R N A P P O I N T E D B Y C L I N T O N A S S P E C I A L E N V O Y F O R C L I M A T E C H A N G E

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ALI BUDIARDJO, NUGROHO, REKSODIPUTRO acted for the Government of the Republic of Indonesia in the issuance of Global Bonds in the amount of US$ 2.2 Billion listed in the Singapore Stock Exchange. For additional information visit www.abnrlaw.com

Allende & Brea advised The Sentient Group, an independent private equity investment firm specializing in the global resources industry, in the acquisition of Rincon Lithium Ltd. from Admiralty Resources NL, an Australian publicly traded company, for US$ 22,170,000. The main asset of Rincon Lithium Ltd. consists of mining tenements in the Provinces of Salta and Jujuy, Republic of Argentina.

Carlos J. García Díaz (partner) and Juan Martin Allende (senior associate) acted for Allende & Brea. For additional information visit www.allendebrea.com

Halliburton and its former subsidiary Kellogg, Brown & Root announced an agreement to pay a total of $579 million to settle charges with the Securities and Exchange Commission and the Department of Justice over bribes KBR paid to win $6 billion in oil contracts from Nigerian officials. The settlement is the second-largest in history, right behind the $800 million Siemens deal announced in December. KBR, which spun off from Halliburton in 2007, pled guilty to five FCPA counts and agreed to retain an independent monitor and remain under Justice Department review for three years. KBR and Halliburton accepted a $402 million Justice penalty; under an in-demnification agreement the companies reached during the KBR spin-off, Halliburton will pay all but $20 million of it. In a separate SEC proceeding, the two companies agreed to pay $177 million. Robb Voyles at Baker Botts represented Halliburton. Voyles said Baker Botts has been working on the Halliburton matter since a series of Nigerian press reports brought the scandal to light in 2004. Along the way, Voyles said, he and his partner, Andrew Baker, have combed through documents, interviewed witnesses, and responded to government subpoenas.

For additional information visit www.bakerbotts.com


17 February 2009: Clayton Utz has advised on two separate and successful capital raisings coming out of Queensland, in a sign that the equity markets are still open for business despite the difficult economic climate.

A Clayton Utz Brisbane team has advised Bank of Queensland (BOQ) on its A$108 million share purchase plan (SPP) and placement, and telecommunications company PIPE Networks on a A$10 million placement and related SPP offer.

The team, led by Brisbane Corporate partner Tim Reid, worked with BOQ to secure relief from ASIC for an SPP offer of $10,000 per shareholder, a change to ASIC's SPP relief policy which has since been extended to other ASX listed companies, including PIPE Networks, in response to difficult market conditions for capital raisings.

BOQ's additional capital will be used to continue to fund the organic growth opportunities for its existing business.

PIPE Networks new capital will assist in funding the system acquisition for its Sydney-Guam undersea telecommunications cable project.

BOQ's placement was conducted in conjunction with the close of the SPP offer once the SPP pricing was known.

Commenting on the deal, Mr. Reid said: "This is something of a reverse of the usual practice of launching an SPP off the back of a placement.

"In the current environment, listed companies need to be able to move quickly to take advantage of narrow windows of opportunity for capital raising on reasonable terms. In both projects we were able to quickly deal with the regulatory issues involved and meet tight deadlines for documenting the offers."

ENDS

For additional information visit www.claytonutz.com

C L A Y T O N U T Z A D V I S E S L E A D I N G Q U E E N S L A N D C O M P A N I E S O N S U C C E S S F U L C A P I T A L R A I S I N G S

A L I B U D I A R D J O A C T S F O R I N D O N E S I A G O V E R N M E N T I N 2 . 2 B I L L I O N G L O B A L B O N D I S S U A N C E

A L L E N D E & B R E A A D V I S E S T H E S E N T I E N T G R O U P I N A C Q U I S I T I O N O F R I N C O N L I T H I U M

B A K E R B O T T S $ 5 7 9 M I L L I O N H A L L I B U R T O N A N D K B R F C P A S E T T L E M E N T

Gide Loyrette Nouel is assisting on the establishment of a significant 50-50 joint venture between Veolia Transport and RATP Dévelopment, a subsidiary of major French mass transit operator RATP, designed to enhance the two companies’ growth potential in Asia over the next twenty years. The entity’s business activity will cover the operation and maintenance of urban and commuter passenger transportation systems throughout Asia which are expected to reach an estimated revenue target of EUR 500 million in 2013. Under the agreement Veolia Transport will transfer to the joint venture its existing contracts and operating companies in China, India and South Korea. Gide Loyrette Nouel advised on the establishment of the joint structure and drafting of the relevant documentation. The Paris team is being led by partner Charles-Henri Leger together with partners Gilbert Ladreyt (tax), Antoine Choffel and Stéphane Hautbourg (competition) and Antoine de La Gatinais (corporate), with assistance from senior associates Sophie Deis-Beauquesne, François Dumonteil (competition) and Alexis Pailleret (corporate).

For additional information visit www.gide.com

Jan 23 2009 - King & Wood represented a syndication consist-ing of several domestic banks, with Bank of China (Hong Kong) Limited acting as the agent . The loan facility of over USD 10 Billion was granted to the subsidiaries of CNPC for the construction and operation of China - Turkmenistan Gas Pipeline Project Finance. King & Wood primarily assisted in the preparation of financing structures, financing term sheets, various financing documents, legal opinion letters and final negotiations. For additional information visit www.kingandwood.com


Hogan & Hartson LLP recently represented China M and Sharp Point in the sale of 67 percent interest of both companies to Telstra for AUD$302 million (US$198 million) in cash. China M is a leading mobile content provider in China and Sharp Point provides technical services to China Mobile's central music platform. Telstra is Australia's leading telecommunications and information services company. The Hogan & Hartson team was led by partner Roger Peng with assistance from associates Amber Tang and Amanda Zhou, and legal professionals Jay Song and Jenny Ni. .

For additional information visit www.hhlaw.com

On 30 January 2009, SNS Bank successfully completed a 2 billion Euros bond issue guaranteed by the Dutch State under the Credit Guarantee Scheme that was established by the Dutch Ministry of Finance in October 2008 for the benefit of the financial sector. Under the Credit Guarantee Scheme banks may under certain conditions apply for a state guarantee for bonds to be issued. The bonds issued by SNS Bank have a maturity of 3 years and a 2.875 per cent. interest rate. The issue was well over-subscribed up to an amount of 2.9 billion Euros. The bonds were placed with a large number of national and international investors. SNS Bank was advised by NautaDutilh. The NautaDutilh team consisted of Jan Paul Franx, Ger Cartigny, Anna Zwalve and Jochem Polderman.

For more information, visit us at www.nautadutilh.com

H O G A N & H A R T S O N R E P R E S E N T S C H I N A M A N D S H A R P P O I N T I N S A L E T O T E L S T R A

G I D E L O Y R E T T E N O U E L A D V I S E S O N V E O L I A T R A N S P O R T R A T P D E V E L O P M E N T P U B L I C T R A N S P O R T A T I O N J O I N T V E N T U R E F O R A S I A N M A R K E T

K I N G & W O O D A C T S I N T U R K E M E N I S T A N G A S P I P E L I N E P R O J E C T F I N A N C E

N A U T A D U T I L H A D V I S E S S N S B A N K I N 2 B I L L I O N E U R O S T A T E G U A R A N T E E D B O N D I S S U E

Morgan Lewis Advises Autonomy in $775 million acquisition of Interwoven a San Jose-based content management and software development company.

Morgan, Lewis & Bockius advised Cambridge, England-based Autonomy, a leading data retrieval and search firm, on U.S. legal issues. Interwoven is a San Jose-based content management and software development company.

Morgan Lewis Bockius M&A partner William Myers led a 22-lawyer team from the firm that includes antitrust partner Harry Robins, securities partner David Sirignano, finance partner J. Michael Jack, regulatory compliance partner Stephen Mahinka, tax partner Barton Bassett, IP partner Rahul Kapoor, and executive compensation partners S. James Dibernardo, Zaitun Poonja, and Heath Miller. For additional information visit www.morganlewis.com


M O R G A N L E W I S A D V I S E S A U T O N O M Y I N $ 7 7 5 M I L L I O N A C Q U I S I T I O N O F I N T E R W O V E N

45th International PRAC Conference April 25 - 28, 2009

Hosted by Wilmer Cutler Pickering Hale and Dorr LLP Open to all PRAC Member Firms

Registration Now Available online at www.prac.org


Investment Agreement with BNDESPAR establishing the rules for the joint investment between Votorantim and BNDESPAR in Votorantim Celulose e Papel S.A. with the purpose of purchasing shares from Aracruz owned by the Lorentzen, Moreira Salles and Almeida Braga families, and, if applicable, also the shares owned by Arainvest (Safra family) for posterior amalgamation of Aracruz by Votorantim Celulose e Papel S.A. Value of Transaction: Appprox R$3billion TozziniFreire Partners Syllas Tozzini and Darcy Texeira Junior acted in the transaction.

For additional information visit www.tozzinifreire.com


SEOUL 2007

October 20-24

PRAC Conference Materials Available online at www.prac.org

PRAC e-Bulletin is published monthly.

Member Firms are encouraged to contribute articles for

future consideration. Send to [email protected].

Deadline is 10th of each month.

W I L M E R H A L E T H E M E D I C I N E S C O M P A N Y A C Q U I R E S T A R G A N T A

T O Z Z I N I F R E I R E A C T S I N A C Q U I S I T I O N B Y V O T O R A N T I M C E L U L O S E E P A P E I S A O F S H A R E S F R O M A R A C R U Z

WilmerHale client, The Medicines Company, announced that it had completed its acquisition of Targanta Therapeutics Corporation. The Medicines Company completed the transaction through a cash tender offer followed by a short form merger. The Medicines Company paid Targanta stockholders $2.00 per share, net to the seller in cash, plus the contractual right to receive up to an additional $4.55 per share in contingent cash payments if specified regulatory and commercial milestones are achieved within agreed upon time periods. With the consummation of the acquisition, Targanta has become a wholly owned subsidiary of The Medicines Company. WilmerHale was legal advisor to The Medicines Company in this transaction, with a team including: partners David Redlick, Hal Leibowitz, Stuart Falber and Jeffrey Hermanson; counsels Marisa Murtagh and Jessica Lopez; and associates Dana Krueger and Erica Koenig.

For additional information visit us at www.wilmerhale.com

alert 11 February 2009

Development appl ications in NSW cannot be chal lenged on the grounds that they contain misleading and deceptive statements in breach of the Trade Practices Act (Cth) 1974, nor do developers owe purchasers or developers of adjoining land a duty of care to avoid economic loss caused by inaccurate statements in development appl ications.

This fol lows the NSW Supreme Court 's long-awaited decision in the case of Street v Luna Park Sydney Pty Limited [2009] NSWSC 1 handed down last week (Clayton Utz acted for two of the successful defendants).

Thril ls, spills and lit igation

Sydney's famous Luna Park si ts on the harbour in a prime posit ion close to the Harbour Bridge. Unsurprisingly this is also a popular place to l ive. Some residents object to the terri f ied screams generated by happy thr i l l -seekers, and joined with a developer to sue the Park and the second defendant.

Their c laims centred on two development applications (DAs) lodged by the second defendant which were si lent as to the intent ion to locate thri l l r ides in an extension to the site. By doing this, they said, the second defendant engaged in misleading and deceptive conduct in breach of sect ion 52 of the Trade Practices Act. In the al ternative, they claimed negligent misrepresentat ions were made to them.

The residents claimed that they suffered damage by purchasing their propert ies on the misapprehension that only chi ldren's r ides would be located in the northern extension, and paid more than their propert ies were worth i f af fected by a proposal to operate thr i l l r ides in the extension. The developer claimed that i t converted i ts property to a residential apartment block, when, had i t known of any proposal to operate adult thr i l l r ides in the extension, i t would have instead retained i t for commercial uses, which would have been more f inancial ly beneficial .

Not misleading, and not in trade or commerce either

Just ice Brereton found that neither DA was misleading or deceptive. In reaching his decision, he started by emphasising that " in considering whether the al leged representations were conveyed, the whole of the context, and the whole of the document, are relevant" and then pointed out that:

"Lodging a development applicat ion does not import a representat ion that the applicant wi l l undertake the development in question i f consent is granted. A development appl ication is an applicat ion for permission - or consent - to do something that otherwise would be prohibited by law. The lodging of a development appl ication conveys no commitment on the part of the applicant to proceed with the development i f consent is granted...The granting of development consent, let alone the making of a development appl ication, does not involve any obl igation to implement the consent, nor any representation that, i f consent is granted, i t wi l l be implemented".

Even if a DA contained this sort of representat ion, i t could not breach the Trade Pract ices Act as the relevant conduct was not " in trade or commerce" because:

the representations in the DAs were not directed towards persons who had a potential or actual trading or commercial deal ing or transact ion with the second defendant - there was no potential or actual trading or commercial deal ing or relat ionship between the second defendant and the consent authority; and even i f the representat ions were considered to be directed to owners and occupiers of potent ial ly affected propert ies, they were not persons who had a potent ial or actual trading or commercial

Development applications a TPA-free zone, says NSW Supreme Court

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dealing or transact ion with the second defendant.

Were the DAs negligent misrepresentation?

No. There was no duty of care owed to the plaint i f fs (as potential purchasers or developers of neighbouring propert ies) to avoid foreseeable r isk of economic loss caused by inaccurate or misleading statements in the DAs.

Implications

This case has important impl icat ions for al l developers and property owners:

the lodgement of a development appl ication is not conduct " in trade and commerce" and is therefore not capable of being misleading and deceptive under the Trade Pract ices Act. developers do not owe purchasers or developers of adjoining land a duty of care to avoid economic loss occasioned by inaccurate statements in development applicat ions.

Disclaimer Clayton Utz News Alert is intended to prov ide commentary and general informat ion. I t should not be re l ied upon as legal advice. Formal legal advice should be sought in part icu lar t ransact ions or on mat ters of interest ar is ing f rom this bul let in . Persons l is ted may not be admit ted in a l l states.

For more information please contact:

Name: Andrew Poulos - Partner SydneyTel: +61 2 9353 4195Fax: +61 2 8220 6700Email: [email protected]

Name: Brendan Bateman - Partner SydneyTel: +61 2 9353 4224Fax: +61 2 8220 6700Email: [email protected]

Name: Peter Briggs - Partner SydneyTel: +61 2 9353 4225Fax: +61 2 8220 6700Email: [email protected]

Name: Nick Thomas - Partner SydneyTel: +61 2 9353 4751Fax: +61 2 8220 6700Email: [email protected]

Name: Claire Smith - Senior Associate Sydney

Tel: +61 2 9353 4713Fax: +61 2 8220 6700Email: [email protected]

Name: Natasha Nadj - Senior Associate Sydney


Name: Sallyanne Everett - Partner Melbourne


Name: Karen Trainor - Partner BrisbaneTel: +61 7 3292 7012Fax: +61 7 3221 9669Email: [email protected]

Page 2 of 3.

Name: Alfonso del Rio - Partner in Charge Canberra

Tel: +61 2 6279 4009Fax: +61 2 6279 4099Email: adelr [email protected]

Name: Brad Wylynko - Partner PerthTel: +61 8 9426 8552 Fax: +61 8 9481 3095Email: [email protected]

Name: Margaret Michaels - Partner DarwinTel: +61 8 8943 2517Fax: +61 8 8943 2500Email: [email protected]

Page 3 of 3.

January 22, 2009 - No 1/2009 www.tozzinifreire.com.br

LATEST ISSUES

Brazil: New Regulations for Ports

Brazilian Insurance Authorities Extend IRB’S Grace Period

Brazil: Viracopos Airport Privatization Model

Brazilian Securities Commission: Proposed Regulation for Offerings of Securities with Limited Placement Efforts

Capital Markets

BRAZIL: REGULATION FOR THE OFFERING OF SECURITIES WITH LIMITED PLACEMENT EFFORTS

The Brazilian Securities Commission (CVM) has recently enacted a new regulation to simplify the procedures relating to public offerings of securities in the Brazilian market to qualified investors.

Inspired by rule 144-A of the United States, the Brazilian regulation exempts from registration with the CVM a public offering of certain securities, such as debt instruments, shares of investment funds, certificates for real estate receivables and certificates for agribusiness receivables, whenever offered to a restricted number of qualified investors.

The exemption applies only to public offerings made to no more than 50 qualified investors and purchased by no more than 20 qualified investors. In any event, placement efforts must be restricted to individualized contacts with potential investors. As a result, placement efforts cannot contemplate the use of stores and offices open to the general public, nor the use of public communication vehicles such as press, radio, television and public web pages.

Secondary trading of securities offered pursuant to the new rule can only occur after 90 days from their subscription or purchase by primary investors. Moreover, only qualified investors are allowed to negotiate such securities unless the issuer takes additional measures to comply with registration requirements and the preparation of an offering memorandum.

Antonio Felix de Araujo Cintra Partner - São Paulo

[email protected]

Ana Carolina de Salles Freire Partner - São Paulo

[email protected]

WWW.TOZZINIFREIRE.COM.BR T 55 11 5086-5000 F 55 11 5086-5555

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February, 2009

on Competition &Antitrust Law

On February 6, 2009 the Government of Canada introduced Bill C-10 (Budget Implementation Act, 2009) (the “Bill”), which, among other changes, proposes broad reforms to the Competition Act R.S.C. 1985, c. C-34 (the “Act”), and certain amendments to the Investment Canada Act R.S.C. 1985, c. 28 (the “Investment Act”). We find it unusual to include such sweeping amendments to the Act in budget implementation legislation, which may limit the amount of debate and revision the provisions are subject to. The Bill comes on the heels of the final report of the Canadian Competition Policy Review Panel (the “Review Panel”), released in June 2008, following which the Conservative Government of Stephen Harper indicated it would consider incorporating many of the Panel’s recommendations. This is reflected in the Bill, which, among other matters proposes to:

1. Replace the existing criminal conspiracy provisions of the Act with a per se criminal offence for cartel-type activities, similar to the U.S. regime, and addition of a civil provision to address an “agreement or arrangement” that “prevents or lessens, or is likely to prevent or lessen, competition substantially”. This proposal establishes a dual track approach to dealing with behaviour that may have anti-competitive effects, and attempts to distinguish “hardcore” cartel activities from other types of agreements that may have anti-competitive effects. In theory this approach may not be objectionable but it is replacing a provision that has had the benefit of over a hundred years of judicial consideration and enforcement experience. We are concerned that the amendments will result in years of uncertainty until its application has been settled by the courts and through enforcement policies.

2. Repeal the criminal price discrimination, predatory pricing and promotional allowance provisions (previously ss. 50 and 51 of the Act). This leaves these activities subject only to the civil abuse of dominance provisions of the Act.

3. Replace the criminal resale price maintenance provision (s. 61

Proposed Amendments to Canada’s Competition Laws

of the Act) with a new civil framework applicable when the impugned conduct “has had, is having or is likely to have an adverse effect on competition in a market”. Section 103.1 of the Act is amended to permit any person to make an application to the Competition Tribunal with respect to conduct contrary to the new resale price maintenance provisions (paralleling the existing access for reviewable practices contained in ss. 75 and 77 of the Act, which contain, inter alia, the refusal to deal, tied selling and exclusive dealing provisions of the Act).

4. Permit the Competition Tribunal to administer monetary penalties for abuse of dominance offences “in an amount not exceeding $10,000,000 and, for each subsequent order…an amount not exceeding $15,000,000.” The availability of administrative monetary penalties for abuse of dominance had previously been limited to domestic air services (under s. 79(3.1), now proposed to be repealed). Interestingly, the penalties proposed in the Bill are substantially higher than the $5 million threshold suggested by the Review Panel. These changes are likely to be controversial. Under the existing legislation conduct that may give rise to abuse of dominance (which includes common practices such as loyalty rebates, tied selling, bundling and exclusivity arrangements) is presumed to be lawful and it is not easy to tell in advance when the conduct should be the subject of a remedial order. Imposing multi-million dollar penalties when there are no clear rules for knowing in advance when the conduct will attract such a sanction seems unfair and may chill pro-competitive activity.

5. Increase the fines and length of imprisonment for certain offences under the Act. For instance, the maximum term of imprisonment for failure to comply with a prohibition order is increased from two years to five, and the punishment for committing an offence under the revised criminal conspiracy provisions is amended to imprisonment for a term not exceeding 14 years (up from 5) or to a fine not exceeding $25 million (up from $10 million), or to both.

For further information please contact any of the following members of our Competition | Antitrust group:

Edmonton

Barry Zalmanowitz, Q.C. (780) 423-7344 [email protected]

Toronto

Susan Paul (416) 863-4461 [email protected] Caverly (416) 863-4702 [email protected]

Montreal

Pascale Dionne-Bourassa (514) 878-5844 [email protected]

Calgary

Matt Sudak (403) 268-6854 [email protected]

2.

6. Increase the notification thresholds for mergers to transaction sizes of $70 million or greater, an increase from the current $50 million (except for the case of amalgamations, where the threshold is already set at $70 million). The thresholds will now be subject to annual revision pursuant to a formula that accounts for inflation.

7. Reduce the period within which a completed merger may be challenged before the Competition Tribunal to one year (from three).

8. Introduce a second stage merger review process that permits the Commissioner of Competition, in its discretion, to require additional information from applicants. The initial review period of 30 days would be extended in the case of a second stage request to 30 days from the date on which all the information requested in the second stage has been provided. This proposal follows the recommendations of the Review Panel and brings Canadian practice closer to the regime followed in the U.S. In our view the revisions may result in substantially increased compliance costs to merging parties, and could introduce significant delays and uncertainties into the Canadian merger review process. Interestingly, while this was probably the most controversial recommendation made by the Review Panel, it was not an issue on which the Review Panel sought submissions and as such did not benefit from a fulsome consultation process.

9. Introduce a national security test for investments under the Investment Act, and increase the thresholds for review under the act (to $1 billion in most cases).

The proposed amendments to the Competition Act encompass most of the Panel’s recommendations. As indicated above some of these are controversial and may in our view harm the competitiveness of the Canadian economy, which is ironic given that the Review Panel’s mandate was to make recommendations to enhance Canada’s competitiveness. Notably the introduction of a second request merger review process is, in our opinion, a mistake. While there may be some mergers the Competition Bureau needs more time to review, a shift to a U.S. second request model is not necessary to accomplish this and has the potential to impose long delays and enormous costs on the merging parties. We do not believe that the amendments to the cartel provisions, given the uncertainty that they are likely to bring, are warranted. Finally, the proposed changes to the abuse of dominance provisions also have the potential to cause unintended harm, as noted above.

The remainder of the changes to the Competition Act we believe, on balance, are long overdue and will likely be beneficial. Similarly, we view the changes to the Investment Canada Act to be positive.

Should you wish to discuss the proposed changes and how they might impact your business, or obtain assistance in communicating any concerns you have to the Government, please contact a member of our national Competition | Antitrust group.

This bulletin is designed to supply brief details of recent legislative or other initiatives of interest and some commentary. The summaries and comments provided are, of necessity, brief and should not be relied upon as legal advice. We encourage you to contact any of the lawyers listed below for further details or advice in the context of a particular situation.

China Practice/Shanghai Office Advisory Bulletin

Elevating Standards: China's Newly Amended Patent Law

By Ron Cai, Sisi Liu and Kevin Moore [February 2009]

China's National People's Congress recently adopted a new amendment to it's Patent Law, which will take effect on Oct. 1, 2009. The Patent Law of China was formulated in 1984 and took effect on April 1, 1985. It has been amended three times: first in 1992, second in 2002, and most recently on Dec. 27, 2008. This article provides an overview of major changes under the third amendment (“New Law”).

Heightened patent-granting threshold

The 2002 amended Patent Law (“Current Law”) adopted a relatively low threshold for patent applications that has been criticized as a “relative novelty threshold.” In China, as in most other countries, patents are divided into three categories: invention; utility; and design (“creations”).

A patent can be granted in China for creations that (i) have not been “publicly disclosed in publications” worldwide and (ii) have not been “publicly utilized or otherwise made known to the general public” in China. Put another way, a creation used or known in foreign countries can still be granted a patent in China so long as it is neither used nor known in China and is not publicly disclosed worldwide.

This low threshold is widely considered in China to impede application and improvement of existing foreign creations in China and has arguably resulted in some low-quality patents. The New Law thus elevates the threshold for granting a patent by replacing the relative novelty threshold with a stricter threshold. This threshold, commonly referred to as a “complete novelty threshold,” requires that a creation not be publicly disclosed, used or known worldwide before a patent application is submitted.

It has been reported that the purpose of the amendment is to enhance Chinese patent quality in the long run.

Cross-border issues

The Current Law requires that patent applications for an achievement realized in China be filed there before being filed abroad. The New Law eliminates this requirement. As of October 2009, patent applications can be directly filed overseas. It is noteworthy, however, that applications will be subject to “security review” by China's patent office before being submitted overseas. We understand this review is intended to protect China's national security. Failure to comply with this procedure will result in no Chinese patent being granted. The detailed procedure of the review remains to be formulated by China's State Council.

Under the Current Law, transfer of contract for patent (or patent application) to a foreign party must be approved and registered. The New Law leaves this requirement to China's rules on technology application, the Administration Rules on Technology Import/Export Contract, which were also recently amended and will take effect in March 2009. Under the New Law, transfer of patent (or patent application) that falls within the “freely import/export technology” classification is only subject to online registration. Approval is still required for patent (or patent application) that falls within the “restricted import/export technology” classification.

Under the Current Law, foreign applicants are required to use patent agencies designated by the Chinese authorities. The New Law has no such restriction. Foreign applicants will be free to choose any legally established patent agency.

Restraining counterfeits

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The New Law indicates that China is taking a tougher stance on restraining counterfeits. Where the Current Law fails to spell out expressly the powers relating to inspection of counterfeits, the New Law fills in the blanks: Powers include conducting inquiries, on-site inspection, review and reproduction of relevant documents, inspection of relevant products, and containment or seizure of products when there is evidence they are counterfeit.

China is pressing further by increasing the fine imposed for patent violation from three times any illegal gain made through a counterfeit to four times the illegal gain, and from ¥50,000 to ¥200,000 when there is no illegal gain.

Facilitating defense

The New Law focuses on helping patent owners halt and prove patent infringement. It also emphasizes the adequacy of compensation to patent owners.

The Current Law gives patent owners the right to apply for injunction to stop infringement before filing a lawsuit. However, a court is required under general Chinese civil procedure law to decide within 48 hours whether to grant the injunction. In practice, courts seem rarely able to make decisions so quickly regarding patent infringement. A commonly applied injunction is to halt production.

However, courts have often been reluctant to grant a timely injunction given the possible large-scale impact of a halt in production. The New Law extends the decision time to 96 hours. Hopefully, this extension will allow courts ample time to make injunction decisions and avoid rejecting applications due to time constraints.

The New Law also enables plaintiffs to be compensated for reasonable expenses incurred in stopping patent infringement.

Freedom of technology use

On one hand, the New Law strengthens protection for patent holders. On the other hand, it seeks balance, so that the rights of patent owners do not unduly hamper overall technology development in China.

Creators often face legal challenges for using “low-quality” patented technology. When accused of using such technology, creators need to spend much time and energy proving their innocence. To do so, they must nullify the “infringed” patent through administrative procedure before submitting their case to a court. This mandatory procedure often causes disputes to go unsolved, dragging on for considerable lengths of time, sometimes up to 10 years.

The New Law appears to recognize this issue and provides a practical solution: As of October 2009, if it can be proven that a patented creation is an “existing technology or design” (i.e., that such technology or design was publicly available before the application date of the patent), use of the technology will not be deemed as patent infringement. It seems that a time-consuming procedure to nullify a patent will no longer be necessary before fighting a patent infringement accusation.

Co-developed creations

The Current Law lacks guidance on exercising rights for licensing a patent developed by more than one creator when the creators cannot reach a licensing agreement. This has resulted in a substantive number of co-developed patents being left unused. The New Law aims to balance rights among patent owners by allowing individual owners of a co-developed patent to use the patent themselves or exercise non-exclusive license (unless agreed otherwise in advance by the creators). This change will likely reduce the number of collaborative patents left unused in absence of unanimous consent. All the creators are required to share any profit from the application or licensing of a co-developed patent.

One patent per creation

The New Law introduces a principal that only one patent will be granted for one creation. The time allowed for review and approval of an invention patent is longer than for a utility patent. The practice has been that applicants apply for both invention and utility patents for the same creation so that it is protected by the utility patent while the invention patent is approved. The New Law does not obstruct this practice. Applicants can still apply for both invention and utility patents, but they must relinquish


the remaining term of a utility patent to obtain an invention patent for the same creation.

Restriction on inherited patents

The New Law demonstrates that China is paying more attention to the protection of inherited patents. Where a patent is acquired through inheritance, the New Law requires the patent applicant to either show the source of the patent or to provide a satisfactory explanation. No patent will be granted if the acquisition of an inherited patent is not in full compliance with the New Law.

Design patent and “offer for sale”

The Current Law only prohibits the manufacture, sale and import of products that infringe upon a protected design patent. The New Law enhances design patent protection by prohibiting the use of products that infringe upon design-patented products in offers for sale. This revision should end patent infringement in many forms by further prohibiting unauthorized uses in advertising, store sales, exhibition displays, etc.

Other changes

The New Law adopts international practices. It provides that China can grant mandatory licensing for manufacture and export of patented medicines according to international conventions. This amendment is China's codification of its obligation under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) to create mechanisms to address public health problems in developing and underdeveloped countries. It also introduces foreign experience in the pharmaceutical field to China, further exempting the use of patented pharmaceutical products from patent infringement for the purpose of administrative approval.

Conclusion

Although the number of patent applications in China may fall after the amendment goes into effect, the New Law promises to better restrain counterfeiting, facilitate IP dispute resolution, and improve overall Chinese patent quality. While these changes bring Chinese patent law into conformity with international practice and agreements, its larger effect may be to encourage home-grown creativity.

For more information, please contact:

This advisory is a publication of Davis Wright Tremaine LLP. Our purpose in publishing this advisory is to inform our clients and friends of recent legal developments in China. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.

Copyright © 2009, Davis Wright Tremaine LLP.

Ron Cai Shanghai, China (011) 86-21-6170-9501 [email protected]

Sisi Liu Shanghai, China (011) 86-21-6279-8560 [email protected]


February 2009

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© 2009 King & Wood www.kingandwood.com

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Tax Issues Related to Intellectual Property Transfer of the Foreign Enterprise to China Transferee

By Stephen Nelson* and Wu Libin**

Cross-border intellectual property (“IP”) transfer has been growing rapidly in international trade. IP transfers may be accomplished by various methods, which may have different tax consequences. This article examines tax policies related to cross-border IP transfers in China. 1. Types of Cross-border IP Transfer Intellectual property refers to the proprietary right to intangible property enjoyed by an enterprise or individual which is created by the mind, mainly including patents, non-patented technology, trademark and copyright. Basically, IP transfers can be divided into two types: ownership transfer (outright sale) and technology license (transfer of the right to use). Each of the two IP transfer types may be carried out through different forms of transaction. For example, the transfer of the ownership of a patent can be accomplished by the sale of the patents or by the contribution of the patents to the registered capital of a company. As the transfer of the ownership by a foreign company to a company in China is rare, the article primarily focuses on tax issues arising in respect of the license of IP to Chinese parties. 2. Primary Taxes Involved in the Transfers of IP into China

2.1 Enterprise Income Tax Under Article 3 of the Enterprise Income Tax Law of the PRC (“EIT Law1”), a non-resident enterprise that does not have any establishment or place of business in the PRC, or that has an establishment or place of business in the PRC but whose income is not effectively connected with such establishment or place of business, shall pay enterprise income tax on income derived from China. Therefore, if a foreign enterprise (non-resident) licenses IP to a China transferee for consideration, the foreign enterprise shall be subject to the PRC enterprise income tax. According to Article 4 of the EIT Law, the tax rate applying to the foreign enterprise mentioned in the above paragraph shall be 20%. However, Article 91 of the Implementing Regulations of the EIT Law of the PRC2 reduces the tax rate to10%. It should be noted that if there is any tax treaty between China and the country of residence of the foreign enterprise, which provides a more preferential rate to the foreign licensor, then the provisions of the tax treaty shall prevail. For example, the withholding tax rate which applies to royalties paid out of China to a Hong Kong company is 7%.3 No other major jurisdiction has a lower withholding tax rate in respect of China-source royalties.

1 The Enterprise Income Tax Law of the PRC was adopted at the 5th Session of the 10th National People’s Congress of the PRC on March 16, 2007 and became effective as of January 1, 2008. 2 The Implementing Regulations of the Enterprise Income Tax Law of the PRC were adopted by the State Council at the 197th executive meeting on November 28, 2007 and became effective of January 1, 2008. 3 See Article 11 of the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income. The arrangement became effective as of December 8, 2006.

February 2009

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Income derived from a transfer of ownership of IP generally should fall within the definition either of business profits or capital gains. In the case of a transfer of a Chinese-registered trademark or patent, we believe that the better view is that the income should be taxable in China as a capital gain, both under domestic law and in accordance with the relevant tax treaty. As this is a situation encountered very infrequently by the PRC authorities, actual implementation may be inconsistent. Therefore, local tax authorities, when first presented with the situation, may attempt to tax the entire amount of the remittance at the withholding tax rate applicable to royalties. In the past, the paid business tax could be deducted from taxable income in calculating the income tax payable. Thus, where the withholding business tax was 5%, enterprise income tax would be levied on 95% of the total payment. However, under the Circular on Enterprise Income Tax of the Non-resident Enterprises (Cai Shui [2008] No. 130) issued on September 25, 2008, business tax is no longer deductible. 2.2 Business Tax Any non-resident enterprise or individual that transfers or licenses for valuable consideration an intangible property to a Chinese enterprise or individual is subject to the PRC business tax. Business tax is assessed at the rate of 5% 4on the total price and any additional fees and charges it receives from the IP transfer. However, if the foreign transferor transfers the IP to China transferee in the form of technology contribution to the capital of the Chinese company, and thus becomes the shareholder of the transferee, the IP transfer is not subject to the PRC business tax.5

2.2.1 Tax Preference In order to strengthen technical innovation and encourage the introduction of technology, under the Circular on Tax Issues Related to the Implementation of the Decision of the CPC Central Committee and State Council on Strengthening Technical Innovation, Development of High Technology and the Realization of Industrialization (Cai Shui Zi [1999] No. 273) (“Decree 273”), income derived from technology transfer, and related technology consultation and technology services offered by units or individuals (including foreign enterprises and foreign individuals) shall be exempt from the business tax. Under Article 2 of Decree 273, technology transfer refers to the activity where the transferor assigns the ownership (outright sales) or the use right of a patent or non-patented technology to the transferee for compensation. Technology consultation and technology services related to the technology transfer refer to the provision of technology consultation and technology services by the transferor to help the transferee master the transferred technology according to the provisions of the technology transfer contract. In addition, the payment for technology consultation and technology services must be included in the same invoices as that for technology transfer. The following specific provisions apply to the turnover of technology transfer exempt from business tax:6

(a) If the technology is transferred with drawings or other media as the carrier, the turnover exempt from the tax shall be the total price and all additional fees paid by the transferee. (b) Where existing technology is transferred with goods as the carrier such as a sample, sample machine or equipment, the turnover exempt from the tax shall not include the value of the goods. (c) The cost of the parent of microbial bacterium spawn and new animal and plant varieties provided to

4 See Appendix of the Interim Provisions of the Business Tax. The Appendix was promulgated by the State Council on December 13, 1993 and became effective as of January 1, 1994. 5 See Article 1 of the Circular related to Business Tax of the Share Transfer (Cai Shui [2002] No. 191) The Circular was jointly issued by State Administration of Taxation and Ministry of Finance on December 10, 2002 and became effective as of January 1, 2003. 6 See Article 2.2 of the Decree 273.

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supplement the biological technology shall be included in the turnover exempt from business tax. But microbial bacterium spawn sold in a large scale shall be subject to value-added tax. (d) Income relating to technology transfer earned in the form of “admission fees” or “royalties” determined according to a certain percentage of sales shall all be income that are free from business tax. 7 (e) Trademark royalties or other similar incomes under a technology transfer contract are not income that is exempt from business tax.8 2.2.2 Technology Transfer vs. Trademark or Copyright Transfer There is no general business tax preference for trademark or copyright transfers. However, under the Approval on Deeming the Income Derived from Computer Software Transfer as Technology Transfer Income (Guo Shui Han [2002] No. 234), income derived from the license of computer software which is protected according to copyright laws and regulations, shall be exempt from business tax referring to the technology transfer income. 2.2.3 Impact of the New Interim Regulation on Business Tax New Interim Regulation on Business Tax9 was issued and took effect as of January 1, 2009. However, the new Interim Regulation on Business Tax does not indicate if the existing business tax preference related to technology transfers will continue in effect. Therefore, we have to await detailed implementing regulations or a clarifying circular to confirm this point. 2.3 Stamp Duty Under Article 1 of the Interim Provisions on Stamp Duty,10 all units and individuals, including foreign enterprises and individuals, which conclude IP transfer contracts in China, are subject to PRC stamp duty. Therefore, both parties to any IP transfer or license contract shall pay stamp duty at the rate of 0.03% or 0.05%.11

2.4 Special issue An interesting issue is whether the payment is taxable in China if one foreign party licenses another foreign party the right to use an intangible in China. In such case, we believe that notwithstanding the fact that the intangible property (for example, a trademark) is to be used in China, it is not transferred in China and the transferor does not actually obtain income from China. Moreover, the licensee is not within the jurisdiction of China for purposes of enforcing withholding tax. Therefore, in our view, the better approach is that the payment should not be subject to PRC tax. However, discussions with various local tax bureaus reveal inconsistent positions on this issue. Therefore, in specific cases a concerned party may wish to inquire of the relevant local tax bureau.

7 See Article 1 of the Circular of the State Administration of Taxation for Defining the Incomes of Foreign Enterprises and Individuals from Technology Transfer Exempt from Business Tax (Guo Shui Fa (2000) No. 166). The Circular was issued by the State Administration of Taxation on October 8, 2000 and became effective as of October 8, 2000. 8 See Article 2 of the Circular of the State Administration of Taxation for Defining the Incomes of Foreign Enterprises and Individuals from Technology Transfer Exempt from Business Tax (Guo Shui Fa (2000) No. 166). 9 New Interim Regulation of the PRC on Business Tax was adopted at the 34th executive meeting of the State Council on November 5, 2008 and came into force on January 1, 2009. 10 The Interim Provisions on Stamp Duty were adopted by the Ninth Executive Meeting of the State Council on June 24, 1988 and became effective as of October 1, 1988. 11 According to Article 1 of the Notice on Imposing Stamp Duty on Contract of Technology Transfer (Guo Shui Di Zi (89) No.034) . The Notice was issued by State Administration of Taxation on April 12, 1989. The applicable tax rate of the stamp duty related to patent application transfer and non-patented technology transfer shall be 0.03%. And the patent transfer and patent license contract shall pay stamp duty at the rate of 0.05%. According to Appendix of the Interim Provisions on Stamp Duty, transfer or license contract of the trademark or copyright shall pay stamp duty at the rate 0.05%.

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3. Cross-border IP Transfer and Transfer Pricing Rules Statistics show that 70% of global cross-border transactions are made between associated enterprises. 12In particular, quantum of transactions in respect of administrative services and intangible assets are increasing quickly. If technology transfers are made between two associated enterprises, transaction shall comply with the arm’s length principle. Under Article 41 of the EIT Law, if a transaction between an enterprise and its associated party does not comply with the arm’s length principle, thus reducing the taxable income or revenue of the enterprise or the associated party, the tax authorities shall be empowered to make adjustments using reasonable methods. Moreover, beginning with the tax returns for 2008, enterprises are required to maintain documentation supporting the pricing of their transactions with affiliates. Therefore, companies that set their royalty rates for intangibles at a high level, reducing the profits of their Chinese companies to a level below that which the Chinese tax authorities consider acceptable, must have documentation to support their pricing. If they do not have the documentation on hand when the tax authorities carry out an audit, they will be subject to penalties should the tax authorities decide that a pricing adjustment is warranted.13

The new transfer pricing rules of the EIT Law also allow for the conclusion of cost sharing agreements between a company in China and one or more overseas affiliates.14 Research and development cost sharing agreements are very common among technology companies, particularly those based in the United States. Under a cost-sharing agreement, no withholding tax will be payable on the cost-sharing fees remitted out of China because the Chinese entity obtains partial economic ownership of the IP. However, in order to implement a cost-sharing agreement, the Chinese party often will have to pay a “buy-in” in respect of existing technology, which will be subject to tax in China. 4. Tax Withholding If a foreign transferor transfers IP to a Chinese transferee, the transferee is required to withhold the enterprise income tax and business tax payable by the foreign transferor. But this does not mean that the Chinese transferee becomes the taxpayer, as the foreign party remains the taxpayer. Under Article 63 of the Tax Collection Administration Law 15, where a Chinese transferee fails to withhold or collect the taxes which should have been withheld or collected, the tax authority shall pursue the payment of taxes from the foreign transferor (the taxpayer), and impose a fine on the Chinese transferee in an amount from 50% to five times of the amount of taxes which should have been withheld. 5. Tax Planning Considerations As we have discussed, different means of transferring IP may have different tax consequences. This provides foreign transferors of IP an opportunity for tax planning in certain circumstances. For example, while technology licenses will be subject to tax, a contribution of technology shall be tax free in China. Please note if the foreign transferor intends to make a contribution in intangible property, it should consider the

12 Xu Xiufang, “Tax Aspects Related to Income Derived from Cross-border Technology Transfer”, Peiking University Press, September 2007, p.139. 13 See Section 6 of the EIT Law: Special tax adjustments. 14 According to Article 112 of Implementing Regulations of the EIT Law, an enterprise may reach a cost sharing agreement with its related parties on the sharing of jointly incurred costs based on the arm’s length principle. 15 The Tax Collection Administration Law was adopted at the 21st meeting of the Standing Committee of the ninth National People’s Congress of the PRC on April 28, 2001 and became effective as of May 1, 2001.

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relevant limitation on contributions of intangibles. Specifically, under article 27 of the Company Law of PRC16 effective as of January 1, 2006, intangible contributions shall not be more 70% of the registered capital of the company. The business tax exemption for technology transfers also provides tax planning opportunities for foreign investors, particularly when facing a choice between a transfer of technology or a license of trademarks or copyrights, for example. Such an opportunity may arise in the context of a franchisor, for example, that may not normally consider allocating a portion of its consideration to technology. If licensing technology, the foreign party needs to exercise caution to ensure that it maximizes the amount of income that may be exempt from tax (for example, while at the same time paying business tax on the non-technology aspects of the transaction). Chinese licensees of IP from their foreign affiliates now must exercise caution in setting their transfer pricing in respect of such transfers, and in preparing documentation to support their intercompany prices. Companies now have the opportunity to consider the implementation of research and development cost sharing agreements to avoid tax altogether on the provision of technology to their affiliates in China. Finally, although the withholding tax rate on licenses of IP into China is 10%, both under domestic law and under almost all of China’s tax treaties, the Hong Kong Double Tax Arrangement with China extends a preferential rate of 7%. Therefore, foreign licensors may explore the tax planning opportunities that may be afforded by the Hong Kong arrangement. 6. Conclusion Currently, China is experiencing a new round of tax reform, with the new EIT Law having entered into effect in 2008, and new business tax regulations having been issued in November 2008. In addition, the State Administration of Taxation issued the Implementation Measures of Special Tax Adjustments (Provisional) on January 8, 2009, with retroactive effect to January 1, 2008. The Provisional Measures have established detailed rules for transfer pricing. Therefore, it is important for Chinese companies and foreign licensors need to follow the latest tax laws and regulations in respect of IP transfers and transfer pricing, as they may effect transactions which already have been entered into.

* Stephen Nelson is a partner of King & Wood’s Taxation Group in Beijing. ** Wu Libin is an associate of King & Wood’s Taxation Group in Beijing.

16 The Company Law of the PRC was amended and adopted at the 18th session of the Standing Committee of the Tenth National People’s Congress of the People’s Republic of China on October 27, 2005 and the amendments became effective as of January 1, 2006.

Securities Regulation Editorial

Change in French disclosure and transparency rules

On Saturday January 31, 2009, the Ordinance no. 2009‐105 (the ʺOrdinanceʺ) completing the implementation in France of EU Directive no. 2007/14/CE of March 8, 2007, so‐called Transparency 2, was published in the Journal Officiel. Most of the relevant provisions of the Ordinance will come into force 6 months, and the others 9 months, after its publication. The Ordinance, among other things, strengthens and clarifies the regime applicable to the disclosure of large exposures in listed shares. It forms part of a series of texts, since the beginning of this year, which are reshaping large areas of French securitiesʹ regulation. The Ordinance was eagerly awaited following intense debates in Europe and the US about whether economic interests in shares (such as CFDs) should be treated as shares for disclosure purposes. Such debates stem from positions taken in the UK by the Takeover Panel and the FSA, further to their consultations of 2005 and 2007. There was also particular focus on this issue in the US following Judge Lewis A. Kaplan’s opinion of June 11, 2008 in CSX Corporation v. The Children’s Investment Fund Management (UK) LLP, et al. (S.D.N.Y). The Ordinance includes provisions to the effect that: • cash settled OTC derivatives or ʺeconomic interestsʺ do not have to be

aggregated with shares or voting rights for disclosure purposes, but are to be reported separately by a holder who crosses a threshold of shares or voting rights if they have an economic effect similar to shares (the concept of ʺcash settled agreements and financial instruments with an economic effect similar to the holding of the sharesʺ is to be further defined by the General Regulation of the Autorité des marchés financiers (AMF));

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2.

• investment firms and derivatives dealers will

continue to benefit, on the conditions set by Transparency 2, from a large trading book exemption covering both shares and derivatives;

• on top of existing 10% and 20% thresholds, the crossing of thresholds of 15% and 25% of share capital or voting rights triggers an obligation upon the acquirer to disclose his intentions regarding his holding. The declaration of intentions following the crossing of any of these four thresholds now relates to intentions for the following 6 months (not 12 months as before). Such disclosures must be more extensive in terms of content than before. Changes to declared intentions must be explained and disclosed to the market. In such event, the 6‐month period will restart;

• it has been clarified that the shares that a person can purchase, at its sole initiative, immediately or in the future, pursuant to an agreement or a financial instrument, shall be treated as shares directly owned by such person. Both European and U.S. call options are thus now clearly covered.

Agreements or financial instruments giving access to existing shares which are not caught do not fall within this regime, but must be reported separately by a holder who crosses a threshold of shares or voting rights. This should apply in particular to call options subject to conditions precedent (e.g. if they cannot be exercised if the strike price is not reached on the market) or which can be physically settled at the sole sellerʹs initiative. The same rules apply for voting rights. It is worth noting that, in spite of debates on this issue, the first threshold remains unchanged at 5%. You will find attached, for information, a marked copy (unofficial English translation) of the two main Articles of the French Commercial code impacted by these provisions of the Ordinance.

Didier Martin Avocat à la Cour, Partner [email protected]

Youssef Djehane Avocat à la Cour, Partner [email protected]

Alban Caillemer du Ferrage Avocat à la Cour, Partner [email protected]

This brief is a summary of certain legislative reforms introduced in France. It is circulated for information purposes only and should not be used as the basis for any business or investment decision without prior specific legal assistance. For further explanation or additional information, please do not hesitate to contact the authors.

3.

Articles L.233-7 & L.233-9 of the French Commercial code (unofficial English translation - For information only)

L.233‐7 of the Commercial code I ‐ When the shares of a company having its registered office in France are admitted to trading on a regulated market

or a financial instruments market which permits trading in shares which may be entered in the books of an authorised intermediary as provided for in Article L.211‐4 of the Monetary and Financial Code, any natural person or legal entity, acting alone or jointly, who comes into possession of a number of shares representing more than one twentieth, one tenth, three twentieths, one fifth, one quarter, one third, one half, two thirds, eighteen twentieths or nineteen twentieths of the capital or voting rights shall inform the company of the total number of shares or voting rights it holds within a time limit determined in a Conseil dʹEtat decree commencing on the day on which the equity participation threshold was exceeded.

The information specified in the previous paragraph is also reported, within the same time limit, if the equity participation or voting rights fall below the thresholds indicated in that paragraph.

Persons required to provide the information indicated in the first paragraph shall indicate the number of securities they hold which give deferred access to the capital, as well as the voting rights attached thereto.

Any person required to make a declaration pursuant to the first paragraph shall indicate in the declaration:

a) the number of securities it holds which give deferred access to shares to be issued, as well as the voting rights attached thereto;

b) issued shares which can be acquired by this person by virtue of an agreement or a financial instrument referred to in Article L.211‐1 of the Monetary and Financial Code, without prejudice to 4° of I of Article L.233‐9 of this Code. The same applies to the voting rights that can be acquired under the aforementioned conditions;

c) issued shares which are the subject of any agreement or financial instrument referred to in Article L.211‐1 of the Monetary and Financial Code, settled exclusively in cash and that has an economic effect similar to the holding of the shares for such person. The same applies to voting rights subject to an agreement or financial instrument under the aforementioned terms and conditions.

II ‐ Persons required to provide the information indicated in I shall also inform the Financial Markets Authority, within

a time limit and under terms and conditions determined in its General Regulations, as soon as the participation threshold is exceeded, when the companyʹs shares are admitted to trading on a regulated market or a financial instruments market other than a regulated market, at the request of the person managing that financial instruments market. In this last case, the declaration may relate to only part of the thresholds indicated in I, on the conditions set out in the General Regulations of the Financial Markets Authority. This information is published as determined in the General Regulations of the Financial Markets Authority.

The general regulations also specify the method for calculating participation thresholds. The General Regulations also specify the method for calculating participation thresholds and the terms and conditions under which an agreement or a financial instrument mentioned in c of I may be considered as having an economic effect similar to the holding of the shares.

III ‐ The companyʹs memorandum and articles of association may impose an additional reporting obligation relating to

the holding of fractions of the capital or voting rights below the one twentieth referred to in I. The obligation relates to the holding of each such fraction, which cannot be below 0.5% of the capital or voting rights.

4.


L.233‐7 of the Commercial code (Cont.) IV ‐ The reporting obligations stipulated in I, II and III do not apply to shares: 1. acquired solely for the purposes of clearing, settling or delivering financial instruments within the framework of the

regular short‐term settlement cycle described in the General Regulations of the Financial Markets Authority; 2. held by book‐keeping custodians in connection with their book‐keeping and custodial activities; 3. held in the trading portfolio of an investment service provider within the meaning of (EC) Council Directive 93/6, of

15 March 1993 concerning the adequacy of the funds of credit investment companies the Directive 2006/49/EC of the European Parliament and of the Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions, provided that such shares do not represent a percentage of the capital or voting rights of their issuer above a threshold set in the General Regulations of the Financial Markets Authority and that the voting rights attached to those securities are not exercised or otherwise used to participate in the issuerʹs management;

4. lodged with members of the European System of Central Banks or lodged by them in the performance of their

duties as monetary authorities, as determined in the General Regulations of the Financial Markets Authority. V ‐ The reporting obligations stipulated in I, II and III do not apply: 1. To a market maker when the threshold of one twentieth of the capital or voting rights is exceeded in connection

with market making, provided that he does not participate in the issuerʹs management within the meaning of the General Regulations of the Financial Markets Authority;

2. When the person referred to in I is controlled, within the meaning of Article L.233‐3, by an entity subject to the

obligation laid down in I to III for the securities held by that person or if that entity is itself controlled, within the meaning of Article L.233‐3, by an entity subject to the obligation laid down in I to III for those same shares.

VI ‐ In the event of the reporting obligation referred to in III not being complied with, the companyʹs memorandum and

articles of association may provide for the provisions of the first two paragraphs of Article L.233‐14 to apply only if requested by one or more shareholders holding a fraction of the issuing companyʹs capital or voting rights at least equal to the smallest capital holding which must be declared, and subject to this being duly recorded in the minutes of the general meeting. This fraction shall nevertheless not exceed 5%.

VII ‐ ‐When the companyʹs shares are admitted to trading on a regulated market, the person required to provide the

information indicated in I shall also declare the objectives to be pursued during the next twelve months whenever the thresholds of one tenth or one fifth of the capital or voting rights are exceeded. The said declaration shall indicate whether the buyer is acting alone or jointly, whether it envisages making further acquisitions, whether it is seeking to acquire a controlling interest in the company, directorships for itself or for one or more other persons, or seats on the executive board or the Supervisory Board. It is sent to the company whose shares have been acquired and to the Financial Markets Authority within ten trading days. The said information is published as determined in the General Regulations of the Financial Markets Authority. If the stated objectives change, and this can occur only in the event of major changes in the environment, situation or shareholder base of the persons concerned, a new declaration, published in the same way, shall be made and sent to the company and the Financial Markets Authority.

5.


L.233‐7 of the Commercial code (Cont.) VII ‐ When the companyʹs shares are admitted to trading on a regulated market, the person required to make the

declaration referred to in I shall also declare its objectives for the next six months whenever the thresholds of one tenth, three twentieths, one fifth or a quarter of the capital or voting rights are exceeded. The said declaration shall indicate the details of the funding of the acquisition, whether the buyer is acting alone or jointly, whether it envisages making further acquisitions, whether it is seeking to acquire a controlling interest in the company, the strategy it is envisaging regarding the issuer and the planned operations to realise such strategy, as well as any temporary transfer agreement covering those shares or voting rights. It should also specify whether the person is seeking the nomination of itself, or of one or more other persons, as director or as member of the executive board or the supervisory board. The General Regulations of the Financial Markets Authority are to specify the detail required in respect of these matters taking into account, if relevant, the level of participation and the characteristics of the person required to make the declaration.

This declaration is sent to the company whose shares have been acquired and submitted to the Financial Markets Authority within a time limit determined by a Conseil dʹEtat decree. This declaration is to be published as determined in the General Regulations of the Financial Markets Authority.

Should the stated objectives change within six months from the submission, a new justified declaration shall be sent to the company and the Financial Markets Authority without delay and published under the same terms and conditions. The new declaration causes the six‐month time limit indicated in the first paragraph to restart.

6.


Article L.233‐9 of the Commercial Code I ‐ The following are treated as shares or voting rights owned by the person required to provide the information

referred to in I of Article L.233‐7: 1. Shares or voting rights owned by other persons on behalf of that person; 2. Shares or voting rights owned by companies which control that person within the meaning of Article L.233‐3; 3. Shares or voting rights owned by a third party with whom that person acts jointly; 4. Shares or voting rights which that person or a person referred to in 1 to 3 above is entitled to acquire on its own

initiative by virtue of an agreement Issued shares which can be acquired by this person or one of the persons indicated in paragraphs 1 to 3, on his own initiative, immediately or in due course, pursuant to an agreement or a financial instrument referred to in L.211‐1 of the Monetary and Financial Code. Voting rights which can be acquired under the same terms and conditions shall be declared in the same way. The General Regulations of the Financial Markets Authority specify how the present paragraph is to be applied;

5. Shares in respect of which that person is the usufructuary; 6. Shares or voting rights owned by a third party with whom that person has entered into a temporary transfer

agreement covering those shares or voting rights; 7. Shares lodged with that person, provided that it may exercise the voting rights attached to them as it chooses in the

absence of specific instructions from the shareholders; 8. Voting rights which that person may freely exercise by virtue of a power of attorney in the absence of specific

instructions from the concerned shareholders. II ‐ The following are not treated as shares or voting rights owned by the person required to provide the information

referred to in I of Article L.233‐7: 1. Securities held by undertakings for collective investment in transferable securities managed by a portfolio

management company controlled by that person within the meaning of Article L.233‐3, unless provided for in those same General Regulations under the conditions provided in the General Regulations of the Financial Markets Authority unless provided for in those same General Regulations;

2. Securities held in a portfolio managed by an investment service provider controlled by that person within the

meaning of Article L.233‐3, in the context of a portfolio management service provided to third parties as envisaged in the General Regulations of the Financial Markets Authority, barring any exception provided for in the same General Regulations provided for in those same General Regulations;

3. Financial instruments indicated in 4 of I held by an investment service provider in his trading portfolio within

the meaning of the Directive 2006/49/EC of the European Parliament and of the Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions, provided that those instruments does not give access to a position of the capital or voting rights of those securities superior to one of the thresholds indicated in the General Regulations of the Financial Markets Authority.

7.

Y o u c a n a l s o c o n s u l t t h i s b r i e f o n o u r w e b s i t e , i n t h e N e w s / P u b l i c a t i o n s s e c t i o n .

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The Brief – Securities Regulation (the "Newsletter") is a free, periodical electronic publication edited by the law firm Gide Loyrette Nouel (the "Law Firm"), and published for Gide Loyrette Nouel’s clients and business associates. The Newsletter is strictly limited to personal use by its addressees and is intended to provide non-exhaustive, general legal information. The Newsletter is not intended to be and should not be construed as providing legal advice. The addressee is solely liable for any use of the information contained herein and the Law Firm shall not be held responsible for any damages, direct, indirect or otherwise, arising from the use of the information by the addressee.

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New Japanese banking regulations open certain Islamic finance transaction to subsidiaries of Japanese banks Nov 04 2008 So Saito and Ryoko Yoshimine

The bill for the amendment of the banking regulations which allows subsidiaries of Japanese banks to conduct certain types of Islamic finance came into effect on 12 December 2008. The enactment of the new bill is a monumental step because it is the first law which is intended to directly target Islamic finance in Japan3. This article will briefly explain the current situation of Japanese banking regulations on Islamic Finance. Japanese banking regulations with regard to Islamic finance Regulations on banks In principle, Japanese banks are only permitted to conduct the activities that are listed in the banking law and the ancillary activities to such listed activities. Other than permitted exceptions, for example, the banking law does not permit banks to buy products. In a Murabaha (cost-plus-sale) transaction, banks purchase merchandise from a broker, and in an Ijara (lease-to-own) transaction, banks own the merchandise for the leasing period. Under the current banking law, therefore, banks themselves cannot usually participate in Murabaha and Ijara transactions. The new banking regulations do not change the above regulatory situation. Banks are allowed to invest in securities; interests in Mudaraba and Musharaka can be considered securities under the securities regulations. Banks, therefore, are considered to be able to invest in general Mudaraba and Musharaka transactions, provided that their position is considered to be as pure investors. If the bank's role goes beyond that of pure investor, however, the act might be prohibited under the Japanese banking regulations. If a bank acts as a real-estate adviser to a partnership that gives advice on the types of real estate the partnership should invest in, for example, such act might be prohibited. Banks should take careful note of this. Mudaraba or Musharaka might be treated as subsidiaries or associated companies under consolidated accounting rules if banks invest more than a certain percentage, or have more than a certain level, of controlling rights in the transaction. Some burdensome banking regulations might be applicable to subsidiaries and associated companies of banks. If banks wish to avoid these issues, they should carefully consider how the structure is set up. The new bill and regulations on subsidiaries of banks Subsidiaries of Japanese banks are also prohibited from being involved in activities other than particular kinds of listed activities and ancillary activities. The activities which subsidiaries can deal with are broader than those of banks, and even under the banking regulations before the enforcement of the new bill that subsidiaries are presumably able to deal with some types of Ijara and Murabaha. The new bill allows subsidiaries of Japanese banks to conduct "lending" type Islamic finance transactions. The new bill added a new article (Article 17-3, paragraph 2, item 2-2 of the Ordinance for Enforcement of the Banking Law) that allows subsidiaries to handle such business if the transaction satisfies the following conditions:

http://http:/jurists.co.jp�

mailto:[email protected]

• The transaction is deemed equal to money lending, although not money lending itself.

• No interest is charged because it is prohibited by religious discipline.

• The board consisting of members who have professional knowledge of the religious discipline accepts such transaction as non-lending transactions.

In Islamic transactions the charging of interest is prohibited by Islamic discipline and generally a Sharia Board judges the qualifications of such transactions under the Islamic discipline, so conditions (ii) and (iii) are usually satisfied. However, regarding condition (i), the new article itself still contains some ambiguity, and there are various kinds of Islamic finance transactions, from more "lending" type transactions to "equity" type transactions, therefore, each subsidiary has to decide by itself what kind of transaction falls into the category of "equal to money lending". Regulations on foreign banking subsidiaries of Japanese banks Japanese banks are allowed to have foreign banks (foreign companies that engage in banking business) as subsidiaries (hereinafter "foreign banking subsidiaries"). Japanese banking regulations in principal allow foreign banking subsidiaries to engage in business which is allowed under the respective foreign jurisdiction — provided that such business does not seek to evade the substance of the Japanese banking law. If local regulations permit foreign banking subsidiaries to engage in certain Islamic financial business, therefore, establishing such foreign banking subsidiaries is a possible way for Japanese banks to participate in Islamic financial business. Conclusion The FSA conveys the message that the new bill "opens" Islamic finance to Japan. However, in reality, the effect of the new bill might be smaller than the announcement might lead us to believe. For example, the bill does not change any regulations that applybanks themselves and the range of transactions which the subsidiaries can deal with is still ambiguous and might overlap the transactions which they can deal with even under the former regulations. However, we believe that the enactment of the new bill still has great significance. It is the first law which is intended to “officially” target Islamic finance in Japan and we actually feel that it will promote a lively discussion on Islamic finance in Japan. We hope that this important bill will further promote the development of Islamic finance in Japan. • So Saito is a partner at Nishimura & Asahi in Tokyo, Japan. He specializes in securitization, Islamic finance, Basel II finance, risk finance, derivatives, acquisition finance, and compliance with banking and securities regulations. He is licensed to practice law in Japan and New York.

Ryoko Yoshimine is an associate. She handles finance transactions with an emphasis on structured finance, acquisition finance and project finance.

This article first appeared on Complinet on www.complinet.com on November 04 2008.

Naturally Resourceful

SIMPSON GRIERSON FEBRUARY 2009

Further information about the proposed reform of the Resource

Management Act 1991 was released by the Government last week.

While the proposals that will be in the Resource Management Act

(Simplify and Streamline) Amendment

Bill 2009 are summarised, the detail will

not be known until the Bill is released in

late-February.

In the interim, the proposals have been

greeted with almost universal support

from business and by concern from

environmental groups. We will outline

some of the key proposals and comment

on their merits and issues that may arise.

Deterring non-meritorious objections and appeals

Proposal: Deterring frivolous, vexatious and anti-competitive

objections and appeals by reinstating of the Environment Court's

ability to award security for costs and increasing the filing fees for

the lodgement of appeals to the Environment Court to $500

(from $55). There is also a proposal to broaden the ability of

Councils to dispense with full public notification.

Comment: These measures are desirable and should discourage

unmeritorious appeals by individuals and groups of individuals.

Further strengthening the notification provisions (by removing the

The Proposed Resource Management Act Amendments - Some Preliminary Comments

presumption in favour of notification) may be of assistance, but the

details are unknown at this stage. However, there appears to be no

appetite to limit the ability of all and sundry to submit on

applications and potentially appeal

irrespective of whether they genuinely

represent a public interest.

Removing trade competition

Proposal: If an appeal is brought, financed or

encouraged for trade competitive motives,

then the party whose position was adversely

affected by the appeal may seek to recover all

the "damages associated with the appeal".

Comment: It is not clear what "damages associated with the

appeal" is intended to include. Is it lost profit/economic losses or

limited to the direct costs of the appeal? To be a deterrent, any

costs award would need to outweigh the commercial advantages of

delaying a competitor's project. The Court would need to firstly

decide whether the appeal was being motivated by trade

competition and the amount of any such damages. Both decisions

are likely to be contentious, and require findings of fact on an

evidential basis. In summary, while the objective is laudable, it is

likely that the Court will be very cautious before making such

awards. There needs to be clear statutory guidance as to how this

mechanism will apply.

"Many of the proposals have

considerable merit. Some will be

contentious and potentially

problematic".

Streamlining processes for projects of national

significance

Proposal: Broadening the criteria for Ministerial intervention to

recognise the operational infrastructure needs of nationwide

network utility operators. This additional criterion would allow

Ministerial intervention for projects which may not individually

be of national importance, but which play a significant role in

improving or maintaining the functioning and integrity of

nationally significant networks.

Comment: This proposal is sensible and should not give rise to

significant debate or uncertainty.

Proposal: The ability to make applications for Ministerial

Intervention direct to the Environmental Protection Agency

(EPA).

Comment: This amendment could potentially streamline the

process, as currently applicants need to first lodge an

application with a local authority, and then make a request to

the Minister to intervene. Time and cost savings could also be

made, as the risk of public notification needing to be repeated

would be avoided (ie. first by the local authority prior to

Ministerial intervention, and then by the Minister). Depending

upon the capability and resourcing of the EPA, it could result in

clearer processes, time and cost savings, and a reduced level of

uncertainty than currently exists in the Ministerial intervention

provisions.

Proposal: The EPA can decide whether the criteria for

Ministerial intervention are met, and refer a matter to a Board

of Inquiry (BOI).

Comment: This is sensible. It is not clear from the overview

documentation whether the EPA will also have the power to

decide to directly refer applications to the Environment Court,

or recommend other forms of intervention (such as all-of-

Government submissions).

Proposal: A requirement for there to be nominations for

membership of a Board of Inquiry from local authorities within

the area where the application occurs and a requirement to

appoint people with local knowledge.

Comment: Difficulties could arise in relation to linear projects

which cover many districts/regions. There is also a risk that a

requirement for local knowledge could result in the appointment

of a local resident/local expert at the expense of an appointee

with specialist expertise, who may be in a better position to

contribute to the decision making process. The broadening of

the scope for Boards of Inquiry along with maintaining the existing

requirement that they be chaired by a current former or retired

Environment Court Judge will put pressure on judicial resources

(particularly given the proposals for direct referral of some

applications).

Proposal: A final decision within nine months of the date of

notification – with a Ministerial power to extend this timeframe if

he or she is satisfied by a report of the BOI that there is a

necessary justification for doing so.

Comment: There would be benefits in terms of streamlining the

process, although the presumption that the process will be

complete within nine months may introduce unrealistic time

pressures for complex or large projects resulting in risks to quality

of evidence and decision making.

Omissions in relation to projects of national significance: There

is no discussion about the role of local authorities in relation to

Boards of Inquiry or direct referral to the Environment Court. A

mandatory officer's report could provide the decision maker with

the same level of information as would be available at a first

instance hearing. It would also go some way to protecting the

interests of the public and introduce a degree of objectivity to the

process. Councils may however resist mandatory participation if

they are required to bear all of their costs, including the need to

engage counsel.

Creating an Environmental Protection Agency

Proposal: The EPA will be established as a statutory authority as

part of the Stage II reforms. For the time being, the roles,

functions and powers of the EPA will be exercised by the

Secretary for the Environment. The Secretary will be able to

delegate these functions to employees within the Ministry for the

Environment. One of the functions of the EPA would be to

centralise some regulatory roles on a nationwide basis.

Comment: The creation of the EPA as a separate statutory office

is preferable to the expansion of the role of the Environmental

Risk Management Authority (ERMA), as was originally proposed

by the Government. The proposed nationwide regulatory

function will impact on some of the functions of regional

councils. It remains to be seen as to whether this may be the

forerunner of another round of local government reorganisation.

Improving plan development and plan change

processes

Proposal: Removing the ability of appellants to make general

challenges or seeking the withdrawal of entire proposed policy

statements and plans.

Comment: While this proposal is sensible and will result in more

focussed and meaningful submissions, removing the ability to

make general challenges on plans is likely to have little impact on

the quality of second generation plans. There have been rolling

reviews of many first generation plans.

Proposal: Modifying the requirement for local authorities to

summarise submissions and call for further submissions on

proposed plans.

Comment: It is unclear what modification is proposed to this

process, and to what extent further submissions would be

allowed. There is little, if any, benefit in summarising

submissions, provided that submissions are available on the

Council website and in hard copy. On the other hand, the ability

to make further submissions is in our view essential. Submitters

should be able to comment on other submitter's proposals, and

if necessary challenge by way of appeal changes made in

response to other submissions.

Proposal: Removing the need for local authorities to make

decisions on each individual submission, but requiring decisions

to be made on issues raised.

Comment: The current decision process is cumbersome and

provides little benefit, due to the limited comment or analysis of

each submission. The change reflects a common practice

amongst many local authorities.

Proposal: Removing the "non-complying" category of activities -

with a three year transitional period, after which they would be

deemed to be fully discretionary activities.

Comment: This will be a contentious proposal. Non-complying

activity status is a primary tool for managing activities which are

regarded as generally inappropriate and/or which do not meet

specific standards (eg. height limits, water quality standards,

minimum flows etc). Removal of the non-complying category of

activities, and therefore the threshold tests in section 104D of the

RMA could potentially result in the proliferation of inappropriate

activities. Local authorities would need to have strong targeted

policies in their plans to provide clear guidance about undesirable

activities, effects, or environmental outcomes. The three year

transition period would allow time for developing such policies.

However, in our view there is room to debate the merits of this

proposal.

Proposal: Enabling the regional council and all territorial

authorities of a region to combine to produce a single RMA

planning document. The Government documentation

specifically refers to combining a regional policy statement with

relevant district plans.

Comment: There is a benefit of combining district plans (as the

RMA currently allows). While regional policy statements set the

policy direction for the region, the ability to combine the regional

policy statement, regional plans and district plans may reinforce

the requirement of section 75(3) of the RMA for district plans to

"give effect to" regional policy statements. This proposal may

also result in greater coordination with regard to issues such as

urban growth and the strategic integration of infrastructure with

land use as required by section 30(1)(gb) of the RMA. In practice

however, local interests may make it difficult for regional councils

and territorial local authorities to unify in this way.

Proposal: Rules in proposed plans to have no effect until

decisions made on submissions have been notified, except where

such rules are required to protect a natural resource, historic

heritage or apply to an aquaculture management area. There

would be the ability to apply to the Environment Court to have

particular rules take effect earlier.

Comment: These amendments would avoid situations where

particular members of the community have existing activities or

particular areas of land affected by ill-considered or poorly

justified proposed plan changes. Such a delay would enable the

plan change provisions to be tested before affecting activities.

(An example could be hazard overlays on plans, which could

have an impact on property values, ability to sell properties etc

without being fully tested through the plan change process.) On

the other hand, it may result in applications for inappropriate

development being made to avoid the effect of the proposed

pan changes.

Proposal: Limiting appeals on proposed policy statements and

plans to questions of law, with the ability to seek the leave of the

Court to appeal generally.

Comment: The proposed changes place more emphasis on the

role of local authorities in setting policy, rather than the

Environment Court. More care and effort would need to be

taken by all involved in making submissions on plans at the first

instance, instead of the common approach of lodging a broad

submission and then presenting a full case at the appeal stage.

Strong, sound decision making would be needed to avoid (or

limit) applications for leave to appeal to the Environment Court

on the merits. This proposal places a lot of reliance on high

quality, objective, local decision making. It will inevitably be a

very contentious proposal. It is doubtful whether this proposal

will achieve quality policy statement and plan provisions. The

Environment Court plays a critical role in considering the merits

of these provisions.

Proposal: Removing the requirement for territorial authorities to

review their plans every 10 years.

Comment: Provided rolling reviews are taking place, this

provision is not needed and was ineffective in any event due to

the lack of sanctions, and the vagueness of what a review

required. However, there have been instances where the

Environment Court has criticised plan provisions and they have

subsequently not been reviewed. A mechanism is needed to

ensure that inadequate, poorly drafted provisions are amended in

a timely manner.

Improving resource consent processes

Proposal: Removing the presumption in favour of notification of

resource consents, and amending the criteria for when public

notification is required on projects with more than minor effects

on the wider environment.

Comment: Further information is needed about these criteria to

see the benefits for applicants and the impact on public

participation. The introduction of limited notification in the

Resource Management Amendment Act 2005 has already gone a

considerable way to reducing full public notification and limiting

the ability of non-affected public to be involved in hearings. The

current proposals could have an impact on the number of

submitters and appeals (at least for small scale, largely compliant

developments). This proposal will be contentious since it will be

seen as limiting the influence of public interest groups.

Proposal: Simplifying the reporting requirements for council

decisions and removing the need for material to be repeated or

restated in subsequent hearing reports or decision reports.

Comment: These proposals are sensible. The current need to

summarise all evidence considered is time consuming and of little

benefit in terms of quality decision making and hopefully these

changes will address that problem.

Proposal: Limiting the ability of local authorities to "stop the

processing clock" during requests for further information from

applicants, other than for the first request.

Comment: This amendment is supported. If good quality

documentation is lodged with Councils, reasonable requests for

further information should be limited, rather than the use of

tactical or multiple requests for further information as a means of

"buying time". Requests could still be made for information to be

provided in evidence at hearings, rather than delaying the

notification or the hearing.

Proposal: All Councils being required to develop a discount

policy in respect of late consent processing, within 12 months of

enactment of the Bill.

Comment: This policy is to incorporate a complaints process,

including a discount on processing fees where the Council is at

fault. Whether this amendment would streamline the consent

process would depend on the extent of any discount in fees and

the implementation of such a policy. At least for smaller

Councils, with limited planning resources (and income) such a

punitive approach could detract from the quality of planning

reports. Statutory guidance or direction is likely to be required

as to the contents of policies and perhaps minimum levels of

discount, in order for this proposal to be meaningful.

Proposal: New provisions requiring resource consent hearings to

close no later than 10 working days following completion of the

last party's presentation at the hearing.

Comment: This is intended to put a limit on the process of

hearings being adjourned to enable decision makers a longer

period to deliberate thereby extending the decision making

period. A more certain approach would be to require a decision

by a set date after the close of the hearing. At least with

complex hearings, there is often a need to leave the hearing

open to allow further information to be provided.

Streamlining decision making

Proposal: Applicants and submitters being able to choose

whether they have an application considered by elected

representatives of the local authority or by one or more

independent commissioners, with the requestor bearing the

cost.

Comment: This proposal formalises the current process whereby

applicants often make such requests of Council. It is not certain

whether an applicant could insist upon a Commissioner hearing,

as the information publicly available refers to both the ability to

"choose" and being a "requestor". Arguably applicants should

always be able to insist on an independent panel. The proposal

to charge submitters who secure an independent panel against an

applicant's wish will be contentious and is potentially

problematic.

Proposal: Applicants for resource consents and notices of

requirement having the ability to request that their application be

directly referred to the Environment Court, provided the local

authority agrees.

Comment: It is not clear what criteria the Council would use in

deciding whether to agree to direct referral. It is also not clear

who the applicant would apply to. This process is to be

"complementary" to the "proposals of national significance"

process and could presumably be used as an alternative to the call

in process. Process issues also arise. What is the role of the

local authority during any hearing? Who decides notification

issues? Will individuals be able to fully participate given the

Environment Court process is an adversarial process? This

proposal in conjunction with broadening the Board of Inquiry role

will if implemented put considerable pressure on judicial

resources.

Proposal: Removing the Minister of Conservation's powers in

relation to decisions on restricted coastal activities, and the local

authority decision being final.

Comment: This amendment is long overdue and should

streamline decision making for relevant consents and would

remove the current confusion as to the Minister of Conservation

and the Department of Conservation's multiple roles (decision

maker, advocate, conservation manager/landowner).

Proposal: Amending the RMA to remove the ability of a requiring

authority to make decisions on notices of requirement, with the

local authority having decision making power.

Comment: Other than ensuring greater consistency with other

decision making processes under the RMA, the justification for

this proposal is not clear. However, the ability for a requiring

authority to choose a commissioner hearing and increased call-in

provisions should reduce concern about this amendment.

Improving national instruments

Proposal: Providing the Minister for the Environment (and

Minister of Conservation in relation to the New Zealand Coastal

Policy Statement) with powers to cancel, postpone and restart a

national policy statement (NPS) once it has commenced at any

time prior to being gazetted.

Comment: This proposal clarifies that the Minister can halt the

decision making process once it has commenced. This proposal

could potentially be beneficial, particularly as the Minister's role

is limited throughout the hearing process (which is before a

Board of Inquiry). If a hearing or the submission process had

commenced, and the Minister decided that the NPS was no

longer required, unnecessary time and expense could be

avoided.

Proposal: Enabling NPSs to direct that a local authority must

change the objectives and policies of policy statements and

plans without the need for further local planning processes. The

reason given for this approach is that a robust process would have

been followed when developing the NPS.

Comment: This proposal is a cause for concern. Unless a NPS

can dictate the wording of relevant objectives and policies that

are to be placed into a plan (which is unlikely given the wide

variation in how plans are drafted) this approach could result in

poorly drafted objectives and policies being placed in plans that

have not been tested through a submission process, and which

may not in fact be in accordance with the NPS. It also assumes

that there is universal agreement on the interpretation of the

provisions of the NPS which, given the lack of specific or

directive language used in such documents, is unrealistic. In our

view this proposal confuses the role of a NPS with that of a NES

which can be directive.

Proposal: Establishing that appeals on changes to plans and

regional policy statements that are implementing objectives and

policies of a NPS are limited to points of law.

Comment: The ability to appeal on points of law implies that

there has been some form of submission from the public.

However, as noted above, one proposed amendment is the

ability to dispense with "local planning processes". Clarification

of these processes is needed. The Courts would need to retain

the ability to assess whether plan changes do implement the NPS

which is a matter of mixed fact and law.

Proposal: Clarifying:

• that consent authorities must have regard to relevant

provisions on NESs when making decisions on resource

consents;

• the effect of a NES on existing resource consent

applications; and

• that consent authorities be given an explicit ability to issue

certificates of compliance where activities comply with a

NES.

Comment: These proposed amendments would correct an

omission in the RMA in relation to resource consent decision

making and are desirable. Other proposed amendments in

relation to NES generally seem positive.

Improving workability and compliance

Proposal: Proposed amendments in relation to compliance

include an increase in the maximum fine for committing an

offence under the RMA, from $200,000 to $600,000 for

corporate offenders and $300,000 for individuals. A further

proposal would give the Court the power to require a review of a

resource consent held by an offender. It is also proposed that

enforcement action be allowed against the Crown.

Comment: Increasing the fines will have little deterrent effect

unless overall levels of fines are increased by the Court – few

fines come close to the maximum at present. An ability to review

a resource consent would have no impact on offenders who fail to

hold a resource consent at all. It makes sense to remove Crown

immunity.

Clarifications

The Government has clarified that it is no longer seeking to

amend section 8 relating to the principles of the Treaty of

Waitangi (due to settled case law) or the definition of

"environment" (due to unintended consequences). This

approach is reasonable.

Relevant dates for further detail of the proposed

Phase I reforms:

The Bill should be before Parliament by mid-February, with the

Government anticipating it will receive assent some time in

September 2009.

Phase 2 reforms:

The Bill will not set up the EPA, or address reforms relating to

aquaculture, fresh water, urban design and infrastructure/Public

Works Act. These matters will be addressed in Phase II reforms,

with the aim being to have them concluded by 1 July 2010.

FYI Naturally Resourceful is produced by Simpson Grierson. It is intended to provide general information in summary form. The contents do not constitute legal advice and should not be relied on as such. Specialist legal advice should be sought in particular matters.

© Simpson Grierson 2009

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PRIVATE EQUITY UPDATE | February 27, 2009 | 1

PRIVATE EQUITY UPDATE

Carried Interest Tax Change in Obama Budget Proposal On February 26, 2009, the Office of Management and Budget released President Obama’s

proposed 2010 budget. This budget proposes a number of federal income tax increases affecting

private equity managers, investors, and individuals earning over $200,000 ($250,000 for married

couples filing jointly). Specific proposals include:

• Taxing carried interest as ordinary income (projected to raise approximately $24 billion

over 10 years).

• Reinstating the 36 percent and 39.6 percent ordinary income rates for taxpayers earning

over $200,000 ($250,000 for married couples filing jointly) (projected to raise

approximately $339 billion over 10 years).

• Increasing to 20 percent the rate imposed on capital gains and dividends for taxpayers

earning over $200,000 ($250,000 for married couples filing jointly) (projected to raise

approximately $118 billion over 10 years).

• Limiting the rate at which itemized deductions may reduce tax liability to 28 percent

(projected to raise approximately $318 billion over 10 years). Thus, any taxpayer with a

marginal tax bracket higher than 28 percent would have a reduced tax benefit from

charitable contributions, state income or property taxes, mortgage interest, investment

interest expense, or other itemized deductions. For example, $10,000 in itemized

deductions currently reduces tax liability by approximately $3,500 for someone in the 35

percent bracket. Under the proposal, the deductions would result in tax reduction of no

more than $2,800, as if the person were in the 28 percent bracket.

• Reinstating the phaseout of personal exemptions and the limitation on itemized

deductions for taxpayers earning over $200,000 ($250,000 for married couples filing

jointly) (projected to raise approximately $180 billion over 10 years).

The effective dates of the proposed changes are not expressly indicated in the budget. However,

Treasury officials have said that the Obama administration intends to wait until 2011 to implement

most of its proposed tax increases.

Hogan & Hartson LLP

PRIVATE EQUITY UPDATE | February 27, 2009 | 2

About the Private Equity Update For more information on the matters discussed in this Private Equity Update, or to have this publication sent to additional colleagues, please contact one of the attorneys below.

DAVID A. WINTER JOHN S. STANTON Partner Partner [email protected] [email protected] 202.637.6511 202.637.5704 Washington, D.C. Washington, D.C. STEVEN E. HOLLINGWORTH Associate [email protected] 202.637.5872 Washington, D.C.

This Update is for informational purposes only and is not intended as basis for decisions in specific situations. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship.

Copyright © 2009 Hogan & Hartson LLP. All rights reserved. Hogan & Hartson LLP is a District of Columbia limited liability partnership with offices across the United States and around the world. Some of the offices outside of the United States are operated through affiliated partnerships, all of which are referred to herein collectively as Hogan & Hartson or the firm.

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1

Closed-End Fund Trustees Sued by Auction Rate Preferred Shareholders

February 27, 2009 The collapse of the auction rate securities market in February 2008 resulted in regulatory actions, arbitration claims, and private litigation against many brokerage firms involved in underwriting, marketing, and selling these securities. One year later, as the auction rate securities market remains frozen, the litigation has extended to the trustees of certain closed-end funds that issued auction rate preferred securities (ARPS). In two recent cases, plaintiffs claim that the trustees of the closed-end funds breached their fiduciary duty by failing to redeem the ARPS at par value or otherwise taking steps to create liquidity for the ARPS holders when it was evident that the auctions for ARPS were failing. Discussion and Analysis Auction rate securities are instruments whose interest rates are determined at periodic intervals, usually weekly or monthly, through a modified Dutch auction process. Closed-end funds generally issue ARPS in order to leverage a fund’s portfolio. The use of leverage generally provides higher yields for the fund’s common shareholders, while the ARPS holders benefit from the liquidity and the short-term interest rates produced by the auction process. ARPS are traded at auction at par value and interest is paid on the securities for a period based on the rate determined at the prior auction. Broker-dealers underwrite, market, and sell the ARPS; some also manage the auction process. The liquidity of ARPS and their payment of higher interest rates in comparison to other investments attracted investors to the auction rate securities market. However, the ongoing operation of the auctions and the liquidity of the ARPS were not guaranteed, and ARPS are not redeemable at the holder’s option. That said, in the more than 20 years during which ARPS were traded at auction, auction failures were very rare and the market for the securities was “highly liquid.”1 The SEC’s Director of the Division of Enforcement testified that the auction rate securities market experienced significant problems in early 2008 as a result of several factors, including the size of the auction rate securities market, which was at $330 billion at the time of the auction failures, the rating agency downgrades of insurers of auction rate securities, and the subprime mortgage and credit crisis of 2007. The Director noted that the significant size of the auction rate securities market demanded that increasing numbers of participants bid in the auctions; however, investors were less willing to invest in auction rate securities due to the downgrade of the insurers. Also, the subprime mortgage and credit crisis limited broker-dealers’ ability to support the auctions with their own capital. As a result, in February 2008, a number of broker-dealers withdrew their support for the auctions, the market froze, and many holders of auction rate securities were unable to sell their shares. Shareholder Suit Against Closed-End Fund Trustees The ARPS holders of closed-end funds sponsored by two fund companies filed lawsuits in federal court against the

1. See Linda Chatman Thomsen, Director, Division of Enforcement, U.S. Securities and Exchange Commission, Testimony Concerning the

SEC’s Recent Actions with Respect to Auction Rate Securities Before the Committee on Financial Services, U.S. House of Representatives (Sept. 18, 2008).

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closed-end funds and their trustees on January 27, 2009.2 The plaintiffs argue that by failing to provide the ARPS holders with a mechanism to redeem their ARPS at par, or otherwise taking steps to create liquidity, the trustees placed the interests of the common shareholders above the interests of ARPS holders, thereby breaching their fiduciary duty to the ARPS holders. The alleged result is that the ARPS holders continue to suffer economic damages because of their inability to redeem their ARPS, and now hold shares that they are unable to sell in the market except at “fire-sale prices.” According to the complaints, while common shareholders continue to benefit from the leverage in the portfolio, ARPS holders are no longer receiving the benefit of the liquidity that once characterized their securities. However, many ARPS holders have received a higher interest rate on their securities to compensate for a loss of liquidity, and net returns for common shareholders have often decreased due to the higher interest rates being paid on ARPS. The plaintiffs further argue that the trustees’ alleged breach of fiduciary duty is compounded by their knowledge of the continuing illiquidity of the auction rate securities market and its negative impact on ARPS holders. As evidence, the plaintiffs point to other closed-end funds that have taken steps to provide liquidity by, for example, redeeming ARPS at par, obtaining permission from the SEC to borrow outside of legal limits in order to refinance issued and outstanding ARPS, and creating replacement securities that can be used to redeem outstanding ARPS at par. The plaintiffs are seeking a declaration that the trustees breached their fiduciary duties to the ARPS holders and an order that the trustees redeem their ARPS at par value, as well as compensatory and consequential damages, costs, and expenses. Implications for Independent Directors This litigation is significant in that it signals a new theory of potential liability for closed-end fund trustees in connection with auction rate securities. To date, actions involving auction rate securities have involved regulatory actions, arbitration claims, and private litigation alleging that the broker-dealers who underwrote, marketed, and sold the securities misled investors about the liquidity of auction rate securities. Broker-dealers who have settled have agreed to buy auction rate securities they sold to investors, although the specifics of the settlements vary. Rather than pursue the broker-dealers involved in the ARPS auctions to create liquidity for the ARPS holders, the complaints discussed above focus—for the first time—on the fiduciary duty of trustees of closed-end funds. Whether the plaintiffs are successful in their case against the closed-end funds and their trustees may depend in part on whether the trustees acted appropriately to balance the allegedly conflicting interests of the common shareholders and the ARPS holders. Absent specific provisions in the Investment Company Act of 1940 addressing the liquidity interests of ARPS holders, however, the question may become one of whether trustees should be held liable for a breach of fiduciary duty if they made reasonable business judgments. If you have any questions or would like more information on these important legal developments, please contact any of the following Morgan Lewis attorneys: New York Jennifer L. Klass 212.309.7105 [email protected] Pittsburgh Richard W. Grant 412.560.3340 [email protected] Washington, D.C. Abigail Bertumen 202.739.5945 [email protected] Patrick D. Conner 202.739.5594 [email protected] Thomas S. Harman 202.739.5662 [email protected] W. John McGuire 202.739.5654 [email protected] Monica Lea Parry 202.739.5692 [email protected]

2. Talarico v. Cavanagh, No. 1:2009-cv-00753 (S.D.N.Y. Jan. 27, 2009); Robertson v. Arch, No. 1:2009-cv-00754 (S.D.N.Y.

Jan. 27, 2009).








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To receive regular legal updates on the issues affecting independent directors, visit http://www.imsi.morganlewis.com/independent-directors/. About Morgan, Lewis & Bockius LLP Morgan Lewis is an international law firm with more than 1,500 lawyers in 22 offices located in Beijing, Boston, Brussels, Chicago, Dallas, Frankfurt, Harrisburg, Houston, Irvine, London, Los Angeles, Miami, Minneapolis, New York, Palo Alto, Paris, Philadelphia, Pittsburgh, Princeton, San Francisco, Tokyo, and Washington, D.C. For more information about Morgan Lewis, please visit www.morganlewis.com.

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Email Alerts NEW TAX BREAKS FOR MASSACHUSETTS LIFE SCIENCE COMPANIES February 26, 2009 By Richard W. Giuliani, Julie Hogan Rodgers Under the recently enacted Life Sciences Act, Massachusetts-based life sciences companies will be provided with over $1 billion in benefits over the next 10 years. The legislation, which seeks to expand the life sciences sector in Massachusetts, includes $500 million in infrastructure investment, $250 million in life sciences grants, and $250 million in various tax breaks. The Life Sciences Tax Incentive Program, effective January 1, 2009, includes nine separate tax credits and benefits, including an investment credit, a Food and Drug Administration user fee credit, life sciences research credits, refundability of existing research credits, sales and use tax incentives, extension of net operating losses, and deductions for qualified clinical testing expenses for orphan drugs. The Massachusetts Life Sciences Center (MLSC), the quasi-public agency of the commonwealth that is charged with running the Program, has announced that it is offering $25 million in tax incentives in 2009. To receive these tax benefits, a life sciences company must file an application with the MLSC, be certified as a life sciences company, and be awarded the benefits by the MLSC. A decision on certification will not be made independent of a decision to award a tax benefit under the Program. The Program is available to for-profit entities engaged in life sciences research, development, commercialization or manufacturing in Massachusetts. This includes companies working in the following areas: agricultural biotechnology, biogenerics, bioinformatics, biomedical engineering, biopharmaceuticals, biotechnology, chemical synthesis, chemistry technology, diagnostics, genomics, image analysis, marine biology, marine technology, medical devices, nanotechnology, natural product pharmaceuticals, proteomics, regenerative medicine, RNA interference, stem cell research and veterinary science. According to the MLSC, the Program targets applicants "that have transitioned or are transitioning from pure life sciences research and development to commercialization and manufacturing." The MLSC will evaluate applications using a number of qualitative criteria including the impact on the Massachusetts economy and jobs, technical merit, management expertise, financial viability, and the potential market for the company's products. We have extensive experience and expertise in Massachusetts tax laws and we are available to assist you in evaluating your eligibility for tax incentives and in the application procedure. Applications are currently being accepted on a rolling basis until May 15, 2009. Awards will be announced no later than September 15, 2009.

For additional information visit us at www.wilmerhale.com

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PRAC MEMBER · PDF file · 2009-03-02The partners of ABNR are pleased to announce the appointment of new partners, Chandrawati Dewi and Luky I. Walalangi, with effect from 1 January