Lawyer Issue

Gibraltar Insolvency Act 2011
Corporate Insolvency Reform
The Hungarian Personal
Bankruptcy Act
Can Crowdfunding fill the gap
for franchise development loans?

Contents
Contact
www.lawyerissue.com
The Sanctions’ Effect and New Russian Law. Where Will the CIS Related
Disputes be Heard in the Future? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Investigatory Privilege . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Gibraltar Insolvency Act 2011 – Corporate Insolvency Reform . . . . . . . . . . .11
Malta: A Tax Efficient Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
International Arbitration in Sport: Why The Pechstein Case Could Throw The
Court Of Arbitration For Sport Into Disarray . . . . . . . . . . . . . . . . . . . . . . .20
The Hungarian Trust Law – An Anglo-Saxon Legal Institution in Civil Law
Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
The Hungarian Personal Bankruptcy Act . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Securities and Exchange Commission’s Approval: Is it a Sine Qua Non for every
Asset(s) Acquisition Transaction? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Brazil – Hiring of Insurance Abroad; Regulations and Restrictions . . . . . . . .41
Can Crowdfunding fill the gap for franchise development loans? . . . . . . . . . .45
Doing Business in The Philippines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
Patenting Software in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
The New Brazilian Code of Civil Procedure: a preliminary overview . . . . . .57
Disclosure and the Modern Slavery Act . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
Communications & Multimedia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
The Golden Age of Joint Lives Maintenance is Dead! . . . . . . . . . . . . . . . . . .67
Doing Business in the UK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74
Outsourcing in the Dominican Republic . . . . . . . . . . . . . . . . . . . . . . . . . . .78
Doing Business in Trinidad and Tobago . . . . . . . . . . . . . . . . . . . . . . . . . . .82
Wills, Probate and Trusts: Testamentary Capacity, Want of Knowledge and
Approval; and Revocable Living Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . .86

Anti-trust/Competition Doing Business in RussiaLaw
THE SANCTIONS’ EFFECT AND NEW RUSSIAN
LAW. WHERE WILL THE CIS RELATED DISPUTES
BE HEARD IN THE FUTURE?
By Marianna Rybynok
It isn’t a secret that over the past 10 – 15 years, the LCIA and other major arbitral institutions in Europe
including ICC, SCC and Swiss Chamber of Commerce have been hearing and continue to hear an
increasing number of disputes originating in Russia and other CIS countries. Now over a year passed since
the US and the European sanctions hit the Russian economy. In this article we are going to consider an
impact which the sanctions are having already and are likely to have in the future on the resolution of
international disputes involving the Russian parties. We are going to try and take into account as many
factors as possible, including some of the recent changes in Russian law.
4 | LawyerIssue
Some of the economic sanctions imposed on
Russia by the EU and the United States apply
to listed individuals, while the others concern
certain sectors of the economy. The scope
of the sanctions is quite wide. The sector
sanctions cover arms and military equipment,
energy and finance, putting a pressure on the
Russian corporate entities operating in these
sectors in different ways.
For example, some of the biggest Russian
companies, such as Gazprombank,
Gazpromneft, Rosneft and many others don’t
have access to the European and the US
capital markets, cannot arrange for loans, etc.
Sanctions concerning individuals are aimed at
restricting their ability to travel and at freezing
their assets. The sanctions are being under
a constant review with new measures being
added and more individuals being included
into the sanctions lists 1 .
The sanctions are obviously having an impact
1 For further information on European sanctions please
see Counsel Regulations 833/2014, 960/2014, 208/2014,
269/2014, 692/2014, 825/2014. For further information on
the US Sanctions please see Executive Order 13662.
on the individuals and the corporate entities
which they were aimed at targeting. However
they are also having some less obvious effects
on other individuals and companies, including
those in the legal services.
The law firms based in Europe and in the US
need to make sure that in rendering legal
support in contentious and non-contentious
matters they are not facilitating any
transactions prohibited by the sanctions. Many
law firms in Europe and in the US have now
developed internal control systems in relation
to the sanctions.
These systems are used whenever it comes to
instructions from the Russian clients. It is not
uncommon these days for an English or a US
law firm to refuse representing a Russian client
in a potential dispute or in connection with a
non-contentious matter.
There is a concern that the arbitrators may
be refusing to act in a similar way. Even if this
will not be the case it is believed there is a
danger that the arbitrators’ impartiality and
independence might get affected.
Apart from this there are other issues arising
out of sanctions in the context of international
arbitration and the use of the European
arbitral institutions:
• if a party to the proceedings is one
of the listed individuals or entities,
then before proceeding with filing a
request for arbitration, such party
would have to apply for a permission
to transfer funds to the relevant
arbitration institution;
• it might be difficult for the witnesses
involved to travel to the venue, i.e. the
place of a hearing; the witnesses may
also experience difficulties in meeting
their legal advisers in their office
based in Europe;
• it might be difficult to enforce an
award in Russia because it might
be seen as contravening the public
policy. Generally it is not very
uncommon for the Russian courts
to refuse enforcement based
on the public policy argument.
For example, in the case of Oil &
Natural Gas Corporation v OJSC
Amur (case no. A73-1288/2009)
the Supreme Commercial Court
held that the damages exceeding
60% of the contract price were
disproportionately high and as
the result the award was refused
enforcement. It might be the case
that with sanctions related arbitral
awards the public policy ground will
be invoked more often, making it
impossible to enforce the awards.
• It might also be difficult to enforce it
in other jurisdictions covered by the
sanctions, as the enforcement itself
might trigger one of the restrictions
imposed by sanctions.
The above listed issues are just some examples
of possible difficulties which are being
experienced or considered by the Russian
and international legal community involved in
resolution of the Russia related disputes.
As the result, a number of commentators
both in Russia and in Europe suggested that
it might be a shift towards arbitral institutions
based outside of Europe for resolution of the
disputes involving the Russian parties. These
alternative institutions may include Singapore
International Arbitration Centre (SIAC) and
Hong Kong International Arbitration Centre
(HKIAC).
Whilst the alternatives are out there, it is
unlikely that the Russian disputes will all move
from the LCIA and other European institutions
to SIAC, HIAC or other Asian institutions.
5

Doing Business in Russia
Over the past twenty years or so, the Russian
Commerce, however it is not the only one.
The more
a misrepresentation. Before 1 June 2015 this
business parties concerned more certainty and
parties have been heavily relying on English
successful the
could be very difficult or even impossible to
more confidence.
law in quite a lot of transactions, including
In April 2013 members of the Russian and
changes are the
achieve under the Russian. Now it is possible. It
M&A, finance, general commercial agreements
international legal community dealing with the
more significant
would be fair to say that the change introduced
The new sections in the Civil Code are just
for sale of goods and services, distribution
Russian related disputes founded a Russian
will be the shift
by section 431.2 is quite a significant
some examples of changes in the Russian Civil
agreements, etc. As for the dispute resolution
Arbitration Association (the “RAA”). The
to Russian
development.
Code, which have been reformed significantly.
methods, international arbitration under the
association acts as an appointing authority
law and the
The changes were made also in the areas
Rules of major European arbitral institutions
was a popular choice. The disputes arising
and/or administers the disputes under the
UNCTIRAL Rules 2010. The association’s
Russian arbitral
institutions.
“
New section 406.1 of the Civil Code, which also
became effective as of 1 June 2015, is very
concerning Russian insolvency law, general
contract law and guarantees.
out of the contracts which had already been
members include some of the World’s top
similar to what is understood as “indemnity”
entered into in the past will obviously continue
legal professionals in the area of international
under the English law. Such term was not
Apart from this, other changes are being
to be heard as per a relevant arbitration
arbitration.
recognized before under the Russian law, the
considered in the Russian judicial system
agreement between the parties.
closest concept was that of an “insurance”
including in relation to international
As for the current transactions, it would probably be
fair to say that the Russian in-house lawyers do think
twice before inserting the LCIA, the ICC, the SCC
arbitration clauses or the arbitration clauses of other
arbitral institutions based in Europe.
Although the association is very young, it is
very active and is becoming more and more
popular quite quickly. There is a common
understanding that in part, a success of the
Russian arbitration institutions, including the
RAA will depend on how often Russian law is
used in international transactions.
which is very different. This change may also
be regarded as a significant improvement in
the context of Russian M&A law.
Needless to say, these are the new provisions
and there are arguments amongst the Russian
practitioners about possible interpretation
arbitration. It is too early to say how successful
the implemented and the anticipated changes
are going to be.
However it is clear that that while the
English law will continue to be used the
Russian legislators and the Russian business
However the substantive law often stays
of some aspects of these provisions. For
community do feel under more pressure now
English. Therefore even if the chosen seat is
Recently several attempts have been
example, some concerns have been expressed
to continue developing a national law so that it
in Hong Kong or in Singapore and even if the
undertaken to make Russian law more
in connection with a wording of a new s. 406.1,
is easier to use in international context.
chosen arbitral rules are those of SIAC or the
attractive in international context. In particular,
which seems to suggest that parties may need
HKIAC, the legal representatives will still have
the Federal Law No. 42-FZ dated 8 March
to include at least a maximum amount of the
The more successful the changes are the more
to include the English lawyers as well.
2015 (‘Law No. 42-FZ’) introduced a number of
indemnity into their agreement, which might
significant will be the shift to Russian law and
important changes into Russian corporate law,
be a difficult thing to do in reality.
the Russian arbitral institutions. Right at this
Also for a client based in Moscow or in St
which became effective as of 1 June 2015.
moment, the Asian institutions are definitely
Petersburgh or in other cities within the
In time the courts’ practice in connection with
a good alternative but with its own practical
European part of Russia having to travel
Most importantly for the M&A transactions,
these new provisions will develop giving the
limitations in place.
to Hong Kong or Singapore might not be
where English law is often used, the new
convenient and cost effective. Last but not
provisions were introduced in connection with
least there is simply a custom.
warranties and indemnities.
A lot of lawyers in Russia have long established
relationships with the partners of the law firms
in London and other European cities. They
had been working together for decades now.
Whether all these factors will actually outweigh
the difficulties associated with the sanctions
remains to be seen.
Apart from the arbitral institutions in Asia, one
should not forget about the Russian arbitration
institutions. The oldest and probably the bestknown
one is the International Commercial
Arbitration Court for Russian Chamber of
New section 431.2 of the Civil Code now
provides a basis for claiming damages for
misrepresentations. Before the claimant was
most likely to rely on section 179 of the Civil
Code, which allowed to claim damages for
misrepresentation but only in conjunction
with a claim to declare the whole transaction
void. For obvious reasons, the claimant is not
necessarily interested in setting the transaction
aside.
Instead, the claimant may wish to simply
recover the losses sustained as the result of
Marianna Rybynok
Counsel at Khrenov & Partners
T: +7 495 927 0707
Email: m.rybynok@yklaw.ru
Marianna Rybynok is Of Counsel in Khrenov & Partners Moscow office. An English qualified solicitor,
Marianna has experience of high value litigation and international arbitration. She represents
companies and high net worth individuals in multi jurisdictional matters across a number of
different industry sectors including insurance, construction and media. In international arbitration,
Marianna has experience advising under a number of different arbitration Rules with seats in
different jurisdictions.
6 | LawyerIssue 7

Doing Business in Ireland
INVESTIGATORY PRIVILEGE
By Pamela O’Neill,
Seana Glennon
The Commercial Court delivered judgment in the case of Quinn v Irish Bank Resolution Corporation Limited
and Kieran Wallace 1 on 19 May 2015, confirming that the scope of litigation privilege extends not only
to documents created for the dominant purpose of anticipated litigation, but also to documents created in
contemplation of a criminal or regulatory investigation.
The judgment has significant implications for businesses engaged in a regulatory process, as it provides them
with an opportunity to immediately engage with their lawyers on a privileged and confidential basis. It also
highlights that the assistance of lawyers at an early stage of an investigation can have substantial benefits for
an organisation, both in the regulatory process itself and in any future civil action.
1 [2015] IEHC 315
The rationale for privilege
In general, a witness will be bound to answer all
relevant questions put to him, and will be held to be
in contempt of court if he refuses to do so; however,
the law recognises that there are a number of
instances in which a person enjoys a privilege from
being compelled to answer a question or produce a
document.
The law of privilege seeks to balance, on the one
hand, the administration of justice and the interest
in ensuring that all relevant evidence is before
the courts, and on the other, the protection of the
relationship between lawyer and client which relies
to a degree on confidentiality. The reasoning behind
the existence of legal professional privilege is that of
encouraging a client to make full and frank disclosure
of all relevant facts in relation to his case to his
lawyer, in confidence that such disclosures will not be
revealed without the client’s consent.
Legal professional privilege can be divided into
two basic categories: “legal advice privilege”
and “litigation privilege”. Broadly speaking, legal
advice privilege protects a person from producing
confidential communications made between him and
his lawyer for the purpose of giving or receiving legal
advice.
In order to establish legal advice privilege, it must
be shown that the document or information
sought to be disclosed consists of a confidential
communication made in the course of a professional
legal relationship, for the purpose of giving or
receiving legal advice. It should be noted that not
all communications between a solicitor and client
are privileged, only those made for the purpose of
giving or receiving legal advice, and those made in
confidence. This privilege will apply regardless of
whether litigation is contemplated or not.
Litigation privilege, on the other hand, applies to
confidential communications between a client and
his lawyer or a third party such as a witness or
expert, the dominant purpose of which is to prepare
for anticipated litigation.
A document will be privileged if the dominant
purpose for its creation is contemplated or
reasonably apprehended litigation. The test as to the
dominant purpose of the creation of the document
is an objective one, and it will not be sufficient that
the document was created for more than one equal
purposes, one of which is contemplated litigation.
It should be noted that no privilege is absolute; as
the doctrine has its roots in public policy, exceptions
may be made in circumstances where the balance
of the public interest in disclosing the document or
communication outweighs the maintenance of the
privilege. In particular, privilege will not apply to
communications made in furtherance of crime or
fraud. The courts have held that the purpose of legal
professional privilege is “to aid the administration
of justice, not to impede it” 1 .
Expansion of the doctrine of
privilege
The Quinn v Irish Bank Resolution Corporation
Limited and Kieran Wallace case concerned an
application for further and better discovery; the
defendants asserted privilege over a number
of disputed documents and sought to establish
that the dominant purpose for the creation of
the documents was the contemplation of further
litigation, or for the purpose of two investigations,
one by the Financial Regulator, and one by the
Director of Corporate Enforcement.
Previous caselaw has confirmed that privilege
1 Gallagher v Stanley [1998] 2IR 267, 271.
can be claimed by a person whose conduct is
under examination by a tribunal of inquiry, on the
basis that although such a tribunal may not be
involved in the administration of justice, it does
have an adjudicatory function, and any report it
may produce has the potential to have serious and
damaging effects for the persons called before it.
In the case of Ahern v Mahon 2 , the plaintiff was
held to be entitled to claim litigation privilege in
respect of communications between him and his
legal advisors and experts retained by him for the
purposes of the inquiry proceedings.
As a person whose conduct was under examination
by the tribunal of inquiry, the plaintiff was held to
be entitled to certain fundamental constitutional
rights, including the right to one’s good name, the
right to fair procedures, and the right to natural and
constitutional justice.
Judge Kelly held that a person appearing before a
tribunal of inquiry and to whom such fundamental
constitutional rights apply to is to be regarded as
being in the same position as a party to High Court
litigation, and not a mere witness, from the point of
view of legal professional privilege.
Judge McGovern in the Quinn judgment accepted
the first defendant’s submission that it was entitled
to assert investigatory privilege or regulatory
privilege in respect of any documents created
for the dominant purpose of engaging with the
regulatory and investigative processes in question.
Judge McGovern cautioned that the privilege did
not extend to all documents created after the date
on which the defendant became aware of the
investigations, but only those documents created
for the dominant purpose of engaging with those
investigation processes.
The logic behind the application of privilege is the
principle that a person must be able to consult his
lawyer in confidence, and be sure that what he
tells his lawyer in confidence will never be revealed
without his consent.
It has been described as “much more than an
ordinary rule of evidence, limited in its application
2 [2008] IEHC 119
8 | LawyerIssue 9

Doing Business in Ireland
to the facts of a particular case. It is a fundamental
condition on which the administration of justice as a
whole rests” 3 .
The labelling of a tribunal of inquiry as inquisitorial
rather than adversarial will not be determinative, and
the central issue will be one of fairness.
The Quinn judgment provides further clarity on the
scope of documents that will attract privilege in the
context of inquiries and investigations, and clearly
establishes the principle of investigatory/regulatory
privilege.
This briefing is correct as at 13 July 2015.
Disclaimer
This information is for guidance purposes only. It
does not constitute legal or professional advice.
3 Lord Taylor in R. v. Derby Magistrates Court Ex parte B [1996] 1 A.C.
487, cited with approval in Duncan v. Governor of Mountjoy Prison
[1997] 1 I.R. 558
Professional or legal advice should be obtained
before taking or refraining from any action as a result
of the contents of this publication. No liability is
accepted by Eversheds for any action taken in reliance
on the information contained herein. Any and all
information is subject to change. Eversheds is not
responsible for the contents of any other website or
third party material which can be accessed through
this website.
Eversheds is an Irish partnership and a member
firm of the Eversheds International network of firms
affiliated with Eversheds International Limited, an
English company limited by guarantee. Member firms
of Eversheds International are independent firms
and members of Eversheds International Limited,
but have no authority to obligate or bind Eversheds
International Limited or one another vis-à-vis third
parties. Neither Eversheds International Limited nor
any of its member firms have any liability for each
other’s acts or omissions.
Gibraltar Insolvency Act 2011 –
Corporate Insolvency Reform
By David Dumas QC,
Michele Walsh
Pamela O’Neill
Partner at Eversheds
T: +353 1 6644241
Email: pamelaoneill@eversheds.ie
Pamela is a partner working on the Eversheds Litigation and Dispute Resolution group. Pamela’s practice comprises
financial services disputes, regulatory disputes and commercial litigation. Due to the nature of Pamela’s practice, she
has specific expertise in case managing large cases requiring strategic and team management skills and document
management expertise.
She has experience in acting for both commercial clients and public bodies alike. She has a particular focus on advising
professionals, financial service providers and regulatory bodies in relation to dispute management, investigations and
claims. Pamela has experience in advising clients on litigation risk management, training policies and procedures to
avoid litigation. In addition she has experience of working on regulatory inquiries and investigations.
Seana Glennon
Solicitor at Eversheds
T: +353 1 6644933
Email: seanaglennon@eversheds.ie
A complete legislative reform of Insolvency law in Gibraltar has been brought about by regime in the form of
the Insolvency Act 2011 (IA) and comprehensive subsidiary and associated legislation took effect on 1 November
2014. The new legislation makes provision for liquidation, as well as for various rescue and recovery
regimes for the first time under Gibraltar law, including creditor voluntary arrangements, receivership and
administrative receivership.
The new Act also deals with individual bankruptcy which is outside the scope of this article. Specific rescue
and recovery for creditors.
The new insolvency regimes of the IA now means that companies in difficulty are given opportunities to turn
around their fortunes whilst ensuring that creditors are able to ensure a maximum return on debts owed to
them. The IA provides a balanced approach between these two positions.
Company Voluntary
Arrangements
company and/or may vary the rights of the
creditors or the terms of a debt.
Seána qualified as a solicitor in January 2013 and practices within the firm’s Litigation and Dispute Resolution Group, in
particular in the Financial Services Disputes and Investigations group.
Seána’s experience includes advising two major financial institutions in relation to a large scale regulatory investigation
by the Central Bank into the mis-selling of financial products. She project manages large volume litigation, issuing both
civil and criminal proceedings in all court jurisdictions. Seána also has experience in drafting legislation and similar
instruments, codes and guidance notes for public bodies. She works closely with in-house counsel in a number of
financial institutions and statutory bodies with regard to providing training on risk management and process mapping.
The directors of a company (or a liquidator/
administrator), if they believe that the company
is or is likely to become insolvent, may propose
a Company Voluntary Arrangement (CVA)
to the creditors under Part 2 of the IA which
may cancel all, or any part of, a liability of the
The process is supervised by an Interim
Supervisor who must be an eligible insolvency
practitioner, who must prepare a report on the
proposal for the creditors and call a creditors’
meeting at which the creditors can either
approve, amend or reject the proposal.
10 | LawyerIssue 11

Insolvency
Approval by 75% (in value) of the creditors
consideration by the creditors who may approve,
demand and recover, and issue receipt for,
have any powers; this marks a complete end to
present and voting on the CVA, binds the
amend or reject the proposal at a creditors’
any income of the asset in respect of which he
the company’s business.
company, each member and each creditor of the
meeting.
was appointed. The Receiver may also manage,
company as if he was a party to the arrangement
insure, repair and maintain the asset.
Liquidation may be commenced by the court or
whether that creditor attended the creditors’
If approved the Administrator manages the
by shareholders’ resolution.
meeting or not.
company’s business, assets and affairs in
Primarily, he must exercise his powers in good
accordance with the proposals. He shall perform
faith and for proper purpose and must at all
The Court will also have jurisdiction, under Part
Following approval and subject to his agreement,
his functions with the primary objective of
times act in the best interests of the person
7, to appoint a liquidator over an unregistered
the Interim Supervisor is appointed as Supervisor
rescuing the company, if possible. He is granted
whose interests he was appointed. Subject to
company, which includes a foreign company,
with such powers and functions as provided for
a wide range of powers to ensure the objectives
his primary responsibility the Receiver must also
provided it has a connection with Gibraltar,
in the proposal.
are satisfied.
have reasonable regard to the interests of the
namely if it has, or had, assets in Gibraltar, or
creditors and the company.
if it carried on business in Gibraltar or if there
Upon an application to Court, where he has
failed to comply with his duties he may be
replaced. The Court has the discretion, following
an application, to give any direction to the
Supervisor and can also confirm, reverse or
The period from the filing of the application for
an Administration Order up to the dismissal
of the application or the discharge of the
Administrative Order is ‘the Moratorium Period’.
Administrative Receiver
As referred to above, the IA also introduces the
concept of an ‘Administrative Receiver’. He is a
is a reasonable prospect that the appointment
would benefit creditors.
Commencement of liquidation
modify any decision made by Supervisor.
During that period the company is protected
receiver of the whole or substantially the whole
A company will be put into liquidation when a
Administration
from any further creditors’ action. Except with
the Court’s leave or the Administrator’s consent,
cannot take any step to, inter alia, enforce any
of the business undertaking and assets of a
company, appointed by a floating charge holder,
or in some circumstances by the court.
liquidator is appointed. The onset of insolvency,
which is relevant for the purposes of voidable
transactions (see below), is the date when the
The Administration provisions are in Part 3
security interest over the company’s assets or
application for the appointment of the liquidator
of the IA. They can be described as company
begin any legal process against the company.
The Administrative Receiver’s powers go beyond
is filed, or, where the company is in liquidation
friendly in that they give the company a window
those of a Receiver and include powers to
following appointment of a liquidator by its
of opportunity to try to rescue its ailing business
An Administration Order cannot be granted by
execute all documents necessary or incidental
members, the date of the appointment of the
during a period when the company structure is
the Court where an Administrative Receiver has
to the exercise of his powers in the name of the
liquidator.
effectively preserved and creditors are prevented
from taking any legal steps against the company.
Generally, an Administrator is appointed by an
been appointed for the company by the holder of
a debenture or other instrument secured by way
of a floating charge.
company and may also use the company seal.
Liquidation
The definition of insolvency
A company will be presumed to be insolvent
Administrative Order made by the Court. The
The concept of an Administrative Receiver is
An application for appointment of a liquidator
if it fails to comply with the requirements of a
Court must be satisfied that the company is,
dealt with below but it is interesting to note
(replacing the previous “petition to wind up
statutory demand that has not been set aside, or
or is likely to become, insolvent and that the
that this might lead to an increase in the use
a company”), can be made by a creditor, the
execution on a judgment in favour of a creditor
appointment will assist in the rescue of the
of floating charges in financing transactions
company, its directors, its shareholders, the
of the company is returned unsatisfied.
company or will achieve a better result for the
concerning Gibraltar companies.
Minister responsible for financial services or the
creditors as a whole than would be likely if the
company were to enter into liquidation.
Upon appointment, the Administrator takes
custody and control of all the company’s assets
and he will manage the business affairs of
the company in furtherance of the objectives.
Unlike liquidation, the powers of the directors
continue so long as they do not conflict with the
Administrator’s powers.
The Administrator has to formulate proposals for
Receivership
The IA provides for the appointment of a
Receiver either court order or by powers granted
under a debenture or other instrument. A
Receiver is usually appointed in relation to a
particular asset of the company and will enjoy
those powers expressly or impliedly conferred on
him by the appointing instrument.
The Act also provides that a Receiver may
Financial Services Commission.
The Court will appoint a liquidator inter alia,
where a company is insolvent, with provision
also being made for appointment of liquidators
on public interest or other grounds.
A liquidator’s principal duties are to collect and
realise the assets of a company and distribute
the proceeds to creditors. Upon appointment,
the liquidator takes custody and control of the
company’s assets, and the directors cease to
A company is insolvent if it is unable to pay
its debts as they fall due, or the value of its
liabilities exceeds its assets.
Voidable transactions
The new legislation introduces several types of
voidable transactions in Part 9 of the IA, with
a new suspect or ‘vulnerability period’. Under
the 1930 Companies Act, the relevant time
frame in determining whether a transaction
by an insolvent debtor could be annulled was
12 | LawyerIssue 13

Insolvency
3 months prior to commencement of winding
up, and in the case of floating charges, six
months before commencement (with the
commencement being deemed to be the date
on which a petition was filed to wind up the
company).
Under the new legislation, the relevant periods
are longer. It is important to note that they will
be calculated from ‘the onset of insolvency’
which is the date on which an application for
appointment of a liquidator is made.
The vulnerability period referred to in
sections 259, 250 and 251, in relation to unfair
preferences, undervalue transactions (s.250)
and voidable floating (s.251) charges is 6 months
prior to the onset of insolvency, or where the
transaction is with a connected person, 2 years
prior to the onset of insolvency.
A “connected person” is defined in the
Insolvency Rules 2014. A person is connected
with an individual if the person is (a) the person’s
individuals spouse or civil partner (b) a relative
of the individual, or of the individual’s spouse or
civil partner; or (c) the spouse or civil partner of
have been in the event of the company going
into liquidation. The preference must have
occurred within the ‘vulnerability period’ and the
company must have been insolvent at the time
or become so as a result of the transaction.
Transactions in ordinary course of business
are not unfair preferences. If the creditor
is connected with the company, there is a
rebuttable presumption that the company was
insolvent at the time or became so as a result of
the preference, and that it did not take place in
ordinary course of business.
Undervalue transactions
This occurs where a company makes a gift to a
person or otherwise enters into a transaction
on terms that provide no consideration for the
company, or significantly less than the value, in
money or money’s worth, than the consideration
provided by the company.
Such a transaction can be set aside if it was
entered into within ‘the vulnerability period’ and
if the company is insolvent or becomes insolvent
as a result of the transaction. If the transaction is
transactions
A transaction entered into within the
vulnerability period to provide credit to the
company is voidable if, taking into account
the risk accepted by the person providing the
credit, the terms of the transaction require
grossly exorbitant payments to be made, or
the transaction grossly contravenes ordinary
principles of fair trading.
Orders to be made by the
Court
The Court has power to make an order setting
aside voidable transactions and make such
orders it considers appropriate, including
restoring the position to what it would have
been if the company had not entered into
that transaction, or in the case of extortionate
transactions, to vary the terms of the
transactions or to take accounts.
Malpractice
Part 10 of the Insolvency Act deals with
malpractice and directors liabilities.
former director for insolvent trading if that
person continued to trade when he knew or
ought to have concluded that there was no
reasonable prospect that the company would
avoid going into insolvent liquidation. The
director or former director would have a defence
if he or she took every step reasonably open
to him to minimising the potential loss to the
company’s creditors.
The Court has power to order that a director
found guilty of insolvent trading contribute to
the assets of the company.
Fraudulent conduct
Any officer of a company will be deemed to have
committed an offence if at any time during their
appointment, or in the 12 months preceding the
liquidation they transfer or charge any of the
company’s assets, or if they conceal or remove
any of the company’s assets.
Disqualification
A director may also be disqualified from acting
as a director of a company or from being directly
a relative of the individual or of the individual’s
spouse or civil partner.
A person is connected with a company if the
person if (a) is a director of the company; (b) is
a parent or subsidiary of the company; or (c)
has control of the company. The definition also
covers people in partnership with one another
with a connected person, there is presumption
(which is rebuttable) of insolvency.
Voidable floating charges
A floating charge created by a company within
the vulnerability period is voidable if at the
time of creation, the company was insolvent, or
Directors of an insolvent company may be
personally liable and ordered to repay monies or
compensation where they are found to be guilty
of misfeasance or breach of fiduciary duty, or
where they misapply monies.
Fraudulent trading
or indirectly involved in the management of a
company (including as a voluntary liquidator,
receiver or insolvency practitioner).
A disqualification order may be made by the
court if a director has been convicted of any
offence in relation to an insolvent company, is
guilty of fraudulent or insolvent trading under
and also employees.
In relation to extortionate credit transactions
(section 252) the vulnerability period commences
5 years prior to the onset of insolvency and ends
on the appointment of the administrator, or if
the company is in liquidation, the liquidator.
Unfair preferences
This is a transaction, the effect of which places
a creditor in a better position than they would
became so as a result.
The charge would not be voidable to the extent
that it secures money or assets advanced at
the same time as, or after, the creation of the
charge. If a floating charge is created in favour of
a connected person, there will be a presumption
(which can be rebutted) that the company was
insolvent at the time or that it became so as a
result of the charge.
Extortionate credit
A liquidator powers to pursue directors for
malpractice, including for fraudulent trading
where the company’s business has been carried
on with intent to defraud creditors or any other
person, or for any fraudulent purpose. A director
knowingly party to the fraudulent trading may
be liable to contribute to the assets of the
company.
Insolvent trading
A liquidator may also pursue a director, or
sections 259 and 260, is guilty of any fraud or
misfeasance or where the Court considers that
the person’s conduct as director, or shadow
director, makes him unfit to be concerned in
the promotion, formation or management of
companies.
General provisions relating to
Insolvency proceedings
Part 17 of the Act makes provision for the
appointment of a creditors committee in
14 | LawyerIssue 15

Insolvency
liquidations, administrations or administrative
receiverships.
The functions of a creditors’ committee are;
a.
b.
c.
d.
to consult with the liquidator (or
administrator etc.) about matters relating to
the insolvency proceeding;
to receive and consider reports of the
insolvency holder;
to assist the officer holder in discharging his
functions;
and
to discharge any other functions assigned to
it under this Act or the Rules.
A creditors’ committee may call a meeting
of creditors and require the liquidator (or
administrator etc.) to provide the committee with
such reports and information as the committee
reasonably requires, as well as to require him
to attend before the committee. The committee
will also have powers relating to the liquidator’s
remuneration, and to controlling the same.
Part 18 of the Act deals with the appointment of
the Official Receiver and sets out the functions
of the same, with Part 19 setting out the rules
governing insolvency practitioners, with licences
required to act as a liquidator, administrator or
other insolvency practitioner.
Such licences are available only from the Minister
for Financial Services, with the Financial Services
Commission monitoring the same.
Malta: A Tax Efficient Jurisdiction
By Christine Cassar Naudi
David Dumas QC
Partner at Hassans
Malta’s tax legislation provides for a number of benefits which can be derived
by companies and their shareholders. The tax rules can lead to a tax burden in
Malta which is significantly reduced or completely eliminated in certain cases,
and the following are some of the key tax benefits which Malta can offer.
T: +350 200 79075
Email: david.dumas@hassans.gi
David, a Partner at Hassans since 1987, and Queen’s Counsel since 2002, is experienced in a wide range of litigation,
including commercial, insolvency, fraud, banking, compliance and regulatory work, and white-collar crime.
In insolvency work , David has acted for creditors, secured and general, liquidators, troubled companies, and custodians
in investment liquidations. He represents a number of creditors in a long-running bankrupty/ liquidation. He is a
member of the International Insolvency Institute and was involved in the drafting of Gibraltar’s Insolvency Act 2011.
David has served as Chairman of the Industrial Tribunal, and was Chairman of the Gibraltar Bar Council 2009 -2012
and currently serves as Vice-Chairman
Michele Walsh
Senior Associate at Hassans
T: +350 200 79000
Email: michele.walsh@hassans.gi
Michele undertakes a wide range of commercial litigation and has experience in high-value, complex cases involving
multi-jurisdictional proceedings. She has acted for unsecured petitioning creditors in both contested and uncontested
liquidations, as well as for secured creditors of insolvent companies.
Michele also regularly advises on contentious and non-contentious employment matters, including collective
redundancy, TUPE and HR policy and procedure. Michele currently serves as a Chairperson of the Industrial Tribunal.
Michele qualified as a solicitor in England and Wales in September 2007 and was called to the Gibraltar Bar in February
2008. Michele is a member of the Law Society of England & Wales.
1
Imputation system of
taxation
Malta’s imputation system avoids double taxation
at the level of the company and its shareholders
since tax is paid by the company on account
of the liability of the shareholders to pay such
tax. Unlike many European and other countries,
shareholders do not pay tax when they receive
dividends from the Malta company but can claim
a credit for the tax paid by the company.
2
Tax credits and refunds
Significant tax refunds can be claimed by
shareholders of a Maltese company on receipt
of dividends from the company. Although the
Maltese company would pay tax at the corporate
rate of 35%, the effective tax leakage in Malta
after refunds to shareholders can be reduced
significantly depending on the source of income
of the Maltese company and any foreign tax
incurred by it.
3
Participation Exemption
Malta’s participation exemption does not require
any minimum holding period where a Maltese
company holds more than 10% of the interests in
a non-Maltese entity.
It is applicable in relation to any dividend
income or capital gains arising on the holding
and eventual disposal of a participating holding
of equity shares in a non-Maltese company or
partnership. The holding must satisfy a number
of alternative criteria, including a minimum
10% holding or a minimum investment of
€1,164,000 or equivalent in the non-Maltese
16 | LawyerIssue 17

Tax Law
entity. There is also an anti-abuse test which is
to be satisfied, and the safe harbours include
6
Group transfers
No Maltese tax should be payable on
and the exemption will apply in respect of the
transfer of any shares issued by or held by the
Securitisation Transactions (Deductions) Rules.
The securitisation vehicle can opt to wipe out
the holding of shares / interests in entities which
any intra-group transfer of assets of a company
Maltese company.
all of its chargeable income by making use of
are incorporated or resident in the European
Union, or the holding of shares / interests in
entities which have less than 50% of their income
being derived from passive interest or passive
royalties.
subject to satisfaction of a few straightforward
conditions.
7
Transfers of shares in
Maltese companies
10
Partnerships
Following a recent amendments to Maltese tax
laws, partnerships and European Economic
Interest Groupings may elect to be treated as a
those deductions, resulting in no income tax
being payable in Malta. Thus, there are generally
no Maltese tax implications for originators
participating in a securitisation transaction with
a Maltese securitisation vehicle as long as such
originators are themselves not tax resident in
As a result of a recent amendment to Maltese tax
An exemption from Capital Gains Tax should
company for all purposes of the Income Tax Acts
Malta.
laws, where profits of a Maltese company benefit
from the exemption from withholding tax set
out in the EU’s Parent Subsidiary Directive, the
be available to non-resident shareholders
transferring shares in a Maltese company as
long as the company does not itself own real
with effect from year of assessment 2016.
Such election may be made irrespective of
12
Other benefits
participation exemption would only apply to the
estate in Malta. A statutory form confirming the
whether the income derived by the partnership
Malta does not have any thin capitalisation rules,
extent that such profits are not deductible by the
exemption and backed by a certification of a
consists of income during the course of a trading
and it does not have any specific transfer pricing
relevant subsidiary distributing the dividend in
Maltese auditor is filed at the Inland Revenue,
activity or from a passive activity. The election is
rules.
that other EU Member State.
and no provisional or other tax is paid by the
to be made within 60 days from the setting up
shareholders.
of the partnership, but transitory arrangements
It is possible for a Maltese company to re-
The same applies to a permanent establishment
have been agreed to with the Inland Revenue
domiciled and be continued under the laws of
situated in Malta of a parent that is established in
This exemption is also applicable where there is
in respect of foreign partnerships which were
another jurisdiction without having to wind-up its
another EU Member State.
a value shift as a result of the issue of new shares
already in existence prior to the enactment of
assets and liabilities. In such a case, no Maltese
4
Branch exemption
Maltese companies may claim an exemption
by the Maltese company and a consequential
deemed transfer by the existing shareholders to
any new shareholders who subscribe to shares
issued by the company.
the changes in law.
11
Securitisation Vehicles
exit taxes are payable.
Malta has a wide Tax Treaty network with
more than 65 Treaties currently in place, and
from Maltese tax in respect of any profits
which are attributable to a branch / permanent
establishment of the company outside Malta.
8
Withholding Tax
Malta has specific rules on the tax treatment of
securitisation vehicles that enable securitisation
vehicles established in Malta to eliminate tax
more Treaties are being negotiated with other
countries. Furthermore, as Malta is a member of
the European Union, source country withholding
5
Non-domiciled
but Malta resident
companies
No Maltese withholding tax is payable on any
interest or royalties payable by the Maltese
company to non-resident persons who do not
have a permanent establishment in Malta. This
exemption applies as long as the beneficial
leakage. Such tax neutrality can be achieved
through a combination of the general provisions
on deductibility of expenses under the Income
Tax Act and further deductions under the
taxes on payment of royalties can be reduced
or eliminated in terms of the EU’s Interest and
Royalties Directive.
Maltese incorporated companies are taxable on
owner of the interest or royalties is not owned
their worldwide income. However, a non-Maltese
and controlled by, directly or indirectly nor acts
company which is tax resident in Malta is liable
on behalf of an individual or individuals who are
to tax on a source and remittance basis only.
ordinarily resident and domiciled in Malta.
Christine Cassar Naudi
In recent years, various companies which
are incorporated and domiciled in another
jurisdiction have taken up Maltese tax residence.
In such a case, no Maltese tax is payable if the
non-Maltese company has passive income (e.g.
royalties through licensing of IP rights) and the
relevant passive income is not remitted to Malta.
No Maltese withholding taxes are chargeable on
payment of dividends by the Maltese company to
its shareholders
9
Stamp Duties
A stamp duty exemption can be obtained (upon
satisfaction of certain straightforward conditions)
by a Maltese company following is incorporation,
Senior Associate at GANADO Advocates’
T: +356 2123 5406
Email: ccnaudi@ganadoadvocates.com
Christine Cassar Naudi is a Senior Associate with GANADO Advocates’ Corporate Finance and Tax practice. After working for
a number of years with PWC Malta in the international tax department, she joined GANADO Advocates in 2004. Christine
provides tax advice to mostly international clients (both corporate and individual) on optimal tax structuring through
Malta, the income tax, stamp duty and VAT implications for clients with Malta-based companies, and finance leasing
structures for yachts and aircraft. She is a speaker at a number of seminars and conferences.
18 | LawyerIssue 19

Sports Law
International Arbitration in Sport: Why
The Pechstein Case Could Throw The Court
Of Arbitration For Sport Into Disarray
By Jeremy Dickerson,
James Pheasant,
Chris Davies
The Pechstein Proceedings
The story began in February 2009 when blood
samples were taken from Ms. Pechstein as
part of the ISU’s blood testing programme 2
on the eve of the ISU World Allround Speed
Skating Championships in Hamar. These
samples were compared with Ms. Pechstein’s
apparent blood profile based on information
that the ISU had gathered over a number
of years from blood samples taken from
her as part of its anti-doping programme.
That comparison gave rise to suspicious
findings because of an abnormal increase in
reticulocytes (immature red blood cells) which
were potentially indicative of blood doping.
number of grounds. On 10 February 2010,
applying the test contained within Article
190(2)(a)-(e) of the Swiss Private International
Law Act strictly, the Swiss Federal Tribunal
dismissed the appeal.
There was then a second appeal to the Swiss
Federal Tribunal in which Ms. Pechstein
argued that a novel scientific method of
diagnosing hereditary spherocytosis (which
could explain the blood test abnormalities)
had been developed that was not available
to the CAS at the time of the underlying
arbitration. The Swiss Federal Tribunal again
rejected Ms. Pechstein’s appeal.
On 5 March 2009, the ISU filed a complaint
Dissatisfied with the CAS and Swiss Federal
with the ISUDC accusing Ms. Pechstein of
Tribunal’s decisions, Ms. Pechstein issued
blood doping offences. Following a hearing in
a damages claim for €4 million in her
Berne, the ISUDC found Ms. Pechstein guilty
local German Regional Court in Munich
of an ‘Anti-Doping Violation’ and disqualified
(Landesgericht), alongside a complaint to the
her from competing for two years. Notably,
European Court of Human Rights 3 .
this was in spite of the fact that no Prohibited
Substances had ever been identified in any
On 26 February 2014, the Landesgericht 4
of Ms. Pechstein’s samples. Her case was
held both that it was seized of jurisdiction
Introduction
proposed the creation of a “supreme court of
therefore determined on circumstantial
rather than any actual evidence of doping.
and that the arbitration agreement between
the ISU and Ms. Pechstein was invalid, as Ms.
The benefits of arbitration (as opposed
world sport”, the Court of Arbitration for Sport
Pechstein was forced to sign the agreement
to the Court system) in resolving sporting
(CAS), has gained the trust of most sports as
Ms. Pechstein subsequently appealed to
to arbitrate as a precondition of participating
disputes have long been recognised by
an independent and consistent forum for
the CAS pursuant to Article 24 and Article
in her sport. The Landesgericht considered
those concerned with the regulation and
the resolution of disputes. Unsurprisingly,
25 of the ISU Constitution and Rule 13.2.1
this a breach of Article 6 of the European
governance of sport. The specialised
most sports have now adopted the CAS as
and 13.6 of the ISU Anti-Doping Rules.
Convention on Human Rights. However,
expertise of sports arbitrators, the speed,
the final appellate forum (save in limited
The Final Arbitral Award was published
despite this finding, it held that the principle
confidentiality and relative cost efficiency
circumstances) once the sports’ own internal
on 25 November 2009, dismissing Ms.
of res judicata meant that the CAS Final
with which arbitral panels can deliver
dispute resolution procedures have been
Pechstein’s appeal on the grounds that “illicit
Arbitral Award was enforceable pursuant to
decisions are all attractive in an industry
exhausted.
manipulation of her own blood” remained the
the New York Convention on the Recognition
that requires disputes to be decided quickly
and at short notice 1 . Unsurprisingly, the
overwhelming majority of sport governing
bodies therefore include an agreement to
arbitrate sporting disputes in their Rules as a
pre-condition to participation in the sport.
Against that backdrop, the ongoing
proceedings concerning Ms Paula Pechstein’s
dispute with the International Skating
Union (ISU) in connection with the two year
ban from competition imposed by the ISU
“only reasonable alternative source of such
abnormal values”.
Many challenges to doping bans end at that
point with the CAS typically being seen, as
Mr. Samaranch had originally envisaged, as
and Enforcement of Arbitral Awards. The CAS
award and the sanctions imposed on Ms.
Pechstein, therefore, stood, despite the fact
that the basis for it was, in the Landesgericht’s
eyes, illegitimate.
Since its inception, three years after the
then IOC President Juan Antonio Samaranch
Disciplinary Commission (ISUDC) in 2009 for
doping offences are relevant not just to the
immediate issue of CAS’ jurisdiction, but also
the ultimate arbiter of sporting disputes.
However, Ms. Pechstein went further and
appealed to the Swiss Federal Tribunal on a
Having now gained some traction in her
efforts to prove her innocence and challenge
1 See, for example, CAS Ad Hoc Divisions during Olympic
Games.
to the wider issue of how disputes are best
resolved in the modern sporting context.
2 The ISU claim to have tested more than 11,000 blood
samples from 1,650 speed skaters.
3 See ISU Press Release dated 21 October 2013
4 Docket No 37 O 28331/12
20 | LawyerIssue 21

Arbitration, Sports Law
the sanctions imposed on her, Ms. Pechstein
To bring matters up-to-date, the current
Bundesgerichtshof will address the point.
The statement published by FIFPro on 14 July
appealed to the Higher Regional Court of
picture is that the ISU announced on 9 July
2015 that…
Munich (Oberlandesgericht). On 15 January
2015 that it had filed an appeal against the
With the Bundesgerichtshof yet to opine
2015 1 , overturning the decision of the
Oberlandesgericht’s decision to the German
on this and the other issues at stake, there
“Every athlete as a citizen and worker has
Landesgericht, it held that:
Federal Court of Justice (Bundesgerichtshof).
may yet be more twists and turns in this
the right to a fair process and to be judged
On 14 July 2015, FIFPro, the football players’
saga. Whatever the ultimate outcome, it is
in an independent and impartial court. The
a. The arbitration agreement between Ms.
federation, announced that it will financially
impossible for CAS to ignore the challenges
decisions of the regional courts in Germany
Pechstein and the ISU was invalid as it
support Ms. Pechstein in the defence of the
made and the various decisions of the
in Claudia Pechstein’s case have confirmed
was contrary to mandatory German anti-
ISU’s appeal, which is now pending.
German courts.
that this right was not duly granted by CAS
trust law 2 . Namely, the ISU’s insistence
upon the agreement to arbitrate as a
precondition of competing constituted
Analysis
Whilst some commentators have played
down the likely impact of the case, given the
at the time of her anti-doping case.”
“FIFPro is firmly of the view that also today
an abuse of a dominant position. This
One of the most striking aspects of the
long standing jurisprudence of the CAS (and
CAS does not provide footballers and other
was on the basis that the constitution of
German Court’s decisions to date has been
the Swiss Courts endorsement of its role), the
athletes with a structure and process that is
the International Council for Arbitration
their willingness to entertain a challenge to
significance of the German Court’s decisions
fair to the athletes”.
in Sport (ICAS) that selected the closed
CAS’ jurisdiction in spite of Ms. Pechstein’s
is clearly on CAS’ radar, with it stating in a
list of arbitrators and also appointed
failure to raise her jurisdictional challenge at
press release:
…sounds as a warning to CAS that Ms.
the President of the Appeals Arbitration
any point prior to issuing proceedings before
Pechstein and the German Courts are not
Division, who in turn was responsible for
the German Courts.
“If, like in the Pechstein/ISU case, arbitration
alone in their belief that the constitution of
appointing the chair for each CAS panel,
agreements were to be considered as invalid
the arbitral panels (and in this case CAS) are
was contrary to German anti-trust law.
There was nothing preventing Ms Pechstein
by state courts, even when not challenged
weighted in favour of governing bodies to the
ICAS comprises 20 members, of which
from raising a fundamental challenge to her
at any stage during the arbitration, then the
disadvantage of individual athletes.
12 were nominated by the International
arbitration agreement with the ISU and CAS’
basic principles of international arbitration
Olympic Committee, and only 1/5 were
jurisdiction under it at the outset of her case.
would be compromised” 5 .
Admittedly, the CAS has not stood still since
nominated with the athletes’ interests in
Ms. Pechstein did not do so; indeed, she
2009, and there have been amendments to
mind;
willingly submitted to the jurisdiction of the
It is easy to see that the Pechstein case
the constitution of the ICAS and individual
CAS.
could have wide ranging implications for
CAS arbitral panels. It is only natural that
b. Accordingly, the CAS decision (which
sporting arbitration agreements. Specifically,
modifications will be necessary to the
was mandated by the invalid arbitration
Given that under section 73 of the Arbitration
regardless of the Bundesgerichtshof’s view
structure and function of a body established
agreement) was unlawful; and
Act of 1996, a jurisdictional challenge must
of the merits of Ms. Pechstein’s case, if it
over 30 years ago, and the authors
be made as the first step before a participant
upholds the Oberlandesgericht’s decision
believe that it is critical for the integrity of
c. The Landesgericht was wrong to find
takes any substantive steps in the arbitration,
that it has the jurisdiction to interfere with
international sport to be able to call upon
that the principles of res judicata and
the position reached by the German Courts
CAS’ decision, then it both paves the way for
a dedicated and unified appellate body to
the New York Convention meant that
is, ostensibly, directly opposed to the position
courts in other jurisdictions to find similarly
deliver consistent decisions.
the decision of the CAS was valid. The
under English law.
in respect of their national athletes, and
Oberlandesgericht considered that the
opens the door to potential damages claims
Otherwise, the spectre of a possible
breach of anti-trust law was contrary
to public policy 3 , and pursuant to the
exclusion contained within Article V(2)
(b) of the New York Convention, the CAS
decision was not binding.
Either way, if upheld, the German Court’s
decision appears to open up the possibility
of athletes ‘forum shopping’ for alternative
dispute resolution mechanisms after
receiving an unfavourable judgment 4 .
It remains to be seen whether the
against CAS by athletes who have been on the
receiving end of sanctions.
Furthermore, the fact that FIFPro (and other
donors) have agreed to fund Ms. Pechstein’s
defence of the ICU appeal suggests that there
divergence in the application of and
respect for fundamental sporting principles
throughout the world arises. Clearly,
therefore, CAS’ attempts to address the
concerns raised and reform itself are to be
welcomed.
1 Docket No U 11140/14 Kart
2 See German cartel law - Section 19 Act against Restraints
on Competition
3 Pursuant to Article 1061 of the German Civil Code of Civil
Procedure.
4 See (1) Paul Smith (2) Jamie McDonnell v (1) British
Boxing Board of Control Ltd (2) Frank Warren (3) Dennis
Hobson (2015) QBD (Liverpool) 13/04/2015) where the
Court refused to remove the arbitral panel and stated that
in any event, section 73 of the Arbitration Act meant the
application must fail because the boxers’ solicitors had “fully
engaged” with the arbitral process.
are a number of interested stakeholders
in the sports industry waiting in the wings,
hoping that her challenge to CAS’ jurisdiction
will succeed.
5 See Statement of CAS dated 27 March 2015.
Like the majority of commentators, the
authors therefore hope for a reformed CAS
capable of serving the modern sporting
context, not for its abolition. However, the
22 | LawyerIssue 23

Arbitration, Sports Law
sports industry does not speak with one
voice on this issue, as reflected in FIFPro’s
statement that:
“Even after CAS’ structural reform, the
composition of ICAS, the appointment of
arbitrators and chairmen do not provide
athletes with equal representation of
arbitrators and independence of the
tribunal. Other concerns such as procedural
cost and the application of Swiss law to
conflicts between EU-based parties have
Jeremy Dickerson
Partner at Burges Salmon
T: +44 (0) 117 902 2728
Email: jeremy.dickerson@burges-salmon.com
James Pheasant
Senior Associate at Burges Salmon
T: +44 (0) 117 902 2772
Email: james.pheasant@burges-salmon.com
Chris Davies
been criticized before 1 .”
Whilst the decision of the Bundesgerichtshof
is eagerly awaited by those operating in
the sports sector, it appears that the legal
challenges to CAS’s right to act as ‘the
supreme court of world sport’ are unlikely
to subside even if the Bundesgerichtshof
overturns the Oberlandesgericht.
1 FIFPro Press Release 14 July 2015.
Jeremy leads Burges Salmon’s Intellectual Property Litigation team. Jeremy has extensive experience in all areas of
contentious and transactional IP including trade marks, patents and copyright. He has also worked widely in the areas
of sponsorship, merchandising, advertising and sales promotion, sport, defamation and internet issues
James is a commercial litigator with international dispute resolution experience across a wide range of industry sectors,
including specialist expertise in sports and competition disputes.
James utilises a wide range of dispute resolution tools including arbitration, expert determination and mediation to
achieve favourable commercial outcomes for clients. He has represented clients before the English High Court and Court
of Appeal, Competition Appeal Tribunal and Court of Arbitration for Sport as well as various arbitral tribunals and
disciplinary bodies. He also regularly advises on identifying, evaluating and controlling legal risk.
About Us:
The Law Office of Dr.Najeeb Al Nauimi is a full service law firm established in 1997, led by the visionary Dr.Najeeb Al
Nauimi, one of the region’s most reputed legal authority and former Minister of Justice for the State of Qatar. Our law
firm’s inherent passion for justice is built on our deep insights of the Qatari tradition, and its values.
Our vastly experienced and strong teams of legal professionals offer innovative and efficient legal solutions in a
cost effective manner, making us the law firm of choice for our clients. Our law firm provides a broad spectrum of
solutions in a variety of practice areas to our local and international clientele. We have our offices in Qatar (Doha),
UAE (Ajman) and an associate office in US (New York).
Our mission is to strive for legal excellence by providing result-oriented legal solutions to our clients, with adherence
to highest standards of excellence and integrity. It is our strong belief in these values that helped our law firm achieve
a popular and prestigious position across the Middle East.
Founder:
Dr.Najeeb Al Nauimi, a primary architect of Qatar’s
modern judicial structure and former Minister of Justice
for the State of Qatar, is a prominent personality in the
country and in the international legal arena. Having a vast
experience strengthened by his degrees in law gained in
Egypt and United Kingdom, he has represented the Govt
of Qatar in the capacity of a Counsel and Agent in the
International Court of Justice in various cases of domestic
and international importance.
A prolific writer and an eloquent speaker on various
international issues and legal matters, such as; the border
dispute case which was between Qatar & Bahrain and he
was agent of Qatar before the ICJ( International Court Of
Justice) in 2000. Also, he was representing general assembly
of united nations in the case of nuclear weapons use. More
ever , Dr. Najeeb Al Nauimi has authored and co-edited a
variety of books on an assortment of topics.
As a member of various international legal organizations
and societies, he has been an active personality on the legal
front on many international issues, including environmental
causes. His expertise covers varied fields of International
Law, Petroleum Law and Maritime Law, among others.
As an international human rights lawyer and an esteemed
professor of Law, Dr. Najeeb has been at the forefront
of judicial reforms and a catalyst of human rights
developments in the country.
He has played a pivotal role in upholding the issues of
human rights violations in the region, and has been
instrumental in the use of international human rights
conventions and treaties to advance such issues in the
country, as well as in the GCC region.
As a defender of human rights, Dr.Najeeb was closely
associated with the protection of the rights of the detainees
held in Guantanamo Bay. He was appointed as the
Chairman of the Committee for the Defence of Detainees
at Guantanamo and personally represented 93 of the
detainees being held in the much-publicized US military
prison. Dr.Najeeb also played an active role in defending the
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poet, Mohammed Rashid al-Ajami.
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Advocates and Legal Consultants
Address:- P.O Box: 39, Office No. 902,
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24 | LawyerIssue Fax No: +974 44311128
25
E-mail : dohaoffice@najeeblawfirm.com

Civil Law
The Hungarian Trust Law – An Anglo-Saxon
Legal Institution in Civil Law Environment
by István Sándor
In the legal
relationship
of the asset
management,
it is also
possible to
set out other
conditions,
such as its
duration,
which is
maximum 50
years ...
87/2014 (III. 20.) on certain rules concerning
the financial security of fiduciary property
management undertakings.
Chief features of the
Hungarian trust
Under the fiduciary asset management
contract, the trustee has the duty to manage
the property transferred to his ownership by
the settlor in his own name, for the benefit
of the beneficiary, for which the settlor is
obliged to pay a fee. The managed asset can
settlor, however, may remove the trustee
from office at any time, and simultaneously
appoint another trustee.
Trust companies
Act XV of 2014 distinguishes professional and
ad hoc asset management. An undertaking
contracting on a regular basis for fiduciary
property management at least twice
annually, or for a property management
fee in excess of one per cent of the value
of the trust property on the date of the
be things, rights and claims as well.
contract, or for any other financial gain, may
carry out fiduciary asset management only
If the settlor and trustee are one and the
in possession of the licence issued by the
same person, fiduciary asset management
National Bank of Hungary prior to the start of
is established by the irrevocable unilateral
such activity.
declaration of the settlor set out in a public
instrument. A legal relationship of property
The professional fiduciary asset managing
management settled by testament is
company can be only a limited liability
established by the trustee’s acceptance of
company or private limited company with a
his appointment to such position, under the
registered office in the territory of Hungary,
terms set out in the testament.
or the branch – registered in Hungary – of
an undertaking based in another contracting
In the legal relationship of the asset
state of the Agreement on the European
The new Hungarian Civil Code (Act No. V of 2013) came into effect on 15 th of March
2014. The Civil Code regulates the fiduciary asset management contract, a very similar
legal institution to the Anglo-Saxon trust. The concept of the Hungarian trust was
drawn up on the basis of the model of the trust in English law and that of the Treuhand
in German law. The introduction of the fiduciary asset management on a legislative
level is necessitated by strong, current demand in the economy. We have observed that
several Hungarian investors chose legal regimes of other countries because the institution
of the trust provided them with a better legal and economic solution. Now there is an
opportunity to establish trust also in Hungary, a civil law country.
The new Hungarian Civil Code sets out a
contractual arrangement and its validity is
bound to a written contract. The regulation
is of a general scope and several details are
regulated in two further separate pieces of
legislation. Such details are regulated in Act
XV of 2014 on Trustees and the Regulation of
Their Activity, and in Government Decree No
management, it is also possible to set out
other conditions, such as its duration,
which is maximum 50 years, terms, right of
unilateral termination, remuneration of the
trustee, appointment of additional trustees,
regulation of the delegation of other agents,
and the beneficiary’s right to transfer.
The settlor reserves the right to remove the
trustee, appoint a new trustee, replace the
beneficiary, modify given parts of the settlor’s
declaration, and to determine or modify the
duration of property management.
The settlor and also the beenficiary may
monitor the activity of the trustee falling
within the scope of property management,
but the costs of such monitoring are incurred
by the settlor. It is a mandatory rule that
the settlor may not instruct the trustee. The
Economic Area.
The fiduciary asset management company
may not carry out activity other than asset
management, and its name must make
reference to property management. The
company must hold the licenses required for
such activity. The fiduciary asset management
company is required to fulfil strict staff
and equipment requirements to receive
the authorisation of the National Bank of
Hungary.
The rights and duties of the
trustee
Under the contract, the trustee may not
be the sole beneficiary. The settlor and
the trustee, however, may be one and the
same person. The trustee has the duty to
26 | LawyerIssue 27

Civil Law
provide information, manage the property
beneficiary. Costs incurred in connection with
value, and profits thereon, constitute part of
Tracing
as instructed in the declaration of the settlor,
the provision of information and the payment
the trust property, whether registered or not.
avoid conflicts of interest and manage
the property separately from his own. If
the trustee is authorised to designate the
beneficiary under the contract, the trustee
has the right to determine the share of the
beneficiary.
Due to stricter requirements arising
from the fiduciary nature of the legal
relationship, the trustee has the duty
to act in utmost consideration of the
interests of the beneficiary. The trustee
has the duty to protect the trust property
against foreseeable risks in a commercially
reasonable manner.
The management of the property includes
the exercise of rights arising from ownership,
other rights and claims transferred to the
trustee, and the fulfilment of obligations
arising therefrom. The trustee may dispose
of the assets belonging to the trust property
under the conditions and within the limits
of invoices are borne by the settlor and
beneficiary.
The trustee is liable for the fulfilment
of the undertaken obligations with the
trust property. The trustee assumes
unlimited liability with his own property
for the satisfaction of claims arising from
commitments charged to the trust property,
if these cannot be satisfied from the trust
property, and the other party was not
and could not have been aware that the
commitments of the trustee exceed the limits
of the trust property.
If the settlor appoints several trustees,
the actions and decisions of the trustees
are taken jointly. If the trustees are also
liable with their own property for their
commitments, they assume joint and several
liability for joint decisions toward third
parties.
Several trustees assume joint and several
liability toward the settlor and beneficiary
for the breach of obligations arising from
As a general rule, the creditors of the settlor
may not lay claim to the trust property, unless
the settlor is also a beneficiary. In respect
of the contract between the settlor and the
trustee, the creditors of the settlor may assert
claims in accordance with the modern rules
of actio Pauliana, under the general rules of
the law of obligations.
In exceptional cases, the aforementioned Act
XV of 2014 also allowed the termination of the
asset management contract in the execution
procedure launched against the settlor.
Pursuant to regulation in the Civil Code, which
corresponds to the rules of common law,
in the event of the trustee’s insolvency, the
creditors of the trustee may not lay claim to
the trust property.
This rule is also applicable to the spouse,
partner and successors of the trustee. The
trust property does not constitute part of the
trustee’s inheritance either. This regulation
provides asset partitioning for the trustee
The settlor and the beneficiary have the right
to take action against third parties to whom
the trustee transferred property in breach of
the asset management contract, gratuitously
or in bad faith. Such regulation essentially
corresponds to the rules of common law
tracing in English law.
Is the Hungarian trust a real
trust?
Overally yes, in minor details no. The
Hungarian fiduciary asset management has
the same function as the English trust, the
asset partitioning, the tracing, the trustee’s
office are regulated very similarly.
On the other hand in the Hungarian
regulations we can experience several smaller
differences. Under the new Hungarian Civil
Code, the fiduciary asset management
contract mostly resembles the express trust.
Conditions give rise to a resulting trust only in
exceptional cases, while the constructive trust
and charitable trust are not regulated.
sets out in the contract.
The trustee has a duty to keep confidential
any fact, information and other data he
becomes aware of during his appointment as
trustee or in relation thereto. Such obligation
fiduciary property management.
Asset partitioning
The trust property constitutes property
separate from the trustee’s own property and
which resembles to the Anglo-Saxon trust
rules.
The creditors of the beneficiary clearly
have the right to take action against the
trustee, quasi under the legal title of the
This is, to a certain extent, understandable,
as under Hungarian private law, these legal
situations are regulated with the institutions
of unjust enrichment, foundations and public
donations.
is without prejudice to the establishment
of the trusteeship and remains in effect
after the termination of fiduciary property
management. The settlor and his successors
may grant exemption from the confidentiality
obligation.
The trustee has the duty to inform the settlor
or the beneficiary of the trust property upon
other property managed by him, which the
trustee is obliged to register separately. The
parties’ derogation from this rule is void.
Assets registered as property managed
separately from the trustee’s own property
and other property managed by him are
deemed to fall within the scope of trust
property until proven otherwise.
beneficiary. This is possible only if the right
of the beneficiary to receive from the asset
managed is due.
It is difficult to determine the claim of the
beneficiary’s creditors in relation to the
beneficiary’s claim in the trust property, if
the trustee holds discretionary power with
respect to the management of the property,
The fiduciary asset management contract
must be made in writing, while the Anglo-
Saxon trust may be created orally or by
implied conduct. In view of the fact that
fiduciary asset management is a new legal
instrument in Hungarian law, we believe it
is reasonable that the contract is bound to a
written form to avoid any legal uncertainties.
their request. Upon request, the trustee has
the duty to account for the trust property,
and settle accounts with the settlor and
Any assets substituting the managed assets,
insurance indemnities, damages or other
because the claim of the beneficiary is also
uncertain and unascertainable in such a case.
The new Hungarian Civil Code does not set
out expressis verbis that the settlor has the
right to revoke fiduciary asset management,
28 | LawyerIssue 29

Civil Law
while in Anglo-Saxon law, the settlor retains
this option during his lifetime, if he laid this
down in the deed of trust.
Under the new Hungarian Civil Code, as a
general rule, fiduciary asset management
is a contract for consideration, while Anglo-
Saxon law presumes gratuity, unless provided
otherwise.
Under the new Hungarian Civil Code, the
fiduciary asset management contract has a
maximum duration of 50 years. A time limit is
also applied in English law, with the exception
of the charitable trust. International trends,
however, increasingly suggest a loosening
and elimination of time limits.
According to the principle derived from the
Saunders v. Vautier case, the beneficiary
is entitled to the distribution of the trust
property if he is of legal age and does not
breach the interests of other beneficiaries.
This rule is not applied in the Hungarian law.
Conclusion
We have to come to the conclusion that
the Hungarian regulation of fiduciary asset
management contract is mainly convenient to
the Anglo-Saxon trust. We have to emphasise
that the Hungarian trust regulations
functionally are in accordance with the
English law principles.
We can find high-level regulation of asset
partitioning, the trustee’s office and the rules
of tracing.
Some critics may expressed on the obligatory
registration of the trust, which can be
explained by chariness of the legislators.
Overall the Hungarian trust can fill out the
main functions of the English trust in the
economy.
I suppose that the Hungarian trust-like legal
instrument will gain ground step by step in
the near future, which will contribute to the
economy and the international business
relationships of Hungary as well.
The Hungarian Personal Bankruptcy Act
By Dr. Kornelia Nagy-Koppany
The Hungarian Parliament recently enacted Act CV of 2015 on Personal Bankruptcy (the
“Act”). The Act will become effective on September 1, 2015 1 and fill the gap of the country’s
bankruptcy law, Act XLIX of 1991 2 , as amended, on Bankruptcy Proceedings and Liquidation
Proceedings also known as the Bankruptcy Act that did not allow private individuals to
file for bankruptcy, or using the terminology of the Act, debt settlement petitions.
1 http://www.magyarkozlony.hu/dokumentumok/fb415639d09af80cabd00f053dc9e0fd3fc78d46/megtekintes
2 http://www.matraholding.hu/images/userfiles/files/Legislation.pdf
István Sándor
Associate Professor at Kelemen, Mészáros, Sándor and Partners Law Office
T: +36 1 221 8472
Email: istvan.sandor@kelemen-lawfirm.hu
István Sándor is a practising lawyer and associate professor of law at the ELTE LAW Faculty.He visited several
universities and research centres and gave lectures in international conferences. He is member of the IBA,
Interlegal, FIDE, STEP, Selden Society and several Hungarian law and scientific associations. He published
several books and articles in company law, trust law, legal history and civil law. His book on trust law was
published last year in Hungary.
The Act fills an important gap in the Hungarian
legal system concerning the availability of debt
settlement proceedings for private residents
of Hungary. Proper implementation of the Act
should create an efficient personal bankruptcy
system that is able to provide the long-sought
relief for qualifying debtors and at the same time
honor the rightful interest of their creditors.
Main Provisions of the Act
Individual debtors will now have the legal
opportunity to settle their debts through an
agreement made with the creditor(s). Debtors
successfully petitioning debt settlement
proceedings enjoy various privileges during the
quasi moratorium, including exemption from
judicial enforcement procedures, avoidance of
losing their pledged real and tangible properties
and the possibility to avoid eviction.
Who May Be a Debtor
Persons residing in Hungary with combined
30 | LawyerIssue 31

Bankruptcy & Restructuring
assets and income less in value than their total
outstanding liabilities may be debtors under the
Act.
The Act sets forth the basic eligibility
requirements for the petitioning of a debt
settlement proceeding as follows 1 :
• total debts must be more than HUF
2,000,000 2 but less than HUF 60,000,000;
• total debts must exceed the value of the
debtor’s combined assets and income,
including income expected for the next five
years but may not exceed twice (200%) that
amount;
• 80% of the outstanding debt has to be
accepted or unchallenged by the debtor;
• one of the debts must be for HUF 500,000 or
more and outstanding for at least 90 days;
• the debtor may not have more than 5
subordinated claims;
• one of the debts must be from a consumer
loan agreement or an agreement financing
the debtor’s private business; and
• none of the debts are from secondary liability
for the debts of a business.
Debtors who participated in any prior
unsuccessful debt settlement proceedings as
a debtor or additional debtor are not eligible
to file another debt settlement petition within
10 years following final conclusion of the prior
proceeding. 3
Other Participants in Debt
Settlement Proceedings
1 Article 7 of the Act
2 Approximately EUR 64,500 based on EUR 1.00/HUF310
exchange rate.
3 Article 8 of the Act
The debt settlement proceeding was construed
to provide breathing room not only to the
individual debtor but his/her immediate
family members who got caught in the debt
trap. Persons who have joint and several
liability for the debtors’ debts and live in the
same household with the debtor, or a marital
community, will qualify as additional debtors and
entitled to the same rights and subject to the
same obligations as the debtor.
It is also assumed that under specific
circumstances certain debts may be repaid by
persons other than the debtor, for example the
holder of a lien or surety. Under the Act judicial
enforcement procedures may not be initiated
and pending proceedings will be stayed against
these persons if they join the debtor in the
debt settlement proceeding as co-debtors, and
undertake similar payment obligations in case
the debtor, as the primary payor, would fail to
pay the debt agreed and accepted under the
payment settlement plan or any other binding
document conceived within the proceeding.
Property of the Estate of the
Debtor
The commencement of a case under the Act
creates an estate. The estate is comprised of
all the assets and income of the debtor and
additional debtor, including any assets or income
acquired during the debt settlement proceeding.
There will be an exemption for assets and
income required for basic personal needs, the
amount to be set by implementing regulations.
Family Bankruptcy Service 4
The Family Bankruptcy Service will be established
to employ a family trustee and maintain the
debt settlement register. The Family Bankruptcy
Service will assist the court during the judicial
debt settlement proceeding. The family trustee
will act as the executive authority in the
implementation of the court’s decisions.
4 Articles 11-15 of the Act
Debt Settlement Register 5
the estate, or lessors under a financial leasing
The debt settlement register will be the official
register to contain the data of those who
underwent any personal debt settlement
proceeding including (i) information on the
initiation of the debt settlement proceeding;
(ii) the stages of the proceeding; and (iii) the
agreement. In both cases the property of the
estate used by the debtor for his/her own
primary housing purposes, or the housing
purposes of his/her close relative(s), must be
subject to the aforementioned lien/leasing
contract.
resolution rendered on the merits at the
conclusion of the proceeding. In addition,
commencement of a debt settlement proceeding
shall also be entered into the Central Credit
The main creditor must participate in the out-ofcourt
debt settlement procedure. If the debtor
does not have a main creditor, the petition
AInformation System.
must be filed with the court through the Family
Insolvency Service.
The Debt Settlement Proceeding
Following submission of the petition, the Family
The Act stipulates the following three phases of Bankruptcy Service should verify compliance
the debt settlement proceeding:
with all legal and financial prerequisites, and
then simultaneously issue a certificate on the
A) Out-of-court Negotiation6
petition and publish an individual public notice
electronically on its website to unlisted and
At the outset and following the filing of the unknown creditor(s) inviting them to file their
debt settlement petition, the debtor and the
creditor(s) shall attempt to enter into a debt
settlement agreement. The debtor must state in
writing, addressed to the main creditor, that s/
he requests a debt settlement proceeding. The
claim(s) within 15 days. The publication will
remain on the website of the Family Bankruptcy
Service until the out-of-court negotiation was
successful or is registered in the Debt Settlement
Register.
statement must include the following:
• personal data of the debtor and his/her
creditor(s);
After the initiation of the proceeding, creditor(s)
may only pursue their claims within the
framework of the debt settlement proceeding.
• property of the estate of the debtor;
During the proceeding, the debtor must make
his/her assets and income available – excluding
• composition and amounts of debts and the
obligations assumed for their repayment;
and
the assets and income required for everyday
living expenses – and may neither pledge nor
willfully diminish the value of the estate to be
used for the satisfaction of the creditor(s) claims.
• list of close relatives and civil partners living BIt is the main creditor who is charged with the
in the same household of the debtor and coordination, negotiations and preparation
their regular incomes and expenses.
of the debt settlement agreement. The debt
settlement agreement is concluded when the
The main creditor of the debtor may be from creditor(s), debtor, additional debtor(s) and
among banks, credit institutions and financial codebtor(s) make a valid statement accepting
enterprises that hold a lien on the property of the terms of the agreement, and return the
statement to the main creditor and the debtor.
5 Article 16 of the Act
A debt settlement agreement is valid only if
100% of the participants in the debt settlement
6 Articles 17-31 of the Act
32 | LawyerIssue 33

Bankruptcy & Restructuring
proceeding has approved it. Out-of-court debt
• secured claims;
all creditors regardless of their participation or
expenses for the everyday life of the debtor
settlement agreements do not require court
position in the plan approval vote.
and his/her close relatives living in the same
approval, but they must be entered into the debt
• unsecured claims;
household.
settlement register.
Execution of the agreement should be
• priority claims;
supervised by the family trustee, who can inspect
If the financial position of the debtor
B) Judicial Proceeding7
the debtor’s financial management at any time.
substantially deteriorates, the debt repayment
• claims of privileged creditors (holding claims
resolution may be amended twice upon the
Although more costly because of the filing and
for alimony, child support, unpaid public
The court may amend the agreement twice at the
debtor’s request.
debt management fee, a judicial proceeding may
utility charges, public debts); and
debtor’s request if there is a substantial negative
be initiated if the parties
change in the debtor’s financial situation. In both
The debt repayment procedure period is five
• fail to enter into an out-of-court agreement
within 90 days from the receipt of the Family
Bankruptcy Service’s certification (120 days if
there are multiple creditors);
• there is no main creditor able to coordinate
• subordinated debts (e.g. claims of close
relatives, civil partners, partner companies).
Afterwards, the family trustee prepares the
debt settlement plan proposal together with
the debtor and sends it to the creditor(s), who
have 30 days to accept the proposal or request
Ccases, the amended agreement will be put to a
vote among the creditors not yet satisfied.
Once the settlement is concluded, the family
trustee will prepare a closing account statement
with the assistance of the debtor.
years, which may be extended by the court only
once, for a maximum of two additional years.
Upon the conclusion of the debt repayment
procedure the family trustee, with the
cooperation of the debtor, shall prepare a final
closing account statement.
the negotiations; or
its amendment. As part of the settlement, the
C) Debt Repayment Procedure8
Termination of the Debt Settlement Proceeding
debtor may agree with the creditor(s) on the
• the debtor does not comply with the
conditions of the debt settlement regarding
The court shall initiate a debt repayment
The court may terminate the debt settlement
provisions of the executed debt settlement
payment facilities, payment rescheduling,
procedure if the
proceedings if the debtors do not comply
agreement within 30 days following receipt
potential conversion of debt from foreign
with their obligations during the procedure.
of the notice to comply.
currencies to HUF, the relevant exchange rate,
• parties could not come to an agreement in
Termination of the debt settlement procedure
the joint risk pertaining to the foreign exchange
the judicial proceeding;
will end all the benefits and protections that the
Judicial debt settlement proceedings follow the
rate and the allocation of amounts collected
debtors enjoyed while the case was pending, and
rules of civil, non-litigious procedures and are
within the scope of a prior enforcement
• the debtor did not pay all of his/her debts in
creditors may continue to pursue and enforce
intended to make the debtor and the creditor(s)
procedure.
accordance with the settlement agreement;
their claims in accordance with the general rules
reach an agreement on payment facilities.
or
of civil, civil procedure, and judicial enforcement
At the commencement of the proceeding, a
In order to become effective, the settlement plan
laws.
notice is published on the website of the Family
requires the approval of the debtor, the main
• the settlement agreement requires an
Bankruptcy Service inviting creditor(s) to the
creditor, and the simple majority of all other
amendment due to an unanticipated
Post Debt Settlement Agreement Rights of
judicial proceeding within 30 days. The family
creditors. Although a successful plan does not
deterioration of the debtor’s financial
Creditors
trustee, with the cooperation of the debtor,
require 100% consensus, this phase accords
position or any unanticipated and significant
compiles the list of creditors and additional
all creditors the right to present proposals on
income, but the parties fail to reach an
The following rights are available to creditors
debtors, and the details of the creditors’ claims
the merits of the plan and the subsequent
agreement on the amendment.
if debtors fail to comply with their obligations
within 30 days upon expiration of the deadline
agreement.
undertaken in the debt settlement agreement or
open for creditors to file their claims.
If any of these happen, the court adopts a
the court’s resolution:
The Family Bankruptcy Service assists the court
debt repayment resolution, which includes the
In this phase of the proceeding, claims must be
during the judicial debt settlement proceeding
allocation and sale of the debtor’s estate within
• If the debtor removes or conceals any
classified in categories, such as:
and supports the debtors in performing their
the scope of a repayment plan.
property of the estate, or gives preference
obligations and exercising their rights.
to certain creditors by breaching relevant
• claims accepted or unchallenged by the
The family trustee will prepare the debt
statutory provisions or provisions of the debt
debtor;
If the content of the plan complies with all
repayment plan for the court’s approval.
settlement agreement, creditors participating
applicable legal provisions and has the required
Additionally, the family trustee should suggest
in the proceeding may, in case of out-of-court
• claims challenged by the debtor;
consents, the court approves it in a resolution.
solutions to ensure housing and necessary
negotiations, request the termination of
7 Articles 32-68 of the Act
The court approved agreement will be binding on
8 Articles 69-82 of the Act
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Bankruptcy & Restructuring
the debt settlement agreement9, or in case
of judicial proceeding, request the court to
repeal its release resolution10.
• If the term of a contract or the conditions of
repayment was defined in a way that exceeds
the term of the agreement in the release
resolution and the debtor has not fulfilled
his/her payment obligations during this
period, creditors participating in the judicial
proceeding may request the termination of
the debt settlement agreement 11 .
Miscellaneous Provisions of
the Act
The general procedural rules of the judicial debt
settlement proceedings will be provided by the
Hungarian Code of Civil Procedure with certain
derogations related to electronic communication
and the broader powers of court officers. 12
9 Article 93 of the Act
10 Articles 95-96 of the Act
11 Article 94 of the Act
A complaint may be submitted against the family
trustee for any irregularities, negligence or if his/
her acts infringe the rights and rightful interests
of the debtor and/or the creditor(s) 13 . For the
appeal of the orders of the court rendered
during the proceedings, the Act includes specific
rules that differ from the general provisions of
the Hungarian Code of Civil Procedure 14 .
In the debt settlement proceedings creditor(s)
have to pay a registration fee and a claim
management fee. 15 Debtors are obliged to pay
a one-time fee of HUF 30,000 in case a main
creditor can be engaged in the out of court
proceeding.
Following its entry into force and until September
30, 2016, only those debtors may file a debt
settlement petition whose residence or the
residence of their close relative(s) are threatened
by judicial enforcement or auction sale. 16
13 Articles 97-99 of the Act
14 Articles 100-102 of the Act
15 Article 88 of the Act
Securities and Exchange Commission’s Approval: Is it a
Sine Qua Non for every Asset(s) Acquisition Transaction?
By Fidelis Adewole
12 Article 36-38 of the Act
Dr. Kornelia Nagy-Koppany
Managing Partner at KNP LAW
T: +36 20 926 4264
Email: knagykoppany@knplaw.com
16 Articles 103-105 of the Act
Dr. Kornelia Nagy-Koppany is the Managing Partner of KNP LAW Nagy Koppany Varga & Varga that she
founded in 2006. Her practice areas include life sciences and pharmaceuticals, corporate and commercial,
insolvency and restructuring, and intellectual property rights. Dr. Nagy-Koppany represents multinational
life sciences and technology companies in regulatory, competition, legal entity integration, cross-border
transactional and IP matters. She also advises creditors in bankruptcy and liquidation matters. Dr. Nagy-
Koppany graduated from Eötvös Loránd University Faculty of Law with a JD degree, and received an MA
in international comparative law from Faculté lnternationale de Droit Comparé, Strasbourg, France, an
LL.M from New York University School of Law, and an International Business Management diploma from
Georgetown University. While at NYU, Dr. Nagy-Koppany was a student intern and the recipient of the Judge
Galgay Fellowhip at the United States Bankruptcy Court for the Southern District of New York. She advised the
Hungarian government on the amendments to the 1991 Bankruptcy Code.
The Securities and Exchange Commission (“SEC”), established under the
Investments and Securities Act, 2007 (“ISA”) is the body charged with the
overall regulation of capital market activities in Nigeria.The SEC has also
unwittingly become a competition regulator. Accordingly, the SEC has the
responsibility of reviewing, approving and regulating mergers, acquisitions,
takeovers and all forms of business combinations. (ISA, s. 13.)Thus, every
merger, acquisition or business combination between or among companies is
subject to the prior review and approval of the SEC.
There are two topical issues among
on these and the lack of clarity is due largely
practitioners relating to the requirement to the language used in the SEC Rules and
for SEC’s approval for asset acquisitions: (A) Regulations, 2013[1] (the “SEC Rules”).
whether the SEC’s approval is required for an
asset acquisition; and (B) if the SEC’s approval ASEC APPROVAL FOR
is required, whether there is or there ASSET ACQUISITIONS?
should be a monetary threshold or asset
value that would trigger the SEC approval Rule 421(1) of the SEC Rules defines
requirement? The ISA is not altogether clear “acquisition” as “the take-over by one
36 | LawyerIssue 37

Mergers & Acquisitions
company of sufficient shares in another
company to give the acquiring company
control over that other company” (emphasis
supplied). Further, Rule 433 of the SEC Rules
also defines “acquisition” as “where a person
or group of persons buys most (if not all)
of a company’s ownership stake in order
to assume control of a target company”
(emphasis supplied). Rule 421(1) is limited to
shares acquisitions.
Rule 433 suggests that for there to be
an “acquisition” the acquirer must
assume control of the acquiree after the
acquisition. The assumption of control of
the acquiree does not necessarily occur in
asset acquisition transactions. It is fair to
say that both Rule 421(1) and Rule 433 do
not contemplate SEC approval for asset
acquisitions.
It is however arguable that the SEC’s approval
is required for asset acquisitions for at
least three reasons. First, there are copious
references to “asset(s)” under Part I of the
SEC Rules that deals with “take-overs”,
“mergers” and “acquisition”.
Rule 422 of the SEC Rules sets out the scope
of SEC’s regulation under Part I of the SEC
Rules to include “every merger, acquisition or
combination between or among companies,
involving acquisition of shares or assets of
another company” (emphasis supplied).
Further, Rule 423(2) of the SEC Rules
states that the SEC shall approve a merger,
acquisition or external restructuring if SEC
finds that “such acquisition, whether directly
or indirectly, of the whole or any part of
the equity or other share capital or of the
assets of another company, is not likely to
cause substantial restraint of competition
to create monopoly in any line of business”
(emphasis supplied).
One of the documents that is required to
accompany a letter of intent to be submitted
by an applicant seeking approval from the
SEC under Rule 434 of the SEC Rules is a
report of valuation of shares/assets to be
acquired. (SEC Rules rule 434(xvii).) Again,
Rule 436 of the SEC Rules sets out the
contents of Information Memorandum for an
acquisition.
Part of the background information to be
contained in an Information Memorandum
is the “list of assets to be acquired and their
value (where applicable)”. (SEC Rules rule
436(1)(d). Moreover, Rule 437 of the SEC
Rules requires that an executed share/asset
purchase agreement should be forwarded to
the SEC post-acquisition.
The definitions of “acquisition” under
the SEC Rules suggest that the scope of
acquisition under the SEC Rules is limited to
shares and does not cover asset acquisitions,
notwithstanding, numerous references to
“asset” under Part I (on take-overs, mergers
and acquisition) of the SEC Rules which
clearly show that the term “acquisition” as
used in the SEC Rules also involves asset
acquisition and therefore subject to the SEC’s
prior review and approval.
It is settled law that in the interpretation of
statutes, every clause of a statute must be
construed with reference to other clauses/
provisions of that statute in order to have a
consistent enactment.
Nigerian Ports Plc v Okoh (2006) All FWLR
1145 at 1157H and Canada Sugar Refining
Co. Ltd. v R (1898) AC 735.
Second, assuming that the term “acquisition”
as defined in Rule 421(1) is limited to share
acquisitions, asset acquisitions will still
be subject to the SEC’s prior review and
approval. This is because asset(s) acquisition
is unarguably a form of business combination
which falls within the SEC’s scope of
regulation.
By section 13(p) of ISA, one of the functions/ effect of preventing, restricting or distorting
powers of the SEC is to “review, approve, competition in any part of the Nigerian
regulate mergers, acquisitions, take-overs market.
and all forms of business combination and
affected transactions of all companies” If the SEC reviews the transaction
(emphasis supplied). Also, Rule 422(2) of documentation and comes to the
the SEC Rules states specifically that the determination that its approval is not
provisions of Part I (on take-overs, mergers required, it [the SEC] would issue a “No
and acquisition) of the SEC Rules shall apply Objection” to the transaction.
to “every merger, acquisition or combination
between or among companies, involving BWHEN SHOULD
acquisition of shares or assets of another THE SEC APPROVAL
company” (emphasis supplied).
REQUIREMENT APPLY?
Thus, all take-overs, mergers, acquisitions, The writer is of the strong view that it is
business combinations undertaken by not every asset acquisition transaction that
companies, partnerships or agencies of the requires the SEC’s approval. Otherwise, the
federal government are subject to the SEC’s SEC will be inundated with applications/
approval.
requests for approval and the SEC will be
unable to perform its other functions as the
Third, SEC’s competition regulator status sale of a company’s asset, irrespective of the
makes it incumbent for the SEC to review value, would require the SEC’s prior review
and approve every asset acquisition between and approval.
companies in order to ensure that such asset
acquisition will not cause substantial restraint There are at least three tests that could be
of competition or tend to create monopoly in adopted for determining when the SEC’s prior
that line of business enterprise. (SEC Rules, review and approval will be required for an
rule 423(2)(a).)
asset(s) acquisition transaction. These tests
are: (1) the asset value test; (2) the operating
Even where the SEC’s prior approval is not asset test; and (3) the competition test.
obtained for an asset acquisition, the SEC
has the power to break up such a company Asset Value Test. This test involves setting a
where it considers that such an acquisition threshold in terms of the value of the assets
constitutes a restraint to competition or to be sold/transferred. The SEC’s prior review
creates a monopoly in a particular industry. and approval will be required where the value
(SEC Rules, rule 432.)
of such asset is above the set threshold.
A ground for the SEC to order a break-up
of a company is where the company enters
into an agreement or business undertaking
which has the effect of preventing, restricting
or distorting competition in any part of the
Nigerian market. (SEC Rules, rule 432(3)(a).)
It is, therefore, prudent (assuming it is not
mandatorily required) to seek the SEC’s
approval before entering into any agreement
for asset acquisition which may have the
Operating Asset(s) Test. The SEC’s prior
review and approval should be required in
an asset(s) acquisition transaction where all
or substantial part of the operating asset(s)
(that is, asset(s) constituting the business of
a company) of a company are to be sold or
transferred to another entity.
For example, the sale/transfer of all or
substantial number of telecommunications
masts/towers by a telecommunications
38 | LawyerIssue 39

Mergers & Acquisitions
company will require the SEC’s prior
review and approval under this test as
telecommunications masts/towers are the
operating assets of telecommunication
companies.
Competition Test. As stated above, the SEC
in reviewing approving acquisitions or any
business combinations has the obligation to
ensure that such transaction would not cause
substantial restraint of competition or create
a monopoly in a particular line of business
enterprise.
Thus, where the asset(s) to be sold/
transferred does not constitute the
substantial part of the operating asset(s)
of a company but one with competitive
significance, the SEC’s prior review and
approval of such transaction should be
required.
of such an asset or set of assets will likely
result in the acquirer having ten per cent
of the market share in that line of business
in addition to the acquirer’s current market
share.
CONCLUSION
The current state of the law is not altogether
clear as to whether asset(s) acquisition
transactions are subject to the SEC’s
prior review and approval. It is, therefore,
imperative to amend the SEC Rules to clearly
cover asset(s) acquisition and provide clear
parameters or thresholds for determining
what asset acquisition will be subject to SEC’s
review and approval.
Brazil – Hiring of Insurance Abroad;
Regulations and Restrictions
By Vitor Rogério da Costa,
Maria Cecilia Costa
For instance, the SEC Rules could provide
that an asset or set of assets would be of
competitive significance where the acquisition
Fidelis Adewole
Senior Associate at G. Elias & Co
T: +234 (1) 460 7890
Email: gelias@gelias.com
Fidelis Adewole is a senior associate with G. Elias & Co., one of Nigeria’s leading business law firms. He is
a seasoned litigator and has advised on numerous mergers and acquisitions across various sectors of the
economy. He recently advised Asset Management Corporation of Nigeria on the sale of Enterprise Bank
Limited.
Fidelis holds a Bachelor of Laws degree from Ambrose Alli University, Ekpoma and was called to the Nigerian
bar in 2005. He is a member of the Chartered Institute of Arbitrators (UK) and Chartered Institute of Taxation
of Nigeria.
The possibility of hiring insurance abroad by Brazilian individuals or
companies is restricted according to Brazilian Federal Legislation, rules of the
Superintendence of Private Insurance (“SUSEP”) and the Private Insurance
National Board (Conselho Nacional de Seguros Privados) (“CNSP”),
normative entity of insurance activities in Brazil.
Federal Regulations
Currently, the terms and conditions for
hiring of insurance abroad by Brazilian
domiciled individuals or entities are
regulated by Complementary Law No. 126,
dated January 15th, 2007 (“LCP No. 126”).
From a Brazilian legal perspective, it is of
utmost importance to review the terms
40 | LawyerIssue 41

Insurance
and conditions of the respective insurance
regulations;
insurance companies for the risk coverage,
penalties, in the terms of the current
agreement in order to determine whether
according to SUSEP´s applicable regulations,
legislation and regulation.”
or not Brazilian regulations which foresee
• II – coverage of risks abroad in which
or upon issuance of a denial letter by a class
restrictions on the hiring of insurance
the insured party is an individual
representative entity.
Among the documents which may be
abroad are applicable to a specific case.
resident in Brazil, to whom the
required by SUSEP are copies of the formal
effectiveness of the hired insurance
As a general rule, only if there is no similar
consultations submitted to 10 (ten) Brazilian
When reviewing an insurance agreement
is limited, exclusively, to the period in
insurance coverage available in Brazil may
insurance companies which operate in
to be hired abroad it is relevant to
which the insured party is abroad;
the individual or entity resident in Brazil hire
the respective insurance segment and the
analyze the following issues:
the insurance abroad to cover risks in Brazil.
answers obtained from such insurance
(i) if the insurance contractor is domiciled
in Brazil,
• III – insurances which are the subjectmatter
of international agreements and
treaties acknowledged by the National
Compliance and Inspection
companies.
Alternatively, SUSEP may accept
Congress; and
CNSP Resolution No. 197/2008 mentioned
consultations made by the class
(ii) if the insurance agreement is formalized
above is regulated by the Circular No. 392
representative entity to all Brazilian
with an insurance company that does not
• IV – insurance which have already been
of 2009 issued by SUSEP, which regulated,
insurance companies containing all the
operate in Brazil,
hired abroad, according to the then
among other issues, the possibility of hiring
necessary information related to the risk to
applicable regulations, on the date of
insurance in foreign currency, which is
be covered. Issuance of the denial letter by
and
publication of this Complementary Law.
limited to certain risks; the inspection of
the referred representative entity may only
compliance with the applicable rules and the
be issued if no Brazilian insurance company
(iii) if the subject-matter of the insurance is
• Sole paragraph. Entities may hire
existence of penalties applicable to entities
formalizes its intention to cover the risk or
related to a person resident and domiciled
insurance abroad to cover risks abroad,
which fail to comply therewith.
if the entity only receives negative answers
in Brazil, as well as the risks covered.
informing such hiring to the Brazilian
from the insurance companies.
insurance supervising entity within the
SUSEP, as a supervisory institution may,
Article 19 of LCP No. 126 determines
term and under conditions specified
according to articles 10 to 16 of its Circular
For purposes of the insurance hired
that certain types of insurance must
by the respective Brazilian regulatory
No. 392, demand, at any time, certain
abroad for hulls, machinery and civil
be exclusively hired in Brazil, such as (i)
insurance entity.”
documents described in these articles in
liability for vessels registered under the
mandatory insurance foreseen under
order to assure that the risks cannot be
Brazilian Special Registry (Registro Especial
Brazilian laws and regulations; and (ii)
CNSP, through Resolution No. 197/2008,
covered by insurances offered in Brazil,
Brasileiro – REB) foreseen under item V,
insurance hired by individuals or entities
ratified the exceptions for the hiring of
among other legal requirements.
article 5, of CNSP Resolution No. 197/2008,
resident in Brazil which subject-matter is the
insurances abroad, foreseen in article 20 of
whenever the Brazilian insurance market
protection against local risks.
LCP No.
This “supervisory power” is described in
does not offer prices compatible with
article 10 of the Circular No. 392, as follows:
the international market, SUSEP may, at
Exception to such general rules is made to
126 and mentioned-above and, still,
any time, require copies of the formal
the events foreseen under article 20 of said
authorized the hiring, abroad, of insurances
• “Article 10 : As set forth in the above
consultations submitted to 5 (five) Brazilian
Law, as follows:
covering hulls, machinery and civil liability
article, SUSEP will be able to, at any
insurance companies which operate in the
for vessels registered under the so-called
time, require to the insured and / or
respective insurance segment, the answers
• “Article 20: The hiring of insurances
Brazilian Special Registry (Registro Especial
to the respective insurance broker the
obtained from such insurance companies
abroad by individuals resident in Brazil
Brasileiro – REB).
documents that prove the compliance
and the answers from foreign insurance
or by entities domiciled in national
with the current regulations for the
companies and their respective prices for
territory is restricted to the following
A Brazilian entity or individual must first
hiring of insurance abroad.
the insurance to be hired abroad.
situations:
• I – coverage of risks to which no
insurance is offered in Brazil,
considering that such hiring does not
represent violation of the applicable
search for an available insurance offered in
Brazil before hiring insurance abroad.
Lack of coverage for the risks in Brazil must
be evidenced by the Brazilian individual
or entity upon obtaining denial by local
• Sole paragraph: The non-presentation
of documentation described in the
above article subjects the insured and
/ or his intermediary, when resident
and domiciled in Brazil, the applicable
Penalties
The Law Decree No. 73 of 1966, amended by
LCP No. 126 has established what penalties
will be applied if an insurance is hired in
42 | LawyerIssue 43

Insurance
violation of the insurance, coinsurance and
reinsurance regulations.
Article 113 of said Law Decree
states that:
“the individual or entity that
performed operations of insurance,
coinsurance or reinsurance
without proper authorization in the
Country or abroad will be subject
to a penalty equal to the amount
insured or reinsured”.
Therefore, any Brazilian resident – individual
or entity — who hired insurance abroad for
covering risks in Brazil in violation of the
applicable regulations shall be subject to
a fine in an amount corresponding to the
amount insured.
Can Crowdfunding fill the gap for
franchise development loans?
By David Kaye, Andrew Fraser,
Louise Crilly
Vitor Rogério da Costa
Partner at Vitor Costa Advogados
T: +55 (21) 8218 2450
Email: vitor.costa@vcadv.com.br
Bachelor in Law - Pontifícia Universidade Católica do Rio de Janeiro – PUC/RJ (1966). Centro de Estudos no
Ensino do Direito – CEPED (1968). Master of Laws – University of California – Berkeley (1970). Registered with
the Brazilian Bar Association (Rio de Janeiro and São Paulo Chapters). Member of the International Fiscal
Association, the Brazilian Association of Financial Law and the Board of Directors of Aliança Francesa - RJ,
and a former member of the Stock Market Study Committee at CVM. Received the honor title “Ordem de
Comendador do Rio Branco”. Practice areas: Corporate Law, Business Law, Tax Law, Capital Market, Foreign
Capital and the Brazilian Central Bank. Languages: Portuguese, English and French.
Maria Cecilia Costa
Partner at Vitor Costa Advogados
T: +55 (21) 8218 2450
Email: cecilia.costa@vcadv.com.br
Bachelor in Law from Pontifícia Universidade Católica do Rio de Janeiro – PUC/RJ (1996). Registered with
the Brazilian Bar Association (Rio de Janeiro Chapter). She has previously worked at the law firm Veirano
e Advogados Associados, between 1993 and 2002, and was a partner in the firms Varella, Borgerth & Riet
Corrêa Advogados (2003 to 2005) and Duarte e Varella Advogados (2005 to 2007), in addition to working at
the firm Campos Mello, Pontes, Vinci & Schiller (2007 to 2009). Practice areas: Corporate Law, Business Law
and Contracts, Public Law and Regulatory Law, Foreign Capital and the Brazilian Central Bank. Languages:
Portuguese, English and French.
Franchising is moving with the times. Originating
with Albert Singer in 1851 (who used franchising as
a method of distributing and servicing his eponymous
sewing machines), the use of franchising grew slowly over
the following century before gathering pace in the 1990s
and booming in the 2000s. Nowadays it has become
commonplace and we are starting to see a wide variety of
would be Franchisors taking to Crowdfunding platforms
such as ‘Crowdcube’ and ‘Kickstarter’ to try and secure
funding for their franchise development plans.
44 | LawyerIssue 45

Franchise Law
Franchising is a business growth
designated franchising teams) have always
Equity Crowdfunding is the method most
The growth of the mini-bond industry as a
method whereby a business owner (the
been keen to stress their support for the
frequently used by start-up and early stage
means of alternative finance is predicted to
“Franchisor’) grants a type of license
franchising industry and are ready and
businesses and, as such, it fits well with
reach £8 billion in 2017. The application of
(known as a franchise) to another (the
“Franchisee’), permitting the franchisee
to run their own business following the
willing to lend to many franchisees of
established brands such as “Dominos
Pizza” or “McDonalds”, we have noticed
businesses looking to franchise.
The advantage of the Equity model are:
mini-bonds to the franchising market can
be seen through a number of successful
franchise specific deals.
processes, procedures and training set out
a reluctance since the recession to lend
by the Franchisor.
development capital to relatively new
• Funding can be raised quickly with
For example, one of our clients (an
businesses seeking to franchise.
limited upfront fees;
established chinese takeaway franchise) has
The Franchisor allows the franchisee to
recently launched a mini-bond campaign
trade under the name (and trade marks) of
This has forced such businesses to look into
• Presenting the franchise project via
with a target of raising £1 million (at the date
the Franchisor and gives them a complete
more innovative ways of securing funding
the Crowdfunding website is useful
of writing this article they have managed to
package containing all that the Franchisee
including Crowdfunding and Mini-bonds.
marketing which can raise awareness
raise £554,250 of this target).
needs to run their business. In return, the
Franchisee pays the Franchisor an upfront
Crowdfunding
of the brand and help recruit a
franchisor’s first franchisee; and
Also, although not strictly a franchising
fee and an ongoing percentage of their
operation, Chilango (a mexican restaurant
turnover.
Crowdfunding, whilst not a new concept,
• Sharing the plans for franchising and
chain) recently secured £2.2 million of
has seen significant growth in recent years
monitoring any reaction or feedback
funding via the operation of a mini-bond
The franchising industry is one which is
thanks, in a large part, to increased internet
is a great way of testing the potential
which will be used to fund the opening of a
well-established in many countries around
accessibility and a significant increase in the
market for franchisees.
further three Chilango restaurants.
the world with the global industry looking to
number of Crowdfunding platforms.
hit £3 trillion by 2020 and the UK franchise
Indeed as a live case study, one of our
In addition to the benefits of Crowdfunding
industry alone being worth £13.4 billion to
Crowdfunding utilises large groups of
clients, specialising in craft beers and ciders,
there are many advantages to securing
the UK.
people (the “Crowd’) to collect a significant
successfully raised £107,130 on Crowdcube
investment through mini-bonds.
number of small contributions which (when
in May 2015 and hopes to use the funds to
It is evident that franchising is an enticing
added together) makes a usable sum.
aid their expansion through franchising.
For example, there are no restrictions on
method of growing your business, however
the cost of franchising your business can
The main types of Crowdfunding are:
Mini-bonds
the amount that can be raised and no equity
needs to be sacrificed by the business
often be prohibitive as most of the costs
(albeit the business will have to ensure that
have to be paid before a Franchisor recruits
Equity – where members of the Crowd
Mini-bonds are an increasingly popular form
it meets all the interest repayments to its
its first franchisee (and is able to start
recovering its investment from franchise
fees).
invest in return for a shareholding in the
business;
of alternative finance which may also appeal
to potential franchisors. Essentially a “Minibond”
is an unsecured, non-convertible
investors!).
In short, we predict that Crowdfunding
Donation – where members of
and non-transferable bond issued from a
and Mini-bonds will increasingly be used
By way of example, the fees charged by
the Crowd simply donate money to the
company in return for investment.
as an alternative means of raising the
franchise consultants, lawyers and other
business (usually for a charitable cause);
development capital required to set-up a
professionals in setting up the network
The bond acts as a type of loan whereby
franchise operation and, going forward,
and the cost of marketing and advertising
Lending – where members of the
the investor receives regular fixed interest
the establishment of new franchise
franchise opportunities for sale all require
Crowd are repaid their investment over a
(usually between 6% and 8% a year) for
brands will no longer be subject to the
to be paid in advance of any franchisees
certain period of time; and
a specified term (usually around three
discretion of a bank.
coming in to the business. Given this, would
to five years) and the return of the initial
be franchisors need to make sure they have
Reward – where members of the
investment amount at the end of the term.
this “development capital” in place to
Crowd receive an item or service in
fund the set-up costs.
return for their money (e.g. a limited
This method of funding is normally used by
edition product or a discount for future
businesses at a relatively advanced stage.
While banks (particularly those with
services)
46 | LawyerIssue 47

Franchise Law
David Kaye
Partner at Harper Macleod LLP
Doing Business in The Philippines
By Monalisa C. Dimalanta,
Sheryl F. Balot
T: +44 (0) 0141 227 9576
Email: David.Kaye@harpermacleod.co.uk
David specialises in Franchising and Business Law and acts as Company Secretary to a large number of companies
including Retail Trust, LEBC Group, Evergreen Fashion and is an Arcadia nominated Governor of Fashion Retail Academy.
David is an affiliate member of the British Franchise Association (BFA) and acts as legal advisor to the BFA Franchise
Group in Scotland.
Chambers UK Guide to the Legal Profession lists David as a “Leader in the Field” and expert in Franchising and
commercial law, where clients admire his broad commercial know-how and businesslike manner. “He’s just thoroughly
professional and always offers good counsel. He has a wide knowledge of retail and a good network of people in the
industry.” Observers also note his “calm manner” and “strength at negotiation.”
Andrew Fraser
Associate at Harper Macleod LLP
T: +44 (0) 141 227 9534
Email: andrew.fraser@harpermacleod.co.uk
Andrew advises clients, predominantly in the retail and franchising sectors, on a wide range of commercial matters,
business structures and franchise operations. Prior to joining Harper Macleod, Andrew was a Franchise Consultant
helping businesses to grow through franchising; existing franchisors to improve and expand their networks; and working
with large retailers to franchise internationally. He has worked with a wide range of clients from sole traders to global
companies, including Ralph Lauren, Esprit and American Eagle Outfitters.
Louise Crilly
Solicitor at Harper Macleod LLP
Louise acts on behalf of start up and high growth businesses seeking investment and has significant experience advising
on Crowdfunding deals.
1. How can foreign
corporations engage in
business in the Philippines?
A foreign corporation may transact business
in the Philippines after obtaining a license
to transact business from the Securities
and Exchange Commission (SEC), provided
its country of origin allows Filipino citizens
and corporations to do business in its own
country.
A foreign corporation transacting business
in the Philippines without a license is not
permitted to maintain or intervene in any
proceeding in any court or administrative
agency of the Philippines. It can, however,
be sued before any court or agency in the
Philippines.
The most common local forms of business
enterprises used by foreign corporations
are domestic subsidiary corporations,
branch offices, representative offices, or
regional headquarters, or regional operating
headquarters.
(a) Domestic Subsidiary
Corporation
A domestic subsidiary corporation is one
where at least 51% of its equity is owned
by a foreign corporation or a foreign
national. It is, however, considered as a
legal entity separate and distinct from
the parent corporation. It is incorporated
48 | LawyerIssue 49

Doing Business in the Philippines
in the same manner and procedure
as that of any domestic corporation
Headquarters (RHQ)
foreign corporation is taxed based on net
income with the same option to pay 15%
holidays, exemption from taxes and duties
on imported capital equipment, exemption
established under Philippine laws.
An RHQisa branch established in the
tax on gross income. A non-resident foreign
from taxes and duties on spare parts,
(b) Branch
Philippines by a multinational company
which does not earn or derive income
from the Philippines and which acts
corporation is taxed based on gross income
received. ROHQs pay taxes at the rate of
10% of its taxable income, while RHQsare
exemption from wharfage dues and export
taxes/duties/impost/fees, exemption from
contractor’s tax, tax credits and additional
A branch office of a foreign corporation
as supervisory, communications, and
exempt as these are not designed to be
deductions from taxable income.
is established by obtaining a license to
coordinating center for its affiliates,
income-generating.
operate from the SEC, which requires the
subsidiaries, or branches in foreign
Incentives – by way of special tax rates,
inward remittance of USD200,000.00. The
markets.
When the minimum income tax of a
among others – are also available to
establishment of the branch office also
requires the appointment of a qualified
resident agent to represent the foreign
corporation.
(e) Regional Operating
Headquarters (ROHQ)
domestic corporation or a resident foreign
corporation is greater than the regular
corporate income tax, a Minimum Corporate
Income Tax Rate (MCIT)of 2% of the gross
business establishments operating within
designated economic zones (Ecozones). In
lieu of all other taxes, five percent (5%) of
the gross income earned by all businesses
An ROHQ is also a branch of a
income is imposable on the fourth taxable
and enterprises within the Ecozonesare
The branch is considered as extension of
multinational company but can derive
year immediately following the year in which
remitted to the national government.
the foreign corporation’s legal identity.
income from the Philippines by providing
such corporation commenced its business
The branch may, however, engage in
limited services exclusively to its affiliates,
operations.
Rsegistered tourism enterprises and
the same line of business as the foreign
branches or subsidiaries. It cannot solicit
operators within the Tourism Economic
corporation and is authorized to engage
goods and services on behalf of any
Any excess of the minimum corporate
Zones (TEZ) are granted income tax holidays,
in profit generating activities.
company.
income tax over the normal income tax shall
gross income taxation, exemptoin from
(c) Representative Office
A representative office must be
registered with the SEC, which requires
an initial inward remittance of at least
USD 30,000.00.
Thereafter, the parent company may
remit such amounts as may be necessary
for the representative office’s operating
expenses.
A representative office acts as a liaison
between the parent company abroad and
its clients in the Philippines.
Itundertakes activities such as promoting
company products, conducting market
studies or surveys, and providing
technical support for the company’s
products. It cannot derive income
from and solicit orders or sales in the
Philippines.
(d) Regional or Area
2. What are the taxes
imposed on entities
operating in the
Philippines?
Philippine taxes are imposed by both the
national government and local government
units (LGUs).
The national government imposes income
taxes on corporations and individuals, as
well asparticular taxes for specific industries,
while business tax is imposed by LGUs.
The income tax rates depend upon the
classification of the taxpayers.Domestic
corporations are taxed at 30% of annual
taxable income from worldwide sources with
option for 15% tax on gross income subject
to certain conditions.
A foreign corporation, whether or not
engaged in trade or business in the
Philippines, is taxable on Philippine-sourced
income at the rate of 30%. A resident
be carried forward and credited against
the normal income tax for the three (3)
immediately succeeding taxable years.
The LGUs impose local business taxes at
varying rates depending on the nature of
the business; they also impose real estate
taxes, local transfer taxes, and community
taxes.
3. Are there available tax
incentives to companies
operating in the
Philippines?
Companies that are engaged in a preferred
project listed in the Investment Priorities
Plan (such as manufacturing, agribusiness
and fishery, services, economic and lowcost
housing, hospitals, energy, public
infrastructure and logistics, and publicprivate
partnership projects) or whose at
least 50% of total production is for export
may avail of tax incentives.
These tax incentives include income tax
taxes on capital investment and equipment,
exemption from taxes on transportation
equipment and spare parts, and exemption
from taxes on importation of goods and
services.
4. Is there any limitation
on foreign ownership of
Philippine corporations?
What limitations exist
in the participation of
foreigners in corporate
management?
Foreign nationals and/or foreign
corporations are generally allowed to
hold as much as 100% equity ownership
in domestic corporations (subject to
minimum investment amounts), except in
corporationsengaged in certain businesses
specified under the Foreign Investment
Negative List (FINL) where foreign equity
may be completely prohibited or limited
to certain percentages (or those known as
nationalized or partly-nationalized activities).
For instance, the law limits to 40% the
50 | LawyerIssue 51

Doing Business in the Philippines
foreign equity ownership in public utilities.
Foreign nationals may also act as
incorporators and directors of a domestic
corporationsprovided majority of the
incorporators and directors are residents of
the Philippines.
(60) days beyond the intended period of
stay.
6. What are the common
visas available to foreign
investors and expatriate
personnel?
visas and former Filipino citizens who are
holders of foreign passports, both of whom
are at least 35 years old.
The SRRV is a special non-immigrant
resident visa that provides its holders with
multiple-entry and indefinite stay status in
the Philippines. It is valid for so long as one
remains a member of good standing of the
Program.
Foreigners may also serve as officers of the
corporation, except as corporate secretaries
as these should be Philippine residents
and citizens. Treasurers are required to be
Philippine residents.
Foreign investors or expatriate personnel
may avail of an Employment Visa, a Treaty
Trader’s Visa, a Special Investor’s Resident
Visa (SIRV) or a Special Resident Retiree’s
Visa (SRRV).
Monalisa C. Dimalanta
Partner at PJS Law
T: +632 840 5025
Email: mcdimalanta@pjslaw.com
For corporations engaged in nationalized
or partially nationalized activities, foreign
directors should not exceed the proportion
of actual and allowable foreign equity
ownership. In such industries,all of the
executive and managing officers must be
Filipino citizens.
5. Are foreign nationals
allowed to enter and stay in
the Philippines without an
entry visa?
A non-restricted foreign national whose
country of origin has diplomatic ties or
bilateral agreement with the Philippines is
not required to secure an entry visa and
may be allowed to enter and stay in the
Philippines not exceeding twenty-one (21)
days or seven (7) days, subject to extension,
provided:
• He/she holds a valid ticket for his/
her return journey to port of origin or
next port of destination; and
• His/her passport is valid for a period
of not less than six (6) months beyond
the contemplated period of stay.
Immigration Officers at ports of entry may,
however, exercise their discretion to admit
holders of passports valid for at least sixty
An Employment Visa may be issued to
foreigners who are engaged in lawful
occupation in the Philippines withbona fide
employer-employee relationship with a
Philippine employer.
The duration of this visa is co-terminus with
the Alien Employment Permit issued by the
Department of Labor and Employment. An
Alien Employment Permit authorizes the
foreign national to work in the Philippines
A Treaty Trader’s Visa may be issued to a
foreigner who is entering the Philippines
solely to carry on trade or commerce
between the Philippines and the country of
which he is a national pursuant to a treaty of
commerce and navigation.
The SIRV entitles the holder to reside in
the Philippines for an indefinite period
as long as the required qualifications and
investments are maintained. It is issued to
any qualified foreigner, except for restricted
nationals, at least 21 years old, who follows
the prescribed rules and is willing and
able to invest at least USD75,000.00 in the
Philippines.
The SRRV may be issued by the Bureau
of Immigration in connection with the
Philippine Retirement Authority’s Retirement
Program for all foreign nationals with entry
Mona received her Bachelor of Laws (Ll.B.) degree from the University of the Philippines in 1997, and her
Bachelor of Arts (Journalism) in the same University in 1993 where she graduated cum laude. She obtained
her Master of Laws (Ll.M.) degree from the University of Michigan where she attended as a DeWitt fellow
in 2000-2001. In the UP College of Law, she was a member of the Editorial Board of the Philippine Law
Journal. She also belonged to the honors society and the debating team that participated in the ASEAN
Varsities Debate in Malaysia. She was admitted to the Philippine Bar in 1998 and has completed a course
on Negotiation of Financial Transactions by the United Nations Institute for Training and Research (UNITAR)
and attended various seminars in the Philippines and abroad on negotiating power purchase agreements. In
2005, Mona has acted as legal counsel to the Secretary the Department of Energy.
As head of PJS Law’s Energy Practice Group, Mona has been continuously cited as “Leading Lawyer” by several
leading financial and legal publications. She has likewise led the group in winning several international
awards and recognitions. Mona also acts as President of PJSLaw Foundation and is a Professor at the Ateneo
de Manila Law School.
Sheryl F. Balot
Partner at PJS Law
T: +632 840 5025
Email: sfbalot@pjslaw.com
Sheryl received her Juris Doctor (J.D.) degree from the University of the Philippines in 2011 and was admitted
to the Philippine Bar in 2012. She obtained her Bachelor of Science (Economics) degree in the same University
in 2002 where she graduated cum laude. She served as a project officer of the Public-Private Partnership
(PPP) Center of the Philippines for 8 years prior to joining PJS Law.
As member of the of the Infrastructure and Energy group of the Firm, Sheryl had advised on several major
transactions of the Firm including Modernization of the Philippine Orthopedic Hospital project, the joint
venture project on the development of a 500MW coal power plant, among others.
52 | LawyerIssue 53

Patent Law
Patenting Software in China
by Handong Ran
Software patent applications may also be rejected
under Article 2.2 of the Chinese Patent Law for
lack of a technical solution. 3
function of the computer program is performed
by a corresponding component or group of
components.
A 3-step test is normally applied to decide
If it is not practicable to define the components
whether an Article 2.2 objection should be
by their physical structures, it is not necessary
raised:
to do so. The components can then be defined
in means-plus-function language. If means-
• whether the claimed subject matter involves
plus-function language is used for a product
execution of computer programs in order to
claim, it is important to ensure strict one-to-one
solve a technical problem;
correspondence between recited means and steps
recited in the corresponding method claim.
• whether the computer programs are
executed by a computer so as to control or
Although the Guidelines allow means-plus-
process internal or external objects of the
function language to be used for product claims,
computer in accordance with the laws of
in practice, it is not uncommon for Chinese
nature;
Examiners to raise objections against means-plusfunction
claims on grounds of lack of support by
• whether any technical effect is achieved
the description.
in accordance with the laws of nature by
execution of the computer programs.
The Chinese practice still does not allow certain
types of claims. For example, claims to data
Failing any one of the three steps, the claimed
structures are not patentable, but such claims
subject matter will not be regarded as a technical
can be amended to methods for generating the
Similar as in many other jurisdictions, China
a problem, are normally regarded by Chinese
solution in the sense of Article 2.2 of the Chinese
relevant data structures which are potentially
does not allow computer programs as such to be
Examiners as defining rules and methods for
Patent Law.
allowable.
patented, but does not rule out patentability for
performing mental activities:
inventions related to computer programs. 1
• methods of calculation or rules of
In order to obtain appropriate patent protection
for software inventions, certain rules need to be
Claims to computer-readable medium storing
instructions and computer program products
A number of exceptions to patentability are set
mathematical calculation;
respected when drafting applications for such
are not allowable either. Therefore, terms such
out by Article 25(2) of the Chinese Patent Law,
one of which relates to rules and methods for
• computer programs as such or computer
inventions.
as “data structure”, “signal”, “computer-readable
medium”, “computer program product” etc. should
performing mental activities. This is the exception
programs recorded on computer-readable
A claim drafted as a process for resolving a
not be used as definition of inventions in claims if
that is often cited by Chinese Examiners to raise
media; and
technical problem and reciting specific steps
fast grant is desired.
non-patentable subject matter objections against
inventions related to computer programs.
• rules and methods for playing games2.
performed by way of executing computer
programs to perform specific functions can
However, for Chinese patent applications based
normally meet the requirement of Article 2.2 and
on earlier foreign applications (e.g., Chinese
Claims essentially relating to one of the following,
However, if a claim recites technical features apart
does not fall within the exception of Article 25(2).
national phase entry of PCT applications, or direct
even if presented in the form of a solution to
from content relating to methods for performing
Chinese filing and claiming priority from earlier
1 Computer programs are defined in the Guidelines for Patent
Examination of the Chinese Patent Office (Guidelines) as “coded
instruction sequences executable by an information processing
device, e.g., a computer, to obtain certain results”, or “symbolized
instruction sequences or symbolized statement sequences
that can be automatically transformed into coded instruction
sequences”; a software invention is defined as “a solution to an
identified problem, which is wholly or partly based on processes
of computer programs, for controlling or processing external
or internal objects of a computer via execution of the computer
programs by a computer”.
mental activities, patentability cannot be ruled out
for the claimed subject matter under Article 25(2)
of the Chinese Patent Law.
2 Computer games that involve performance improvements for
the computer running the games or technical changes to the
structure or function of the computer running the games may
potentially be patentable.
A product claim normally needs to be drafted
in a way that it spells out not only each specific
component of an apparatus but also connections
between the components and describes how each
3 A “technical solution” is defined in the Guidelines as “aggregation
of technical means applying the laws of nature to solve a
technical problem”.
foreign applications), it is advisable to keep such
claims at the time of entry/filing in the event that
the Chinese practice changes later to allow such
types of claims.
Often, amendments or new claims (e.g., in
divisional applications) based on originally filed
54 | LawyerIssue 55

Patent Law
claims are more likely to be accepted by Chinese
Examiners than those made based on the
description.
Description of Chinese patent applications
also needs to be carefully crafted to support
amendments to the claims. Chinese examiners
are often reluctant to allow claim amendments
unless there is almost verbatim support in the
specification.
This is particularly relevant if the patent
applications originate from jurisdictions which
adopt less strict policies on added matter issues
than China.
Apart from describing the solution as a whole,
the description needs to clearly and completely
describe the design and technical features
involved in the computer programs that are
necessary for achieve desired technical effects. It
is advisable to include in the description technical
problems that the prior art fails to solve and how
the invention solves such problems specifically.
Where appropriate, it is also advisable to include
some description of technical effects achieved
by each technical feature or group of technical
features. The Chinese Examiners tend to be more
prepared to accept that the invention is technical
if they see such description. Arguments for
technical effect not based on the description, even
if presented with supporting evidence, often are
not accepted by the Chinese Examiners.
Normally at least a main flow chart needs to
be included in the description of a software
invention. Where specific functions or branches
of a computer program involve multiple steps,
it is advisable to also include flow charts
corresponding to the specific functions or
branches.
The description needs to clearly and completely
describe each and every step shown in the flow
charts. If particular steps are not essential, it is
important that the description explicitly says
so. Otherwise, the Applicant may be forced to
include corresponding steps and means in the
independent claims.
Where execution of computer programs involves
changes to the hardware of a computer, a diagram
showing the structure of the computer should be
included, and the description should describe the
relevant hardware components and connections
therebetween in a way clear and sufficient for a
skilled reader to implement the invention.
The New Brazilian Code of Civil Procedure:
a preliminary overview
By André de Luizi Correia,
LuisAntonio da Gama e Silva Neto
Handong Ran
Partner at Jenkins
T: +44 (0) 20 7931 7141
Email: HRan@jenkins.eu
Handong graduated from Zhejiang University, China with a BSc degree in Electrical Engineering and later acquired
MSc degrees in Electronics Engineering and Management of Intellectual Property from Queen Mary & Westfield College
(University of London).
Handong has previously worked as an IT analyst in a blue chip IT firm and as a research assistant in a cancer research
lab. Handong joined Jenkins in 2006 and qualified as a Chartered Patent Attorney and a European Patent Attorney in
2010. He handles patent applications mainly in the fields of telecommunications, computer hardware, software, and
electronics. Handong moved back to China at the end of 2011 and set up a Beijing Office for Jenkins. He is now the head
of this office.
Handong is fluent in Mandarin and English and has a good understanding of Japanese.
In recent years, there has been a huge effort
in Brazil to reduce the duration of lawsuits
and enhance the effectiveness of the Judiciary
system, with the purpose of bringing more
certainty and security to its citizens, corporations
and investors.
In fact, a revolution in the way civil disputes
are resolved before Brazilian courts is being
expected as a result of the enactment of the
New Code of Civil Procedure (Federal Law #
13.105/2015) on March 16, 2015, coming into
effect in January of 2016.
Like most of the civil law countries, Brazil
has passed a statute composed of a very
comprehensive set of rules (1.072 articles)
designed to regulate every single aspect of the
legal proceedings for dispute resolution in court,
both in state and federal levels.
The New Code has incorporated into statutory
law certain principles, precedents and soft law
that courts and scholars havebeen applying and
discussing for decades. Old rules were refreshed
and new rules were included in order to
address all the needs, scientific discoveries and
technological advances of the global economy
and society.
Influenced by these objectives, the new
procedural law is breaking some dogmas and
56 | LawyerIssue 57

Civil Procedure
canons of the old Italian-inspired Brazilian Code
of Civil Procedure, in force since 1973. The old
Code was enacted during Brazil’s dictatorship
period, when the major concern of the legislative
power was to grant as many chances of defenses
and appeals as possible, in order to avoid the
abuses of an arbitrary regime.
The new Code seeksnot only to speed up the
pace of the proceedings, but also to create a wise
balance between effectiveness and predictability,
time/cost reduction and legal certainty. The
main idea of the new law is to create an organic,
organized and simple statute, that permits the
judges to concern with the merits of the cases
and not in solving minor procedural issues,
applying substantive law to deliver justice in the
end of the day.
This approach mitigates the differences between
dispute resolution in Brazil and in the Common
Law countries, traditionally focused in resolving
the merits, rather than discussing procedural
issues.
Roughly speaking, the New Code gives more
importance to precedents, establishes the
possibility to condense thousands and thousands
of individual lawsuits in a single class action or
link its result to a the first judgment rendered
by a Superior Court. It also reducesthe number
of appeals, institute more penalties for frivolous
litigation and encourages the adoption of
alternative means of dispute resolution, such as
mediation and arbitration.
One of the most praised features of the New
Code is the fact that the parties have now
freedom to agree on certain rights and steps of
the proceedings in cases involving disposable
rights. Under article 190 of the New Code, “the
parties may establish changes in the proceedings
in order to adjust them to the specificities of
the case and agree on their burdens, powers,
prerogatives and procedural duties, before
or in the course of the lawsuit.” Additionally,
article 191 of the New Code provides that “upon
agreement, the judge and the parties may
establish a schedule for the procedural acts”.
Another change that hasbeen praised by scholars
and lawyer is the fact that precedents issued by
superior courts will now become binding upon
lower courts. Like most of the civil law countries,
precedents in Brazil were not binding, but
persuasive. This tradition will change with the
New Code of Civil Procedure.Although the new
law does not classify precedents as a source of
law (the only sources of law are statutory law,
general principles of law, analogy and customs),
precedents willbe binding on lower courts.
As a mechanism to promote foreseeability
and make jurisprudence more uniform
(enhancing legal certainty)precedents will
suffer an enormous change, gaining in some
cases the force and the effects that they have
in the Common Law countries,to serve as a
guide to similar cases adjudicated by the lower
courts, decreasing the number of appeals for
the same issue. This is one of the most drastic
transformations in the whole system, as the
decision of the Supreme Court of Brazil will bind
judgments of lower courts, what does not exist in
the current law.
Giving more power and effectiveness to its
decisions, the new procedurallaw demands
the higher Courts to create uniform, stable and
coherent precedents.The new law imposes a
duty of uniformity and precedents stability to
the courts. Once a precedent is established
any modification of its grounds demands the
Superior Courts to hear expert opinions about
it, permitting an institutional dialogue that will
overcome the parties of the case.
In this sense, the New Code of civil Procedure
inaugurates a very powerful mechanism to
improve the management of a large amount of
individual lawsuits that involve similar issues.
Such mechanism, named Motion for Resolution
of Repetitive Claims, is provided by article 967 et
seq of the New Code, under which a precedent
issued by a court on a leading case will be applied
to all similar cases throughout the country. With
this mechanism,the Courts will be able to identify
lawsuits that are reproduced in a large scale,
identifying the relevant legal issues and selecting
among a wide number of similar cases a leading
case to be ruled by a higher court. During the
adjudication of the leasing case, all similar cases
will stay suspended, until a final decision on the
leading case is rendered. After that, the precedent
will be applied to all similar cases, becoming
binding on the lower courts.
Another tool provided by the new procedural
law to reduce the number of lawsuits is the
encouragement of settlements and the institution
of preliminary mediation. Once a complaint is
filled, the judge may call a preliminary hearing
where a mediator will encourage amicable
Andre de Luizi Correia
Partner at Correia
T: +55 (11) 3728-9237
Email: andrelc@cfgs.com.br
LuisAntonio da Gama e Silva Neto
Partner at Correia
T: +55 (11) 3728-9279
Email: luis@cfgs.com.br
solutions. This method aims to encourage the
parties to reach a settlement early on in the
proceedings.
Moreover, the New Code of Civil Procedure
provides for the possibility of rendering partial
awards to resolve in a definitive manner
interlocutory issues concerning the merits of the
dispute. The early resolution of part of the issues
at stake may encourage settlement at an early
stage of the proceedings.
All these new features, clearly inspired by
common law systems, are being introduced into
Brazilian Law with the purpose of making the
application of law uniform and effective, in a direct
effort to increase legal certainty and reduce the
time and costs that have so far been associated
with the slow pace of judicial proceedings in Brazil.
Andre de Luizi Correia is a partnerat Correia, Fleury Gama e Silva Advogados. He has an LLM degree in Business Law
from Northwestern University School of Law (2014) and an LLM degree in Procedural Law from the Pontifical Catholic
University of São Paulo(2000).
Andre practises in litigation; arbitration; banking and finance; and administrative and regulatory law.
LuisAntonio da Gama e Silva Neto ispartnerat Correia, Fleury, Gama e Silva Advogados. He has an LLM degree in
Procedural Law from the Pontifical Catholic University of São Paulo (2009), and a specialization degree in Tax Law from
Geraldo Ataliba Institute – IDEP (2002).
Luis practises in litigation and arbitration.
58 | LawyerIssue 59

Employment Law
Disclosure and the Modern Slavery Act
by Tom Player
From October, 2015, a new duty upon larger businesses will be
implemented in UK, requiring them to publicly report steps they have
taken to ensure their operations and supply chains are trafficking and
slavery free.
The aim of this new legal intervention is to
encourage organisations to tackle modern
slavery with greater urgency by driving up
transparency and raising awareness of this
critical issue.
Accordingly, whilst legal penalties for breach
of the new requirement will be limited,
businesses could face the far more costly
consequence of adverse publicity and loss
of reputation, with campaigning pressure
groups being likely to prove increasingly high
profile in their monitoring of compliance and
condemnation of failure.
What is meant by “modern
slavery”?
One might be forgiven for associating the
term “slavery” with a by-gone era. But
exploitation of others is sadly not a mere
vestige of the past and the term “modern
slavery” has been adopted, therefore,
to encompass modern-day forms of
enslavement, including forced and
compulsory labour and human trafficking.
Slavery has a devastating impact on
individual victims. But it also affects those
businesses caught up in increasingly
high profile media and online campaigns
alleging slavery and human rights abuses.
Sectors frequently cited as vulnerable
to forced labour practices include
agriculture, construction, hospitality and
manufacturing. A common scenario of
where workers can become trapped
in servitude is where a migrant worker
takes a loan to pay for his or her travel to
another country to work, or to pay fees
to a recruitment company, with a view to
repaying the money from their earnings.
Such individuals can find themselves
trapped in ‘debt bondage’ as other sums
are added to the loan while they work,
such as accommodation and transport
costs, exceeding their capacity to make
repayments. Their passports are also
withheld often.
Relevance of modern
slavery for the business
world
While reputable businesses may be
satisfied that their own operations are
slavery-free, the reality is that slavery,
in its various forms, permeates many
aspects of the legitimate economy.
Even reputable businesses, therefore,
may be less clear that organisations in
their supply chains or other business
relationships, such as franchises, outsourcing
partners and joint-ventures,
apply the same rigour to weeding out
worker-exploitation.
As has been seen in recent years, ethical
business-to-business procurement terms
have become more prevalent, reflecting
investor and customer sensitivities on
human rights and giving rise to increasing
demands for disclosure of corporate
social responsibility performance data as
part of tendering processes.
Governments and stock exchanges are
requiring greater corporate transparency
on human rights, often leading to risks
of litigation or regulatory scrutiny.
Awareness amongst workers themselves
is also heightened, potentially leading to
labour dispute and disruption to supplychains
and with pressure groups proving
ever more active and vocal.
Accordingly, whether for reputational,
legal, financial or operational reasons,
businesses are under more pressure than
ever to take action –and to be seen to be
doing so.
What does the new UK
duty entail?
The duty, which derives from the
Modern Slavery Act, 2015, will apply to
all commercial organisations supplying
good or services in the UK and having a
minimum total turnover of £36 million or
more. Significantly, the duty will apply not
only to companies incorporated in the
UK but to those incorporate elsewhere, if
they carry on part of their business in the
country.
To comply, businesses will be required to
prepare a slavery and human trafficking
statement for each financial year, setting
out the steps the organisation has taken
during that year to ensure slavery and
human trafficking is not taking place in
any part of its own business or in any
of its supply chain – or alternatively, a
60 | LawyerIssue 61

Employment Law
statement that it has taken no such steps.
Further details are awaited. However, all
amendments to the UK Companies Act
broader focus upon human rights could
This statement must be signed by a director
indications are that businesses should
are brought into force.
prove advantageous to businesses
or equivalent (e.g. the general partner in
prepare now, given current timelines.
more widely, triggering a more focused
a limited partnership) and be published
prominently on the organisation’s website.
The Act sets out areas which “may” be
included in the annual statement and
What are the penalties for
failing to publish a slavery
and trafficking statement?
These amendments go beyond slavery
and trafficking. Furthermore, globally,
the UN Guiding Principles (‘UNGP’)
expect companies to ‘know and show’,
through human rights reporting, how
approach to demonstrating ethical
values and practice.
It may also facilitate a more co-ordinated
method of reporting, avoiding the need
statutory guidance will provide more detail
The UK legislation imposes limited penalties
they prevent and address salient adverse
for piecemeal responses or duplication.
on these areas in due course.
for non-compliance (the disclosure duty being
human rights impacts.
The suggested areas are:
subject to enforcement by the Secretary of
State by injunction, which seems unlikely).
Comment
Inevitably, legal interventions such
as by the UK will render modern
slavery an issue of compliance, not a
• information about the organisation’s
However, the presumption is that pressure
Some businesses may decide to adopt
voluntary ‘add-on’ but engaging top-
structure, its business and supply
groups will target businesses in vulnerable
the UNGP Reporting Framework to
level leadership will be instrumental to
chains;
sectors, particularly consumer brands, and
ensure a broader, consistent approach
achieving progress.
subject them to reputational campaigns to
to human rights reporting in an effort
• the organisation’s policies relating to
force annual disclosure.
to meet a number of new stock market
It will be essential, therefore, that going
modern slavery;
and national human rights transparency
forwards organisations have a strategy,
The UK government has also said that it
measures, including the Act.
from identifying who will provide that
• its due diligence processes in relation
may ‘name and shame’ businesses which
top-level commitment, to assessing risk
to slavery and trafficking in its business
drag their heels, an approach that has met
Even so, viewing the UK Modern Slavery
and policy approach.
and supply chain;
with some success in other areas, such as
Act holistically and in the context of
payment of the statutory minimum wage.
• the parts of the business where there is
a risk of modern slavery and the steps
it has taken to assess and manage that
risk;
How does the UK Act
compare with other human
rights disclosure duties?
• its effectiveness in ensuring that
The UK is not the first jurisdiction to adopt
modern slavery is not taking place,
a more proactive approach to addressing
measured against appropriate
performance indicators;
modern slavery. A similar disclosure
provision was introduced in California in
Tom Player
• training available.
2012, albeit upon even larger organisations,
with a turnover threshold of $100m.
Partner at Eversheds
When do businesses need
to publish a slavery and
trafficking statement?
The aim of the UK government is to introduce
the disclosure duty in October 2015. It also
intends to implement transitional provisions
to give businesses sufficient time to prepare,
where the financial year end is within close
proximity to October.
In terms of reach, however, the UK Act goes
further by covering organisations carrying
out any part of their business in the UK (no
minimum ‘footprint’); all sectors, not just
retail and manufacturing; and both goods
and services (not just supply chains for
goods).
It is noteworthy also that, in 2016, current
corporate duties to report on human rights
will be strengthened yet further once
T: +44 292 047 7574
Email: thomasplayer@eversheds.com
Tom Player is an Employment Partner at Eversheds LLP. He has particular specialism in Industrial
Relations, International Labour law Modern Slavery and Business and Human Rights and is listed
as a recommended individual in Chambers and Partners Legal Directory.
He designs and delivers regular Employee Relations courses for clients and is a regular speaker
at the Eversheds annual Labour Relations and International Labour Relations seminars. Tom has
also delivered Seminars for Lexis Nexis, Xpert HR and Mercer’s Labour and Employment relations
network and was also a speaker at the REC conference on the Agency Worker’s summit.
62 | LawyerIssue 63

Technology, Media & Telecoms
Communications & Multimedia
by Mariette Peters
Section 114A… Guilty
until proved innocent?
In this day and age of technology, where
information is easily available and
communication is just an email away,
internet-related crimes have also been
increasingly rampant.
Section 114A of the Evidence Act 1950,
was introduced in the hope of enabling
law enforcement officers to successfully
identify the online perpetrators. In the
recent months, cases on the interpretation
of section 114A have reached the Malaysian
courts.
Introduction
Section 114A, referred to as the
Presumption of Fact in Publication, was
introduced via the Evidence (Amendment)
(No 2) Act 2012 (“the Amendment Act”).
The amendment came into force on 31 July
2012.
The amendment aims to facilitate the
identification and proving of the identity
of an anonymous person involved in the
publication through the Internet.
Section 114A – Presumption of fact
in publication
• A person whose name, photograph
or pseudonym appears on any
publication depicting himself as the
owner, host, administrator, editor or
sub-editor, or who in any manner,
facilitates to publish or re- publish
the publication is presumed to
have published or re-published the
contents of the publication unless
the contrary is proved.
• A person who is registered with
a network service provider as a
subscriber of a network service on
which any publication originates
from is presumed to be the person
who published or re-published the
publication unless the contrary is
proved.
• Any person who has in his custody
or control any computer on which
any publication originates from is
presumed to have published or
re-published the content of the
publication unless the contrary is
proved.
• For the purpose of this section:
(a) “network service” and “network
service provider” have the meaning
assigned to them in section 6 of the
Communications and Multimedia Act
1998 [Act 588]; and
(b) “publication” means a statement
or a representation, whether in
written, printed, pictorial, film,
graphical, acoustic or other form
displayed on the screen of a
computer.
The implications
According to sub-section (1) of section 114A,
if your name, photograph or pseudonym
appears on any publication on the Internet,
representing yourself as the publisher,
you are presumed to have published the
contents of such publication. For example,
if someone creates a blogsite in your name,
you are presumed to have published the
contents on that site, unless you prove
otherwise. If someone posts a comment on
your blog, you are also presumed to have
published it. This will apply to Facebook,
Twitter, or any form of social networking
service, where you are deemed to have
published anything posted on their wall, if
that posting is published under your name.
A scrutiny of subsection (2) also appears
to have serious consequences. If a posting
originates from your account with a
network service provider, you are deemed
to be the publisher unless the contrary is
proved.
A further presumption in subsection (3)
is for the contents that originate from
a computer. You are deemed to be the
publisher so long as your computer was the
device used to post that content.
The section is also said to automatically
apply when the act complained involves
cyber-crime. 1
Reversing the burden of
proof
The section has caused some uneasiness
in criminal cases, as it appears to impose
the burden on the person to prove his
innocence, as opposed to the prosecution
to prove its guilt. Furthermore, since
computers may be easily manipulated and
hacked into, the issue that arises is whether
it is too risky to reverse the onus onto
Internet users, network services subscribers
and computer owners, to prove their
innocence.
Retrospective
Furthermore in the recent High Court
case of Tong Seak Kan & anor v Loke Ah
Kin[2] it was ruled that the presumption
has retrospective effect. In that case the
defamatory statements complained of were
published of the blogsite on 8 August 2011.
1 YB Dato’ HJ Husam HJ Musa v Mohd Faisal Rohban
Ahmad [2015]1 CLJ 787
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Technology, Media & Telecoms
Although the Amendment Act took effect
from 31 July 2012, section 114A applied,
nevertheless. Although Tong Seak Kan &
anor v Loke Ah Kin is of a civil nature, the
question prompted revolves around the
constitutionality of section 114A, if applied
retrospectively in criminal proceedings.
Rebuttable
Although the presumption is rebuttable,
the argument, however, is that there may
be difficulties in adducing evidence for the
same. It may not only be difficult for the
layman to navigate his way through the
maze of technology, there may also be
other legal hindrances.
Furthermore, the standard to achieve
in rebutting the presumption is on a
balance of probabilities. A mere denial is
insufficient. This has been argued to be too
onerous a burden.
Much ado about nothing?
The law-makers, however, claim that this
section is not as oppressive as it sounds,
arguing that section 114A merely renders
specific, a power that the court already has
in another provision in the Evidence Act,
namely, section 114. That section reads:
Section 114
The court may presume the existence of any
fact which it thinks likely to have happened,
regard being had to the common course of
natural events, human conduct, and public
and private business, in their relation to the
facts of the particular case.
This provision suggests that the court may
already invoke a presumption that could have
the same effect as section 114A, except for the
fact that section 114A is more specific.
Conclusion
Although the section is intended to
balance the right of aggrieved persons,
especially of those maligned through social
media, it begs the question of whether
this presumption, if applied especially in
criminal cases, is one of guilt, and therefore
goes against the very grain of the criminal
justice system.
The Golden Age of Joint Lives
Maintenance is Dead!
By Marc Saunderson
Mariette Peters
Partner at ZUL RAFIQUE & partners
T: +60 3 6209 8228
Email: mariette.peters@zulrafique.com.my
Mariette Peters obtained both the Bachelor of Laws and Master of Laws from the University of Malaya. She
was admitted as an Advocate & Solicitor of the High Court of Malaya in 1992.
There is no doubt that Family law responds, more than other areas of
law, to changes in society and high earners now earn significant salaries
and there is a clear trend for couples to divorce later in life, to reflect
a greater life expectancy and a greater expectancy of what quality
of life they will enjoy in retirement.
In 2002, she joined ZUL RAFIQUE & partners where she set up the Knowledge Management, Research &
Training Department. She is responsible for all research and publication of the firm and monitors the firm’s
document management system. In line with her designation and academic background, Mariette conducts
lectures and training sessions on a regular basis in various areas including Knowledge Management and
other legal areas such as those related to privacy, data protection, IT Law and Evidence. Being a Registered
Trademark Agent, Mariette’s legal practice area includes Intellectual Property (“IP”), where she handles all
the IP files of the firm.
Joint lives periodical payments has been the
norm during my working life, with the onus on
the payer – invariably the husband – to apply
to terminate or reduce such an order if the
wife were to remarry, cohabit, or find well-paid
employment, to avoid crystal ball gazing. But
of course that in itself creates uncertainty in
both parties being able to plan their futures and
leaves open the potential for a further round of
litigation and significant costs, and capitalisation
at a later date.
Section 25A (2) provides that it is the courts’
statutory duty when making a periodical
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Family Law
payments order to consider:
Relief: Short Marriage) [1997] 2 FLR 26:
I therefore want to consider the questions of
(£3.86 million as opposed to the Husband’s
“needs”, “sharing”, length of periodical
£3.65 million), but the Husband had slightly
“Whether it would be appropriate to require those
“The proper course is to impose no term, but to
payments, how we treat bonuses and quantum.
more pension. She had an income of £22,000
payments to be made or secured only for such term
as would, in the opinion of the court, be sufficient
to enable the party in whose favour the order is
leave the payer to seek the variation….. Gazing into
the crystal ball does not give rise to a reasonable
expectation.”
Needs and Sharing
net per annum, the Husband had an income of
between £720,000 – £770,000 net per annum
and hoped to retire at the age of 55. He had by
made to adjust without undue hardship for the
termination of his or her financial dependence on
the other party.”
So what Is Income?
R v R (Financial Remedies: Needs and
Practicalities) [2013] 1FLR 120 – Coleridge J
now remarried a partner in Deloittes.
The court increased her periodical payments by
Income is easy for the average man in the street
Coleridge J reminds us that cases will be dealt
£100,000 net, i.e. from £250,000 to £350,000 net.
The rationale which underpins Section 25A was
– it is what their pay slip shows.
with on the basis of needs and practicalities.
However, the Court anticipates a termination
properly set out by the Supreme Court in Miller
upon former Husband’s retirement, anticipated
v Miller/McFarlane v McFarlane [2006] UKHL 24,
However, I prefer Peter Duckworth’s definition:
JS v L (Financial Remedies: Pre-acquired assets,
to be 2015 but that terms is extendable, and
where their Lordships stated that:
needs)[2013] 1FLR 300 – King, J “Needs Trumps
the Court imposed a sliding scale of 40% up to
“In relation to the husband’s annual earnings/
Everything”
£750,000, 20% up to £1 million and 10% over £1
“The goal the court is required to have in mind
is that the parties’ mutual financial obligation
should end as soon as the court considers just and
reasonable.”
“The whole point of a divorce is to enable people
whose lives were previously bound up with one
another to disentangle those bonds and lead
independent lives.”
By 2008 in the case of VB v JP [2008] EWHC 112
receipts from the Business, means the aggregate
of all (a) income received by him, whether in the
nature of salary, bonuses, dividends, compensation,
pension scheme contributions, or the like, and (b)
benefits in kind, including car allowances, P11D
benefits, EBT schemes, share incentive schemes
or similar, less any tax and National Insurance
contributions (or the equivalent in another
jurisdiction) deducted therefrom in the tax year in
question.”
Paragraph 85 – “there is no doubt that the
husband came into the marriage with
substantial assets, which assets are
capable of being the subject of forceful
arguments in favour of their being
excluded as non-matrimonial property.
In my judgment, however, … those
assets are required in order to satisfy
both the immediate and long-term
needs of the wife and children.”
million.
In Murphy v Murphy [2014] EWHC 2263 , the
wife was 32 and Husband, 35. They met in 2004,
cohabited from 2005, and married in 2007. The
marriage broke down 6 years later in 2013, at
which time they had twins aged 3.
At the FDR the majority of issues were resolved
in terms of capital and pensions, but a dispute
remained as to whether spousal maintenance
Fam, the court held:
“In ordinary circumstances a wife has no right or
If we are not considering the above, then we may
well be missing something.
Duration
should be stepped down in the near future and
should be subject to a term order.
expectation of continuing economic parity (sharing)
Please remember in terms of EBTs there are
MacFarlane v. MacFarlane 20th June [2009]
The wife at this time was a full-time carer, but
unless and to the extent that consideration of her
deferred Tax and NI issues that need to be
had held well-paid employment before that. She
needs or compensation for RGD so requires. A clean
addressed if treated as income that can support
This was an 18 year marriage to the date of
had planned to train as a teacher, but that had
break is to be encouraged wherever possible.”
periodical payments.
separation, with three children the youngest of
not materialised and she felt it was no longer
whom was 12. Mr MacFarlane was an accountant
viable, and, as such, she was opposed to any
Sometimes as practitioners we forget this very
As with all periodical payments cases there are
with Deloittes. Capital had been divided equally
stepping down of maintenance.
simple point, and having grown up in an era of
two questions –
between the parties and in 2002 at the time of
joint lives maintenance we all too often forget
the drive to achieve a clean break in anything
• How much?
the original hearing the wife had been awarded
periodical payments on a joint lives basis of
The Husband had been working in Hong Kong,
but had now returned to London and faced
other than larger money cases.
• How long?
£250,000 per annum.
a higher tax bill, and raised issues regarding
variation of the level of maintenance he was
In L v L (Financial Remedy: Deferred Clean Break)
After various appeals the original award was
paying.
[2011] EWHC 2207 Fam, it was held that the court
Let me start with duration. Gone are the days
reinstated by the House of Lords (as was) in
has a positive duty to consider a term order,
where a wife would simply receive periodical
2006.
The court took the view that to step down
even when neither party is seeking it.
payments for life and we would glibly advise
maintenance, i.e. to guestimate what the wife
If there is uncertainty about the appropriate
the husband that the wife would remarry and
periodical payments would come to an end.
In 2007 the wife applied for a further increase in
periodical payments. At the time of this hearing
could or would be earning in 3 years’ time was
“totally speculative”.
length of term, the court held in C v C (Financial
the wife had more capital than the Husband
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Holman, J. reminded us of Section 25A (2) MCA
1973, namely:
“Where the court decides in such a case to make a
periodical payments order in favour of a party to
the marriage, the court shall in particular consider
whether it would be appropriate to require those
payments to be made….. only for such term as
the evidence shows that choices made during the
marriage had generated hard future needs on the
part of the Claimant. In this case the duration of the
marriage and the children were pivotal factors.
• An award should only be made by reference
to needs, save in exceptional circumstances
where it can be said that the sharing or
basis
• There is no criterion of exceptionality on an
application to extend a term order. On such
an application an examination should be
made of whether the implicit premise of the
original order of the ability of the payee to
achieve independence had been impossible
payments order of £700 per month for a 2 year
term where the parties were in their mid-30s
with a 3 year old daughter. The husband was
an IP lawyer and the wife an Actuary. (Pause
There) Prior to the birth of the parties’ child the
wife had earned more than he had, but was now
only working part-time, earning £32,300 to his
£94,000.
would, in the opinion of the court, be sufficient to
enable the party on whose favour the order was
made to adjust without undue hardship to the
termination of his or her financial dependence on
the other party.”
In the circumstances, despite the relatively short
length of the marriage, the Judge declined to
make a term order.
SS v NS (Spousal Maintenance) [2014] EWHC
1483 – Mr Justice Mostyn, this was a case where
the wife was aged 39 and the Husband, 40.
compensation principle applies.
• Where the needs in question are not causally
connected to the marriage, the award should
generally be aimed at alleviating significant
hardship.
• In every case the court must consider a
termination of spousal maintenance for
the transition to independence as soon as
it is just and reasonable. A term should be
considered unless the payee would be unable
to adjust without undue hardship to the
ending of payments. A degree of hardship
to achieve and if so, why?
• On an application to discharge a joint lives
order an examination should be made of
the original assumption that it was just too
difficult to predict eventual independence.
• If the choice between extendable and
non-extendable term is finely balanced the
decision should normally be in favour of the
economically weaker party.”
In this case the wife was awarded £30,000
per annum index-linked RPI and received a
The wife was unsuccessful on appeal, the court
taking the view that the wife could increase her
7 days to 10 days per month over a period of 2
years, and if necessary she could apply to extend
the term because there was no Section 28 (1A)
bar.
In Wright v Wright [2015] EWCA Civ. 201, the
Husband was an equine surgeon earning
£150,000 per annum, and was required by a
2008 order to pay joint lives maintenance of
£33,200 to his wife, plus child maintenance and
school fees.
The parties had lived together since 2002,
married in 2007, had 3 children aged 11,9 & 7, all
privately educated. They separated in May 2013.
The Husband was in a new relationship.
The Husband was a banker and the wife was the
in making the transition to independence is
acceptable.
• If the choice between an extendable term
and a joint lives order is finely balanced, the
statutory steer should militate in favour of
capped percentage of 20% of the Husband
future bonuses. The bonus share was nonextendable,
but the base spousal maintenance
had an extendable term which expired when the
youngest child reached 18 (in just over 10 years’
time).
District Judge Cushing in her Judgment had
said that the wife would be expected within the
following 2 years to begin making a working
contribution towards her own household
expenditure. Indeed the Judge had said:
primary carer for the children.
They had assets of broadly £3.29 million.
The Husband had a number of unvested shares,
which on receipt would be taxed as income.
Counsel for the wife included the unvested
shares, but this was criticised by the Husband.
Mostyn, J said:
“In my judgement there would have to be special
features present before money earned, but which
is deferred in collection and conditional on
performance, is excluded from the divisible pool.”
Mostyn, J. gave the following guidance:
“Spousal maintenance is properly made where
the former.
• The marital standard of living is relevant to
the quantum of spousal maintenance, but is
not decisive.
• The essential task of a Judge is not merely to
examine each individual item in the budget,
but to stand back and look at the global
total and ask if it is a fair and proportionate
outcome.
• Where the Respondent’s income comprises
a base salary and a discretionary bonus
the Claimant’s award may be equivalently
partitioned, with needs of strict necessity
being met from the base salary and
additional discretionary items being met
from the bonus on a capped percentage
Beware Extendable Term
Maintenance
Yates v Yates [2012] EWCA Civ. 532
The parties entered into a 3 year term without a
Section 28 (1A) bar.
The wife’s subsequent application to extend and
capitalise periodical payments resulted in the
husband having to pay a lump sum of £398,000
– the equivalent of 12 years further periodical
payments.
In Chiva v Chiva [2014] EWCA Civ. 1558, capital
had been shared equally.
This was wife’s appeal against a periodical
“There is a general expectation in these courts that
once a child is in Year 2 most mothers can consider
part-time work consistent with her obligation to the
children. By September 2009/10 the wife should be
able to work. She will be 46 or 47 years old. I do not
anticipate her having a significant earning capacity,
nor would it be reasonable to expect her to muck
out stables for the minimum wage. However, she
should make some financial contribution.”
Upon the husband’s application to vary, Her
Honour Judge Lyn Roberts reduced the spousal
maintenance gradually over 6 years, at the
conclusion of which payments would cease.
She notably commented that wife had made
“..no effort to get a job without good reason”,
and that a working mother would be “…a good
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Family Law
role model for the children”, and “..vast numbers
of women with children just get on with it” and
this wife should have been doing so as well.
The Court of Appeal refused the wife’s oral
application for permission to appeal saying there
was no prospect of a successful challenge to the
Judgment.
It was open to the wife to make a further
application if despite her best efforts she failed
to produce a significant financial contribution
both at the present and for the future, but the
onus henceforward would be on her. (Lord
Pitchford)
Be aware that this case cannot be cited
as an authority.
With reference to quantum
In Vaughan v Vaughan [2007] EWCA Civ. 1085,
the Court of Appeal held there was no authority
and no foundation, even in principle, for equal
sharing of future income.
In Nightingale v Turner [2015], a stay-at-home
husband says £50,000 per annum on divorce is
unreasonable.
The wife is a “high-flying” accountant and at the
start of proceedings was 41, with a salary of
£420,000 per annum and was a Partner at PwC.
She was the bread-winner, her husband the
homemaker – a traditional role reversal.
The couple were married for 7 years, but had
cohabited for 10 years, and had one child.
The Judge felt it was reasonable to expect the
husband to go back to work full time and he
should be able to earn £36,000 per annum,
which was discounted against maintenance. The
husband seeks to argue that he should remain a
house-husband.
The husband felt there was gender-bias and is
challenging the order, seeking a stay in the sale
of the family home and an increase of periodical
payments by 50%.
In effect the husband simply argues that if the
roles had been reversed his periodical payments
would have been generously assessed.
A date for appeal is to be fixed.
So where does that leave
bonuses?
In P v P [2013] – Eleanor King, 20 December 2013,
the court said that when ordering maintenance
payments following divorce in a case where
Husband’s income comprised salary and
substantial bonus, the proper approach was to
make an order which met the wife’s basic needs
out of salary and then to use a percentage of the
bonus to top-up that figure.
However, it was necessary to set a cap upon the
total amount payable from the bonus to avoid
the wife receiving substantially more than was
appropriate.
In H v W [2014[ EWHC 4105 (Fam), Mrs Justice
Eleanor King, 20 December 2013, placed a cap
upon Husband’s bonus so rather than having a
percentage of his bonus reducing over a period
of time, she placed a cap on the amount of
bonus that was capable of being shared. In this
case £20,000 per annum.
In SS v NS [2014] EWHC 4183 Fam, Mostyn, J.
gave his views on an obiter basis, and said:
“Where the Respondent’s income comprises a base
salary and discretionary bonus, the Claimant’s
support may be equivalently partitioned with needs/
necessity being met from the base salary and
additional discretionary items being met from the
bonus on a capped percentage basis.”
Following on from the indications by King, J. in
H v W (Cap on wife’s share of bonus payments)
[2013] EWHC 4105, and Roberts, J. in B v B [2014]
EWHC 4545 Fam, although Mostyn, J. stresses
not what is necessarily required in all cases, but
rather:
“…a matter of balance and degree.”
In conclusion, the title to this article is that the
golden age of joint lives maintenance is dead.
That is not necessarily so and perhaps in more
modest asset cases joint lives maintenance
remains the answer because it avoids the issue
of “crystal ball gazing”; but in larger money cases
I am comfortable with the title of the article.
In many ways it reflects changing attitudes and
a pre-White era when a wife would seldom
receive more than 25% of capital but have the
security of joint lives maintenance. In an era of
50%-50% why do we have a need for joint lives
maintenance in larger money cases.
Perhaps in view of the guidance in SS v NS we
now need to consider advising our clients with
some caution.
But is that really the case? The Matrimonial
Marc Saunderson
Partner at Mills & Reeve LLP
T: +44 (0) 121 456 8390
Email: Marc.Saunderson@mills-reeve.com
Causes Act is 42 years old and I take you back to
the start of my article –
Section 25A (2) provides that it is the court’s
statutory duty when making a periodical
payments or order to consider –
“Whether it would be appropriate to require those
payments to be made to secured only for such term
as would, in the opinion of the court, be sufficient
to enable the party in whose favour the order is
made to adjust without undue hardship for the
termination of his or her financial dependent on the
other party.”
…… So what has changed?
Marc is a specialist in family law, dealing predominantly with high net worth cases. He advises
individuals following breakdown of their marriage or relationship.
He is a mediator and trained collaborative lawyer and has built a hugely successful practice on
the basis of a no nonsense approach that is aimed at finding solutions at the earliest possible
opportunity.
72 | LawyerIssue 73

Anti-trust/Competition Tax Law
Law
Doing Business in the UK
by Nigel Eastaway
The United Kingdom consists of Great Britain and Northern Ireland. Great Britain
consists of England and Wales and Scotland. The legal systems in the territories
of the United Kingdom do differ in certain respects particularly in connection with
land law. Certain taxes are devolved or becoming devolved but basically the legal
systems allow anything to be done that is not regulated or prohibited unlike the
civil law jurisdiction in most of the rest of the European Union where anything is
permitted if the law allows it. The UK is a member of the European Union and
benefits from the internal market and is rated as the top global financial centre.
Business in the UK is usually carried on
through a company incorporated in one
of the constituent countries, which may
be a limited company or a public limited
company with a higher minimum share
capital, or a quoted public company
where shares are quoted on the stock
exchange. Each company is a legal entity
which can sue or be sued in its own right.
Business could also be carried on through
a UK branch of a foreign company and
the branch profits could be subject to
UK taxation. Other common business
structures are partnerships where the
partners have unlimited liability for the
debts of the business, limited partnerships,
where the limited partners’ liability is
limited to their investment in the firm which
must also have a general partner with
unlimited liability, which can be a limited
company. Limited liability partnerships
are separate legal entities, like companies,
but are taxed on the individual partners or
corporate partners on their share of the
profits or losses.
There are other business structures
such as cooperative societies, charities
and other not-for-profit organisations.
Certain business structures are subject
to regulations such as those engaged in
insurance and banking.
Taxation
The UK has the dubious accolade of
inventing Income Tax in 1798.
Income Tax
Unincorporated businesses and individual
partners of limited partnerships are subject
to Income Tax. Currently the first £10,600
is normally tax-free. The next £31,785 is
taxed at 20%, the next £118,215 is taxed
at 40% and the excess at 45%. There are
allowances for married couples and blind
persons.
The number of personal allowances has
been reduced in recent years as the nil
rate band has increased. Employees are
normally taxed under the Pay As You Earn
system where tax and national insurance
contributions are deducted at source by the
employer on behalf of the government.
National insurance contributions are also
paid by the self-employed at different rates
and the proceeds, in the main, are used
to finance public health and pensions.
Stock options are another complex area
for employees, which may be taxed as
income or capital gains depending on the
circumstances.
Non-UK Residents and
Non-UK Domiciliaries
Individuals who are not resident in the
United Kingdom are only taxable on their
UK source income and non-UK domiciled
individuals may be taxable only on UK
source income and remittances of overseas
income and capital gains if they meet the
necessary requirements.
The UK recently introduced a complex
statutory residence test to determine who
is, and who is not, a resident in the UK for
tax purposes.
Domicile is a complex area and it is
normally inherited from the father at
birth, but in certain cases it is the mother’s
domicile that prevails, and the individual
can acquire a domicile of choice by living
in a country and intending to remain there
permanently or indefinitely.
A non-domiciled individual who has lived in
the UK for a number of years is subject to
the remittance basis charge and after being
resident in the UK for 17 out of 20 years is
deemed to be domiciled in the UK for tax
purposes.
Corporation Tax
The UK claims to have the most competitive
rate of corporation tax in the G20, at 20%
currently, but in the process of reducing
to 18%. It also has the largest number of
double taxation treaties of any country in
the world and has been participating in
the base erosion and profit shifting (BEPS)
project sponsored by the OECD.
The UK does have anti-avoidance legislation
through the controlled foreign company
rules and it is possible to obtain an advance
pricing agreement in some cases which
enables royalty rates to be agreed with
74 | LawyerIssue
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Tax Law
HM Revenue & Customs in advance. The
UK anti-avoidance provisions have been
extended by the introduction of a diverted
profits tax.
A number of international companies have
paid very little tax, relative to their turnover
in the UK, by avoiding a permanent
establishment and concluding contracts on
the internet in favourable tax jurisdictions
such as the Netherlands, and delivering
products to UK residents from warehouses
in the UK which would not count as
permanent establishments and under many
double taxation treaties.
The UK has also been active recently on
a number of perceived abuses of the tax
system.
Inheritance Tax
A UK domiciled or deemed domiciled
individual is subject to inheritance tax on
assets in excess of the nil rate band of
£325,000. The rate of inheritance tax for
lifetime transfers is 20%, on the reduction
in the estate as a result of the transfer, and
the rate on death is normally 40%, but can
be reduced to 36% where 10% or more of
the estate is left to charity.
The nil rate band may be increased from
April 2017. An individual who ceases to be
UK domiciled and dies within 3 years of
that date is deemed domiciled in the UK for
inheritance tax purposes.
Individuals coming to the UK for an
extended period will usually be advised
to transfer assets into a foreign trust
before coming to the UK. Civil law based
individuals may consider transfers into a
suitable foundation.
The UK Crown dependancies Jersey,
Guernsey and the Isle of Man now have
both trust and foundation laws, whereas
the UK tends to treat foundations as trusts
or companies depending on which would
produce the greatest tax revenue.
Capital Gains Tax
The annual exemption for chargeable
gains before capital gains tax becomes
payable is currently £11,100 and half that
rate for trusts. The basic rate of capital
gains tax is 18% up to the basic rate limit of
£31,785 and 28% thereafter on the taxable
chargeable gain.
Value Added Tax
The UK has a typical European Union Value
Added Tax system where supplies of goods
or services are subject to VAT at a zero-rate,
a 5% reduced rate and a 20% standard rate,
with credit for VAT suffered on purchases.
Some supplies are outside the scope of VAT.
Excise Taxes
The UK charges excise taxes on certain
goods and services such as tobacco, alcohol
and gambling.
The UK tax system now holds the dubious
distinction of being the most voluminous
tax legislation in the world and UK
professional advice is essential for anyone
contemplating setting up business in the
UK. The UK workforce is normally welleducated
and the UK has four of the top ten
universities in the world. Non-EU resident
employees may need a work permit to work
in the UK.
The UK is a highly technically inventive
country and intellectual property is a major
asset of many businesses. Copyright in the
UK lasts for the creator’s lifetime and for 70
years after his death.
Trademarks have an unlimited life and the
UK trademark for Bass beer, which is a red
triangle, is the first UK registered trademark
and is still in use.
Patents normally have a life limited to 20
years and it is possible to protect certain
designs under the design rights legislation.
Tax incentives are available for creative
development and a lower rate of tax may
apply to the profits from patented products
under the patent box rules.
The UK has a worldwide reputation for the
independence and expertise of the judiciary
and a number of companies and individuals
with major financial disputes seek out the
English Courts to ajudicate on the merits
of the case without fear or favour, which
unfortunately is not the perceived norm in
every jurisdiction.
Nigel Eastaway
Partner at MHA MacIntyre Hudson
T: +44 (0) 20 7429 0529
Email: Nigel.Eastaway@mhllp.co.uk
The final but not insignificant benefit of the
United Kingdom is its language, which has
become, in many respects, the worldwide
business language thanks to its use
throughout the Commonwealth and former
colonies including, most importantly, the
United States of America.
However this common language has to
be used carefully as the same word may
have different meanings in different
circumstances and in different jurisdictions.
For example, a “scheme” in the UK is merely
a plan or arrangement which may be for a
multitude of legitimate purposes, whereas
a “scheme” in the US is normally regarded
as a tax avoidance scheme and sailing too
close to the wind for comfort.
Nigel is a partner in MHA MacIntyre Hudson, based in the London City Office. MHA MacIntyre
Hudson is a member of Baker Tilly International, an association of 161 member firms in 137
countries with 2,750 Partners and employing 27,000 people in 738 offices and a combined
revenue of US$ 3.4 billion.
He was appointed an Officer of the Order of the British Empire (OBE), in the 2012 New Year
Honours for services to Taxation Law, and has appeared in Debrett’s People of Today annually
since 1992.
He is a Fellow of the Institute of Chartered Accountants in England and Wales and member of
its Tax Faculty. He is a Fellow of the Association of Chartered Certified Accountants, a Fellow of
the Chartered Institute of Taxation, a Member of the Academy of Experts and the Expert Witness
Institute, a Member of the Society of Share and Business Valuers, a Fellow of the Institute of
Chartered Secretaries and Administrators and a Professional Member of the Royal Institution of
Chartered Surveyors.
76 | LawyerIssue 77

Outsorucing
Outsourcing in the Dominican Republic
by Angelina Salegna Bacó
Outsourcing is the practice of transferring resources and certain tasks of one
business to another independent business, which provides specialized services.
Introduction
In the outsourcing process, a business function is
carried out by a third party service provider. The
hiring business transfers part of its operational
management to an outsourcing firm. In this way,
the outsourcing firm can operate away from the
normal relation of the hiring business and its
clients.
Many companies use specialized businesses to
manage their most promising business activities.
These include areas such as IT, human resources,
asset management, real estate and accounting.
Many businesses also outsource technical user
support as well as telephone call handling,
manufacturing and engineering.
The service costs are usually lower if these areas
are outsourced. Allowing many businesses, in
service and consumer goods industries, to shut
down their own customer relation centers and
contract these out to a third party.
The main goal of outsourcing is to reduce
production costs. But, outsourcing is also a source
of competition: as it allows businesses to reduce
production costs by outsourcing to firms which
offer the best quality at a lower price.
The hiring business no longer has to sustain the
costs of running a specialized function, which is
a fixed cost. This is replaced by a variable cost,
by employing a firm which has already borne
these fixed costs. Moreover, the outsourcing
firm is more specialized in this function. For the
outsourcing firms, this results in an increased
market reach and greater specialization in the
outsourced task.
Due to this demand, customer service call centers
have increased significantly in the Caribbean. This
has especially been the case in the Dominican
Republic.
Labor Code and the
Outsourcing in the Dominican
Republic
In the Dominican Republic, national labor laws
provide a high level of protection for employees.
In particular, Dominican law seeks to ensure that
their employers are solvent. Solvency is ensured
giving the employee protection by making several
businesses jointly responsible for labor debts.
Because of this rule, you need to look closer at the
different models of labor relations which can give
rise to outsourcing.
Here are the various forms:
a) The subcontracting business. This is
a business which relies on another firm to
provide goods and services. This firm agrees
to carry out the work at their own risk and
with their own financial, material and human
resources.
b) Labor market intermediation. This brings
in an apparent employer between the worker
and the actual user or recipient of its services.
There are three types of such labor market
intermediation:
1) Traditional labor market
intermediation. This is carried out by
employment agencies, which act only as
a contact between the job seeker and the
employer and does not get involved in
the employment relation. In this type of
intermediation, you maintain a two-way
relationship, not a three-way relationship.
2) Placement agency. This is where an
intermediary, becomes not only the contact
between the employer and the employee,
but also remains in the employment relation,
as the apparent employer.
3) Supply of temporary labor. This is
carried out by temporary work agencies,
which hire workers and send them to
other businesses. These businesses later
determine the temporary workers’ duties
and supervise their work. The staffing firm
has a more limited role. It selects staff,
supplies its clients with workers, and pays
these workers wages (which are ultimately
paid on behalf of their business clients).
In the Dominican Republic, there are different
types of contracts used to govern labor relations
for outsourcing contracts. But, depending on the
circumstances of the contract – even though it is
a commercial contract, this could be considered a
labor subcontract.
A. The subcontracting business.
In the case of a subcontracting business, there
is no employment relation between the service
recipient and the subcontracted worker. This
is possible because of how a subcontracting
business operates. In most instances, it offers
services externally. In other words, outside the
client’s headquarters. It works with its own budget,
its own administration, and without any obvious
connection with the service recipient.
In the Dominican Republic, the subcontracting
business occurs mainly in the free zone sector
where there are subcontracting businesses
(textiles, voice and data services) which supply
services to large multinational companies and
form part of their global outsourcing chain.
In the practical application of Dominican labor law,
no labor disputes have arisen involving a service
recipient business.
78 | LawyerIssue 79

Outsorucing
B. Intermediation.
workers who were generally unaware of their
regardless of those agreements which have been
clients. Moreover, the solvency of such businesses
Within these forms, we have commercial
“actual employer”.
reached with the sub-contractor.
has not been challenged, at least in the labor
subcontracting arrangements which are:
• Traditional labor market intermediary;
• Apparent employer;
• Supplier of temporary labor.
Below, we will examine each one of these:
But, article 12 of the Dominican Labor Code
states that:
Intermediaries are those who do not have all the
elements or their own arrangements to fulfill the
B3. Supply of Temporary Labor
In the Dominican Republic, are not intermediaries,
but employers, those who take on work or part of
work in favor of others and carry out this work by
disputes which have taken place so far.
While we said earlier, there have not been
any issues because we were dealing solvent
companies. Yet, if the intermediary were an
insolvent company, we understand that the
B1. Traditional labor market
intermediary.
An intermediary’s role is limited to managing
obligations arising out of the relations with their
workers and, are jointly responsible with the
contractor or principal employer.
Articles 7 – 12 of the Labor Code intends to
themselves, working independently.
In the concierge business, there are businesses
that provide cleaning services to homes and
businesses from various sectors of the economy.
courts would make the service recipients jointly
responsible for the payment of employment
benefits.
Conclusion
and placing staff on assignments. At no point
regulate labor subcontract; its goal is to assure
This is also typical in the private security industry,
To sum up, in the Dominican Republic, employees
does this intermediary carry out or take part in
the workers’ rights by establishing a shared
where many surveillance businesses provide
receive a high level of protection from labor laws.
the performance of the employment contract.
responsibility between all those who take part in
services to both homes and businesses.
The law gives the employee protection by ensuring
The intermediary takes part in this agreement
the outsourcing chain.
that businesses are held jointly responsible for
in return for a commission or fee for every job
These business services have operated adequately
their employment, to guarantee the financial
processed, until the end of the assignment.
Dominican law permits that both the owner of the
and have not led to any litigation which has
safety of their work benefits.
work (or ultimate beneficiary) and the contractor
challenged the authenticity of the commercial
This type of outsourcing is governed by article 7 of
may resort to subcontracting of workforce. But
contract between the supplier of services and
For this reason, it is advised that when you
the Labor Code which states:
does not permit that such outsourcing falls into
the ultimate beneficiary. Nor have the workers
commit to outsourcing contracts of any form, the
the hands of a person without solvency.
involved in this arrangement challenged the status
labor implications should be examined carefully
… are deemed […] intermediaries those who use
of the supplier.
by a legal expert.
workers for jobs in other companies.
Let’s turn back to the issue of the intermediary, in
particular, the apparent employer. If outsourcing
Suppliers of labor, such as those in the concierge
This type of outsourcing has not resulted in any
is established, the provision in article 12 of the
and surveillance business, have operated with
disputes in Dominican labor relations. In general,
Labor Code makes jointly responsible all those
independence in their business dealings with their
this type of outsourcing is common in large and
who are involved in the outsourcing chain.
medium-sized businesses.
B2. Apparent employer
The same Dominican Supreme Court of Justice
established that:
This type of outsourcing is governed by articles 7 –
12 of the Dominican Labor Code.
The first paragraph of Article 7 of the Dominican
Labor Code establishes that an intermediation
goes beyond that of a typical work placement. It
treats the intermediary as one who employs and
at the same time involves itself in the performance
of the employment contract; and this intermediary
even becomes involved in directing any work
carried out by the hired workers.
In such conditions, this intermediary becomes
an “apparent employer” for all the contracted
It is the responsibility of the owner of the
work, when sued for payment of these fees
for contracted workers by a contractor or
subcontractor, to prove, not only the existence of
the construction contract, but also the financial
solvency of these and their independent status.
(3rd Chamber, Supreme Court of Justice, January
19th 2005, Judicial Bulletin 1130, page 713).
In fact, take the example of an employee who
receives instructions from the business where he
is physically working and is paid a salary from this
business. In these circumstances, the employee
is well within their rights to sue that business
Angelina Salegna Bacó
Founding Partner at Sánchez y Salegna
T: +1 809 542 1212
Email: asalegna@sys.do
Angelina takes a pragmatic approach to law, following her vast experience as a manager and
entrepreneur.
She is a highly regarded lawyer in the areas of commercial and labor litigation. She also
specializes in business and administrative law.
In addition, Angelina is Managing Partner of Sánchez & Salegna and aims to create a
distinguished firm with lawyers who are completely dedicated to our clients’ interests.
80 | LawyerIssue 81

Doing Business in Trinidad & Tobago
Doing Business in Trinidad
and Tobago
By Nassim Mohammed
Introduction
Trinidad and Tobago (T&T) is a twin-island
Republic located in the southern Caribbean
with a population of approximately 1.3
million. Unlike most of the tourism-based
economies in the Caribbean, T&T’s economy
is heavily dependent on the energy sector.
T&T has transitioned from a primarily oilbased
economy to a natural gas-based one
with major investments in petrochemicals.
In this regard, T&T is currently the world’s
largest exporter of methanol and is a leading
exporter of liquefied natural gas (LNG). As a
result, T&T is one of the wealthiest countries
in the Caribbean and Latin America as
measured by per capita GDP. 1
Over the past quarter century, the T&T
government has undertaken a number of
1 In 2014, according to information from the International
Monetary Fund, T&T had a GDP (nominal) per capita of
US$21,311.
reforms to liberalize the economy so as to
facilitate foreign investment in the country.
These reforms include the removal of most
restrictions on the ownership of property by
non-nationals 2 and the virtual abolition of
foreign exchange controls. 3
In addition, T&T has several advantages
when compared to other countries in the
region, including:
• Availability of skilled manpower;
• Availability of relatively good
telecommunications and other
infrastructure;
• Relatively low energy costs; and
• Strategic location at the crossroads of
the Americas.
2 Non-nationals of T&T may purchase up to five acres of
land for commercial purposes without having to obtain a
licence.
3 The T&T dollar is the subject of a managed float and the
current rate of exchange is approximately TT$6.35 to US$1.
In the circumstances, T&T is well-placed to
attract foreign investments.
Establishing a Business in
T&T
Generally, foreign investors may carry
on business in T&T through a locally
incorporated company or by registering
an External Company (Branch) in T&T.
The process of incorporating a subsidiary
company or registering a branch is
relatively straightforward and inexpensive.
On average, incorporating a T&T subsidiary
company would take approximately one
week while the process of registering a
T&T branch of a foreign company may be
accomplished in about two week time.
Generally, companies are required to be
registered for corporation tax, employee
tax (“PAYE”) and national insurance (“NIS”).
Depending on the level of their business
activity, they may also have to register for
value added tax (“VAT”).
These registrations are fairly uncomplicated
and can be accomplished within a
reasonable period of time.
Generally, one can obtain registration in
respect of corporation tax, PAYE and NIS
within one day while registration for the
purposes of VAT can usually be completed
within one week.
Taxation Overview
The current rate of corporation tax for
most companies operating in T&T is 25%.
Companies in the petrochemical sector 4 are
taxed at the rate of 35% while companies
engaged in the petroleum production
4 The 35% Corporation Tax rate is applicable to companies
engaged in (a) the liquefaction of natural gas; (b)
manufacture of petrochemicals; (c) physical separation
of liquids from a natural gas stream and natural gas processing
from a natural gas stream; (d) transmission and
distribution of natural gas; and (e) wholesale marketing
and distribution of petroleum products.
business and refining businessare subject
to tax under a separate regime altogether. 5
Payments of dividends to non-residents
are subject to a 10% withholding tax.
Where dividends are paid to a non-resident
parent company, a reduced rate of 5% is
applicable.
Other payments to non-residents (interest,
rentals, royalties, management charges) are
subject to tax at a rate of 15%. It should also
be noted that T&T has entered into Double
Taxation Treaties with various countries 6
and such treaties may provide for reduced
rates of withholding tax.
Capital gains are not generally subject to
tax in T&T. There is, however, a regime for
the taxation of short-term capital gains
which are defined as the gains accruing on
the disposal of an asset within 12 months of
its acquisition. Such short-term capital gains
are subject to tax at the rate of 25%.
The other principal taxes impacting on
businesses in T&T include the following:
• A business levy of 0.2% on the gross
sales or receipts of a company.
However, companies are only liable
to pay the higher of its business levy
or corporation tax liability. Further,
companies are exempt from business
levy for the first 36 months following
registration.
• A green fund levy amounting to 0.1%
of a company’s gross sales or receipts
is payable by all companies.
• VAT, at a rate of 15%, is due on the
supply of goods and certain prescribed
5 Petroleum production companies are subject to petroleum
profits tax at the rate of 50% of chargeable profits,
unemployment levy at the rate of 5% of chargeable
profits and supplemental petroleum tax with rates based
on weighted crude oil prices.
6 Currently T&T has entered into Double Taxation
Treaties with Brazil, Canada, CARICOM, China, Denmark,
France, Germany, India, Italy, Luxembourg, Norway,
Spain, Sweden, Switzerland, the United Kingdom, the
United States and Venezuela.
82 | LawyerIssue
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Doing Business in Trinidad & Tobago
services. Where a company is
registered for VAT, however, it would
be entitled to recover all of the VAT
it has incurred in the course of its
operations.
• An ad valorem stamp duty is
imposed, at varying rates, on certain
transactions including the sale or
transfer of property or shares.
Free Zone
The T&T Free Zones regime was designed
to encourage local and foreign investment
in export-driven projects that create jobs,
develop skills and create external markets
for products and services. Such investors
benefit from various fiscal incentives
provided for in the relevant legislation.
It should be noted that companies
engaged in the exploration and production
of petroleum and natural gas and the
manufacture of petrochemicals do not
qualify for free zone status in T&T.
Approved free zone companies are exempt
from corporation tax, business levy and
green fund levy on the sale of goods and
the export of services. Distributions and
certain payments also qualify for relief from
withholding taxes. Approved companies
are also exempted from Customs Duties on
imported goods and materials. Approved
companies also benefit from an exemption
from property taxes.
The T&T Government recently signaled
its intention to encourage the building of
centralized service hubs to support the
financial services sector. This involves the
consolidation by financial institutions of
national and regional back-office operations
in T&T.
In the circumstances, such enterprises will
provide services to customers in T&T as well
as the wider region. These operations may
include data base management, accounting,
legal, HR support and credit card
processing, among others. The intention is
to utilize the existing free zone regime in
order to incentivize these activities.
Manufacturing
Companies engaged in manufacturing may
qualify for approval under the free zone
regime. Additionally, manufacturers are
entitled to accelerated capital allowances in
the form of a 90% initial allowance on the
capital expenditure incurred in acquiring
plant and machinery.
Companies engaged in manufacturing
may also seek approval under the Fiscal
Incentives Act. Benefits available to such
companies under this legislation include
relief from customs duties and VAT on the
importation of plant and machinery as well
as total or partial relief from withholding tax
on distributions.
Tourism Projects
Companies in the tourism sector may
access benefits under the Tourism
Development Act for approved tourism
projects (which are not limited to hotels but
include ancillary facilities such as marinas,
theme parks, golf courses).
Approved companies may be granted
corporation tax holidays of up to seven
years as well as relief from customs duties
on imports. A tax exemption on interest
received in respect of loans used for
approved projects is also available.
Immigration Issues
Non-residents can generally freely enter
T&T for business meetings. A work permit
will, however, be required where a nonresident
person intends to work in T&T
for a period exceeding 30 days in any 12
month period. In addition to work permits,
nationals of certain countries are required
to obtain an entry visa to visit T&T. Work
permit applications are made to the
Ministry of National Security and normally
take between 4-6 weeks to be issued.
General Environment
T&T is a parliamentary democracy and
has a stable political climate. The legal
system is based on the English common
law system. The final Court of Appeal is the
Judicial Committee of the Privy Council in
the United Kingdom. The Courts in T&T are
independent though the judicial process
tends to be lengthy.
In recent years, the T&T economy has been
characterized by moderate inflation and
relatively low rates of unemployment. 7 The
defining feature of the financial system in
the past few years has been a low interest
rate environment combined with high
liquidity in the system. Total public sector
debt currently amounts to 39.9% of GDP.
The country’s investment grade status is
currently rated “A” (Standards & Poor) and
“Baa2” (Moody’s).
The country is heavily dependent on
the energy sector (40% of GDP, 50% of
Government revenues, 80% of exports),
however, and its overall economic
7 The inflation rate is currently at 5.6% while the unemployment
rate is 3.7% (Central Bank of Trinidad and
Tobago Economic Bulletin: July 2015).
Nassim Mohammed
Senior Manager at Ernst & Young
T: +1 868 822 5022
Email: nassim.mohammed@tt.ey.com
performance is closely linked to energy
prices. As a result, the Government is keen
to promote investments in the non-energy
sector as a means to diversify the economy.
T&T has an established, well regulated
financial sector that includes commercial
banks (including the local operations of
international banks), insurance companies
and a stock exchange. Further, there are
no foreign exchange controls in T&T and
profits may be freely repatriated.
Investors have access to a well-educated
labour force. Tertiary education is free in
T&T and this has resulted in ever increasing
numbers of university and technical
graduates entering the work force. There is
a minimum wage in T&T that is currently set
at TT$15 per hour.
T&T has two international airports with
a number of airlines offering direct and
connecting flights to all major international
destinations. T&T also has two strategically
located international ports (Port of Spain
and Point Lisas). T&T also has a modern
communications network with ready access
to land-line telephones, mobile telephones
as well as the internet.
In conclusion, T&T has made significant
strides in recent times to transform the
business environment of the country so as
to attract foreign investment.
Providing advice to clients on the tax efficient structuring of transactions and operations with
emphasis in the financial services sector.
84 | LawyerIssue
85

Anti-trust/Competition Wills Trusts & Estates Law
Wills, Probate and Trusts: Testamentary
Capacity, Want of Knowledge and Approval;
and Revocable Living Trusts
by Jacy A. J. Whittaker
Wills And Probate
In The Bahamas, wills, probate and trusts law
operate largely as in the UK, with its legal system
being based on English common law. Case law
emanating from the UK courts has persuasive
effect in The Bahamas and is normally followed
(in the absence of domestic judicial authority or
legislation).
On the death of an individual, the estate must be
distributed in accordance with the law, whether
that is under the last valid will of the deceased or,
in the absence of a will, under the statutory rules
of intestacy set out in The Inheritance Act 2002.
The issue of whether the deceased’s last will was,
in fact, valid is the crux of many cases brought
before the courts in recent times.
Developments In
Testamentary Capacity
Testamentary capacity is a hugely subjective issue
which is somewhat of a testing area for private
clients and the courts alike. Practitioners are
professionally obligated to remain vigilant as to
Litigation involving wills and deceased estates has
been rising in recent years, reflecting both a greater
sense of entitlement and a greater willingness to take
legal action against others.The wills, probate and
trusts lawyers at Bahamas law firm ParrisWhittaker
are increasingly instructed to act for clients involved
in contested wills, probate and trusts.These areas are
becoming increasingly dynamic, with the developing
case law giving welcome clarity as to how the law is
interpreted by the courts.
issues pertaining to mental capacity from the
moment they first see the client.
Any concerns as to lack of capacity arising,
for instance, out of illness, effects of drugs,
bereavement and so on should put the
practitioner on alert. They must take appropriate
action, whether this is talking sensitively with
the client or obtaining a doctor’s report. It is by
taking necessary precautions that the risk of later
disputes after the death of the testator can be
minimized.
This is vital given that a growing number of people
are taking action to claim an inheritance (or an
increased sum) from deceased estates on the
grounds that the testator lacked the required
testamentary capacity to make a valid will. So far
as the case law is concerned, the test for whether
a testator has capacity to make a will is set out in
Banks v Goodfellow (1870) LR 5QB 549.
The testator must be able to understand the
nature of the act of making a will, and its effects;
to understand the extent of the property of which
he or she is disposing; and to comprehend and
appreciate the claims to which he or she ought to
give effect.
The testator must not be subject to any disorder
of mind as shall “poison [her] affections, pervert
[her] sense of right, or prevent the exercise of [her]
natural faculties”.
Recent important rulings demonstrate the issues
practitioners need to be watchful for, particularly
given that the courts are willing to declare a will
invalid on the basis of ‘want of knowledge and
approval’ – even where there is insufficient proof
of lack of testamentary capacity.
Hawes v Burgess 1
In Hawes v Burgess, the testator did not know
of or approve the contents of the will, even
though it was drafted by an experienced solicitor.
Although she executed the will, she did not have
opportunity to check and approve its contents
first. Critically, the will was based on inaccurate
information supplied by one of her daughters – a
residuary beneficiary of the estate. However, the
testator’s son had been excluded from the will.
The client’s lawyer was an experienced wills
solicitor, and his “near contemporaneous
attendance notes” (as described by the judge)
were clear about his views on the capacity of the
testator to make the will. The solicitor found her
to be compos mentis and able to give instructions
for a will at the relevant time.
However, expert medical evidence was later taken
from a doctor who never actually saw the testator.
This expert said there was strong evidence that
the she suffered from cerebrovascular disease
which, in the light of evidence given by other
witnesses and accepted by the trial judge,
amounted to dementia of modest severity.
The Court of Appeal said, however, that this fell
short of what was required to show dementia and
lack of mental capacity.Critically, the daughter
1 Hawes v Burgess [2013] EWCA Civ 94
had played a major role during the will-making
process, being the ‘controlling force’ who had
even been present at the time the will was
executed. Although the UK’s Court of Appeal
ruled that although lack of testamentary capacity
had not been conclusively proved – there was
want of knowledge and approval and the will was
therefore invalid.
So whose evidence did the court prefer? That of
the solicitor who had actually met his client, and
not that of the medical expert who had not met
her. As Mummery LJ stated:
“My concern is that the courts should not too readily
upset, on the grounds of lack of mental capacity,
a will that has been drafted by an experienced
independent lawyer. If, as here, the experienced
lawyer has been instructed and has formed the
opinion from a meeting or meetings that the testatrix
understands what she is doing, the will so drafted
and executed should only be set aside on the clearest
evidence of lack of mental capacity.
The court should be cautious about acting on the
basis of evidence of lack of capacity given by a
medical expert after the event, particularly when that
expert has neither met nor medically examined the
testatrix, and particularly in the circumstances where
that expert accepts that the testatrix understood
that she was making a will and also understood the
extend of her property”.
This represents highly useful guidance for
practitioners – both wills and probate lawyers and
litigators.
Topciapski
The subsequent case of Topciapski v Topciapski 2
takes a similar theme. The claimant, one of the
testator’s sons who was excluded from the will in
question, argued that the testator neither knew
nor approved the contents of the will, and that
the other son exerted undue influence on the
testator.
2 Topciapski v Topciapski (2013) Ch 20 March 2013
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Wills Trusts & Estates
He relied on expert medical evidence that
referred to a further medical report questioning
the testator’ capacity on the basis of marked
‘generalised atrophic and ischaemic changes’
which impacted adversely on the testator’s
capacity to know and approve of the contents
of the will, and there seemed to be no rational
reason for the claimant son to have been
disinherited. In this case, the Will was declared
invalid on the ground of want of knowledge and
approval.
Turner v Phythian
In a further case 3 , the court found that the
testator’s will was invalid both for lack of
testamentary capacity and for want of knowledge
and approval. The testator was a lady whose
mental state was fragile throughout her adult
life and, at the time the will was made, she was
strongly bereaved and taking antidepressants.
The first defendant was the sole executor and also
involved in the will drafting; the other beneficiary
was his wife.
The court found there was no evidence from
anyone other than the first defendant that the
testator had ever read the will or, indeed, had
the will read out to her; nor had there been any
discussion or explanation as to its content in the
presence of the witnesses prior to the execution
of the will. She had had no independent legal
advice. The will was declared invalid on grounds
that the testator did not have mental capacity to
make the will, and she did not know or approve its
contents.
Sharp v Hutchins
In this 2015 case, testamentary capacity was not
in dispute: the claimant (the sole executor and
beneficiary) asked the court to pronounce a will
as valid, but the defendants challenged the will on
the grounds of want of knowledge and approval
on the part of the testator.
The judge ruled in favour of the claimant and
3 Turner v Phythian [2013] EWHC 499
found on the facts that “any degree of suspicion
was relatively low because it was not a case where
the 2013 Will was procured by the person benefitting
under it”.
The High Court ruled that the testator understood
what was in the will when he signed it and what its
effect would be, and accordingly pronounced for
that will.
What Do Practitioners
Need To Know?
There are a number of salutary lessons for
private client lawyers:
• The courts may resist declaring a will invalid
for lack of testamentary capacity, but still
find it is invalid for want of knowledge and
approval (as the above cases show).
• There is a presumption that the testator
knew of and approved the contents of a will
if the will is formally executed in accordance
with the required legal formalities. This
presumption may be rebutted where there
are factual circumstances that “excite the
suspicion of the Court”.
• Where there are such circumstances, the
court will scrutinize them and consider the
evidence before deciding if a will fails for
want of knowledge and approval.
• In such cases, the burden of proof is on the
individual relying on the disputed will itself
to prove to the court that the will reflects the
testator’s wishes.
• Where testamentary capacity and execution
of the will are undisputed, where a
claimant cannot sufficiently satisfy the
court that the circumstances around the
will are “suspicious”, a ‘want of knowledge
and approval’ will not succeed. The
testator’s knowledge and approval are
“presumptuously established”.
As Mummery LJ stated in Hawes v Burgess, the
cost of contesting the will was a calamity for the
family in every way. Lawyers should always be
mindful of their duty to their clients to minimize
the risk of potential – and calamitous – legal action
further down the line by taking appropriate steps
if they have any concerns as to the testator’s
testamentary capacity and or knowledge and
approval of the will’s contents.
Trusts: Revocable
Living Trusts
Setting up a Revocable Living Trust can lessen
the risks of potential disputes involving a
deceased after an individual dies (although trusts
disputes can, of course, arise at some point).
While a Revocable Trust can be contested, the
procedure for doing so is much more difficult
than it is to contest a will. A Revocable Living
Trust offers trustees a number of benefits well
worth consideration. A Revocable Living Trust
(sometimes called a ‘Living Trust’) is set up by an
individual for the purposes of holding their own
assets in trust.
These, in turn, are invested and spent for that
individual – who is also the beneficiary. In other
words, the trustmaker, trustee and beneficiary
are generally the same person. It will govern what
happens when the trustmaker is alive, if and when
he or she becomes mentally incapable, and finally
on death. One of the biggest advantages of a
revocable living trust is avoiding probate because
it can spare beneficiaries the cost and stress of a
potentially lengthy probate process.
Jacy A. J. Whittaker
Partner at ParrisWhittaker
T: +242 352 6112
Email: jw@parriswhittaker.com
Avoiding the public probate process also ensures
greater privacy in disbursing the assets of an
estate to the beneficiaries. In addition, the process
of setting up a revocable living trust can be a good
incentive for individuals to deal with the important
issues relating to their assets, and the potential
ways of looking after them effectively.
Clients for which a revocable living trust could be
advantageous need to balance the administrative
and legal costs of setting one up against the cost
benefits of having the trust in place. Importantly,
the clients will still need to have a will in place to
cover property and assets outside of the trust.
Parris Whittaker:
Biography
Parris Whittaker is an award-winning Bahamas law
firm with expertise across the full range of legal
practice. The firm combines an international reach
with a firm grounding in the Bahamas region, and
close working partnerships with important bodies
such as the Bahamas Port Authority.
It was founded in 2011 by partners Arthur K.
Parris, Jr, one of the most senior leading legal
authorities in the region, and Jacy Whittaker,
a seasoned litigator who is very active in the
Bahamian business community. Partner Kenra
Parris-Whittaker is an award-winning lawyer who
recently secured a significant victory in maritime
law at the Appeal Court.
Jacy enrolled in law school (University of Buckingham, and later Inns of Court School of Law), then joined Callenders
& Co., where he worked side-by-side with a legendary Queens Counsel on multiple matters—including one of the
Bahamas’ most monumental matters. Six years later, he and partner Arthur K. Parris, Jr. left to form ParrisWhittaker.
Jacy has since added commercial transactions, probate law, admiralty law, and corporate structuring, re-structuring,
and formation to his list of capabilities. He acts as local counsel for a handful of international companies.
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