Q3 2010 Issue 1
Akzo Nobel and the
battle for privilege
GOODBYE INVEST IN TOUGH SOCIAL
CAUTION UNREST ACT SCIENCE
Has Jackson Third-party The Bribery Bill Get the best out of
introduced risk-free litigation funders puts the FCPA in Twitter and
litigation? p10 eye up Europe p14 the shade p16 LinkedIn p26
Spain & Portugal p38
Akin Gump Launches in Geneva
We are a global law firm that emphasizes cross-border, cross-practice collaboration
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Our Geneva office is the headquarters of our global international arbitration practice,
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The CEDR Certificate
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This course ensures guided learning, greater reflection
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modular format across seven days over a period of several not just about what happens across the negotiating
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Those explicitly involved in complex negotiations (deal Dates, venue and cost
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Module 1: Thursday 9 and Friday 10 September 2010
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Litigation Funding Strategy & Technology
10 Jackson’s reactions 24 Jackson on e-disclosure
Tackling one of the thorniest
What the funding reforms
issues in legal costs
mean for commercial cases
14 New frontier 26 Social networking:
Third-party funders are five tips for lawyers
finding opportunities in Think “Twitter feed” is a
Europe bag of seeds? Here’s help
28 Cover Feature Financial Litigation Competition & EU
Akzo Nobel 16 Stand aside, FCPA? 32 Kokott’s unwelcome
Battle for privilege The UK’s Bribery Bill may
be tougher than its US
One lawyer’s take on the
With Akzo Nobel, the Commission cousin latest from Akzo Nobel
is stirring up an in-house revolt.
18 Vulture clash
Ben Rigby surveys the battle lines
The murky world of
– and meets some of the key com-
vulture fund litigation
Arbitration & ADR Collective Redress
20 Stars of the East 34 Turning American?
Inside Asia’s arbitration UK business turns against
hotspots the Financial Services Act
5 Jobs 50 Expert Views
BSkyB v EDS
38 Region Focus 7 Comment How to avoid a liability cap
The Jackson Review
Spain & Portugal
8 People & Firms A commercial lawyer’s perspective
CDR (Commercial Dispute Resolution)
Rivals in crisis Russia
Iberian courts are swamped with
58 Country Reports Sevmash case shows growing
acceptance of foreign awards
insolvency. Will a growing ap-
petite for arbitration be enough
to drag them out of the mire? Ben 62 Conference Diary Economists
Three cases reshaping patent licensing
Lewis reports from Madrid and
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he term “alternative dis- Reason two: nobody can agree Reason three: it’s insular
pute resolution” is part of what it means The idea of “alternative dispute resolu-
the parlance of law. But Because of the jumble of concepts em- tion” is hopelessly parochial. In many
what exactly is alternative bodied by the term, it never seems to countries, litigation is the foreign con-
about it? mean the same thing twice. For some cept.
Perhaps we should take a leaf from (particularly in the US), “alternative dis- Japanese parties must find it jarring
the book of John Sturrock QC, a barris- pute resolution” is synonymous with to hear chotei (conciliation), wakai (com-
ter who recently told delegates at a mediation; for others, arbitration. promise) and chusai (settlement-focused
Scottish conference that the term That’s just those in the know. Many arbitration) referred to as alternatives to
should be consigned to the waste bin clients in Europe and beyond are still litigation – not that they would ever be
of terminology. getting to grips with the concepts, let so confrontational as to tell you so.
One can see his point. Here are alone the labels. In the Middle East there is a similar
three reasons why we might want to Legal practice hinges on definitions. attitude. With legal systems built
consider the term to be past its sell-by If the term “alternative dispute resolu- around amicable settlement, litigation is
date. tion” is to be retained, it should at least not a default option but a last resort.
have a global definition, particularly as It’s tough selling a concept. Just ask
Reason one: it’s gone mainstream the practice of commercial arbitration is the Spanish Arbitration Club and the
According to Fulbright Jaworski’s inherently international. Portuguese Arbitration Association: as
last litigation survey, more than half their members make clear in our feature
of UK companies prefer to arbitrate on page 38, some litigators are dyed in
than litigate – and that leaves out
the growing core of mediation, adju-
The idea of the wool.
But it’s even tougher when the con-
dication and other out-of-court
“alternative cept itself is unclear.
So where do we go from here? Stur-
Even if arbitration is on the wane, as dispute resolution” rock suggests replacing “alternative”
CDR (Commercial Dispute Resolution)
Fulbright concludes, that’s a hefty
chunk of the market that hardly justi-
is hopelessly with “complementary”, “supplemental”
What’s more, arbitration has
parochial. In many Nevertheless, it’s hard to avoid the
thought that if lawyers and lawmakers
changed. While once it was fast and countries, litigation are serious about promoting arbitration
cheap, the modern process has become and mediation, they should stop charac-
ever more similar to litigation, making is the foreign terising them as something different al-
further nonsense of its “alternative”
concept together. With that in mind, how about
just… “dispute resolution”? CDR
People and firms
UK and Ireland Snelling of Freshfields Bruckhaus De- ter as Sophie Havard Duclos, an IP and
ringer and Kelwin Nicholls of Clifford technology specialist, left Freshfields
Herbert Smith’s management shake- Chance. Bruckhaus Deringer to join Laude Es-
up saw insurance litigator Martin quier Champey as the litigation firm’s
Bakes take up the new role of general Austria and CEE fourth partner.
counsel. Baker McKenzie reversed the
Michael Scott, a competition partner, It’s been a quiet market for lateral hires trend with a lateral hire from a boutique
has succeeded David Gold as the in Eastern Europe’s dispute resolution – namely Courtois Lebel. Eric Bory-
firm’s senior partner. market. Wolf Theiss did, however, sewicz, a specialist in industrial litiga-
The firm’s annual promotions make a double promotion – litigators tion and arbitration, made the move
round focused heavily on dispute reso- Holger Bielesz and Clemens Trautten- along with a team of three lawyers.
lution, with a number of the new part- berg joined the firm’s partnership in Meanwhile Ashurst promoted
ners based in London. They include Vienna. The appointments came Christophe Lemaire, an antitrust
Karen Anderson and Nik Kiri (finan- shortly after the firm hired a senior lawyer with experience in the French
cial-services litigation); Susannah Cog- competition litigator in Brussels (see competition authority, to the firm’s
man (white-collar crime); John Benelux, below). Paris partnership.
Whiteoak (insolvency); Chris Parker Linklaters rewarded its competition US-qualified arbitrator and public
(arbitration); Kim Dietzel (competi- head for Poland and CEE, Malgorzata law specialist Noah Rubins became a
tion); and Jeremy Garson (commercial Szwaj, with a promotion to partner. new partner in Freshfields Bruckhaus
litigation). Deringer’s Paris office.
There was a boost in London for
White Case’s insolvency team, Benelux
which poached bankruptcy partner Germany
Christian Pilkington from its US rival Having just lost its London arbitration
Skadden Arps Slate Meagher head (see UK and Ireland, above), Allen Overy stepped up the rhetoric
Flom. Howrey suffered a second walkout as as it announced a “swift repositioning”
Rachel Couter, a banking disputes Brussels-based competition litigator in the German market. The firm raided
partner, joined SJ Berwin from Gibson Peter Camesasca left for Covington Lovells (now Hogan Lovells) for part-
Dunn Crutcher. Burling. Howrey had only recently ner Daniel Busse, who will be
Meanwhile Howrey took a blow launched a competition practice in based in Frankfurt and lead the firm’s
with the departure of the firm’s UK arbi- France, hiring six lawyers from Clif- German disputes practice. The move is
tration head Melanie WIllems to Chad- ford Chance. one of several concurrent hires in Ger-
bourne Parke, soon followed by a The Austrian firm Wolf Theiss many by Allen Overy , which
second loss in Belgium (see Benelux, hired cartels specialist Jochen Anweiler als o to o k o n a corporate partner
below). from O’Melveny Myers in Brussels. and a finance partner in Düsseldorf
The moves are a setback for the US In Luxembourg Allen Overy pro- and Frankfurt respectively. That
disputes boutique, which has enjoyed moted Katia Manhaeve, an IP technol- should more than make up for the loss
recent successes including the hire of ogy specialist with experience in of Marcus Grosch, the Mannheim-
competition litigator Shaun Goodman dispute resolution, to the firm’s part- based patent litigator who left Allen
from Cleary Gottlieb Steen Hamil- nership. Overy for Quinn Emmanuel earlier
ton, and a six-lawyer raid on Clifford Paul Kuipers, an insolvency lawyer this year.
Chance’s Paris office. who has advised PricewaterhouseC- Lovells made some promotions in
Watson Farley Williams sought to oopers on the collapse of the European advance of its merger with Hogan
take advantage of London’s shipping arm of Lehman Brothers, has been Hartson. Three of the new dispute reso-
disputes market, as Robert Platt joined elected partner in the Amsterdam of- lution partners are in Germany – they
CDR (Commercial Dispute Resolution)
the firm from Curtis Davis Garrard, an fice of Linklaters. Also in Amsterdam, are Kim Mehrbrey (Düsseldorf), and Se-
energy and transport boutique. The Clifford Chance made litigator Alvin bastian Lach and Christian Herweg
move reflects the thriving market for Khodabaks a partner. (Munich).
shipping litigation: Ince Co, a firm Freshfields Bruckhaus Deringer
specialising in that area, promoted four also sought to strengthen its German
dispute resolution lawyers to its part- France offering with the promotion of Frank-
nership. furt arbitrator Boris Kasolowsky and
Other promotions in London in- The recent trend in Paris for boutique- Düsseldorf competition lawyer Uta
clude Mark Clarke of Ashurst, Tom bound defections continued this quar- Itzen to the partnership.
Michael Kremer of Clifford Chance Alberto Fortún and Manuel Monzó
was promoted to the firm’s partner- were appointed as equity partners.
ship in Düsseldorf. In Portugal Morais Leitão Galvão
Teles Soares da Silva Associa-
Russia and CIS dos announced its annual promo-
tions, which included disputes
Russia and CIS lawyer Miguel de Almada. The
firm also hired litigator Carla Os-
ório de Castro in Oporto.
A rare mass defection in Geneva led
to a lift for Akin Gump Strauss
Hauer Feld. The firm’s hire of
seven lawyers from a merger-ready
Hogan Hartson (now Hogan
Lovells), including veteran arbitrator
Charles Adams as well as arbitration
partner Michael Stepek, gives the
Moscow’s litigation market welcomed firm’s nascent Geneva office a strong
a new face in April – that of Nicholas start in ADR.
Munday, formerly the UK dispute res-
olution head of Clifford Chance. The
firm relocated Munday to cope with a Middle East and Asia-Pacific
surge in local demand. He has prior
experience of handling Russian dis- Seems like everyone’s heading for Sin-
putes, having already been based in gapore these days. Among the latest
Moscow for three months. arrivals is David Llewelyn, White
But the celebration was short-lived. Case’s IP and technology specialist.
A month later Clifford Chance’s head Llewelyn will join the firm’s new
of dispute resolution in Russia, Ivan Singapore arbitration practice, which
Marisin, defected to Dechert’s year-old was established with the relocation
Moscow office – which must be a relief of energy disputes lawyer Aloke Ray
for Dechert following the firm’s earlier in the year.
abortive attempt to hire Chadbourne Norton Rose made a more modest
Parke’s Russian senior partner advance by promoting arbitrator KC
Mikhail Rozenberg last year. Lye to the partnership.
There were also promotions in Her-
bert Smith’s Asia offices. The firm
elected May Tai as an arbitration part-
ner in Shanghai and Gavin Margetson
Spain and Portugal as a general dispute resolution partner
CDR (Commercial Dispute Resolution)
The annual promotions round at Cua- Fai Hung Cheung, a specialist in
trecasas Gonçalves Pereira saw complex financial disputes at Allen Expanding?
seven litigation lawyers promoted Overy, became a partner in the firm’s
to the partn e rshi p – a h e ft y Hong Kong office.
ch un k of t h e S pa n i s h firm’s 18 Clifford Chance promoted dispute Please send details of partner
appointments. Cuatrecasas also resolution lawyers James Abbott and moves to Ben Lewis at
took the opportunity to make Cameron Hassall to the partnership, firstname.lastname@example.org
changes among its existing partners: in Dubai and Hong Kong respec-
litigators Ferrán Cerdà, Pedro Claros, tively. CDR
Debate rages on
At the Law Society’s dispute
resolution conference a Clifford
CDR (Commercial Dispute Resolution)
Chance partner shared his insights
on what Jackson’s reforms mean for
commercial cases. Ben Rigby was
ord Justice Jackson’s magis- ability to recover success fees and ATE the case.
terial review on costs opens insurance premiums from unsuccess- This concept of risk-free litigation is
doors for private individuals ful defendants. problematic and outside the spirit of
to seek justice they are cur- However, the higher fees and there- access to justice, said Davis.
rently denied. fore risk associated with commercial He pointed out that the Jackson re-
But they are not the only ones it will cases makes conditional fee arrange- forms are likely to be good for compa-
affect. Though less trumpeted, the re- ments (CFAs) less attractive to com- nies, more often sued by CFA-backed
port also has implications for high- mercial lawyers. One report by insurer claimants than using such arrange-
value commercial litigation. First Assist puts the uptake of CFAs at ments themselves.
These implications are big enough just 7% of commercial cases. Companies will not have to take
that the Law Society’s dispute resolu- When they do use CFAs, commer- into account the risk of paying up to
tion section costs conference was cial litigators also tend to structure double normal costs if the case proves
awash with lawyers from Slaughter them differently, he said. Often this successful, thus the risk of fighting liti-
and May, Linklaters and other high- involves being paid about 75% of gation is reduced.
profile commercial law firms. normal fees with an uplift to 125% if Davis also supported making suc-
Among them was Clifford Chance successful. cess fees payable by the assisted party.
litigation partner Simon Davis, who He acknowledged that whether or
spoke in a personal capacity at the con- not this was a good thing depended on
He took a proportionate approach
The concept of whether one took a claimant or defen-
to his subject, acknowledging that risk-free litigation Looking at damages and cost shift-
commercial litigation is a fragment of
the dispute resolution market.
is problematic and ing, given that most commercial litiga-
tion is about money, having less costs
But to Davis, Jackson LJ’s proposals outside the spirit to factor in was a benefit, he said.
must genuinely enhance commercial Commercial defendants will there-
justice just as it aims to do for individ- of access to justice fore benefit from not being obliged to
ual justice. pay the opponent’s success fees if they
He cited a comment made by Lord But financial pressures resulting lose a case, while avoiding increased
Neuberger, the Master of the Rolls, in from the credit crunch mean even com- damages.
January. “The time for discussion and mercial parties with ample resources He suggested the cap on success
debate is over,” said Neuberger. “It is are beginning to use CFAs to reduce fees was unlikely to be of concern to
now time for action.” their legal bills. commercial defendants, and may actu-
Action, he argued, that should be One concern about CFAs shared by ally prove a benefit if it means
CDR (Commercial Dispute Resolution)
swift but not hurried: in many places commercial claimants and defendants claimant lawyers ponder cases more
Jackson’s review prescribes a frame- is that they give the assisted party the carefully.
work, leaving the detail to be worked ability to pressure the opposition -
out. As every lawyer knows, small de- much like the legal aid of old. Inducing settlement: Part 36 offers
tails can later turn out to be critical. Davis called this “no-risk litiga- Davis suggested that Lord Justice Jack-
tion”. Parties that are insured against son’s suggestions on offers to settle
Success fees and ATE insurance loss could avoid paying onerous legal might open up defendants to black-
Jackson’s report proposed that success- fees while also avoiding any serious mail.
ful claimants should be denied the risk of having to pay costs if they lose He drew similarities with using the
obligation to pay success fees as a the point of settlement. “The language
weapon in litigation. of rewards and penalties is inappropri-
Davis outlined the existing situation ate,” he said.
regarding Part 36 offers - when a de- In his eyes it would be acceptable
fendant makes a formal offer to settle a for a claimant to benefit from a bonus
case - and their cost consequences. only if the defendant had required an
If this offer is not accepted and the actual adjudication on the dispute.
unsuccessful defendant is ordered to This, he said, “is what courts are for”.
pay less than the offer made, the
claimant pays the defendant’s costs Contingency fees
from the time of the offer. Davis also commented on contin-
Lord Justice Jackson proposes that gency fees. He noted the recommen-
dation that the losing party should
“The language of not be obliged to pay the contingency
rewards and But he did raise an eyebrow at the
possible need for independent legal
penalties [used by advice when entering into such agree-
Jackson] is ments.
This was despite Jackson’s claim
inappropriate” that contingency fees will not lead to
lawyers taking advantage of their
this leaves claimants “insufficiently re- Commercial clients are sophisti-
warded” for making Part 36 offers and cated ones. The review was ambigu-
defendants “insufficiently penalised” ous about whether this will only
Simon Davis for rejecting them. apply to private litigants or to compa-
But Davis believes Jackson misses nies. CDR
CDR is partnering with
leading law firms and
service providers to bring you incisive analysis of
dispute resolution topics.
Investors may be piling money into London-listed
litigation funds, but their eyes have been firmly fixed
on lucrative American disputes. Now third-party
funders are seeing increasing potential in Europe,
writes Greg Bousfield.
Support from Jackson
espite another round of
media rumours triggered “Although the That is as concrete as it get at this
by the Jackson Review,
Europe still seems to offer
opportunities in stage, but funded cases will continue
to fall into Juridica’s strictly commer-
investors little compared with the US the US seem to be cial litigation framework, which in-
for third-party litigation funding
larger, we are cludes international arbitration.
Competition law damages cases are
But Europe, and particularly the
UK, is gaining credibility as a TPF
thinking about of particular interest, Fields adds,
stressing that Juridica does not fund
market. Juridica Capital Management how to adjust our retail areas like class actions arising
announced in January it is getting seri-
ous about the UK and earmarked $50
processes to fit from personal injury (which are ex-
cluded from consideration by the So-
million for local projects. the UK market” licitors’ Code of Conduct), product
Juridica, which has more than $200 liability or mass tort claims.
CDR (Commercial Dispute Resolution)
million under management, was the In the US, Juridica targets cases
first litigation fund to list in London with potential recovery between $15
(on the LSE’s Aim board) in December have made the company aware of UK million and $25 million. This threshold
2007 and has funded three UK cases. possibilities: “We need to have more would have to be substantially lower
Juridica chairman and chief execu- presence in London and a more robust in the UK, where cases generally in-
tive Richard Fields says that “several business there. Although the opportuni- volve smaller sums, says Fields. “Right
opportunities a week” are now coming ties in the US seem to be larger, we are now we are interested in who the lawyers
Juridica’s way in the UK. thinking about how to adjust our and barristers are we can deploy, as
He says multinational law firm clients processes to fit the UK market.” opposed to the size of the case.”
“Right now we are
interested in who the
lawyers and barristers are
we can deploy [in the UK],
as opposed to the size of
Lord Justice Jackson’s review of the full amount of adverse costs, sub- cused on trying to resolve things out-
civil litigation costs was “most en- ject to the discretion of the judge, side the courts whereas the US is a
couraging” for the TPF industry, he which would likely add the major cost very court-orientated country with far
says, as are the future possibilities of of after-the-event (ATE) insurance to more litigation than any country in the
alternative business plans under the whatever part of the claim that was world, with cases that are much vaster
Legal Services Act. funded. and complex than anywhere else with
Jackson concluded that the cur- “We have done two deals without much larger damages,” he says.
rent low volume of TPF does not jus- insurance but most cases would in- “Billions of dollars are needed to
tify regulation, which would likely volve some element of ATE,” Fields fund US litigation; there is a huge
focus on capital adequacy require- says. gap between need and available capi-
Although abuse-of-process rules Market potential in Europe Contrary to the clichés, acceptance
(champerty and maintenance) would Burford Capital has a similar busi- of TPF is weak among the American
not be scrapped, nor would they auto- ness model to Juridica. Like its com- public and lacks legislative support.
matically exclude TPF under the pro- petitor, the company successfully Third-party funding of US class ac-
posals laid out in the report. floated on Aim last October, attract- tions, which are already notorious, is
Jackson’s view that TPF is most ing £35 million from UK institutional likely to be regarded as abusive.
“TPF really started in Australia in
2003 then moved to the UK and then
Burford has no immediate plans to fund to the US at the end of 2007,” Seidel
says. “Public acceptance of litigation
UK cases - the US is more dynamic and funding is good in the UK. It’s amaz-
lucrative. But change is on its way ing in the US how little law firms
CDR (Commercial Dispute Resolution)
know about TPF; it’s really just arriv-
readily obtained for high-value cases investors. This relative maturity keeps Europe
with good prospects of success also One difference is that Burford has attractive for Burford Capital. “Keep
corresponds with the commercial no immediate plans to fund domestic in mind that the UK is a very impor-
focus of funders like Juridica. UK cases. For now, the US is simply a tant market where we will be operat-
Less appealing for them was his far more dynamic and lucrative mar- ing in the future,” Seidel says.
recommendation that third-party fun- ket, says chairman Selvyn Seidel. He seems certain that future is on
ders should potentially be liable for The UK and Europe are very fo- its way. The only question is when. CDR
The UK’s Bribery Bill received royal assent
in April. Writing as the Bill reached its
second reading, Nick Benwell of Simmons
Simmons explains its implications for
companies in the UK - and abroad.
hen the Bribery Bill be- Long-arm jurisdiction Systems and controls
comes law as expected A remarkable aspect of the new corpo- It is therefore clear that the key for any
in 2010, it will be the rate offence, however, is its long-arm organisation which has a UK presence
toughest anti-bribery jurisdiction. In a move the US would will be to ensure it has adequate sys-
law in the world. Unlike the US For- have been proud of, the offence applies tems and controls in place. This begs
eign Corrupt Practices Act 1977 not only to companies incorporated in the question, what systems and con-
(FCPA), it will apply both to public the UK, but to any organisations which trols will be considered as adequate?
and private sector corruption, and carry on any part of their business in Following a report by a joint parlia-
there will be no exception for facilita- the UK. mentary committee on the Bill, the
tion payments. To take a couple of examples - if a Government appears to have accepted
In both these respects, it will be no US bank or a Chinese industrial con- that guidance on this issue must be
different from existing UK laws. The glomerate operates a small branch in published before the Bill comes into
main change (and it is a fundamental London, the bank or conglomerate will force, in order to allow businesses time
one) will be the introduction of a new be criminally liable in the UK if an em- to ensure they have adequate systems
corporate offence. ployee, agent or subsidiary were to and controls in place.
The Bill is set to impose criminal lia- pay a bribe, whether in the public or It is probably too much to hope that
CDR (Commercial Dispute Resolution)
bility on organisations in the event that private sector, anywhere in the world. the guidance will provide a complete
employees, subsidiaries, agents or con- There is no requirement that the code - it is more likely that principles
sultants pay bribes in relation to the bribe be approved by or paid through will be published.
organisation’s business anywhere in the UK branch - the mere fact of hav- The systems that may reasonably be
the world. ing a UK branch will give the UK pros- expected of a multinational will clearly
There will only be one defence - if the ecutors and courts jurisdiction. And, as differ from those that may reasonably
organisation can prove it has adequate indicated above, the only statutory de- be expected of a small engineering
anti-corruption systems and controls in fence will be to prove the existence of company which trades overseas on
place. More on that point below. adequate systems and controls. only a few occasions each year.
The guidance is unlikely to be sur- penses defence; and plainly unrealistic) or permitting crim-
prising - there has developed a broad • as mentioned above, there will be no inal acts, on the basis they are unlikely
consensus on what constitutes interna- exception for facilitation payments. to be prosecuted.
tional best practice in this area. This is a difficult area. The Serious
Having said that, it is important Fraud Office has made it clear that Cross-party support
to ensure that any organisation with prosecutions are highly unlikely if While there are aspects of the Bill that
a UK presence will be compliant companies are trying to “do the right may change as it proceeds through the
with UK laws - not just FCPA com- thing” by reducing facilitation pay- Parliamentary process, there seems to
pliant, given the broader scope of ments. The making of such payments be cross-party support for the Bill. And
UK laws. is, however, a criminal offence under despite electoral uncertainty, the Bill
the Bribery Bill (as indeed, it is under looks set to come into force this year -
Other developments existing laws). probably in the autumn.
There are several other aspects of the This leaves organisations with the Through the Bribery Bill, the Gov-
Bill that it is important to note: choice of insisting on zero tolerance ernment is trying hard to restore the
(and facing the accusation within the UK’s reputation as a country which is
• it contains a specific offence of brib- business that such an approach is tough on corruption. The Bill will be
CDR (Commercial Dispute Resolution)
ing a foreign public official. It will be a the toughest anti-corruption law in the
defence to prove that the payment was world, with the ability to catch organi-
permitted by local written laws - but
not (as had been hoped by many) if the
The Act may soon sations which have any presence in the
payment was based on a reasonable be discussed in the If the UK Serious Fraud Office is
belief that it was permitted under local
same tones as the sufficiently funded to rise to the chal-
lenge, the UK’s Bribery Act may soon
• unlike under the FCPA, there will be
no marketing and promotional ex-
FCPA be discussed around the world in the
same tones as the FCPA. CDR
What happens when
the credit rot spreads
from companies to
Bousfield assesses the
chance of vulture fund
reece and several other No barriers for vulture funds arrangements, prefacing litigation.
Eurozone countries are Traded sovereign debt came into exis- The IMF has been criticised for re-
unlikely to default on tence in 1989, as part of a failed at- peatedly failing to get agreement on a
their debts any time soon. tempt by US treasury secretary sovereign debt restructuring mecha-
But if they did, could private holders Nicholas Brady to address national nism which would tie all creditors to a
of sovereign debt litigate to get their debt in South America. So-called common restructuring programme.
money back? Brady bonds allowed syndicated bank “I never believed that they would
In theory they could, says Ioannis debt to be exchanged for traded sover- come up with a single mechanism be-
Alexopoulos, head of litigation at DLA eign bonds. cause that would involve a buy-in of all
Piper in London. But given the circum- But during the last decade, in the the major economies and that is un-
stances they would more than likely context of various African debt relief likely for political reasons, especially in
find themselves unable to stand aside initiatives and NGO campaigns, the the case of the US,” says Alexopolous.
from a debt restructuring programme. G8, the World Bank and IMF, and the
In any case the days of vulture Paris Club have expressed concern
funds buying up discounted sovereign over vulture fund practices.
debt from creditor banks, typically of In 2007 the Paris Club resolved to
heavily indebted poor countries
(HIPCs), and often successfully relying
avoid the sale of its claims on HIPCs to
other creditors who do not intend to
CDR (Commercial Dispute Resolution)
on litigation or the threat of litigation provide debt relief under a Paris Club funds taking
to get back the original debt plus large
interest payments are in the past, he
But this concern hasn’t yet yielded
holding out of
“The political climate has now
any major international agreement on
debt restructuring which might hinder
changed. And courts are also rejecting banks from selling distressed debt to arrangements,
onerous default provisions imposed
by creditors in the secondary debt
Nor does anything stop funds tak-
market.” ing holding out of restructuring litigation
Interest or penalties?
But courts can deem onerous interest
“It’s safe to say
rates as penalties and therefore
English courts will
The pivotal UK case was an attempt continue to strike
in 2007 by fund Donegal Investments
to enforce a government bond debt
out onerous default
claim in the English courts against provisions”
Zambia for $55 million.
Donegal had purchased the dis- Ioannis
counted Zambian debt from Roma-
nia, a creditor of Zambia. The UK’s
High Court objected to how Donegal DLA Piper
had calculated interest and costs on
the debt, re-calculating it at $15.5 mil-
“Although the court upheld the in an attempt to freeze $284 million of gives funds first bite of the (litigation)
new agreement they stuck out the new $1 billion Argentinean distressed debt cherry over debt restructuring arrange-
default provisions which would have it holds. ments, has not been judicially ques-
been very generous to the new debt The UK’s Court of Appeal ruled on tioned.
owners by finding they had the nature a technical issue: the bond contract had And the trade in distressed sovereign
of penalties,” says Alexopoulos. “I not submitted Argentina to the juris- debt continues. “Not much of this will
think it’s safe to say English courts will diction of the English courts as re- stop vulture funds buying and banks
continue to strike out onerous default quired under the State Immunity Act. selling, if the price is right,” Alex-
provisions.” Yet despite a tough environment for opolous says.
The original vulture fund, Elliot As- distressed sovereign debt litigation, the If these vultures find their way into
sociates, has coincidentally lost out fundamentals remain in place. the courts, they may yet get their taste
earlier this year in the Court of Appeal The doctrine of pari passu, which of meat. CDR
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Stars of the
Asia’s ADR centres
sia has become the scene of an same period. Hong Kong. May Tai, a senior associ-
arbitration gold rush. Meanwhile Cietac (China Interna- ate of the firm’s arbitration team, has
tional Economic and Trade Commis- left London to Shanghai and Patrick
The shift in global economics and sion) managed 1,230 cases compared to Zheng, an arbitrator with experience at
mounting expenses are increasingly 979 in 2005. Cietac, has joined Herbert Smith’s Bei-
driving investors away from tradi- jing office as a disputes consultant.
tional arbitration centres such as New Law firms relocate resources Similarly, Allen Overy has relo-
York, London, Paris and Geneva. International law firms are relocating cated dispute resolution lawyers to
Now Singapore, Hong Kong, India key people and resources to respond to Singapore and Hong Kong.
and China are gaining reputation as the growing demand for commercial
places where an arbitration case can be arbitration services in the region. Following trade flows
successfully settled. White Case has recently launched “The growing interest of international
Between 2005 and 2008, the number an international arbitration practice in firms for East Asia is similar to what
CDR (Commercial Dispute Resolution)
of arbitrations seated at the Hong Singapore with partner Aloke Ray, happened for Japan in the 1980s,” says
Kong International Arbitration Centre who has left the firm’s London office Shourav Lahiri, a partner at Pinsent
more than doubled from 281 to 602. to head a four-lawyer team. Masons. The firm has been in Hong
The growth has been mirrored on a Other international firms have im- Kong for 25 years and has had a pres-
smaller scale in Singapore, whose main plemented similar strategies. ence in Singapore for more than a
arbitral institution, Siac, saw a sharp Herbert Smith has moved Justin decade.
increase from 45 to 71 cases in the D’Agostino, an arbitration partner, to “The UK market is shrinking and
The ADR community is looking east. Widespread
relocations of lawyers and a boom in cases have
made Hong Kong, Singapore and their neighbours
a battleground for arbitration supremacy. Chiara
Albanese compares their offerings.
the trade flows are likely to be directed Dominant seats other origin.
towards and between China and India It is these two jurisdictions - Hong “It is especially prominent for India-
and Southeast Asia,” says Lahiri. “Ar- Kong and Singapore - that have related disputes. Indian and Indonesian-
bitration lawyers want to follow that emerged as the strongest contenders in related matters have a natural gravity
trade because it will naturally lead to the region. towards Singapore because Hong Kong
an increase in the ADR and disputes “Hong Kong is perceived by most is not a viable choice for international
workload.” clients as a neutral venue with a stable investors to seat India-related arbitra-
He points to arbitration costs as a and reliable legal system,” says Her- tions due to enforcement issues,” says
catalyst for the shift. These range from bert Smith Hong Kong dispute resolu- Nicholas Peacock, a partner at Herbert
the fees charged by the institution, the tion partner Justin D’Agostino. Smith’s Singapore practice.
fee for the arbitrators and the cost of He adds: “It is a happy middle Frances van Eupen, an Allen
the lawyers. ground for disputes between a Chinese Overy senior associate who moved
“Most major arbitral institutions party and a non-Chinese party. Hong two years ago from London to Hong
CDR (Commercial Dispute Resolution)
charge similar fees, but a cost advan- Kong is acceptable to Chinese parties Kong, says the competition between
tage can be achieved for the legal ad- because it is ultimately part of China Hong Kong and Singapore is palpable.
vice and for maintaining the team and has the added convenience of “Seat decisions should be based
necessary to support the arbitration. being close to home and therefore less more on legal factors rather than
The associated cost is likely to be lower costly.” purely geography,” says Van Eupen.
in Singapore and Hong Kong [than in Singapore has a similar promise of “Two criteria for a good seat are that
established non-Asian forums].” impartiality, but for disputes with an- the local laws and courts should be
“Hong Kong is
because it is
ultimately part of
China and is close
pro-arbitration and the state should and has published a set of rules to Asian governments are also seeing
have ratified the New York Conven- make it cheaper and more effective. the economic benefits of arbitration
tion.” Korea and Japan see a relatively and are trying to promote their coun-
Both are true for Singapore and small number of international arbitra- tries’ credentials as attractive seats
Hong Kong. tions, but the will is there: Seoul for arbitration.
hosted a major regional conference last Most notable among these is Sin-
Other regional contenders year and is keen to promote itself as an gapore, whose government is no
But the two jurisdictions’ appeal for par- international venue. stranger to economic opportunism.
ties in mainland China and India is The Korean Commercial Arbitration The city state has recently introduced
slowly eroding, according to Lahiri - a Board has been actively promoting its a 50% tax break for law firms’ income
growing number of disputes are simply services. It is a possible area of growth from arbitration.
staying at home. in the future. Meanwhile Hong Kong has re-
“India and China are still not cho- formed its court rules and engaged
sen by foreign parties as a seat for an International bodies react in a programme to promote media-
arbitration where the parties are not They had better move quickly. tion.
otherwise connected with the country, Like the global law firms, international In January 2010 the jurisdiction in-
but if you have a project there and you arbitration institutions have responded troduced Practice Direction 31, follow-
are required to arbitrate locally, this is with an aggressive push into Asia. ing reforms to the civil justice system,
becoming less and less of a problem.” The ICC International Court of Arbi- implemented in April last year.
CDR (Commercial Dispute Resolution)
Last November, London’s Char- tration has invested in the region and it Parties are now obliged to consider
tered Institute of Arbitrators (CIArb) now has an office in Hong Kong and one whether mediation is an appropriate
set up a chapter in New Delhi, fol- in Singapore, launched last January. way to settle their dispute.
lowing the launch of a dedicated arbi- During the inauguration ceremony Those who fail to mediate without
tration centre by the Delhi High Jason Fry, the ICC court secretary gen- good reason, or fail to give proper con-
Court in November. eral, stressed the importance of the sideration to mediation early on in the
For the Chinese arbitration body, Asia-Pacific region, pointing to a 13% proceedings and on an ongoing basis,
Cietac, the future is online. The organi- increase in ICC arbitration numbers risk having adverse costs orders made
sation is investing in online arbitration, during 2009. against them. CDR
Asia’s ADR competitors
Singapore International Arbitration group of business people to focus on pervision of the Delhi High Court. In the
Centre: India’s go-to Asian dispute resolution. It is independ- first weeks of operation it has already re-
ent and financially self-sufficient. ceived a number of cases. As India at-
Characteristics - Siac was established in Trump card - Being simultaneously a tracts international investment the
1991 to respond to the growing demand common-law jurisdiction and since 1997 a caseload is likely to increase.
for dispute resolution by the international part of the People’s Republic of China,
community. It is a not-for-profit organisa- whose law is based on German civil law Cietac: vast market potential
tion overseen by a board of directors. Hong Kong is perceived as a group com-
Trump card - It has recently moved to promise for different parties. Characteristics - Formerly known as the
Maxwell Chambers, a specially developed The Uncitral Model Law is applied as Foreign Trade Arbitration Commission,
complex. the statutory regime for international Cietac was set up in 1956 under the China
It is considered a neutral and arbi- commercial arbitration. It is especially Council for the Promotion of International
tration-friendly location and local prominent for China-related disputes. Trade. It is headquartered in Beijing and
courts actively support ADR. Singa- has three sub-commissions in Shanghai,
pore’s International Arbitration Act is Delhi High Court Arbitration Centre: Shenzhen, and Tianjin, respectively.
based on the Uncitral Model Law. It is strong start Trump card - The level of international
especially prominent for India-related investment in mainland China is in-
disputes. Characteristics - Launched on 25 creasing. Last May the organisation
November 2009 to provide institutional published a set of rules for online arbi-
Hong Kong International Arbitration arbitration under the framework and pro- tration and local courts are becoming
Centre: independent, common-law cedures laid down by a committee set up more supportive of ADR. The potential
by the chief justice of the court. market is vast and the scope for growth
Characteristics - Established in 1985 by a Trump card - It will operate under the su- is extremely high.
Champions of dispute resolution
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