Understand Your Rights. Solve Your Legal Problems
Litigation finance is used by both individuals and companies who have been mistreated and want to take another party to court, but cannot afford the high legal fees often associated with litigation.
The litigation finance industry is currently valued at $5 billion dollars in the US, and is expected to reach $22 billion by 2027.
Currently used for shareholder disputes, class actions and claims against a director, a famous case hit the press in recent years when Hulk Hogan used litigation funding of $10 million to fight a misrepresentation claim, and eventually won $31 million in damages.
Dan Kramer of Kramer Sullivan explains: “Litigation finance is certainly on the rise. Historically, a lot of people gave up on claims because they were too expensive or inaccessible to the general public. Now, you can speak to specialist funders who will take a view and only operate on a no-win, no fee basis.”
“The biggest demand we have is for people with shareholder and director disputes, mostly when they are denied a huge sum or pay out. But the more evidence you have the better, whether it is documentation, contracts, recordings and emails. You don’t have to go fishing for information or try planting things, but if you have a legitimate case, these bits will help.”
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“Furthermore, you should adequately look at the costs you need for litigation, including how much your solicitor would charge, court fees, time off work and other expenses. This allows you to determine how much you need to borrow and it will help the lender too.”
The amount you can borrow through litigation funding is almost unlimited and having claims worth up to £1 billion are not uncommon. A prospective lender will look at the value of your potential claim, the risks and chances of being victorious, usually taking a success fee of up to 5% if you are paid out.
If you have obtained funding but eventually lose your claim, this is something that the financier would have budgeted for. You can also purchase supplementary litigation insurance to provide some form of financial backup. This will pay for any legal or solicitor fees on a damaged-based fee structure. It is common to include indemnity insurance in any litigation funding to cover any negligence by your legal team.
Many businesses and households in the UK use second legal charges as a way to secure extra funding for household debts, home improvements or business expansion.
The idea is that it is the ‘second charge’ against your property, so your first charge would typically be your mortgage, since this is the first thing that gets charged each month – with the second charge being the second payment taken out.
You can usually borrow a little less with your second legal charge than your first main charge or first charge mortgage – since the lender is now second in line to receive funds. You can also have a third charge if you require additional funding on top, although this is less common.
To be eligible for second charge, you typically need to demonstrate a good track record at paying off your first charge mortgage and being up-to-date with mortgage repayments will certainly help your eligible. Both employed and self-employed individuals can apply and your property will usually be subject to valuation to ensure that it is still growing in value and does not have any detrimental issues such as subsidence.
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Products ranging from £1,000 up to £5 million are available from your local bank, initial mortgage provider or a specialist lender. You can borrow up to 70% LTV through providers such as MT Finance, Precise Mortgages or Masthaven, and this is slightly less than your first charge would may be up to 80% LTV.
Second legal charge terms range from 1 to 24 months but may last several years depending on the provider or bank you apply with. Repayments are typically made in equal monthly instalments or you can request different payment terms such as interest only or rolled up.
A second legal charge is secured against your property and failing to keep up with repayments on time will put your property at risk. Although the first charge provider will be able to access more equity, a second charge lender will be able to claim whatever equity that is owed to them.
Some lenders may be willing to take a view on adverse credit histories. Since the loan is secured, this will help your application if the property is valuable and continues to grow in value. Being up-to-date with existing mortgage repayments will be key to support your application.
We speak to Chris Collier, a Senior Digital Forensics Analyst, who reveals more about the process of digital forensics and how his findings can benefit legal cases.
How has digital forensics developed over the years and what importance does it play in legal cases now, in comparison to a decade ago, when the digital world was a lot different?
From a mobile device perspective, the last ten years have brought massive changes in the world of digital forensics. Phones have drastically changed over this time, especially with the introduction and growth of smartphones (the original iPhone was released in 2007). At the beginning of this period, phones were generally built for storing limited contact data (primarily a short name and a number), making calls and sending/receiving SMS – with limited storage volumes. Current smartphones are now capable of storing vast amounts of data, from contacts, calls and messages (which covers standard SMS to application messages, multimedia messages, emails), to media files such as music, images and documents. With handsets capable of 512GB storage data and an additional 1024GB expansion with memory cards - a potential 1.5TB of storage. A vast array of free and paid-for applications now allow users to communicate away from standard networks, send encrypted data and automatically destruct messages/images. Apps also interact with on-device cameras/video recorders and GPS locators to provide organisers, navigation tools, file sharing tools, IoT (Internet of Things) controllers, document processing, health application data etc.
Additional security features on the handsets such as PIN, Passwords and data encryption (handset and application-specific) greatly affect the ability to recover data from handsets.
The volume and type of data have increased the importance of information recovered from digital devices from ancillary data to key evidence. Examples of this can be: GPS data recovered from handsets putting suspects at the scene of a crime; communication data discussing a crime to be committed, or a crime after it has been performed; documents relating to fraud; illegal image files stored on the handset or additional storage; health application data showing the activity of a user when the crime was being committed, including heartrate/physical exertion.
Data is now split across storage on physical devices and data stored on the cloud. With applications caching data on devices and full data stored on the application creators’ servers, such as Facebook Messenger, Dropbox etc., new techniques have had to be developed to recover data directly from separate servers to combine with the data recovered directly from the handset.
Additional security features on the handsets such as PIN, Passwords and data encryption (handset and application-specific) greatly affect the ability to recover data from handsets.
Forensic methods have also changed over this period such as: connection techniques such as infra-red and multi-pin cables; ever-faster USBs, Bluetooth extractions and the development of advanced techniques - such as, Chip Removal (where the memory chip is removed from the device and data is read directly from it), ISP (In-System Programming, where connections are soldered directly to the board, allowing communication direct to the chip); password bypass tools and decryption techniques; and, changes in the way data is stored on the handset with an increasing reliance on SQLite database storage for applications. The volume and complexity of recovered data have also changed which has led to more time being spent on examination and analysis.
Once a device has been pre-imaged, we move onto the Extraction/Analysis stage.
What are the steps in digital forensics?
The first key step is seizure of devices. With mobile phones it is important to stop the connection to the network – this can be done as simply as turning the handset off – because, with an active network connection, it is possible to remotely wipe data on a handset. This is generally performed by our clients, however, MD5 can perform onsite collections to securely recover exhibits. Once exhibits have been seized, they are brought to the MD5 lab for analysis.
Handsets will initially be pre-imaged at MD5; this allows us to perform an initial assessment of the device. This is performed in the MD5 shielding unit, a secure room that blocks all network connections. Here, we check devices for PIN/Passwords, record the handset’s date and time against the atomic clock, check for further handset information, such as specific model variant and operating system, and further disable the option to connect to a network.
Once a device has been pre-imaged, we move onto the Extraction/Analysis stage. Initial attempts will be made to extract a physical image of the device using non-destructive forensic methods. If this fails, advanced techniques are then reviewed and further assessments of the device are made, whereby we will determine what advanced techniques are viable and consult the client on which route they would like us to take.
Once all data has been recovered, the analyst will review the data and identify what is relevant to the given case remit. This can be searching for given user contacts, looking for specific files, reviewing a timeline of data for events or further complex work. Once this has been completed, the analyst will prepare a report on their findings.
Once completed, the report and exhibits are passed onto the client, with the analyst on hand if further explanations are required.
The volume of data can vary between applications or handset make, model and OS (Operating System).
How do you piece together the digital ‘chain of events’?
Data is reviewed together with a remit from the client. More information provided in the remit allows the analyst a better understanding of the case and requirements. The analyst will then manually review the data against the client remit looking for information relating to the case.
This can be looking for specific data, i.e., contacts with a specific person or looking for specific files. It could be a more complex review of data: reviewing a timeline of data to build a picture of events and interpret this into something more accessible, attempting to determine where data has come from or how it has appeared on the device.
How much can you actually recover when undergoing a legal investigation?
The volume of data can vary between applications or handset make, model and OS (Operating System). Effectively, all live data is recoverable, either through forensic tools, advanced methods or, as a last resort, manual data capture. Deleted data can vary on an application, OS, make and model basis – this can also be further affected by the presence and type of handset encryption.
Generic web browsing is normally completed in applications such as “Chrome”, “Safari”, “Samsung Internet”. From these, we are able to recover varying sets of data, depending on the application or handset make/model/OS.
Application data can vary depending on what the application chooses to cache (store in the application's memory). Applications such as Facebook Messenger do not store full message communications on the handset – full messages are stored on the Facebook servers with a selection of messages cached to the handset memory. The application will temporarily store a copy, to speed up retrieval the next time the user wants to access the same data from the internet. This is largely done to save space on the handset, improve performance, and allow the data to be accessed by a wide range of devices.
What evidence can be obtained from web browsing and social media and how can this change the course of a legal case?
Applications generally separate web browsing and social media data on mobile devices, with dedicated applications for each social network.
Generic web browsing is normally completed in applications such as “Chrome”, “Safari”, “Samsung Internet”. From these, we are able to recover varying sets of data, depending on the application or handset make/model/OS. This can include Web history and bookmarks, Web searches and autofill data, Cookie data, password and account information. It is also possible to recover cached images and web pages from some devices. This can be very relevant in many cases. The data may relate to: accessing/downloading illegal files; searches relating to locations/places prior to the suspect being there; often criminals search for answers on the internet in relation to commenting/covering up crimes which can be important when building a case.
Along with the application data, the user accounts are recovered from the handsets. This allows for easy tracking of evidence.
Social media data can be recovered directly from applications. This can include cached data (such as wall posts and direct messages), user accounts, user activity (in some cases this can include data volumes transmitted to the network), messages data including multimedia, location data. All of which can be used when building a case and viewing a timeline of events, or may even contain the incriminating data vital to a case.
How easy is it to trace evidence back to the accused? What challenges may arise for you?
PIN- and password-locked devices can ease the process of attributing handset data to an owner. Often a locked device will only be accessible to the owner, without access to forensic tools. This gives us a level of certainty with attributing data to a device owner.
Most applications are activated with a user account. Along with the application data, the user accounts are recovered from the handsets. This allows for easy tracking of evidence. Often accounts are set up with a personal email, phone number, user name and contact image.
This can be a challenge if the account has been set up with data to obfuscate using generic names or data not related to the owner, however, the presence of this account on a device allows us to tie the data back to the owner.
Chris Collier
www.md5.uk.com/
My name is Chris COLLIER and I am a Senior Digital Forensics Analyst and the Head of Mobile Device Forensics at MD5 Limited. I have been a digital forensic practitioner since 2007. I first started my career at the Digital Forensic Unit in Humberside police. There, my duties included the collection and investigative analysis of digital devices (including mobile phones, tablets and satellite navigational aids) and the presentation of the data in evidential form suitable for a court of law. During this time, I examined in excess of 6,000 Digital devices. In this role, I gave evidence in courts within the English Legal System and the United States of America.
In March 2017, I moved to MD5 Limited. Here my role involves forensically acquiring data from digital devices (including onsite examinations), analysing and investigating data according to client specifications and clearly and accurately producing written reports where I have to verbally ‘translate’ technical findings to clients and stakeholders. I am also called upon to clearly and accurately present digital evidence in court, including being able to explain my actions taken and support conclusions under cross-examination.
I am also responsible for running the mobile phone forensics team which involves: mentoring, monitoring and development of staff members; leading Research and Development on projects into new working practices to ensure that MD5 Ltd is offering the most appropriate and effective service to meet client requirements; developing Standard Operating Procedures and proactively acquiring knowledge to ensure MD5 is using the most appropriate hardware and software to meet client requirements; overall responsibility for quality assurance checks; providing advice to internal and external stakeholders regarding the feasibility and reliability of forensic analysis in relation to the digital evidence sought.
MD5 LTD is a UK leading provider of Digital Forensic & eDisclosure services to large multi-national corporate businesses, Law Enforcement & Government Agencies and high profile legal firms. Founded in 2003 by a former Head of the Digital Forensics Unit at the National Crime Squad. MD5’s forensic laboratory continues to investigate the business world’s ever-changing digital environment, allowing our experts to discover reliable evidence from the investigation of Computers, Mobile Phones, other Digital Devices and Digital Storage Media, Cloud Data and Internet activity.
The work taken on by MD5 ranges from standard forensic examination and analysis, to bespoke advanced data recovery techniques, or large-scale eDisclosure projects, where a high level of knowledge may be required or where an expert opinion may be required. MD5 have the ability to recover data from a wide range of primary storage devices, interpret complex data and then present the evidence in a clear format to establish legal facts for courts. As a result, this allows us to provide expert Digital Forensic Services tailored to the needs of our clientele.
Digital forensic investigation often identifies a large volume of suspect documents and emails. MD5’s eForensics approach combines our expertise in digital forensics and data analytics with electronic review tools, so our commercial clients can recover evidence from a mountain of data in significantly shorter timescales. MD5’s eDisclosure service provides our clients with proportionate, defensible outcomes for every day as well as complex commercial cases. Our experienced eDisclosure team helps our clients to meet the challenge of the increasing volumes of data stored in computers, mobile phones, and the Cloud.
The terms of the contract will, of course, allocate the risk and cost of the Coronavirus. Although I have studied and have a keen interest in the law, I know where my expertise lies and, therefore, I stick to my specialist subject of delay rather than liability.
To some degree, I think that the outfall from the Coronavirus crisis will have a detrimental effect on all of the parties involved in the majority of projects. On developments where there is a spirit of collaboration and ‘being in it together’, I would expect the pain to be shared. A significant number of projects, however, will no doubt rely on the Contract to allocate the risk, and in such cases, either party may end up paying a hefty price for something that nobody was anticipating just six months ago.
How has Covid-19 impacted your industry?
Construction has, of course, suffered enormously along with the rest of the economy. How much of the pain is long lasting, is the big question. I am sure that life will not quite be the same again, whether it be more people working from home or greater reticence to use public transport. Depending on the scale of the change in the way we go about our lives will determine the effects on the office building and infrastructure sectors, for example.
Do you foresee any legal cases arising due to delays in this area? How does this compare to common factors behind delays in construction?
Arguments will develop regarding the extent of the delay actually caused by Covid-19 and it is inevitable that a large number of disputes will end up in adjudication, arbitration and the Courts.
It is possible that the effects of the global pandemic were starting to impact projects before the lockdown was imposed and will continue to impact projects long after sites fully re-open.
For a Delay Expert such as myself, the delays resulting from the Covid-19 crisis are no different to analyse than any other cause of delay. It is imperative to establish the progress position of the project as close to the start of the lockdown as possible. Doing this will enable the identification of the delay incurred before sites were closed. Of course, the simplest delay to calculate will be while the site is totally shut. More involved analysis, however, will be required when certain trades return and in reduced numbers, causing production rates to fall below those that were expected at the time that the work was tendered. The identification of the critical path (the longest sequence of activities) will be paramount in determining whether actual progress is being achieved or the work being carried out is not critical in progressing towards completion.
It is possible that the effects of the global pandemic were starting to impact projects before the lockdown was imposed and will continue to impact projects long after sites fully re-open. As countries around the world imposed restrictions at different times, it is possible that the supply of imported materials and components were being delayed before restrictions were imposed in the country where the project is being held. Similarly, with factories and quarries having been closed globally, there will be material supply issues as developments re-open.
Should contractors take all necessary actions required to remedy any delay during the pandemic? What action can they take?
Many contracts oblige the contractor to use “best endeavours” to mitigate any delay. This is obviously very difficult when faced with a threat to life. It may be that contractors can usefully review the programme for the remainder of the work and re-programme to suit the evolving circumstances. It may be that alternative methods of construction can be considered that would be more suitable. Certain offsite tasks, such as design, can be carried out before it was originally planned to relieve some of the pressure later in the programme. Whatever contractors do during this period should be recorded in the event of a future dispute.
At the forefront of my thoughts whenever I am appointed, is my duty to remain independent.
From an Expert’s view, what strategies could limit delays from the outbreak?
I would suggest that the programme is at the forefront when developing strategies to limit the delays. Hopefully, there was a detailed plan for carrying out the work before the project was stopped. It is essential that the Project Programme will need to be reviewed and re-drawn to take account of the circumstances we are in. I would expect that the programme would require continuous development for some time, as more information about likely labour levels and material supplies becomes available.
What steps do you take when writing a report and devising an opinion for the Court?
At the forefront of my thoughts whenever I am appointed, is my duty to remain independent. As most Expert appointments are by one of the parties, it is not always as straightforward as it may seem. Certainly, in the initial stages, my knowledge and information are derived from the party which has appointed me. Reviewing the information presented with some healthy scepticism is definitely a skill to maintain. The courts are not friendly places for experts that fall short of the required standards; I have the principles laid down in the Ikarian Reefer case always to hand to remind me of my duties and responsibilities and all Chronos reports are peer-reviewed prior to issue.
Litigation seems to have become a potential career graveyard for experts in recent years with judicial criticism likely to severely dent an expert’s fee-earning capability.
How long does it take to devise a report? What information do you need?
It depends. I am appointed on small disputes, very large disputes, and everything in between. My report needs to be proportionate to the size of the dispute but also sufficiently thorough so that it stands up to scrutiny. If all the relevant information is available at the outset, which is a rare occurrence, a straightforward analysis and report can be produced in up to two weeks. At the other end of the scale, it may take months to compile a report for a multimillion-pound dispute with complicated circumstances.
How has the expert witness role evolved over the years? What changes have happened during this time?
Litigation seems to have become a potential career graveyard for experts in recent years with judicial criticism likely to severely dent an expert’s fee-earning capability. In part, this may be because reports that were prepared for adjudication, are later being presented in court and the expert either not taking or being given the opportunity to ‘upgrade’ a report to stand up to greater scrutiny.
I have also seen a greater number of experts in my field with backgrounds from areas which are not primarily associated with time management. As a planner, who has spent many years on sites compiling and maintaining programmes, analysing those same programmes to determine the extent and likely causes of delay is, for me, a natural progression.
Tim Marlow
T: +44 (0)203 9686096
M: +44 (0)7932 181032
Chronos Consult
81 Chancery Lane,
London, WC2A1DD
About Tim:
I am a Chartered Builder and a Delay Expert. I am a co-owner of Chronos Consult, which is a specialist delay and planning consultancy covering all sectors of the construction and energy industries.
I am proud of the fact that I am a career planner having started with John Laing Construction on its graduate training programme over 30 years ago. Having been lucky enough to work for some great companies such as Lend Lease and BAM, I was involved in some fantastic projects including the Leadenhall Tower (aka The Cheesegrater) and the Bloomberg Headquarters (opposite Cannon Street) in London.
Always having held an interest in law, I set out to join the world of dispute resolution and forensic delay analysis by undertaking an MSc in Construction Law & Dispute Resolution at Kings College, London. Since then, I have become a fellow of the Chartered Institute of Arbitrators and a member of the Academy of Experts. I am an enthusiastic proponent of dispute boards and am accordingly a member of both the Dispute Resolution Board Foundation and the Dispute Board Federation.
As a delay expert, I have been appointed to give my opinion on a wide variety of projects, from private residences to hotels and power stations to airports. My experience covers most sectors of the construction and energy sectors in the UK and Internationally. Although I mainly act as a party-appointed delay expert, my duty is to provide my independent opinion to the court or tribunal. I have also given oral evidence in international arbitration proceedings.
Matt Lindsay and I established Chronos Consult as a boutique consultancy based in Chancery Lane in London which specialises in delay analysis and project planning and has expertise in all sectors of the construction and energy industries. We had both built up good networks of clients and felt that there would be a good synergy if we merged. Chronos Consult has its offices in Chancery Lane in London, ideally placed when called to meetings at the surrounding law firms. We are immensely proud of the fact that we have so many repeat clients and when we receive work through recommendation.
Our main market is delay analysis, however, as we are all planners, we also undertake prospective planning commissions. Between us, we have experience of all the major industry sectors, and although the majority of our appointments are in the UK, we also work on projects worldwide. Chronos now has a group of trusted professionals providing a wealth of experience to our broad range of clients.
Carmen Boucher, a barrister and advocate in collaborative law, is answering some questions divorced couples may have. From keeping up with maintenance payments when the economy is weak, to whether or not custody rules have changed during isolation periods, Carmen succinctly explains how the pandemic has impacted her clients.
What impact is the pandemic having on separated and divorced couples?
We are seeing very diverse reactions – for some former spouses, the situation and the lack of control have further ruptured already tenuous relationships. What is really encouraging, however, is that the vast majority of families have banded together and are facing this new reality by working as a family unit, rather than two separate parts.
Custody rules have not changed during this pandemic.
How has the current economy affected divorcees with maintenance and capital obligations? What would you advise them to do?
For families here in Alberta, this weakened economy has been extremely difficult, particularly for those who have financial obligations to former partners or children. If a payor is unable to make their payments, the first step that I would suggest is to contact the other party and see if they can come to some agreement to defer some, or all, of their payment. This pandemic should not be viewed as a free pass to avoid obligations, but both sides must face the reality of the situation and be reasonable if the payor is suddenly facing financial difficulties that are out of their control.
The courts were very quick to implement a procedure for hearing emergency or urgent applications, including those where there are parenting issues.
Have custody rules been impacted? What should divorced couples be advised to do in this situation?
Custody rules have not changed during this pandemic. There continues to be an expectation, as always, that people will follow court orders which are already in place, including parenting orders. Children are experiencing so many sudden changes – they are cut off from their friends, stuck at home 24/7 with siblings and parents, and unable to participate in their regular activities. Cutting them off from one parent, on top of everything else, is bound to have a very negative effect on their mental health. If there is any uneasiness or concern between the two households, I encourage the parents to communicate those concerns in a non-accusatory way. When both parents are focussed on the best interests of the children, and each is making a concerted, genuine effort to really listen to the other person’s perspective, they are much more likely to find a solution that works for them.
Anyone who believes they have an urgent situation involving children should contact a lawyer to discuss their available options.
Has the pandemic impacted urgent applications involving children, including getting emergency injunctions? How do you think this situation should be handled?
The courts were very quick to implement a procedure for hearing emergency or urgent applications, including those where there are parenting issues. For certain matters, people have actually been able to get court time much more quickly than they were pre-pandemic, while others cannot get into court at all.
Any alternative dispute resolution process could assist the parties to find a solution, but it is crucial that they first get legal advice to understand what their rights and obligations are. Anyone who believes they have an urgent situation involving children should contact a lawyer to discuss their available options.
. The process allows people, with the guidance of lawyers specifically trained in the Collaborative process, to focus on the best interests of children, if any, and what is important to each one of them as individuals.
Has it been easier to navigate current divorce proceedings with mediation during the pandemic, rather than litigation? Are you hoping to see a bigger shift in this area, post-pandemic?
Mediation can be a great process for helping couples navigate through divorce and separation at any time, but especially right now. With the courts focussing on urgent issues, mediation and arbitration are some of the best options available for people who want to keep moving forward and resolve their divorce and separation matters.
Our firm has had tremendous success with the Collaborative Family Law process, both before the pandemic and continuing on during the court closures. The process allows people, with the guidance of lawyers specifically trained in the Collaborative process, to focus on the best interests of children, if any, and what is important to each one of them as individuals. They decide how their family will end one chapter of their lives and move on to the next. The Collaborative process provides much-needed flexibility to separating and divorcing couples – it really allows them to keep their power and their autonomy. They know their family best, so why would they want someone who hears a 20-minute summary of their life together to make decisions that will significantly affect their future? That is what often happens in litigation.
I think that, for me, the Collaborative Family Law process is the preeminent choice for navigating through separation and divorce, by allowing the participants to make their own choices in a respectful and supportive environment.
One aspect of the Collaborative process, which is very important, particularly for business owners, is that the process is private. That means that all the very personal information which is discussed during separation, including finances, stays between the parties and their lawyers. Those details are never presented in an open court with the public watching.
I think that, for me, the Collaborative Family Law process is the preeminent choice for navigating through separation and divorce, by allowing the participants to make their own choices in a respectful and supportive environment. This is even more important when children are involved, as there can be many years of co-parenting ahead for these families. A positive relationship between the parents allows the children to really flourish and benefit from what both parents have to offer.
Barrister & Solicitor/Avocate
11210 – 142 Street NW
Edmonton, AB T5M 1T9
P: 780-488-4460 F: 780-488-4783
Practising in Family Law, Wills and Estates, and Adult Guardianship matters, Carmen is passionate about helping clients navigate their legal matters via negotiation and settlement rather than through adversarial processes. However, she also understands that a collaborative approach may not be available in all situations and she will strongly advocate for her client in court when it is appropriate.
She has been a Registered Collaborative Family Lawyer since 2017 and participated in collaborative training for estate lawyers in 2018. Carmen is focused on assisting clients to become more involved in the outcome of their divorce and estate matters in order to better meet their needs.
Carmen is also a trained mediator and is always pleased to help clients who prefer to work together to reach the best possible solution for their family in that manner. Carmen is fully bilingual and is pleased to assist her clients in either of the official languages of Canada.
We speak with Advocate Ra’ed Qawasmeh, the contract and legal advice manager at Truth Law Firm, where he briefly outlines the contract strategies you should adopt when constructing a commercial contract and the important clauses to include, as well as discussing the law firm at which he practises, sharing how having a ‘dream team’ helps their firm and its clients.
What are good contract strategies to adopt when devising a commercial contract?
In developing and adopting contract strategies with regards to commercial contracts, the following steps need to be taken:
(a) Start by collecting information about the scope of the contract and the key issues that need to be addressed in order to implement the client’s objectives throughout the contract.
(b) Provide a clear definition of the intent of the parties to the contract and/or scope of work, parties responsibilities, and
(c) Address key considerations such as indemnity, liability and dispute resolution clauses. In general, we strive to keep in mind the big picture while focussing on the small details and serving the client at the same time.
What are the top important commercial contract clauses clients ought to include?
All clauses in a commercial contract shall be considered important when defining a relationship between two or more parties, however, we strongly believe that certain clauses complete the commercial contract. They are the following:
Is there a contract checklist you advise clients to follow?
There is no checklist for the client to follow, as each contract is deemed to be different from others, depending on the client’s purpose of the contract; however, we advise clients to have the contract in a written form rather than verbal, in order to expressly provide the intention of the parties to ensure its implementation and the parties’ adherence to the clauses of the contract. In addition to containing the basic clauses mentioned previously, you must ensure that the subject matter of the contract is lawful and abides with the applicable laws.
A brief insight into Truth Law Firm
Truth Law firm was established by lawyer Mr Fendi Faouri in October 2003. He founded a firm, that started with practising and offering Civil Legal Services to civil individuals. By 2007, the company expanded and had seven employees. The firm kept growing through a high demand of different business approaches and methods. Today, Mr Fendi, an expert in the legal field with various experience in Public, Private and Corporate Law, has been able to extend the law firm to include a well-trained and trusted team of 25 employees with various legal backgrounds which includes Litigation, Arbitration, Construction, Corporate and Commercial matters, Intellectual Property and Trademark, Mergers and Acquisitions, Joint Ventures, and Banking and Finance.
Among the Firm's core values is the commitment to excellence, teamwork, innovation and professionalism. We are committed to respecting the privacy and confidentiality sought by our clients to legitimately protect their interests. Dedication to our clients is our priority, we always respect the trust they place in us providing proactive recommendations to help them achieve greater efficiency and to enhance and protect their interests.
What are the mottos and criteria your firm abides by?
We would like to first point out that the firm’s general motto is that the firm’s success depends on its employees. We cannot grow or achieve our goals without the affection and efforts of all employees. In essence: great lawyers make a great law firm. Moreover, we stand strictly by the policy of communication between the firm’s employees as well as communication with the firm’s clients. The criterion is to have an efficient team that shares the same vision, the general concern about the quality of the firm’s services, clearly defined time frames for achieving goals, excellent communication within the team and clients and challenging goals that each set for oneself - this includes the involvement of the maximum number of people in addressing various matters in order to reach common grounds based on the efforts of the whole team.
What are the further aspirations of your "dream team"?
The legal business in Jordan can be competitive, and if the law firm wishes to continue its success it shall adapt to the latest trends in the field. Accordingly, Truth Law Firm currently serves many high end, multinational corporations and international enterprises, and we continuously attempt to develop and expand. Therefore, we cooperate with international law firms in various countries such as Lebanon, UAE, USA and UK in order to enable us to provide additional external services in the Middle East, Gulf countries and internationally; we also try to learn from their best practices. But the most important features of our “dream team” is to be highly efficient in order to succeed.
Ra’ed Qawasmeh
Truth Law Firm L.L.C
Mobile: +962796883647
Tel: +96265815001
Fax: +96265810064
Amman, Jordan
Marat discusses how a strategy is important when dealing with disputes which fall across many jurisdictions, and the importance of a good team when handling challenging situations abroad.
Do you often have cases whereby Russian individuals or entities invest in companies based abroad?
Generally, yes. Of course, one cannot fail to notice that the measures introduced by the countries with the aim of combating the spread of COVID-19 have influenced investing activity of legal entities and individuals throughout the world.
However, during the normal course of business, the majority of our clients are Russian High-Net-Worth Individuals or companies acquiring some asset(s) abroad. We also have a number of foreign clients who would like to invest in business in Russia or deal with Russian companies.
Mostly, the jurisdictions that are typically involved for Russian-related projects on structuring complex transactions and corporate holdings, are: Cyprus, BVI and the UK
Moreover, some of them are involved in cross-border corporate or commercial disputes in Russia and abroad, which requires expertise in and understanding multiple legal and business orders.
What jurisdictions are usually involved here?
Mostly, the jurisdictions that are typically involved for Russian-related projects on structuring complex transactions and corporate holdings, are: Cyprus, BVI and the UK, although, we have noted a growing tendency of Russian and foreign entrepreneurs looking for new countries, regions and spheres of investment.
For example, one of the most complex and challenging cases we have been involved in recently is connected with participation in a gold mining project mainly located in Ethiopia, with several other jurisdictions involved.
Another point which should be taken into account is what jurisdiction we would like to enforce the award in the future.
What is the most complex aspect of cross-border disputes and litigation?
When we are faced with cross-border disputes, we need to think about: the appropriate forum for a resolution of the dispute; the applicable substantive and procedural law; the potential for amicable settlement of the dispute, and alternative dispute resolution methods like arbitration. Unfortunately, in some Russian-related cases, the parties can simply ignore adding a dispute resolution clause into the agreement.
Another point which should be taken into account is what jurisdiction we would like to enforce the award in the future. In one of our recent cases we had a variety of countries to initiate proceedings in, however, we needed to conduct extensive research in order to track down the location of the defendants' property which could be potentially foreclosed.
When we plan the strategy for dispute resolution, we also consider the remedies available in each particular jurisdiction, "flexibility" of legal norms, potential costs and terms for initiating such proceedings.
Such planning and research is a condition for developing a workable structure for winning a dispute – consider which step has to be conducted at a particular time and in each respective jurisdiction. The key reason for having a workable structure is to make the entire process effective; you ought to make it ready to be promptly amended if some conditions of the dispute change over time.
What other issues should be taken into account when considering a strategy for disputes?
When we plan the strategy for dispute resolution, we also consider the remedies available in each particular jurisdiction, "flexibility" of legal norms, potential costs and terms for initiating such proceedings.
By way of illustration, in Cyprus we managed to obtain disclosure measures regarding sufficient evidence and documents which could be further used in the proceedings initiated in Israel and Ethiopia as well as for criminal proceeding in Bulgaria, whereas Israeli and Bulgarian law did not provide such an opportunity. Also, participating in Cyprian-based litigation allowed us to prepare a very detailed and comprehensive affidavit which described the dispute that was further used in other proceedings. However, our application for the initiation of criminal proceedings in Bulgaria was very short and brief.
On the other hand, dealing with Ethiopian law - which was applicable for corporate relations in the gold-mining companies - turned out be rather challenging, due to the fact that major codifications and regulations are outdated and do not respond to business needs in 2020.
What is important for a good attorney-client relationship in cross-border disputes?
In addition to the strategy, the most important issue is creating a good team of like-minded foreign colleagues who assist us with the dispute and have a single decision-making person or unit on the client’s side that can promptly react to our requests. We develop a strategy, orchestrate actions taken in different jurisdictions by our foreign colleagues and act as an interlink between them and a decision-making person or unit on the client’s side aforementioned.
When we need legal assistance in some "new" jurisdictions we apply to famous legal rankings like Chambers, The Legal 500 and IFLR1000 and search for individuals who specialise in the required sphere of law or legal problem.
How do you form a team for complex multijurisdictional cases?
Firstly, associate of TA Legal Consulting, Alisa Kadzhoyan, assists me in complex multijurisdictional disputes. Alisa joined the firm in 2017 and she specializes in both corporate, investment and dispute resolution matters.
Moreover, due to our experience in cross-border litigation, we have developed a network of legal professionals we trust and we engage with for local court proceedings. However, we are also open to cooperation and establishing contacts with new law firms and practitioners.
When we need legal assistance in some "new" jurisdictions we apply to famous legal rankings like Chambers, The Legal 500 and IFLR1000 and search for individuals who specialise in the required sphere of law or legal problem.
When we participate in complex multijurisdictional dispute, we suppose that coherence of lawyers' actions, control over the implementation of developed step-plan are of paramount importance.
How should the process of collecting evidence be organised?
Collecting evidence is of paramount importance, both in national and cross-border disputes. In litigation which involves multiple jurisdictions, collecting evidence which would support the position of the client is more difficult and time-consuming and requires the assistance of more individuals and services. For example, we once faced with the necessity to obtain a market research report from specialists in China and written evidence from a legal entity incorporated in Zambia. The process shall be carefully monitored and organised in order to procure timely presentation of all-encompassing documents and materials.
Moreover, in cross-border disputes, when access to state registers and data is more difficult compared to litigation within the borders of our country, we resort to assistance from investigators. In our recent cases, investigators successfully collected data regarding assets and property, managed to find contact persons in whatever companies we needed and even revealed forgery of the documents presented to the client within the conflict, which was further proved and documented by technology experts and used as an additional piece of evidence.
From your experience, what is a good way to ensure effective communication and outcome in cross-border disputes?
When we participate in complex multijurisdictional dispute, we suppose that coherence of lawyers' actions, control over the implementation of developed step-plan are of paramount importance. Therefore, we keep in touch with all engaged professionals and the client 24/7 (via meetings and audio/videoconferences).
Firstly, online arbitration proceedings and hearings are being developed by most prominent arbitration institutions and court systems.
Do you resort to PR or other media coverage of the case?
Yes, sometimes PR coverage of the dispute can be beneficial for the client and the outcome of the case. From our experience, media coverage may help if the client is facing fraudulent behaviour. The threat of destroying fraudster's business reputation and effective PR may motivate cooperation and make efforts for amicable settlement of the conflict.
Is IT and online technology of assistance when participating in cross-border disputes?
Yes, modern technologies assist in complex disputes. Firstly, online arbitration proceedings and hearings are being developed by most prominent arbitration institutions and court systems. Moreover, by virtue of online services, we managed to participate in and represent the client at the general meeting of shareholders during the corporate conflict which was held abroad. The services allowed us to organise not only proper communication at the meeting, but also high-quality fixation of the process as another piece of evidence for potential court proceedings.
Marat Agabalyan
Managing Partner I Advocate
TA Legal Consulting
47/2 Leningradsky av., Suite 414
Moscow 125167, Russia
T: +7 (985) 220 8594
TA Legal Consulting is a Russian boutique law firm which was formed in 2015 by me and my partner Ivan Tertychny. We both (from the moment the firm was established) had more than 10 years of experience in major international law firms. The key idea was, and still is to provide extremely high-quality legal services for a great value of money. We agreed that the firm should specialise in structuring and implementation of investment projects in Russia and abroad, assisting clients in corporate and finance transactions and handling complex local and cross-border disputes. This is what we were trained in and did for many years at international law firms.
With couples spending more time than ever in the home together, those isolating with a partner during an unstable marriage, this could possibly be a recipe for disaster.
A rise in divorce?
What impact should we expect the pandemic and lockdown to have on divorce proceedings and married couples? We have seen the impact Covid-19 has had in some areas where the pandemic effect is slowly decreasing. For example, it’s been reported that the COVID-19 pandemic in China has caused a surge in divorce rates.
Speaking to Andrea Hirsch, a family law specialist in Washington, DC, she says: “At the moment, it is hard for me to say what impact the pandemic will have on divorce here.
Nonetheless, if couples do wish to file for divorce but are currently isolating together they should still think about seeking legal advice. However, the process may differ given the current circumstances.
“Divorce is an extremely personal process and every single person contemplating a divorce has different priorities and goals. It is possible to assume there are couples living together unhappily and that the lockdown will exacerbate the unhappiness.”
Do couples need to just ‘cool-off’?
Some reports have suggested a ‘cooling-off’ period to help couples decide if they really want to opt for separation, especially if being enclosed and in each others’ space was what ignited talks of divorce. And even though Andrea voiced that she there is no right answer to whether a ‘cooling-off’ period would work or be wise, she did state that, “I do advise clients to think carefully about divorce and not rush into anything so, in keeping with that advice, I would advise anyone contemplating divorce or separation to consult with an attorney to understand their rights and responsibilities.”
Nonetheless, if couples do wish to file for divorce but are currently isolating together they should still think about seeking legal advice. However, the process may differ given the current circumstances.
Most courts are currently closed, so although new cases can be filed, it is unknown when the courts will re-open and even when they do re-open, there will be a backlog of cases that will need to be heard and there will be considerable delays in court resolutions of matters, Andrea tells us.
“But the non-availabiity of the court system should not be a deterrent if divorce is being considered. A small percentage of cases are resolved through the court system. “Many divorces are resolved through out of court settlement processes, such as mediation, collaborative practice and lawyer negotiation; there is no reason to why you cannot start one of these processes during lockdown, as they are all available remotely and online. Find an attorney who is trained in these approaches and start working.”
There has been some talk on force majeure clauses being implemented in martial agreements, which may help during Covid-19, but is it necessary?
Some aspects of family law, however, need immediate attention. Domestic violence, for instance, has also been a much-discussed impact. Unfortunately, victims may be trapped with abusive partners during this time. With some states, such as New York, actively addressing the issue by introducing new legislation, we wonder if other states should take precedent. In Washington, for example, domestic violence is considered an emergency matter and victims have access to the court system for protective orders.
Do marital settlement agreements need a force majeure clause?
Even though the pandemic was an unprecedented situation, we - lawyers especially – can only use this time to learn and progress and some divorce lawyers may ponder on the benefits with including a force majeure clause in settlement agreements. Many business contracts contain a “force majeure”, a provision that may suspend or altogether excuse performance by one or both parties to the contract due to an “act of God” or other unforeseen, extraordinary event.
There has been some talk on force majeure clauses being implemented in martial agreements, which may help during Covid-19, but is it necessary?
“It might be appropriate to have a force majeure clause for spousal support provisions as they are often made unmodifiable and if a party loses his or her job or their income decreases, support might need to be re-evaluated”, shares Andrea. However, custody and child support provisions of a marital settlement agreement are always modifiable upon a material change in circumstances and certainly the current situation would be a cause to re-examine an agreement. She expands, “It seems safe to assume that even without a force majeure clause, general contract law regarding the impossibility of performance under the current circumstances, would provide sufficient protection if a provision of a marital settlement agreement could not be performed.
The full impact of Covid-19 on divorce, of course, will only be revealed in time. Until then, divorce lawyers are still reachable to offer their expertise and advice on what couples in lockdown can do about their on-going or new venture towards an amicable separation.
Andrea Hirsch
1630 Connecticut Avenue, NW, Suite 400
Washington, DC 20009
202 480-2160 (phone)· 202 480-2169 (fax)
Since 1996, individuals in Washington, D.C., and Maryland have turned to The Law Firm of Andrea Hirsch for help with divorce, child custody, support and other family law issues.
Having the right lawyer affects not only the outcome of the case but the manner in which it is handled. And that manner can have lasting consequences. Fanning the flames of animosity, litigating every point no matter how emotionally and financially draining—this is not the approach of Attorney Andrea Hirsch when handling her clients’ family law disputes.
In this case the claimant successfully continued an injunction restraining the defendant’s consultancy firms from acting as Expert Witnesses for another party in ICC proceedings against the claimant. Articles published elsewhere in the industry have questioned the impact that this might have for the larger global Expert Witness firms.
First of all, how is Diales coping with the current global pandemic? Has COVID-19 had any impact on your business?
Our business is very much a global one, as a matter of fact, we were already operating our offices in Asia Pacific on a home working basis for two months prior to the UK and Europe becoming part of the same lockdown situation. We used that time to ensure all of our Experts, and their assistants, were able to work effectively from home with the right IT equipment, connections, and back up etc., so I’m pleased to say there has been no real effect on the way we service our clients. All of our key Experts remain busy and are coping with some of the challenges that lockdowns and working from home can bring… including being unable to visit the pub!
I also think there are some dangers in implying fiduciary relationships between consultants and clients without clearly setting out the boundaries of those relationships.
It appears you have everything under control from that point of view, but this recent TCC case seems to cause some problems for global Expert Witness firms. What’s your take on that?
I must say I was surprised when I read the decision from a couple of perspectives, as the decision didn’t go the way I thought it was going to for whomever the respondents are, but for us there’s no real material impact of any kind.
When you say you were surprised at the outcome? Can you expand on that a little more?
Sure, I have always operated on the basis that there is no property in a witness, and if that’s true for witnesses of fact why shouldn’t it apply, very simply, to Expert Witnesses as well? I also think there are some dangers in implying fiduciary relationships between consultants and clients without clearly setting out the boundaries of those relationships. How long do they last after a commission has finished? What brings the relationship to a formal end? Is it the issuing of a decision or do you have to wait for the appeal? Or is there some other occurrence, or period of time that would then permit you to work on the opposite side to a former client? What if you do a small piece of work, just an advice note on something for a day or so and then nothing more, does that create a relationship that prevents you working on other projects? I think these are all serious questions, that have been raised by this issue, and need some careful consideration.
How do you see this situation affecting your business moving forward?
I don’t see any effect for us at this time, or moving forward, although I am interested in the outcome.
Can you clarify why there is no effect to the Diales team in your view?
Yes, absolutely. We have a Conflict Check Policy in place within the Group, which means every opportunity coming into the business is checked to see if it creates the potential for conflict. We divide those conflicts into two different categories.
However, even if there is no theoretical or technical conflict of interest, and a client on a project has paid you a great deal of money for your work, whilst they might understand that we act independently and that the relationship won’t affect the outcome of our report, it’s still difficult for a client to come to terms with seeing you on the opposite side of a matter
Can you explain those categories and how you manage the process?
The first category is the straightforward ‘Professional Conflicts’ of interest. These would involve having worked directly on the project, or directly for or against either party, all of the things that are simple to identify as a conflict issue generally. Sometimes things are a little greyer around the edges, but generally I always say that if you need to think about it for more than 60 seconds it probably is a conflict.
The second category is what we would term as ‘Relationship Conflicts’. These are projects where upon there is no strict professional conflict and we are confident that acting would not create such a conflict in real terms, but where we have an existing relationship either on a current commission, or series of current commissions elsewhere in the world, where we know a client will take a view, possibly negatively, about us accepting instructions.
So, are you saying some clients don’t expect you to work against them if you work for them?
Yes. I think that’s true in many instances. However, even if there is no theoretical or technical conflict of interest, and a client on a project has paid you a great deal of money for your work, whilst they might understand that we act independently and that the relationship won’t affect the outcome of our report, it’s still difficult for a client to come to terms with seeing you on the opposite side of a matter, given that you were working with their own legal team and internal commercial team fairly recently.
I’m surprised, to a degree, of the outcome, but it won’t affect us, or our business model moving forward.
So, how does Diales deal with this in practice?
As I said earlier, we have a written Conflict Check Policy to which we strictly adhere. In the event that a set of circumstances arose, like the one in the case you mentioned, where part of our business, say in Asia, was acting for a client on a particular project and the business in the UK, the Americas, or Middle East etc. received an enquiry to act on the same job, albeit for different parties, our Policy requires us to decline the commission unless both parties have consented in writing to us acting.
How do you manage that from a confidentiality point of view?
It’s quite easy really. We would simply advise the second party that came to us with an enquiry that we were unable to act in the matter because of a potential conflict, although this could change if they will permit us to ask for the consent of the other side to proceed.
Does that ever happen?
Frequently, of this type of enquiry I’d say over 60% are resolved with the consent of both parties. Often clients that we’ve worked with appreciate that they are going to get an independent product of high quality. Therefore, it might be a safer bet to have a Diales Expert on the opposite side because at least they know what they get will be fair, reasonable, and independent, and if they go to someone else they don’t necessarily know that is what they’ll be facing, which could be quite wasteful in terms of costs.
So, you don’t really see any impact of this case on the Diales business moving forward?
No. We weren’t involved in this particular case and like I said I’m surprised, to a degree, of the outcome, but it won’t affect us, or our business model moving forward. We are going to retain our stringent conflict checking process and be quite transparent about it.
Mark Wheeler
Head of Diales - Quantum and Technical Expert
Mark has 30 years’ engineering experience within the construction industry. He trained as a mechanical and electrical engineer, with a firm of specialist contractors.
Undertaking a wide range of building services installations in commercial buildings, on both a pre-designed and design and build basis, Mark gained site experience in office developments, industrial projects, and a number of schools and hospitals. This has involved work on a wide range of contracts including JCT; PPC2000; BE Collaborative; FIDIC; and the NEC3 form, with which he has worked extensively.
Mark has acted as an Expert Witness in both technical mechanical and electrical (M&E) matters and quantum disputes. He has also been instructed as expert in NEC3 disputes, from both a project management and quantum perspective.
These intermediaries act like a bridge and facilitate payment collection and settlement between merchants and customers. However, even though a number of payment aggregators and payment gateways have come up, and a significant volume of transactions are carried out using these various payment aggregators and payment gateways, there was an absence of a regulatory framework governing the activities of payment gateways and payment aggregators.
The first indication that the Reserve Bank of India ("RBI") was considering having in place a regulatory framework for payment gateways and payment aggregators came in its monetary policy statement issued on 7 February 2019. Subsequent to this, the RBI issued a discussion paper covering various facets of the activities of payment gateways and payment aggregators as well as the different options towards their regulation. The discussion paper set out three approaches for regulation of payment gateways and payment aggregators, being:
However, the Guidelines have set forth a detailed regulatory framework for payment aggregators only.
Finally, on 17 March 2020, RBI issued guidelines on the regulation of payment aggregators and payment gateways ("Guidelines") under the provisions of section 18 read with section 10(2) of the PSSA. The Guideline came into effect from 1 April 2020 (other than those activities for which specific timelines have been set out in the Guidelines).
However, the Guidelines have set forth a detailed regulatory framework for payment aggregators only. As it regards the entities which are operating as payment gateways and engaged in providing technology infrastructure to route and facilitate the processing of an online payment transaction without any involvement in the handling of funds, the Guidelines have provided only indicative baseline technology-related recommendations which may be adopted by such payment gateways as a measure of good practice.
The Guidelines would also apply to the domestic leg of import and export related payments facilitated by PAs.
We have in this article briefly discussed certain key provisions of the Guidelines:
Applicability
The Guidelines would apply to payment aggregators ("PA") which have been defined to mean the entities facilitating e-commerce sites and merchants to accept various payment instruments from the customers without the need for the merchants to create a separate payment integration system of their own.
The Guidelines would also apply to the domestic leg of import and export related payments facilitated by PAs. However, the Guidelines would not apply to cash on delivery ("CoD") model of e-commerce operations.
E-commerce marketplaces providing PA services cannot continue this activity beyond 30 June 2021 but can provide the PA services only through a separate entity with prior authorisation of the RBI.
Authorisations from RBI
Any non-banking entity desirous of offering services of PAs would require authorisation from RBI. Existing non-banking entities already operating as PAs need to apply for authorisation on or before 30 June 2021, and are permitted to continue their business operations till their applications are finally considered.
An applicant entity proposing to operate as PA needs to be a company incorporated in India, and the proposed activity of operating as a PA must be included in the business objects set out in its memorandum of association.
Further, where any applicant entity is regulated by any financial sector regulator, then such entity shall need to obtain a no-objection certificate from the relevant financial regulator.
E-commerce marketplaces providing PA services cannot continue this activity beyond 30 June 2021 but can provide the PA services only through a separate entity with prior authorisation of the RBI.
Capital Requirements
The Guidelines have prescribed a minimum net worth[1] requirement of INR 250 million for PAs.
In relation to new applicants, the Guidelines provide that at the time of filing an application for authorisation, the minimum net worth would need to be INR 150 million. But such new entrants would need to achieve a minimum net worth of INR 250 million by the end of the third financial year of grant of authorisation by the RBI. Once the minimum net worth of INR 250 million has been achieved, this net worth requirement would need to be fulfilled at all times.
However, all existing PAs have been granted permission to achieve this net worth requirement in a staggered manner. They would need to achieve a net worth of INR 150 million on or before 31 March 2021 and a net worth of INR 250 million on or before 31 March 2023.
In the event a PA fails to comply with the net worth requirement within the stipulated time frame, such PA would have to wind-up its payment aggregation business and the banks maintaining nodal/escrow accounts of such entities would need to monitor and report compliance in this regard.
Where an entity carrying on activities as a PA has foreign direct investment ("FDI"), such entity would also need to comply with the provisions of the FDI policy and the relevant foreign exchange regulations in this regard.
The Guidelines also require any takeover or acquisition of control or change in management of a non-bank PA to be intimated to RBI within 15 days with complete details
Governance
The Guidelines require all PAs to be professionally managed, and their promoters to satisfy the fit and proper criteria prescribed by RBI. Upon receipt of an application for authorisation, the RBI would, amongst other factors, need to be satisfied with the fit and proper status of the applicant entity and its management. For this purpose, the RBI may obtain necessary inputs from other regulators or government departments.
The Guidelines also require any takeover or acquisition of control or change in management of a non-bank PA to be intimated to RBI within 15 days with complete details, including a declaration-cum-undertaking by each of the new directors, if any, in prescribed format. Upon receipt of such intimation, RBI would examine the fit and proper status of the management and, if required, may impose suitable restrictions on such changes.
Reporting requirements
In order to monitor compliance with Guidelines, RBI has prescribed certain periodical and event-based reporting requirements for the PAs.
For instance, while a net worth certificate along with the audited annual report is required to be submitted on an annual basis on or before 30 September every year, PAs would need to submit an auditor certificate regarding maintenance of balance in an escrow account as well as a certificate from the banker on escrow account debits and credits (internally audited) on a quarterly basis within 15 days from the end of the relevant quarter.
Event-based reporting obligations include submission of a declaration-cum-undertaking (in the form set out in the Guidelines) in case of any changes in the board of directors.
Further, a PA would need to submit a list of merchants to the relevant bank (being the bank with which the relevant PA maintains the escrow account) and update this list from time to time.
Escrow accounts
The Guidelines require every non-banking PA to open an escrow account with any scheduled commercial bank wherein the amounts collected by PAs would have to be deposited.
The escrow account cannot be operated for CoD transactions. The banks are not required to pay any interest on any balance in the escrow account. However, the PAs can enter into an agreement with the relevant bank to transfer the "core portion" (which shall be calculated as per the formula set out in the Guidelines) from the escrow amount to a separate account on which interest will be payable by the bank, subject to certain conditions as set out in the Guidelines.
Further, a PA would need to submit a list of merchants to the relevant bank (being the bank with which the relevant PA maintains the escrow account) and update this list from time to time. The relevant bank is required to ensure that the escrow account is used for making payments only to eligible merchants and for eligible purposes. The agreement between the PA and the bank maintaining escrow account must have an exclusive clause regarding its usage for this eligible purpose only.
KYC provisions
PAs are required to comply with know your customer (KYC) / anti-money laundering / combating financing of terrorism guidelines issued by the RBI. Further, provisions of the Prevention of Money Laundering Act, 2002 and rules framed thereunder would also apply to PAs.
The PAs are required to have a formal customer grievance redressal and dispute management framework, and also appoint a nodal officer who shall be responsible for handling customer grievances.
Security and risk management
In order to safeguard customers from any security related risks, the Guidelines require PAs to have in place adequate information and data security infrastructure and systems for the prevention and detection of fraud. Further, the Guidelines direct PAs not to store customer’s card credentials either within their database or the server accessed by the merchant.
Redressal of Customers’ grievances
The PAs are required to have a formal customer grievance redressal and dispute management framework, and also appoint a nodal officer who shall be responsible for handling customer grievances.
Although the model regulatory framework set out in the discussion paper was proposed for both the PAs and the payment gateways, the final framework set forth in the Guidelines is applicable to PAs only.
Our thoughts
With the increased focus of the Government of India on its 'Digital India' campaign, there has been an exponential surge in online transactions. While online transactions are convenient and time-saving, the customers sometimes have to face associated risks as well. Therefore, the approach of the RBI to regulate the activities of PAs appears to be a step in the right direction which ultimately aims to safeguard the interests of customers from any possible security related risks. However, the existing entities which are engaged in offering payment aggregation services might find it difficult to increase their net worth and apply for authorisation of RBI on or before 30 June 2021, especially on account of COVID-19.
Further, while the FDI policy indicates that an e-commerce marketplace may provide support services including payment collection (and that such entities may facilitate payments for sale in conformity with the guidelines of RBI, though there were no guidelines in place to regulate such activities), the Guidelines now finally attempt to regulate the payment aggregation activities of such e-commerce market place and have stipulated a deadline of 30 June 2021 by when e-commerce entities would need to separate their payment aggregation business and apply for authorisation of RBI. Further, the separate entity would have to comply with the net worth requirement which was hitherto not applicable to such e-commerce market places.
Although the model regulatory framework set out in the discussion paper was proposed for both the PAs and the payment gateways, the final framework set forth in the Guidelines is applicable to PAs only.
For any clarification or further information, please contact
Gaurav Wahie
Partner
E: gaurav.wahie@clasislaw.com
Dinesh Gupta
Senior Associate
E: dinesh.gupta@clasislaw.com
Disclaimer: This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to herein. This publication has been prepared for information purposes only and should not be construed as a legal advice. Although reasonable care has been taken to ensure that the information in this publication is true and accurate, such information is provided ‘as is’, without any warranty, express or implied, as to the accuracy or completeness of any such information.
[1] Net-worth consists of paid-up equity capital, compulsorily convertible preference shares, free reserves, share premium account and capital reserves representing surplus arising out of sale proceeds of assets (but does not include reserves created by revaluation of assets) adjusted for accumulated loss balance, book value of intangible assets and deferred revenue expenditure, if any.
