Understand Your Rights. Solve Your Legal Problems
BNP Paribas REIM SGR, on behalf of the Real Estate Fund ‘HITA1’ of Hayrish Italy, acquired from Banco Popolare Soc. Coop. the building located in via Bagutta 2 in Milan (called Garage Traversi), thus perfecting the first operation of the Fund's investment.
The property was purchased for a total value of approximately €70 million with the aim of defining a transformation and enhancement plan that will reposition short on the market as a service industry / commercial area.
HITA1 is a real estate fund reserved to professional investors, oriented to the purchase of real estate ‘value added’ in Italy – in other words, properties that will transform and enhance.
BNP Paribas REIM SGR was advised by Studio Legale Carnelutti for the transaction and Pirola Pennuto Zei & Associati acted as tax advisor. The firm has assisted Mercanti Dorio Banco Popolare in the operation.
"In recent months we have worked extensively together with Banco Popolare in order to complete the purchase of Traversi Garage. We care about this transaction as it fits into the broader decision to extend our presence in recovery operations and transformation of commercial properties in major metropolitan areas in Italy", said the Managing Director of BNP Paribas REIM SGR, Ivano Ilardo.
Interview with Giulia Ferrari of Mercanti Dorio e Associati
Please tell me about your involvement in the deal?
Our Firm and I was appointed by the Banco Popolare Banking Group as legal and tax advisors in the complex transfer deal, involving a real estate asset located in Via Bagutta, in the centre of Milan, called "Garage Traversi". So we have been working in synergy, as a team, helping our clients to evaluate different legal and tax issues related to: real estate, corporate and finance profiles of the transaction, from its structuring to the completion of the sale.
In particular, together with Giuseppe Mercanti, I assisted clients in negotiating and drafting of the contractual documentation that allowed the transfer of the real estate asset from Banco Popolare to BNP Paribas REIM SGR on behalf of the HITA1 Fund from Hayrish Italia, and governed the complex relationships, including intercompany ones, connected to it.
Why is this a good deal for all involved?
The real estate transaction, which took place for a total value of approximately €70 million, allowed the transfer of an asset with relevant strategic and historical value, such as the Garage Traversi, to a qualified operator, that will carry on the developing process already begun by the bank, in order to define a transformation plan that will repose the asset on the market with a mixed- use destination.
What challenges arose? How did you navigate them?
The operation, as a whole, presented various complex profiles. Among them, the legal issues related to the historic and artistic heritage restriction that involve the asset and that impose a particular discipline for its alienation. Furthermore, what was particularly sensitive was the examination and evaluation of the profiles related to administrative procedures that will enable the development of the asset. These issues, as well as others that arose, have been addressed thanks to an intense in-depth analysis successfully carried out by the team, which, during the months of negotiation, thanks to the synthesis of different skills and specific competence, has enabled our clients to reach the more appropriate and effective choices.
Stellar Acquisition III Inc. (NASDAQ: STLRU) (the "Company" or "Stellar"), announced the pricing of its initial public offering of 6,500,000 units at a price of $10.00 per unit. The closing of the Company's initial public offering was consummated on or about August 24, 2016. Each unit consists of one share of the Company's common stock and one warrant, enabling the holder thereof to purchase one share of common stock at a price of $11.50 per share. The securities comprising the units began trading on August 19, 2016 under the ticker symbol “STLRU”. Once the securities units began separately trading, the common stock and warrants were listed on NASDAQ under the symbols "STLR" and "STLRW," respectively.
Maxim Group LLC acted as sole book-running manager for the offering. Chardan Capital Markets, LLC and EarlyBirdCapital, Inc. acted as co-managers for the offering. The Company has granted the underwriters a 45-day option to purchase up to an additional 975,000 units at the initial public offering price to cover over-allotments. The Company sold an additional 400,610 Units based on a partial exercise of the underwriters ‘over-allotment option
The offering is being made only by means of a prospectus. When available, copies of the prospectus related to this offering may be obtained.
A registration statement relating to the securities was declared effective by the SEC on August 18, 2016.
Stellar is a blank check company, also commonly referred to as a Special Purpose Acquisition Company, or SPAC, formed for the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities.
The Company's efforts to identify a target business will not be limited to a particular industry or geographic region, although it intends to focus efforts on seeking a business combination with a company or companies in the international oil and gas logistics, land and maritime oil and gas transportation, terminal and energy storage industries.
Please tell me about your involvement in the deal?
We were the auditor of record for the Company throughout the IPO process and assisted the team with navigating the Securities and Exchange Commission (SEC) filing process, providing practical real time guidance on the SEC comment letter process with their registration statement enabling the Company to go to market in the time frame originally mapped out in the marketing plan.
Our management team has been involved with over 50 SPAC transactions and has worked with virtually every legal and underwriting player in this niche space. These individual transactions have resulted in deals ranging from $50 million to over $1 billion. Withum is the auditor of record for over $3 billion of SPAC IPO’s sponsored by the investment community during the last 12 months.
Why is this a good deal for all involved?
The SPAC market continues to be very active since the traditional IPO market has been stagnant. There are a number of SPACs currently in the market place, but the majority of these are in excess of $100 million in proceeds. Stellar Acquisition III, at $65 million, has more target options available in its search for a business combination, since 80% of the proceeds raised in the IPO need to be used for the intended acquisition. This takes them out of direct competition with a large portion of the SPACs currently in the market place. In addition, the management group has a proven track record of success in the SPAC marketplace, having been involved in previous successful transactions. The management team understands the landscape and has experience in the intricacies of the business combination process, which should prove valuable down the road for the company.
What challenges arose? How did you navigate them?
For us as auditors, the biggest challenge usually occurs when there is a change in the structure or size of the offering. These changes normally occur during the marketing road show process and there are very tight timelines to adjust the registration statement in order to not interrupt the flow of the scheduled investor meetings. In the case of Stellar Acquisition III, the offering size was decreased from 8 million units to 6.5 million units, which causes edits to the audited financial statements and other areas in the registration statement. We had our team of experts on call and ready to review the revised registration statement to ensure all information included was accurately reflected and timely completed to re-file with the SEC.
Intesa Sanpaolo has entered into a sale-and-purchase agreement in respect of the sale of the total share capital of its subsidiaries Setefi and Intesa Sanpaolo Card to a wholly owned subsidiary of Mercury UK Holdco Limited (Mercury) for a counter value of €1,035 million in cash. Mercury, which already owns Istituto Centrale delle Banche Popolari Italiane (ICBPI), is controlled by a consortium composed of Advent, Bain Capital and Clessidra. Setefi and Intesa Sanpaolo Card carry out processing activities relating to payment instruments and operate, respectively, in Italy and in the other Countries where the Group has a presence.
The agreement provides for a ten-year service contract, the commitment by Intesa Sanpaolo to use the processing services provided by Setefi and Intesa Sanpaolo Card and specific undertakings regarding the maintenance of a high service quality.
The transaction will enable the Intesa Sanpaolo Group:
- To focus on the core activities of issuing and acquiring relating to payment instruments, following the recent partial demerger of Setefi in favour of its Parent Company, with the aim of maximising effectiveness of commercial activities and optimising relationships with Group clients;
- To adequately enhance, by way of this disposal, the non-core processing activities, also taking into account that growing investment needs and economies of scale are necessary in order to operate efficiently in this sector;
- To further strengthen the technological platform by entering into a partnership with players of proven experience in the payment sector in Italy and Europe.
The finalisation of the transaction is expected to take place by the end of the year and is subject only to the customary regulatory authorisations being received. It will generate a net capital gain of around €895 million for the Intesa Sanpaolo Group’s consolidated income statement in 2016.
Studio Pedersoli acted as legal advisors for regulatory matters to the consortium of funds managed by Advent International, Bain Capital Private Equity and Clessidra; the consortium acquired Setefi Services S.p.A. from Intesa Sanpaolo S.p.A for an equity value of €1,035 million. The team has been led by Fabrizio Carbonetti, with the support of Marco Romanelli and Alessandro Metrangolo,
GoDaddy Inc. (NYSE: GDDY), the world's largest cloud platform dedicated to small, independent ventures, announced it has entered into a definitive agreement to acquire Host Europe Group (HEG) for €1.69 billion (US$1.79 billion), including €605 million paid to the selling shareholders and €1.08 billion in assumed net debt. The transaction has been approved by the GoDaddy board of directors and HEG's shareholders and is expected to close in the second quarter of 2017, subject to customary regulatory and other closing requirements.
HEG is currently owned by international private equity firm Cinven, which acquired the business in August 2013. GoDaddy intends to integrate the majority of HEG's business while exploring strategic alternatives for HEG's PlusServer managed hosting business, including a possible sale.
As the largest privately-owned web services provider in Europe, HEG serves small businesses and web experts, and has built a thriving business with more than 1.7 million customers. With strong positions in the UK and Germany, including brands such as 123Reg, Domain Factory, Heart Internet and Host Europe, HEG complements GoDaddy's leading position in the US and fast-growing international footprint.
Combining GoDaddy's global technology platform with HEG's footprint in Europe will enable the rapid deployment of a broader range of products to customers and allow for better scale of product development and go-to-market investments across both companies. GoDaddy and HEG share a strong cultural focus on the needs of small business customers, supporting their product offerings with consultative customer care that drives high customer retention.
"GoDaddy has successfully expanded its international business to 56 global markets over the past four years", said GoDaddy CEO Blake Irving. "HEG has built an impressive business that generates strong top-line growth, high margins, and industry-leading customer satisfaction. By joining forces with HEG, we accelerate our expansion into Europe with the delivery of a broader range of cloud-based products, built on a single global technology platform, and supported by unparalleled customer care to help small businesses and web designers succeed online."
Over the recent years, one of the most densely populated countries has developed drastically and rises to become more economically prevalent. This month we hear from A.S.A Bari, who gives deep insights into tax in the aforementioned country, Bangladesh, and it is continuing to develop and help encourage citizens to pay tax; he also touches on the new regulations imposed that should positively affect and widen Bangladesh’s economy.
In a bid to improve tax awareness and compliance, Bangladesh underwent different changes, such as implementing ‘National Income Tax Day in 2008’; have these changes proven a positive outcome?
For the first time in Bangladesh, the ‘National Income Tax Day in 2008’ was held to encourage the responsible citizens of Bangladesh to pay tax. Subsequently, on 31 August, 2008 the Advisory Council of the then caretaker government had decided to observe the 15th September as National Income Tax Day as they thought that such an initiative would bridge the gap between the taxpayers and the tax administration. In fact, from 2010 onwards, National Board of Revenue (NBR) has been organising weeklong income tax fair across the country every year.
Since the beginning of the fair in 2010, its popularity has been rising. This year, taxpayers' crowd at the annual event broke all past records. NBR collected BDT 21.30 billion from the weeklong event, which is 4.63% higher than last year.
According to the statement of NBR, in 2016, a total of 928,973 persons received different tax related services and, 194,598 tax payers submitted their tax return. On the other hand, in 2015, 757,754 taxpayers got various services from the fair, whereas 161,060 taxpayers submitted their income tax returns in the fair. The number submission of returns during the fair in 2014 was 149,309, whereas the number was 52,544 in 2010.
It is pertinent to mention that from 2008 onwards, the Tax-to-GDP ratio in Bangladesh has been increasing with a positive gradient from 8% to 10.3%. In light of the growing trend of the economy, the veteran finance minister of Bangladesh, Mr. AMA Muhith, has come up with a target of increasing the Tax-to-GDP ratio to 15.3% by the Income Year 2018-2019.
To encourage people to be compliant and create a culture of paying tax, the National Board of Revenue has honoured more than 100 taxpayers, including companies, with tax cards. Among them 7 tax cards have been awarded to new tax payers which will encourage young citizens to pay tax. Until last year, top 10 individual taxpayers and 10 companies were honoured with tax cards.
What new and upcoming regulatory changes and developments should business keep an eye out for?
Recently, Parliament has brought about numerous changes in the Income Tax Ordinance 1984. It will be cumbersome to discuss, highlight or, even mention, all changes or development. Therefore, only few of them, which are of substantial importance, shall be discussed.
Firstly, pursuant to the substitution of definition of “income year” (section 2(35) of the Income Tax Ordinance) by Finance Act 2015 and further amendment made by Finance Act 2016, all entities, except for bank, insurance or non-banking financial institution and their respective subsidiaries, are required to have a unified financial year commencing from the first day of July and ending on the last day of June of the next year. Due to this change, any entity having a financial year from January to December is required to switch July-June. In order to implement this, a company having January-December Financial Year must prepare audited half yearly financial statement for the period commencing on 1 January 2016 to 30 June 2016. For the assessment year 2016-17, the company needs to submit two income tax returns. The return covering twelve months of January-December 2015 must be submitted before 15 July 2016. The other return relating to the half yearly period of January-June 2016 must be submitted before 31st December 2016. In case of subsequent financial years, the Company shall cover July-June period and must submit the return on or before the next Tax Day (a concept introduced by Finance Act 2016), which is the 15th January of the next year.
Another substantial change relating to minimum tax has been brought about by Finance Act 2016. The new provision has two-fold implications. Not only the previous section on minimum tax (section 16CCC of the Income Tax Ordinance 1984) has been repealed, but also the previous provision relating to final discharge of liability (section 82C) has been substituted with new section 82C on minimum tax.
Previously, under the repealed section 16CCC a firm having gross receipts of BDT 5 Million or every company, irrespective of profitability of the company in a given financial year, had to pay a minimum tax at the rate of 0.30% of its gross receipts under any heads of income. In contrast, under the sub-section (4) of new section 82C, a manufacturer of tobacco products, a mobile phone operator or all other cases has to pay a minimum tax at the rate of 1%, 0.75% or 0.60%, respectively, of their respective gross receipts.
Under previous section 82C, tax deducted or collected at source in respect of certain circumstances or events (including, but not limiting to, supply of goods, payment of royalty, fees for technical services, sale of rental power, shipping business of a resident, and, transactions of a member of a stock exchange) had been deemed to be the final discharge of liability from that source and, income for such source had been determined on the basis of the tax deducted or collected. Since, under previous section, the income from such source was deemed as income, even though an entity had higher income, the tax deducted or collected at source would be the highest tax that they had to pay. On the other hand, sub-section (1) to be read with sub-section (2) of the new section 82C says that such tax deducted or collected at source, shall be minimum tax and income shall be determined in regular manner and tax shall be calculated by using higher rate on such income. It further says, if the tax calculated is higher than the minimum tax, the higher amount must be paid by the business entity.
Any taxpayer including an entity, should also watch out for areas or businesses, which are incentivized by the government. Such sectors includes Information Technology Enabled Services which includes, but is not limited to, e-commerce business and animation (both 2D and 3D), power, jute, knitwear and woven garments, or any other manufacturing entity.
For example, any income derived from the business of software development or information technology enabled services for the period from 1st July 2008 to 30th June 2024 shall be excluded while computing total income of an entity.
In case of power sector, income tax payable on the income derived from sale of electricity by a private power generation company (except a coal based power generation) shall be exempted for fifteen years from the date of commercial operation, provided that the commercial operation date has been achieved before 31 December 2019. Moreover, tax on income of foreign personnel employed by such power generation companies, will also be exempted for three years from the date of arrival in Bangladesh. Tax on interest payable to foreign lenders, technical know-how and assistance fee and capital gain shall be exempted too.
In order to promote investment in the capital market, the government has also reduced tax on capital gain received from sale of securities of a listed company. For a company, tax rate on such capital gain shall be 10%. In case of sponsor shareholders or directors of a bank, non-banking financial institutions, merchant bank, insurance company, stock broker etc. or a shareholder holding more than 10% of paid up capital on a listed company, tax rate on capital gain shall be 5%. It shall be pertinent to mention here that in other cases, tax on capital gain received from sale of securities of a listed company has been entirely exempted.
Additionally, a newly established industrial undertaking or infrastructure facility will enjoy tax holiday for a period of five to ten years upon fulfilling certain conditions prescribed in section 46B (Industrial Undertaking) or 46C (infrastructure facility) of the Income Tax Ordinance 1984.
Finding the perfect hotel can be troublesome as compromising on sleep is never a welcomed option; very rarely we consider that whilst we are losing sleep in a run-down hotel, that the owner is in a nearby room losing sleep over the battle they face with their management company. In fact, even the best hotels that welcome their customers with open arms are likely to be facing a heated disputed with their management, on how to run their business. Nick Jones has an eye for hotel disputes and reveals the reasons why Owners and Operators often battle, and how profit and brand protection seldom peacefully go hand in hand.
What are the most common factors driving today’s typical hotel disputes, and who are the clients you work with in these disputes?
The most complex and international disputes usually arise between the hotel owner (Owner) and the management company operating the hotel, often under its own brand (Operator). That relationship will be governed by a hotel management agreement (HMA). Owners can be high net worth individuals or groups of investors. Operators are commonly international hotel management groups.
There is a natural tension in this relationship. The Owner’s priority is to maximise profits and, while the Operator wants the same thing, the Operator also wants to protect its brand. More than many other industries, brand and reputation are everything in the hotel world.
While the hotel is performing well financially, this tension is likely to remain largely in the background, but if the hotel’s performance dips or never reaches what was projected before the HMA was signed, the relationship can disintegrate. For example, the Owner may accuse the Operator of mismanaging the hotel and want to make cutbacks to funding and to staff, but the Operator may not be able to tolerate this for fear of damaging its brand.
Common disputes include: claims by the Owner that the Operator misrepresented the projections of the hotel’s financial performance, and/or is mismanaging the hotel to such an extent it is causing a financial loss to the hotel; claims by the Operator that the Owner is not meeting its funding obligations under the HMA, and/or interfering in the management of the hotel making it impossible for the Operator to run the hotel.
How do you also help these clients avoid litigation and curtail their engagement in disputes?
When working on hotel disputes, it’s essential to understand the economic model of the hotel underlying how the hotel is meant to be operating. You also need to be well-versed in how hotels operate on a day-to-day basis and what the industry jargon means. If you don’t have this understanding, you risk considering the legal issues arsing in the dispute in a commercial vacuum and that is going to hinder your ability to help the client achieve a quick resolution.
There are also a number of practical considerations that are specific to managing hotel disputes and it is vital to get on top of them quickly as they can have a great impact on the outcome and length of the dispute.
The hotel industry has an extremely liquid and international employee market. If employees start to see tensions between the Owner and Operator affect their work life, they may just decide to leave and it’s possible that they could quite easily take up a job on the other side of the world. As a result, if the client does not move quickly to take proofs of evidence from key hotel employees, it potentially risks losing the evidence of some of its best witnesses.
Operators can also face an additional challenge: most hotel employees are employed by the Owner, and employees are unlikely to want to give evidence against their employer. If this is going to be the case, it’s important to find out sooner rather than later; if the Operator cannot find witnesses to support its position, this will be a major factor in assessing the legal merits of the case and in formulating a settlement strategy.
As with any dispute, clients must at an early stage preserve all potentially relevant electronic and hard copy documents. This is often not straight forward: both Owners and Operators could have problems collecting documents physically located at the hotel (such as financial records, maintenance and security logs, third party contracts etc.). If the Operator is still in control of the hotel, the HMA can contain strict provisions about how often the Owner can be on site and what information they are permitted. Owners have also been known to block Operators from accessing the hotel, thereby preventing them from collecting their own documents.
One of the most effective ways of dealing with these problems is for the client to sanction a trip by a small legal team to take proofs of evidence from key witnesses and to assist with the collection of documents. While there is an upfront cost involved with this, undertaking this work at an early stage can be effective in putting the client in the best legal and settlement position possible and can ultimately save costs by bringing the dispute to an end more quickly.
Your vast experience in this field also covers international cross-border disputes; what complications arise in these scenarios and how do you confront them alongside your clients?
If your client is the Operator, cross-border disputes are hard to deal with because it will be much more difficult for the Operator to get a clear picture of what is going on at the hotel on a day to day basis. The Operator will have to rely on the reports it gets from the hotel General Manager and will face even greater challenges than those I have already mentioned in managing witnesses and documents.
Another complication can be enforcement. If your client is the claimant in a cross-border dispute, how easy will it be to enforce a judgment/award against the defendant and against what assets? This is something that is often over-looked during the negotiation of an HMA, but must be considered before formal court or arbitration proceedings are issued. Enforcement can be particularly difficult for Operators who are considering suing Owners because an Operator’s recourse under the HMA may be limited to the physical asset that is the hotel. It is always essential to get early local law advice to check the position on enforcement generally, and that the Owner really does own the hotel and, if possible, to find out whether it is mortgaged.
Are there any regulations, UK or beyond, that you would like to see changed to facilitate your work and alleviate the burden of dispute on your clients?
Unfortunately not! As I have said, the majority of hotel disputes are contractual in nature. There are lots of strong personalities in the market and it’s a very challenging industry for both Owners and Operators to be consistently successful in, particularly given we are in a time of so much uncertainty arising out of political, economic and security issues, which naturally affects tourism.
How do you believe legal disputes are best avoided by hotels, by way of better planning in agreements and contracts, for example?
The best way of avoiding disputes is through clarity, certainty and communication. It’s vital that both Owners and Operators take the time to get absolute precision about the terms of the HMA and, crucially, the numbers included in any financial projections for the performance of the hotel and the basis on which those projections were prepared.
Once the hotel is up and running, both the Owner and Operator must work on their relationship, which can often be helped by meaningful engagement at a senior level. This is particularly important for large international Operator groups because Owners can quickly become frustrated if they sense that their hotel is not getting sufficient attention from the Operator’s group executive team. One simple way of avoiding this problem is by ensuring that there are regular conference calls scheduled in at the senior level and that someone from the Operator’s group executive team visits the hotel on an occasional basis.
If a good relationship can be established, it will make it much easier to resolve issues before they become disputes with all the pain and cost for clients that they bring.
On the global stage, UK law firms have long been a force to be reckoned with. Our legal sector is one of relatively few sectors where the UK is a genuine world leader. But just how much of an export success story is it, and in what areas is there still further scope for greater international coverage and specific market penetration?
Daniel Watts, Managing Partner at Edward Drummond & Co, here gives Lawyer Monthly an insight into where opportunities lie and how law firms can make the most of these, while managing the risks involved.
Broadening UK law firms’ horizons – exploiting untapped opportunity in emerging markets
How great is the focus on western economies compared to emerging markets and how might this change in the years ahead? And what challenges and opportunities could this present for law firms, as well as for general counsel working for corporates in these locations?
To shine a spotlight onto what shape UK law firms’ international reach is taking and to identify where future growth opportunities lie, we conducted research into where Partners at top firms are based. As shared owners and leading fee-earners, their presence in particular markets demonstrates the level of managerial expertise and revenue-generating power firms are prepared to commit in a given jurisdiction. Our findings reveal several useful insights which could provide food for thought when it comes to strategic planning for the years ahead.
Risks vs rewards in developed and emerging markets
While UK law firms have a well-established reputation for international work, our study highlighted just how far their global coverage has grown. In fact, today nearly two-thirds (63%) of Partners at Top 20 firms are now based outside of the UK.
But although that’s an impressive figure, we also found that only 20% of Partners are based outside of Europe and North America. As they focus heavily on western economies, leading British law firms are underexposed to other markets – notably emerging markets – despite many of these economies seeing rapid growth in recent years.
The ‘gap’ is particularly evident in areas such as Asia Pacific and Latin America, which are home to 13% and 2% of Top 20 UK law firm Partners respectively. Given that they represent 32% and 7.9% of global GDP apiece, the potential opportunity value is significant. While firms have been working hard to close the gap in Asia in particular, it’s clear that the region still offers plenty of scope for greater market presence.
Africa is another potential hotspot that is also relatively untapped, with only 1% of UK Top 20 Partners based there, although the continent accounts for 3% of global GDP. Former Soviet states and the Middle East, where there are currently low concentrations of Partners, could also represent attractive investment opportunities in the future. They account for 1% and 2% of UK law firm Partners respectively, compared to a 2.8% and 4.3% share of global GDP.
Of course, western markets make strategic sense in terms of cultural, business and legal fit. They are comparatively ‘easy-win’ locations in which to establish new offices, thanks to familiar, stable business environments, similar legal frameworks and regulatory regimes, easily transferable skills deployment, and fewer language barriers.
But although these emerging economies may be more challenging, that’s not to say that the effort would not be well-rewarded. Emerging markets still offer considerable growth potential for the UK’s legal expertise, especially as their economies continue to expand at a faster rate than more mature western economies. Multinationals and other ‘western’ businesses are building up more extensive operational networks worldwide, with bases in these locations increasingly strategically important. With this in mind, UK law firms may want to boost their efforts to identify future target markets – or risk losing out.
Facing up to the challenges
For law firms who want to continue to increase their global footprint, and for corporate in-house general counsel deployed in overseas markets, the execution risks of business roll-out are many and varied. Each country will pose its own unique challenges, and regulatory requirements can make it hard for foreign firms to establish themselves in some overseas markets. Conducting extensive research and thorough due diligence is therefore vital prior to launching into a brand new region.
Some basic steps to consider include:
Performing these fundamental checks and taking the time to get to get to grips with the realities and nuances of doing business in a target location is essential groundwork to inform decision-making going forward.
If the UK’s top law firms are to maintain and enhance their standing worldwide, broadening their horizons could well boost their brand and act as an important competitive differentiator. With emerging markets offering such strong growth potential for law firms, identifying new areas which could present a logical strategic fit and taking an early lead could give them the edge. While European and North American markets in particular will remain a key source of revenue requiring extensive brand presence, forward-thinking law firms with truly global ambitions will want to be ahead of the curve in embracing new opportunities. Doing so in a well-considered, thoroughly researched way based on a sound analysis of the risks as well as the rewards will be critical as a foundation for success.
Not everyone fully understands the benefits mediation can offer to those in a legal predicament. Often disallowing matters to become more heated and proceeding to court, mediation can be the perfect way to resolve legal disputes, in a calm manner. This month, we speak with Nicholas Pryor, who was one of the first to embrace mediation in the legal sphere. After being involved in 1,200 mediations, Nicholas states mediation is far from boring and discusses how and why this practice has progressed in the legal sector.
In recent years, mediation has proliferated as businesses have been educated on the benefits; how would you describe that proliferation and the impact on your practice?
Mediation first became visible in the UK in the early 90s. Since then, the number of mediations has grown exponentially. The Centre for Effective Dispute Resolution (CEDR) Mediation Audit reported over 10,000 civil and commercial mediations in 2016 (1800 in 2003). The growth of mediation has been strongly supported by the Courts who both encourage parties to mediate and penalise parties in costs for unreasonable refusal to mediate. Many businesses with frequent exposure to litigation have become regular users. Banks and insurers, in particular, were early adopters. My background in insurance made me one of the first to conduct insurance mediations and instructions in banking and insurance disputes to this day form a large part of my practice.
Do mediation methods differ significantly from one case to another, and from one country to the next? How complex can the process become in some cases?
In one sense, the method is much the same in every case. My role as mediator is to create and foster a process and an atmosphere in which the parties can reflect on their dispute and explore options for resolution. But every mediation is different and my methods will be tailored to the dispute and the parties involved. All mediations require the same need to listen to the parties carefully, and to drill down to the realities of the settlement options available to them.
The more I work overseas or with parties from overseas, the more I become aware that while the essence of the mediation process is much the same, there are innumerable cultural subtleties between and within different nationalities, all of which need to be factored into the process.
Mediations come in all shapes and sizes. The great majority of commercial disputes involve a handful of parties and last a single day. But some can involve multiple parties (my biggest had over 250 parties) and may take months to complete. My longest took 18 months to get to terms and another 6 months to document and complete the settlement.
What would you say are the necessary steps that can be taken in advance to optimize the chances of a successful process?
The key to success is adequate and appropriate preparation. Parties should talk to each other and the mediator as early as possible about how the issues could be presented, who should attend and what information needs to be available. Parties need realistic advice from their advisers as to their true prospects of success in litigation, and on what sorts of outcome are possible in the process. Mediations settle generally when everyone involved is prepared to look at the sort of proposal that might just have a realistic chance of being accepted.
What key challenges do you come across within your work in mediation, and how do you commonly confront them?
The key challenges facing mediators are maintaining confidentiality, avoiding bias and conflicts of interest and maintaining neutrality. Parties often say they want mediators who are ‘effective’, which is usually a euphemism for ‘assertive’. A balance must be struck between allowing parties space to create their own solutions and choosing when to intervene more assertively. I adopt a pragmatic view of all these issues. Confidentiality is the key element of the process and the ability to discuss a dispute with a neutral observer who is having similar discussions with the other parties is unique to mediation. Most disputes are capable of settlement and litigation is generally better avoided if possible. I am happy to discuss with parties exactly how that might be achieved. That is, though, not as easy as it sounds. Striking the balance between being a good listener and facilitator on one hand and taking a firm line when needed on the other is very much the core art of being a mediator. I just hope I get the balance right more often than not.
Is there a mediated dispute that you will always remember? What particular difficulties did it pose and how did you learn from these?
What almost always sticks in my mind are the people involved rather than the disputes. I have learned so much from people from all walks of life, from shopkeepers and self-employed plumbers to senior politicians and celebrities, all facing what were to them great personal, professional or commercial difficulties. I am constantly humbled by the raw courage of those who can find a way to reach out and make peace with their opponents, and the extraordinary acts of generosity and humanity that even those in deep dispute can show to each other. I have learned not to assume anything about people in advance, but to take them as they come. I have been privileged to have the chance to do something to help them find a way out.
You were involved in establishing CEDR; how would you say this contributed to your leadership in mediation?
CEDR grew out of the efforts of a small group of mediation enthusiasts over the period 1989 to 1992. At that time, I was one of only three or four people in the country who had any direct experience of mediation or acting as a mediator, and therefore one of the very few who could talk about the value of the process from concrete experience. I taught and wrote materials for training mediators from 1992 onwards. I was also a non-executive director of CEDR up to 1998. Being in at the start when very few were involved gave me invaluable visibility as a mediator both in the UK and overseas. I was one of the first mediators to be ranked in Chambers and Legal 500. True, there was less competition in those days, but I am quietly proud of having hung on to a top tier ranking ever since.
As one of Britain’s most experienced mediators, what regulatory changes would you make to the field of dispute resolution if you had the power?
I am often asked whether mediation should be made compulsory. It is quite hard to remember quite how different civil litigation was 25 years ago. Cases took years to come to court and very large numbers of cases went all the way through the system before collapsing into settlement at the door of the court. But that world has, thankfully, disappeared for ever. Mediation is no longer an untried ‘upstart newcomer’ but has now become an established part of the litigation landscape. We now have 25 years’ successful experience of mediation in practice. Many modern lawyers have never known a time when mediation was not part of the system. Mediation is readily adopted for cases of almost every type and size and scale. So, my view is that there is little need for or value in making mediation compulsory. The great majority of those cases that ought to settle do seem in fact to do so.
Is there anything else you would like to add?
The comment most frequently made to me by those I meet at mediations is how boring it must be listening to everyone’s problems. How wrong that view is, as even after 30 years and 1200 mediations, the process constantly surprises and engages me. I constantly meet new situations and problems and different circumstances. Every new case introduces some new challenge. Week after week, I meet interesting and engaging people from every walk of life. They pay me the great compliment of taking me into their confidence, and talking frankly about all manner of highly personal matters. It has always been a great privilege to be allowed inside other peoples’ lives and to help them in some small way get to resolution of difficult situations. Mediation can lead to some remarkable settlements and life as a mediator is very definitely not boring at all.
Jonathon Goodwin has been involved in Solicitors Regulation for more than 20 years having prosecuted on behalf of the Solicitor’s Regulation Authority (SRA) and its predecessors, and has been involved in some of the leading cases relating to solicitors’ regulation. Here he offers invaluable insight into how to act when under investigation; he quotes: “The key is not to panic, but to seek advice as soon as possible”.
What are the most important actions to take when initially contacted by the SRA?
Faced with an investigation by the SRA or proceedings before the Solicitors Disciplinary Tribunal (SDT) many solicitors will feel overwhelmed, frightened and maybe asking the question: “Where on earth do I start?”. It is vitally important that solicitors should have regard towards protecting their ability to practice and to take all appropriate and necessary steps to give them the best possible chance of avoiding adverse consequences. Those subject to an investigation by the SRA or proceedings before the SDT, should seek expert advice, assistance and representation at the earliest possible stage.
What factors do the SRA often consider during their first initial steps of the investigation?
The SRA has the power to investigate those they regulate. The investigation may be commenced by an event within a firm, such as a report of misconduct, or complaint by a client or other party.
All relevant facts are collected which provides the solicitor under investigation with the opportunity to present an explanation. A failure to reply may lead to disciplinary action; the reply and other information provided may be used by the SRA for regulatory purposes.
This letter is referred to as Explanation with Warnings (EWW) letter. The response to the EWW is of crucial importance, as it will be relied upon by the SRA in reaching a decision as whether to further progress on the matter and in proceedings that commence before the SDT, in the event a referral decision to the Tribunal is made by the SRA.
The solicitor may also be subjected to a Forensic Investigation which will encompass consideration of the firms’ accounts, office systems and business arrangements, together with client files being reviewed and requests being made for further information and explanation as matters arise.
The investigation will often conclude with a final, recorded interview, which is another very important stage of the investigation process. The interview will be a summary of all matters identified as cause for concern. It can be challenging, and on occasion, potentially hostile in terms of the style of questioning and will frequently be used in subsequent disciplinary proceedings before the SDT.
What can solicitors do to protect their ability to practice if faced with a hearing before the Solicitors Disciplinary Tribunal?
Following the investigation stage the SRA can conclude matters by way of no further action, internal sanction within its own powers or refer a solicitor to the SDT.
It is crucial that any solicitor facing disciplinary proceedings is in a position to respond to the Tribunal’s directions and/or prepare his/her case in sufficient time to be able to put forward the best possible case to protect their ability to practice.
The Tribunal will then issue directions requiring, amongst other things, a solicitor to file an answer to the allegation statement. The period within which to file an answer is tight, but is an important and key step in the disciplinary process; it states which allegations are admitted and which are denied. The Tribunal applies the criminal standard of proof with the burden being on the SRA to prove its case. The Tribunal must be satisfied to the point where it feels sure that the allegation(s) are made out.
An order made is final and binding, subject to appeal. It is important to bear in mind that each case depends on its own facts and circumstances. The types of misconduct and allegations in proceedings before the SDT are wide and varied.
What would your advice be to solicitors facing an investigation by the SRA or proceedings before the SDT?
I have prepared a free but valuable guide which is available from my website www.jglaw.co.uk. The guide will assist those who are facing investigation by the SRA and/or proceedings before the Tribunal, but there is no substitute for expert advice and assistance.
It is vitally important that solicitors give themselves the best possible chance of protecting their ability to practice. The importance of the initial response to the EWW letter from the SRA, the conduct of the final interview and the Answer in Tribunal proceedings is vitally important requiring great care and consideration.
My passion is achieving for my client’s the best possible outcome, whether that be by persuasive written representations to the EWW SRA letter that result in no action or an internal sanction by the SRA, or a successful outcome following a hearing before the SDT.
Being the sixth largest economy in the world, India is rapidly expanding and becoming an appealing place for foreign investment, but in some ways, has developments to make until it matures like other competitive international markets. We speak with Sakate Khaitan, who spends his time in both UK and India, and expands on what India is doing to further its way up the international market.
You deal predominantly with insurance and litigation; what are the biggest challenges these present together, at an international level?
The litigation landscape has not altered significantly in the lower courts over time. However, there is significant progress towards clearing back log of matters in the higher courts. By some estimates the Supreme Court will have cleared its entire back log within the next couple of years.
Further recent changes to Indian arbitration law will in my view, go a long way in clearing back log of cases and reinforce sanctity of contract. These changes inter alia, require arbitration to conclude within 12 months of arbitrators being appointed. We are seeing a change in attitude of arbitrators and lawyers who are now both working towards meeting the deadline set by law. Additionally, with the launch of the Mumbai Centre for International Arbitrations my hope is an internationally recognised institutional arbitration framework will be established.
What do you find are the most disputed factors surrounding insurance and transactional work in India? How does it differ in the UK?
In the insurance sector, most disputes arise from coverage issues. The reason for such disputes is due to the pool of experienced claims handlers being shallow and loss adjusters not fully examining all facts that will permit a claims handler in determining coverage issues.
In transactional work, regulatory uncertainty causes delay and mismatch of valuation expectations deal failure.
The factors mentioned above are generally not seen in the UK market. The reasons for these differences is that the Indian market is still in its infancy while the UK is a developed market.
As the co-founder of the India Business Forum (IBF) at LBS, how do you encourage cross border investments?
Cross border deals have increased significantly. India has opened its borders to foreign direct investment and systematically demolished the licence Raj [i.e., rule]. This is led to increased inflow of capital and therefore, cross border deals.
It has become significantly easier for Indian entities making acquisitions and/or establishing presence outside India. We have seen some marque deals in the not too distant past such as the acquisition of Corus by the Tata Group and Novelis by the Aditya Birla Group.
This trend is likely to continue as corporations look to new markets for growth and Indian corporations look to acquire technology/brands to expand presence in western markets.
As a Senior Partner, how do you manage your team to ensure that they offer immense value to your clients?
Our firm is based on three core principles: excellence in service; superior client experience and respect for every individual. I lead by example and I encourage my team to believe in our core principles, set goals to grow knowledge, be empathetic and more than anything else, be happy.
In terms of insurance and reinsurance, how does India’s legislative progress compare to its neighbouring jurisdictions?
Recent legislative changes in the insurance sector have resulted in a significant increase in our work. These changes have permitted foreign joint venture partners to increase their holdings from 26% to 49% and also permitted foreign reinsurers to establish branch offices in India. Our specialisation in the sector has put us in a great position to win work in the sector and compete head to head with the largest Indian firms.
What progress do you think India still has to make?
A lot of positive steps have been taken in the recent past and a lot needs to be still done to make India business friendly. To expect a new regime to wave a magic wand to solve all problems, transient and endemic, is unrealistic. The government has taken steps in the right direction which includes amendments to the arbitration act and insurance act, a brand-new companies act and insolvency law, and the efforts that the government has been taking to digitalise the processes. Tax reforms are in the anvil. Next steps would be to take make regulatory processes smooth and certain and remove inefficiency, bureaucracy and uncertainty that our processes are riddled with.
Is there anything else you would like to add?
I would like to thank Mr. Padam Khaitan (Senior Partner Khaitan & Co.) for training me in my formative years, Clyde & Co for giving a big boost to my career by forming an association with my erstwhile firms ALMT Legal and Clasis Law and helping me understand the insurance market in great depth and my core team who have all continuously supported me since they have graduated from law school.
