MCI (P) 003/02/2023 issn 0219 – 6875 KDN PPS 1867/10/2015(025605) REGULATORS AREN’T GIVING UP ON CRYPTO YET HONG KONG MPs BANK ON THE CITY’S RESILIENCE CORRUPTION RISKS CALL FOR PROACTIVE MEASURES
Joint Ventures and Alliances – Guide to Negotiating Commercial Terms, Legal Structures and Documentation ALB VIRTUAL TRAINER & TESTIMONIALS WHAT YOU WILL ACHIEVE AGENDA REGISTRATION INFORMATION Virtual Workshop: Delivered via 2-Part Webinar 7-8 September 2023 3:00pm to 6:00pm (Singapore/Hong Kong/China Time) GMT +8 12:30pm to 3:30pm (India Time) GMT+5.5 11:00am to 2:00pm (UAE Time) GMT+4 OVERVIEW Joint ventures, or commonly known as ”mergerless merger” are popular options for businesses to consider when planning to expand into international markets. Companies need to evaluate the key commercial reasons and corporate objectives behind entering into joint ventures and understand how these can be reflected in the legal structure and documents. In addition, they must be willing to share the overall risks, costs, management, and success of the venture with the local partners. This 2-part virtual workshop will equip delegates with the essential knowledge and understanding of legal and commercial issues driving the setup of international joint ventures. Participants will look at case studies, examine sample documents and receive checklists to assist them with dealing with joint ventures following the course. • Recognise the commercial and legal problems that regularly arise during the life cycle of a joint venture • Understand the often sensitive issue of pre contract documents including the differences in common and civil law • Examine the different options of legal structures that can be selected depending on the commercial objectives and address the advantages and disadvantages of each option including limited companies, partnerships and contractual joint ventures • Overcome the challenges of decision making in a joint venture where parties are working to a common end but have different ultimate interests including minority shareholders, deadlock and options such as ‘Russian Roulette’ and Texas Shoot Out’ • Benefit from case studies, examine sample documents and receive checklists to better deal with joint ventures PRICING Early Bird Rate (Ends 7 August 2023) USD 810 (Before GST) USD 874.8 (After GST) Standard Rate USD 920 (Before GST) USD 993.6 (After GST) CONTACT Romulus Tham (65) 6973 8248 / romulus.tham@tr.com REGISTER www.gevme.com/JVSept23 WEBSITE www.legalbusinessonline.com/JVSept23 GROUP PRICE SAVE AN ADDITIONAL 20%. Register five participants from your organisation and the 5th person attends for free! “Arun conducted the course well blending theory and practical needs” “He has excellent communication skills and extensive international experience to share as well as real world situations” “Always pleased to take questions and gives relevant examples with his answers and useful workable advice on drafting” Arun Singh (Prof) OBE, FRSA is an international lawyer and consultant to an international law firm. He was formerly a partner and head of commercial law at KPMG Legal and partner at Masons (now Pinsent Masons). Arun has advised on disputes and collaborations in a wide range of jurisdictions including Europe, countries in West and East Africa, India, Bangladesh, China, Hong Kong, Saudi Arabia, UAE, Qatar, Pakistan, Libya, Jordan, Syria, the US, Caribbean, Russia, Israel, Lebanon, Egypt, Thailand and Singapore. Arun is cited and ranked in the Chambers Guide to the world’s leading lawyers. He concentrates on international investment, joint ventures, licensing of technology, research and development, M&A, energy, outsourcing and corporate governance in developed and emerging markets; he also handles international legal risk management matters. Arun advises a range of international organisations and is a visiting professor in International Business, Leadership and Negotiations at Salford University Business School, senior associate at Oxford University’s Institute of Legal Practice and teaches international leadership and negotiations at the University of Cambridge. He has facilitated programmes in Europe, Asia, the Middle East and the US. He is a recognised corporate educator and a non-executive director of two international investment companies – one of which is listed on the London Stock Exchange, chairing the Audit Committee and Investment Committee. He was appointed an OBE by HM the Queen in January 1999 for services to international trade, investment and intercultural management. Arun is an editor and contributor to a number of publications including Business and Contract Law (a Thorogood Special Report) and How to Lead Smart People – Leadership for Professionals (Profile Books), a facilitator for company programmes and an experienced speaker at international corporate conferences. Participants who wish to obtain CPD Points are reminded that they must comply strictly with the Attendance Policy set out in the CPD Guidelines. For this activity, this includes logging in at the start of the webinar and logging out at the conclusion of the webinar on each day of the activity, and not being away from any part of the webinar for more than 15 minutes on each day of the activity. Participants may obtain 3 Public CPD Points for each day of the event on which they comply strictly with the Attendance Policy. Participants who do not comply with the Attendance Policy will not be able to obtain CPD Points for attending the activity. Please refer to http://www. sileCPDcentre.sg for more information. 6 Public CPD Points (3 Public CPD Points Per Day) Practice Area: Corporate /Commercial | Training Level: General • Introduction • Pre-Contract Documents – Heads Of Terms/MoU With Sample Document • Selecting the Legal Structure that Reflects Commercial Objectives – Key Determinants • Main Joint Venture Structures – Advantages & Disadvantages • Decision Making • Deadlock & Default • Transfer of Shares • Exit, Termination and Change • Case Studies • Sample documents and checklists
1 ASIAN LEGAL BUSINESS – JUNE 2023 WWW.LEGALBUSINESSONLINE.COM COVER STORY 20 ALB Top 15 Southeast Asia Litigators 2023 The breadth of legal talent available throughout Southeast Asia is impressive. All this talent is in full display in this ranking, which received entries from seven countries across the region. By Asian Legal Business Plus: - Drew & Napier - UMBRA – Strategic Legal Solutions FEATURES 16 Seeking a balance The year 2022 was a catastrophic one for the global crypto industry. However, Asian jurisdictions like Singapore, Hong Kong and Japan have been realistic in acknowledging that crypto isn’t going away any time soon. Instead, they seek to strengthen cryptocurrency regulations and maintain their balancing act in attempting to minimise speculative and compliance risks. 24 ALB MENA Super 50 2023 ALB highlights 50 exceptional lawyers from the MENA region who have distinguished themselves through outstanding client service. The lawyers were selected based on a client survey. 26 Nickel all the way Nickel companies are a driving force behind what is being seen as a record year for public listings in Indonesia, with the listings pointing to the opportunities in Indonesia’s blossoming nickel industry. And this is keeping both mining and capital markets lawyers busy. 28 Waiting for the turnaround For all the talk of a robust rebound in 2023, Hong Kong’s dealmaking scene has been soft so far, compounded by lasting geopolitical upheavals and a slower-thanexpected economic recovery in Mainland China, and as a result, legal work hasn’t quite returned in the same way. Law firm leaders, however, still see a number of business opportunities in a city famed for its resilience. 32 Heightening risks With countries beginning to open their borders completely, and corporates revitalising expansion efforts or diversifying their supply chains into growth markets across Southeast Asia, corruption and other compliance risks are constantly increasing. Lawyers say that companies need to step up their vigilance. 36 Two become one The planned megamerger between Allen & Overy and Sherman & Sterling has sent shockwaves across the legal world, and ignited a tidal wave of interest in merging in an industry thriving on loyal client relations and expansive institutional networks. ALB delves into the matching dance between law firms, including the strategic considerations beforehand and factors that can make or break the union. BRI EFS 3 The Briefing 4 Forum 5 Deals 9 Q&A 12 Explainer 13 Appointments Plus: - CIETAC CONTENTS 26 Nickel all the way REUTERS/Yusuf Ahmad
2 ASIAN LEGAL BUSINESS – JUNE 2023 WWW.LEGALBUSINESSONLINE.COM Asian Legal Business is available by subscription. Please visit www.legalbusinessonline.com for details. Asian Legal Business has an audited average circulation of 11,402 as of 30 September 2016.Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Asian Legal Business can accept no responsibility for loss. MCI (P) 003/02/2023 issn 0219 – 6875 KDN PPS 1867/10/2015(025605) Thomson Reuters 18 Science Park Drive Singapore 118229 / T (65) 6775 5088 / F (65) 6333 0900 10/F, Cityplaza 3, Taikoo Shing, Hong Kong / T (852) 3762 3269 www.thomsonreuters.com RANAJIT DAM Managing Editor, Asian Legal Business, Thomson Reuters Recognising Southeast Asia’s Best Litigators In the ever-evolving legal landscape of Southeast Asia, where complex disputes and legal challenges are a constant, the role of litigators becomes increasingly crucial. These legal warriors navigate the intricacies of the courtroom, advocating for their clients’ rights and delivering justice. It is with great pride that we present the June issue of ALB, featuring the list of Southeast Asia’s Top 15 Litigators. The selection process was meticulous and rigorous, with our editorial team conducting extensive research, analysing case histories, and consulting with legal experts across the region. We sought litigators who not only possessed impeccable legal skills but also demonstrated exceptional strategic thinking, unwavering dedication, and a track record of achieving remarkable results for their clients. This year’s list is a testament to the immense talent and expertise found within Southeast Asia’s legal community. From the bustling metropolises of Singapore and Kuala Lumpur to the vibrant legal scenes in Mumbai and Jakarta, these litigators represent the very best in their respective jurisdictions. They have proven their mettle across diverse areas of law, including commercial litigation, intellectual property, arbitration, and white-collar crime, among others. Each litigator on this prestigious list brings a unique perspective and approach to their practice, enriching the legal profession with their knowledge and experience. Their tireless advocacy, innovative strategies, and ability to navigate complex legal terrain have earned them the respect and admiration of their peers, clients, and the judiciary. We hope this list serves as a source of inspiration for aspiring litigators and a testament to the exceptional legal talent in Southeast Asia. To the litigators honoured in this issue, we extend our warmest congratulations. Your dedication, professionalism, and commitment to justice are truly commendable. May your success continue to inspire and propel the legal profession to new heights. HEAD OF LEGAL MEDIA BUSINESS, ASIA & EMERGING MARKETS Amantha Chia amantha.chia@thomsonreuters.com MANAGING EDITOR Ranajit Dam ranajit.dam@thomsonreuters.com ASIA JOURNALIST Sarah Wong sarah.wong@thomsonreuters.com RANKINGS AND SPECIAL PROJECTS EDITOR Wang Bingqing bingqing.wang@thomsonreuters.com COPY & WEB EDITOR Rowena Muniz rowena.muniz@thomsonreuters.com SENIOR DESIGNER John Agra john.agra@thomsonreuters.com TRAFFIC/CIRCULATION MANAGER Rozidah Jambari rozidah.jambari@thomsonreuters.com SALES MANAGERS Hiroshi Kaneko Japan (81) 3 4520 1192 hiroshi.kaneko@thomsonreuters.com Jonathan Yap Indonesia, Singapore (65) 6973 8914 jonathan.yap@thomsonreuters.com Krupa Dalal India, Middle East, Singapore (91) 22 6189 7087 krupa.dalal@thomsonreuters.com Romulus Tham Southeast Asia (65) 6973 8248 romulus.tham@thomsonreuters.com Steffi Yang South and West China (86) 010 5669 2041 qifan.yang@thomsonreuters.com Steven Zhao China Key Accounts (86) 10 6627 1360 s.zhao@thomsonreuters.com Yvonne Cheung China Key Accounts, Hong Kong and Korea (852) 2847 2003 yvonne.cheung@thomsonreuters.com SENIOR EVENTS MANAGER Julian Chiew julian.chiew@thomsonreuters.com LEAD AWARDS RESEARCER Lokesh Bogati lokesh.bogati@thomsonreuters.com
3 ASIAN LEGAL BUSINESS – JUNE 2023 WWW.LEGALBUSINESSONLINE.COM THE BRIEFING: YOUR MONTHLY NEED-TO-KNOW CORPORATE LEGAL DEPARTMENTS (Reuters) A recent survey has found that those in corporate law departments are largely optimistic about the potential for generative AI and programs such as ChatGPT in performing both legal and non-legal work. In total, 82 percent of respondents say generative AI can be applied to legal work, while 54 percent believe it should be applied to legal work, roughly the same rate as their law firm counterparts. Similarly, 70 percent believe these tools should also be applied to non-legal work. The survey, conducted in late April by the Thomson Reuters Institute, gathered insight from more than 580 respondent lawyers and legal professionals within corporate law departments in the United States, United Kingdom, and Canada. The survey forms the basis of a new report, ChatGPT and Generative AI within Corporate Law Departments, which takes a deep look at the evolving attitudes towards generative AI and ChatGPT within departments, measuring awareness and adoption of the technology as well as lawyers’ views on its potential risks. Median base salary for first-year associates at U.S. law firms in 2023, an increase of $35,000 from 2021, according to NALP, an association of legal career professionals. SEE USE CASES FOR GENERATIVE AI $200,000 (Reuters) Two of the largest U.S. law firm leases signed in the first quarter of 2023 involved big firms downsizing their headquarters in major cities, according to commercial brokerage Savills Inc, as many law firms shrink their physical footprints Cadwalader, Wickersham & Taft shaved off about 34.7 percent of its office space in New York, or roughly 120,000 square feet, when renewing its lease during Q1 2023, Savills said. Four large leases over 100,000 square feet signed in the first quarter helped bump up the quarterly leasing volume to 1.6 million square feet which tracks law firm leases over 20,000 square feet across major U.S. markets. Like Cadwalader, law firm Katten Muchin Rosenman chose to keep its headquarters in the same building when it signed a renewal lease last quarter. 30% - Increase in funding requests at ligitation funder Omni Bridgeway this fiscal year compared with a year ago, as clients seek to save costs, avoid borrowing and offload risk in a tough economy. U.S. LAW FIRM LEASING REBOUNDS, BUT OFFICES SHRINK IN THE NEWS U.S. startup Lega has formally announced the launch of an LLM provisioning and governance platform that will enable law firms to put guardrails around how employees explore new technologies. The startup is founded by former Reynen Court president Christian Lang. Rajah & Tann Asia has launched a data and digital economy regional sector group, which combines its legal, technology, and cybersecurity services. The group will see lawyers collaborate with cyber forensic experts, legal engineers, and data analysts, among others. U.S. fast-food chain Taco Bell seeks to free “Taco Tuesdays” by filing petitions to cancel trademark registrations over the phrase. “TO DEPRIVE ANYONE OF SAYING ‘TACO TUESDAY’ – BE IT TACO BELL OR ANYONE WHO PROVIDES TACOS TO THE WORLD – IS LIKE DEPRIVING THE WORLD OF SUNSHINE ITSELF.” QUOTE UNQUOTE
4 ASIAN LEGAL BUSINESS – JUNE 2023 WWW.LEGALBUSINESSONLINE.COM BRI EFS FORUM TREAD CAREFULLY ANDREW WONG, innovation and knowledge management solutions product manager, Dentons Rodyk As a global law firm committed to upholding professional and ethical obligations, we approach disruptive technologies with curiosity, at the same time, caution, remembering our duties to clients on data privacy and confidentiality. We adopt a measured approach, prioritising education and understanding how the technology operates. This allows us to make informed policy decisions regarding its acceptable use within the legal domain. Generative AI holds significant transformative potential and has already gained widespread adoption. However, it also comes with limitations and security implications that need to be addressed. For example, tools such as ChatGPT cannot guarantee the veracity of their output, so users must exercise caution and independently verify the results. To tackle these challenges, we have adopted a two-pronged approach: - We have adopted and communicated Dentons’ global policy on the acceptable use of generative AI, ensuring that all firm members are aware of the guidelines. Additionally, we have circulated an internal white paper providing extensive education and background information on the topic while highlighting specific risks and considerations relevant to the legal industry. - We have organised in-house sessions that serve as both educational tools and forums for vital discussions on generative AI. These enable our firm members to stay informed on the latest developments, share insights, and collectively address the associated challenges. By taking proactive measures, we ensure that we stay ahead of the curve in leveraging generative AI while mitigating any potential risks it may pose, thereby enabling us to navigate this evolving technology landscape responsibly and effectively. DANIELLE BENECKE, founder and global head of machine learning practice, Baker McKenzie Baker McKenzie has been piloting OpenAI’s GPT series and other large language or foundation models since well before the release of ChatGPT when other firms and industry players started to take notice. Client and industry feedback is that our application and understanding of the impact of AI is market-leading, including more recent advances in generative AI. There’s an important distinction between a firm or other industry player’s use of an application like ChatGPT, on the one hand, and the use of the underlying large language models on the other. For instance, we do not allow our people to use an external “consumer” app like ChatGPT in connection with confidential client data or information. It goes without saying that such use would raise significant legal privilege, data governance, IT security and other risks. For other types of use cases, we have adopted what we call a “permission and support” governance framework. We don’t have a blanket prohibition but ask teams who want to work with such apps or models to centrally coordinate so we can: 1. manage the risks; 2. understand use cases and where demand is coming from; and 3. provide guidance and support. We also have a growing set of internal tools and capabilities that enable the use of models such as the GPT series with appropriate safeguards including around IT security, professional responsibility and client permission. Legal industry players need to think about their governance and investment strategy across multiple commercial and technology stack layers. The tech and market conversation have already evolved to a point where this is not about any one app - it’s about using foundation models and apps powered by them more broadly. ANDREW WONG With the emergence of generative artificial intelligence heralding a new era of productivity, law firms are weighing the use of AI to improve efficiencies and cut costs at a time when economic uncertainty is dampening revenue prospects. But as the technology’s inherent flaws come to light, not to mention the potential for abuse, firms need to move with caution to deal with the flip side of AI. DANIELLE BENECKE MICHELLE MAHONEY HOW IS YOUR FIRM TAKING MEASURES TO ADDRESS THE RISKS ASSOCIATED WITH USING AI WHEN EMBEDDING THESE SPECIALIST TOOLS IN YOUR OPERATING SYSTEM TO COMPLETE LEGAL TASKS AND DRIVE BUSINESS OUTCOMES?
5 ASIAN LEGAL BUSINESS – JUNE 2023 WWW.LEGALBUSINESSONLINE.COM BRI EFS MICHELLE MAHONEY, executive director of innovation, King & Wood Mallesons King & Wood Mallesons has been using AI models on client engagements since 2015. However, with any new technology, large language model (LLM) tools like ChatGPT are not deterministic. They carry risks around reliability, accuracy, providence, output quality and privacy. To mitigate these risks, the firm has implemented a number of guardrails. While the firm encourages staff to learn, test and explore embedding, prompt engineering and elaboration skills with tools like ChatGPT, no client data (in any format), firm data or information about individuals is allowed to be used during experimentation and learning. As the generative AI model landscape continues to evolve at pace, we are developing a robust AI risk management framework, an AI ethical use policy, as well as training for employees to support implementation. We are also watching key developments worldwide, including the recent passing of the EU AI Act, discussion surrounding AI inputs (data used when training an AI system) and outputs (data generated by an AI system), and the application of copyright law. Earlier this month, Japan decided that using datasets for training AI models does not violate copyright law. King & Wood Mallesons remains committed to supporting innovation and building the digital literacy skills of our people. We are excited by the role AI tools will play in how we deliver value for our clients and new growth opportunities. DEALS N/A Mubadala’s purchase of stake in Fortress Investment Group from SoftBank Deal Type: M&A Firms: Kirkland & Ellis; Morrison & Foerster; Shearman & Sterling Jurisdictions: Japan, UAE, U.S. $1.4 BLN Brookfield Asset Management’s sale of properties Brookfield India and GIC Deal Type: M&A Firms: Khaitan & Co; Shardul Amarchand Mangaldas; Trilegal Jurisdiction: India, Singapore $1.1 BLN SBI Holdings’ takeover bid for SBI Shinsei Bank Deal Type: M&A Firms: Anderson Mori & Tomotsune; Nishimura & Asahi Jurisdiction: Japan $743 MLN Nippon Express Holdings’ planned purchase of stake in Cargo-Partner Deal Type: M&A Firms: Freshfields Bruckhaus Deringer; Schoenherr Attorneys Jurisdictions: Austria, Japan $570 MLN Blackstone’s acquisition of International Gemological Institute Deal Type: IPO Firms: Cyril Amarchand Mangaldas; Freshfields Bruckhaus Deringer; Simpson Thacher & Bartlett Jurisdictions: China, France, India, U.S. $500 MLN Establishment of Japanese renewables platform Nozomi Energy Deal Type: Project Firm: Linklaters Jurisdictions: Japan, UK $342 MLN JSW Infrastructure’s planned IPO Deal Type: IPO Firms: Khaitan & Co; Trilegal Jurisdiction: India $218 MLN Samsung Display’s acquisition of eMagin Deal Type: M&A Firms: Goodwin Procter; O’Melveny & Myers; White & Case Jurisdictions: Korea, U.S.
6 ASIAN LEGAL BUSINESS – JUNE 2023 WWW.LEGALBUSINESSONLINE.COM BRI EFS Credit Suisse (CS) might be no more after it was forced into the arms of rival UBS, but the legal backlash arising from the government-orchestrated deal is just gathering storm. With investors worldwide (including in Asia) decrying the Swiss authorities for evaporating billions of dollars in additional tier one (AT1) bonds, law firms are gearing up for protracted legal battles. But first, a bit of background. CS met its sudden demise in March, as mounting fears for the troubled Swiss lender’s liquidity essentially penned a swift end to its 167-year history. This episode not only put regulators on heightened alert, but also introduced a fresh slew of legal questions facing the Swiss authorities. In a bid to preserve the golden brand of Swiss banking, the Swiss government swooped in to orchestrate a shotgun marriage between CS and its local rival, UBS, hoping to smother a wider financial crisis of global implications reminiscent of 2008. Some level of confidence seemed to have been restored, and the global banking system is still standing. But the government’s bold emergency rescue has unleashed a foreseeably protracted legal fight with multiple fronts. Lawsuits have been filed from countries including the United States, the UK, and Singapore, against the Swiss financial regulator, Finma. Sanctioned by two emergency ordinances, Finma greenlit the wipe-out of $17 billion of AT1 bonds issued by CS to make the deal easier to swallow for UBS. As a result, holders of these high-risk convertible bonds took the bullet, while shareholders were handed $3.25 billion in UBS shares, in a move that appeared to bust the debt recovery rulebook wide open and caused uproar amongst empty-handed investors feeling blindsided by the move. Litigation powerhouse Quinn Emanuel Urquhart & Sullivan led the charge against Finma by joining forces with several law firms representing AT1 bondholders across different jurisdictions. Their case is centred on the “proportionality” and “good faith” of Finma’s decision following the Swiss Constitution. Across the Asia-Pacific region, Singapore Big Four firm Drew & Napier is working with Swiss firm Nater Dallafior to help two groups of around 90 bondholders bring administrative law challenges based on Swiss legal principles. “Our clients are seeking to, among other things, set aside the Finma Order with CS reversing the write-down and cancellation of all AT1 bonds and acknowledging its obligations to bondholders with retroactive effect to the time immediately before the write-down,” explains Benedict Teo, head of banking and financial disputes at Drew & Napier. “The challenge rests on the basis that Finma’s exercise of its discretion to order CS to write down the AT1 bonds was improper and/or invalid and that the order to CS to write down the bonds violated the principle of proportionality and was issued in bad faith,” notes Teo. Mahesh Rai, a dispute resolution director, is working on the matter with Teo. Some law firms representing investors based in Asia are pursuing alternative legal strategies to seek redress. One of these arguments accused Finma of breaching investment protection clauses enshrined in the multilateral treaties signed between Switzerland and these Asian countries, including Singapore, China, Japan, and South Korea. Shaun Leong, a dispute resolution partner at Withers KhattarWong, says his firm is taking a rights-centric approach based on international investment law when representing “a massive group of investors, funds to family offices” mainly from Singapore. There are questions “as to what extent can non-Swiss based investors avail themselves of any arguments arising from the Constitution. It is also not immediately clear how the administrative action would result in compensation to investors,” says Leong. However, “Investors have rights, and we hope to be able to challenge against any arbitrary exercise of powers,” he adds. Insurance specialist RPC advises institutional intermediaries, who are under pressure from their bondholder clients and bondholders in Asia, according to disputes and investigations partner Jonathan Crompton. In addition, “we are in the process of advising bondholders in Asia on practical options that will maximise their chances of recovering losses from the bonds in a cost-effective manner,” says Peter Kwon, a financial disputes and advisory partner at RPC. VIOLATING EXPECTATIONS Traditionally known as the “absolute priority rule” in corporate reorganisation and bank restructurings, creditors cannot be forced to accept cuts if shareholders are not completely wiped out. As such, lawyers representing bondholders accuse Finma of violating the investors’ legitimate market expectations in a rebuke to the argument that it was never codified that the AT1 instruments are senior to equity. “One of the key questions we need to ask is, ‘What legitimate expectations did the AT1 bondholders have in the face of such an extraordinary intervention by the state?’ When it comes to debt securities, this is a legal question and not merely a practical one, which is evident from extensive risk factors set out in the relevant documentation,” says RPC’s Kwon. AS BACKLASH MOUNTS OVER CREDIT SUISSE’S AT1 WIPE-OUT, ASIAN BONDHOLDERS READY LAWSUITS
7 ASIAN LEGAL BUSINESS – JUNE 2023 WWW.LEGALBUSINESSONLINE.COM BRI EFS Leong of Withers points out that bondholders’ expectations that their investment ranked above equity go beyond common-sense legal hierarchy. “Bondholders are not granted the powers and privileges that come with being a shareholder,” says Leong. Drew’s Teo concurs, drawing on an industry-wide rebuttal to the Swiss decision. “European regulators, including the Bank of England and the European Central Bank, as well as the Monetary Authority of Singapore, issued statements reassuring investors that AT1 bondholders rank above shareholders under the resolution frameworks in their jurisdiction. These moves underscore the long-established practice of giving bondholders priority over shareholders in debt recovery,” says Teo. CONTRACTUAL RIGHTS On May 18, a Swiss court handed the first legal victory to aggrieved bondholders by ordering Finma to release the fateful decree asking CS to wipe out their investments, giving claimants a boost of visibility into the core legal issue. Finma has insisted that the order was justified based on the AT1 prospectuses, which stipulated that writedowns could be triggered if a “Contingency Event” or a “Viability Event” occurs. It was undisputed that a “Contingency Event” – which required the common equity tier 1 capital ratio of CS to fall below seven percent – did not materialise. But debates have been raging over whether there arose a “Viability Event,” where in one scenario, Finma must determine that a write-down is essential to prevent CS from becoming insolvent or from ceasing to carry on its business while “customary measures” to improve the bank’s capital adequacy are at the time “inadequate” or “unfeasible.” Alternatively, there must be an “irrevocable commitment of extraordinary support from the Public Sector” that improves CS’ capital adequacy. Alluding to the second scenario, Finma stated in its decree - cited by the Financial Times - that it has satisfied the so-called “Viability Event” clause to give CS the power to write off the AT1 instruments by itself because governmentbacked facilities had “a direct positive effect on the liquidity and capital situation” of the Swiss lender. “There are very specific criteria that need to be met for CS to write down its AT1 bonds under a Viability Event, and there appears to be a real question about whether all of these criteria were met properly,” says RPC’s Crompton. Teo of Drew believes the emergency ordinances – issued by the Swiss government to give Finma a “clearer legal basis” to wipe out the bonds - speak volumes to the viability, or lack thereof, of the contractual conditions justifying the action. “If (CS’) contractual entitlement to do so were clear, it would not have been necessary for the Swiss Federal Council to pass the emergency ordinance to empower Finma to order the write-down and for Finma to do so accordingly,” points out Teo. He also notes that even CS reportedly disputed privately that a “Viability Event” had been triggered to warrant a write-down. “This lends support to the view that the contractual conditions for the write-down had not been met,” notes Teo. Adds Withers’ Leong: “While there may be a contractual provision in the bond documentation that allows for the AT1 bonds to be written down, the law could in some instances imply or read provisions into the contract. It would also likely be important to understand whether the power to write down was exercised reasonably and within the applicable legal limits.” Going forward, Teo’s team will likely be filing supplemental submissions and expect Finma and CS to respond to the appeals. “Should the appeals be successful, and depending on the grounds of the Court, this case may provide useful guidance on how AT1 bonds are dealt with in similar situations in the future,” says Teo. And as a key takeaway, Leong suggests that investors should consider “the relevant provisions in their documentation, and ideally have a sense of the applicable dispute resolution options arising from any potential disputes on their investments” to shun a repeat of similar predicaments. The logo of Credit Suisse is pictured on a building in Zurich, Switzerland, April 4, 2023. REUTERS/Pierre Albouy
8 ASIAN LEGAL BUSINESS – JUNE 2023 WWW.LEGALBUSINESSONLINE.COM BRI EFS Image: Aletkina Olga/Shutterstock.com Despite the Hong Kong government’s painstaking efforts to pioneer a technological transformation of the city’s industries, the pace of digitalisation has been lagging among the city’s judiciary and law firms. For example, there have been few takers for an electronic litigation system, which the city’s chief justice intends to extend to all levels of the courts next year. So far, only around 43 out of 900 law firms have reportedly signed up for the system, even as the COVID-19 pandemic discouraged physical interactions. Law firms have rarely been known for agility. But this apparent disconnect between the judiciary’s aspiration and an industry-wide aversion towards technology adoption could risk throttling the Chinese territory’s aspiration to clinch top-class status of legal services in the region, where rival jurisdictions, including Singapore, have been doubling down on investing in legal technology and encouraging adaptation. Nick Chan, a partner at Squire Patton Boggs with a deep technological background, says the key lies in incentives, or lack thereof, in the case of Hong Kong. “The approach adopted by Hong Kong’s judiciary seems to be overfocused on establishing ‘equal treatment,’ whether clerks and law firms take the initiative to embrace e-court filing. For example, the cut-off deadline for submitting documents to the court is the same for in-person or online filing,” says Chan. The former chair of eBRAM International Online Dispute Resolution Centre notes that many users chose to stay with the e-filing system partly for convenience. In addition, “filing clerks have shared that filing in person may still get the benefit of an immediate reminder from an experienced court staff if there are obvious mistakes, whilst if one files online, there is a risk that the error won’t be identified and rectified before the deadline has passed.” “Perhaps improvements can be made to enable the system to be AIempowered to scan the document more intelligently for logical errors, and common/obvious mistakes, including a missing signature or copy/spelling error, and to reduce repetitive form-filling further. If the system is more user-centric with clear time and cost incentives for both law firms and their litigations clerks to embrace the online systems fully, there will be more time and cost efficiency for the judiciary and this will be great for the wider society to reduce delay and cost of justice.,” he adds. Chan thus advises the judiciary to consider the pull and push forces in technology adoption. “It would help to adopt more design thinking, user-centric approach and advanced lawtech in future system upgrades/enhancements and clear policy support to encourage law firms and staff to fully utilise what this great system has to offer,” says Chan, who also urges for there to be more training and funding support for more lawyers and support staff. The slacking adaptation of the e-litigation system also came down to the development of the software itself. According to Chan, insufficient consultation and a lack of industry and private sector engagement play a role in the current situation. For starters, Chan advises against the traditional practice of rewarding the lowest bidding IT firm when outsourcing digital system contracts. Chan believes the conduct naturally begs the question, “is it necessarily the best technology acquired?” Also, with more dominant IT firms edging their smaller rivals out of the arena, a monopolistic trend has gradually taken hold, which could risk further smothering competition and incubation of ideas. The inept bidding period was then followed by an insubstantial consultation process, according to Chan. “Consultation with the industry would be more productive and secure more ‘buy-in’ from the profession if consultation and userrequirement surveys are carried out at inception/planning rather than during pilot testing,” recalls Chan. For instance, when building the system from scratch in the early stages, the government would be better off establishing an advisory board staffed with talents with sufficient knowledge in law as well as technology rather than developing it behind closed doors. Chan, who spearheaded the development of the online dispute resolution platform and LegalCloud at eBRAM, says policymakers and industry players in Hong Kong should take stock of the digital transformation of mainland China’s judicial system. With an emphasis on “judicial digitalisation and transparency,” mainland courts have enabled livestreaming of trials and online circulation of judgments partially spurred by the pandemic. The Futian People’s Court in Shenzhen alone has streamlined more than 121,000 trials, with China’s supreme court holding over 7,600 broadcasts, according to the website China Court Trial Online. But Chan remains optimistic of Hong Kong’s digital potential and is not worried that the underdevelopment of e-litigation system will undercut Hong Kong’s appeal as a regional arbitration hub. “Hong Kong is building a strong reputation in lawtech, and the judiciary should continue to lead the world in this space as well,” he adds. LAGGING DIGITALISATION STYMIES HK’S LEGAL AMBITIONS
9 ASIAN LEGAL BUSINESS – JUNE 2023 WWW.LEGALBUSINESSONLINE.COM BRI EFS Q&A ‘WE SEE OURSELVES GROWING AGGRESSIVELY’ In a subdued year for Indian law firm hiring, Trilegal added lateral partners at pace, including 10 in April alone, as the firm crossed 100 equity partners. Partners Sridhar Gorthi and Nishant Parikh, who sit on the firm’s management committee, share with ALB how they are looking at the additional talent to power Trilegal’s offerings in a liberalising legal market while paying close attention to cultural assimilation and talent management. ALB: Tell us what is driving the latest hiring streak. How does it align with your overall growth strategy? Sridhar Gorthi and Nishant Parikh: Our focus remains on strengthening the quality of our service offering and continually investing in our core values of transparency, meritocracy, and equity. As the firm grows from strength to strength, it attracts the best talent as partners see themselves achieving their long-term goals in alignment with these values. So, we wouldn’t call it a hiring strategy, rather, our ability to promote or attract the best lawyers is bolstered by the proven strength of our platform. ALB: What kind of firm culture are you looking to build, and how do you ensure new hires at various levels are integrated into this firm culture? Gorthi & Parikh: Transparency, meritocracy and collaboration are the defining values of our firm’s culture. These values attract like-minded professionals, and we have seen that integration of new members into our firm has been seamless. In fact, many partners who have joined us laterally are today the biggest brand ambassadors of our culture and values. Having a consistent, transparent, and rules-based system obviously helps as well – our partners have a great deal of clarity on what is expected of them, how the firm is performing, and on their role and remuneration. This clarity builds collaboration and trust, which are the bedrock of our culture. ALB: Are there plans to further expand the firm’s partner base in the near future, and if so, what factors will be considered in determining the timing and scale of such expansion? Gorthi & Parikh: Trilegal has strengthened its position in the market through sustained organic and lateral growth over the years. We are very bullish on the India growth story and see ourselves growing aggressively in the coming years. We are confident that our firm’s values and unique structure will continue to attract the right candidates and drive its growth. ALB: India introduced new rules liberalising its legal market. What outcomes are you anticipating as a firm, and what measures are you putting in place to ensure Trilegal maintains its competitive edge? Gorthi & Parikh: We are optimistic that the rules notified by the Bar Council of India will promote the growth of the legal profession in India. We believe the Indian legal market can thrive in response to the dynamic injection of new participants and opportunities to innovate and stay competitive. We welcome the move and look forward to the potential opportunities these regulations could create for Indian law firms to expand their support for clients in global markets. We are excited by the opportunities created by digital innovation and are investing strategically in this area. In the last few years, our firm has also invested in environmental, social and governance (ESG) initiatives, developed a dedicated Corporate Social Responsibility program, and taken steps to enable and accelerate Diversity and Inclusion at work. Our efforts have been commended, and we have been recognised as an Employer of Choice for legal talent by Asian Legal Business and as the Best Law Firm to Work in India by Vahura. SRIDHAR GORTHI NISHANT PARIKH “Having a consistent, transparent, and rules-based system obviously helps as well – our partners have a great deal of clarity on what is expected of them, how the firm is performing, and on their role and remuneration. This clarity builds collaboration and trust, which are the bedrock of our culture.” Image: creativepriyanka/Shutterstock.com
10 ASIAN LEGAL BUSINESS – JUNE 2023 WWW.LEGALBUSINESSONLINE.COM BROUGHT TO YOU BY CIETAC 中国-拉丁美洲国际仲裁论坛成功举办 China-Latin America International Arbitration Forum Successfully Held On May 30, 2023, China-Latin America International Arbitration Forum (“the Forum”) was successfully held in Beijing. The Forum was organized by China International Economic and Trade Arbitration Commission (CIETAC) and supported by 10 arbitration institutions and international organizations from Latin America and Spain. Wang Chengjie, Vice Chairman and Secretary General of CIETAC and José María Alonso, Chairperson of the Madrid International Arbitration Center (CIAM), attended the opening ceremony and gave the opening remarks. María Agnes Salah, Vice President of the CAM Santiago Board of Directors, gave the opening remarks online. Zhang Shuming, Deputy Chief Judge of the Fourth Civil Division of the Supreme People’s Court of China (SPC), attended the opening ceremony and delivered the keynote speech. Diplomats of Embassy of the Republic of Chile (Chile), Embassy of the Republic of Peru (Peru) and Embassy of the Republic of Argentina (Argentina) attended the opening ceremony and the following sessions. Gu Yan, Vice President of CIETAC Arbitration Court, was the moderator of the opening ceremony. The scene of the forum In his opening remark, Secretary General Wang Chengjie noted that in recent years, the cooperation between China and Latin America has been more consolidated. So far, 21 Latin American countries have signed the “Belt and Road” cooperation documents with China. Despite that the world economic environment is complicated and volatile, the trade and investment volume between China and Latin America has been growing steadily, becoming a global highlight. In this context, cross-border commercial disputes gradually arose. As an internationally accepted dispute resolution mechanism, arbitration plays an important role in resolving disputes and promoting international economic and trade cooperation. As the first foreignrelated arbitration institution in China, with more than 60 years of experience in foreign-related commercial dispute resolution, CIETAC has maintained advanced arbitration rules, a panel of professional arbitrators and provided diversified dispute resolution services in handling China-Latin America commercial disputes. thus is able to meet the constantly changing needs of the parties to resolve disputes. In the future, CIETAC hopes to strengthen cooperation with more Latin American institutions, continue to stimulate the innovation of rules and practices, strengthen talent training and team building, and improve international communication, so as to make arbitration play its due role in promoting the economic and trade development, and ensuring the stability and prosperity of of China and Latin America. Wang Chengjie, Vice Chairman & Secretary General of CIETAC, giving the opening remark Chairperson José María Alonso pointed out in his remark that 2023 is the 50th anniversary of diplomatic relations between China and Spain. In recent years, the two countries have carried out extensive and in-depth cooperation in the economic and trade. CIETAC and CIAM has maintained the friendship for a long term. The two sides hope to take the Forum as an opportunity to further explore effective cooperation and contribute to the development of dispute resolution in hispanic countries. (Left) José María Alonso, Chairperson of CIAM, giving the opening remark; (Right) María Agnes Salah, Vice President of the CAM Santiago Board of Directors, giving the opening remark Vice President María Agnes Salah said that China and the Chile have maintained a long friendly diplomatic relation. The two countries have signed the free trade agreement. China has become one of the most important trade partners of Chile. In the face of a range of commercial disputes brought about by frequent trade and economic exchanges, CIETAC and CAM Santiago shall work together to provide services with higher quality to meet the evolving demands for dispute resolution. In his keynote speech, Deputy Chief Judge Zhang Shuming, the Fourth Civil Division of the SPC, gave a presentation on the practice of Chinese courts in supporting and supervising arbitration. He stated that in recent years, Chinese courts have continued to improve the system of judicial review on arbitration and promote the unification of the standards of judicial review; to hear cases concerning judicial review on arbitration in accordance with the law and clarify the rules of adjudication for new types of disputes; to support the innovation of the international trade and economic arbitration system and promote the popularization of arbitration and the internationalization of
11 ASIAN LEGAL BUSINESS – JUNE 2023 WWW.LEGALBUSINESSONLINE.COM arbitration. In order to further enhance the international credibility of arbitration, he proposed to promote the development of arbitration from the perspective of national and global governance. Promote arbitration towards more professional development by relying on the construction of international commercial courts, actively facilitate the integration and development of commercial dispute resolution mechanisms, provide Chinese solutions and contribute Chinese wisdom to the continuous optimization of the business environment and the fair, efficient, convenient and economic resolution of international commercial disputes. (Left) Zhang Shuming, Deputy Chief Judge of the Fourth Civil Division of the SPC, delivering the keynote speech; (Right) Gu Yan, Vice President of CIETAC Arbitration Court, moderating the opening ceremony The signing ceremony of the cooperation agreements between CIETAC and Madrid International Arbitration Center/Chilean Chinese Chamber of Commerce, Industry and Tourism (CHICIT)was held on the Forum. Wang Chengjie, Vice Chairman and Secretary General of CIETAC, José María Alonso, Chairperson of CIAM and Gustavo Cuevas, representative of CHICIT signed on behalf of the institution respectively. All sides reached the consensus to use the cooperation agreement as a blueprint to further promote in-depth cooperation in the field of dispute resolution in the future, thereby contributing to the development of the rule of law in China and Hispanic countries. (Left) CIETAC and CIAM signing the cooperation agreement; (Right) CIETAC and Chilean Chinese Chamber of Commerce, Industry and Tourism signing the cooperation agreement Arbitration Center of Mexico, Arbitration and Mediation Center of the Costa Rica Bar Association, Brazilian Center for Mediation and Arbitration, Center for Commercial Mediation and Arbitration of the Chamber of Commerce of Argentina (CEMARC), Centre of Arbitration and Conciliation of the Bogotá Chamber of Commerce, Chamber of Conciliation, Mediation and Arbitration Ciesp/Fiesp, Chilean Chinese Chamber of Commerce, Industry and Tourism, CIAM, National and International Arbitration Center of the Lima Chamber of Commerce, Santiago Arbitration and Mediation Centre supported the Forum as international partners, and look forward to strengthening the communication and cooperation with CIETAC in the future and jointly contributing to the building of a China-Latin America commercial dispute resolution community. “Opportunities and Developments for China-Latin America Arbitration in the New Era” is the theme of the Forum. Over 10 Chinese and foreign experts gave presentations on “Communication: Dispute Resolution Systems in China and Latin America” and held a roundtable discussion on “Cooperation: Arbitration and the Development of Trade and Economy in China and Latin America”, concentrating on the cutting-edge issues in the field of dispute resolution in China and Latin America, exploring the direction of future development of cross-border dispute resolution in China and Latin America, discussing and exchanging views on the relevant rule of law practices. The presentation of Session I was moderated by Zhao Jian, Senior Counsel of Zhong Lun Law Firm and CIETAC Arbitrator. Speakers were invited to make comparison between dispute resolution systems in China and Latin American countries, and discuss the recognition and enforcement of arbitral awards in China and Latin American countries, as well as the cooperation among arbitration institutions of China and Spanish-speaking countries in the context of the “Belt and Road” Initiative and other topics. The discussion of Session II was moderated by Liao Fan, Deputy Director-General at the Bureau of International Cooperation, Chinese Academy of Social Sciences (CASS) and CIETAC Arbitrator. Speakers were invited to share and exchange views on the role of arbitration in promoting economic and trade development in China and Latin America, how enterprises can regulate the use of dispute resolution clauses to prevent legal risks, and the benefits of the friendly economic development of China and Latin America for a multi-dispute resolution mechanism and other perspectives. At the end of the Forum, Wang Chengjie, Vice Chairman and Secretary General of CIETAC, said in the closing remark that the development of international commercial arbitration is encountering new changes and challenges. It is necessary to further strengthen international communication and cooperation on dispute resolution. The Forum is a critical point. CIETAC looks forward to establishing partnerships with more Latin American arbitration institutions, promoting the innovation and development of the international dispute resolution system, and playing a more significant role in maintaining the international economic and trade order and the reform of the global governance system. The participants congratulated on the success of the Forum. They commented that the Forum promoted the communication and cooperation between China and Latin America dispute resolution institutions, which would facilitate the construction of a market-oriented, rule of law and internationalized business environment in China and Latin America. The Forum was live broadcasted through Sina Finance and Beijing Time, attracting 120,000 viewers from 15 countries (mainly of Latin American countries) around the world, watched the event through the live. Representatives of relevant government departments, judges, arbitrators, scholars, lawyers, company legal counsels and more than 140 media reporters attended the event on site.
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