►BAKER BOTTS Summary Judgment for Franklin Electric ►CAREY Y CIA Counsel to Deutsche Bank and HSBC Securities USA in US$1 Billion Bond Replacement ►CLAYTON UTZ Advises Anvil Mining on A$1.3 Billion Bid by Minmetals ►FRASER MILNER CASGRAIN Acts for Capital Power US Financing LP in US$295 Million Placement Offering ►GIDE Advises on largest French logistics deal of 2011 Investment Co Ltd ►HOGAN LOVELLS Advises SAB Miller on US$1.9 Billion Strategic Alliance ►KING & WOOD Lancy Group Completes IPO on Shenzen Stock Exchange SME Board ►NAUTADUTILH Advises VTTI and Summa Capital on Join Venture ►SKRINE Acts for Puncak Oil & Gas in acquisition capital in Global Offshore (Malaysia) and KGL Ltd from Global International Vessels Ltd. ►TOZZINIFREIRE Advises Scotiabank in Expansion Strategy into Brazil - Acquisition of Dresdner Bank from Commerzbank AG

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P R A C M E M B E R N E W S

►Baker Botts Poinsett Returns as Special Counsel in Government Relations ►Davis Wright Tremaine Veteran China-USA Attorney Fraser Mendel Joins Firm ►NautaDutilh Partner Appointments ►Rodyk Hosts PRAC 50th International Conference ►Simpson Grierson Welcomes New Associates ►TozziniFreire Appoints Oil & Gas Head; Adds Two Tax Partners ►Wilson Sonsini Expands Regulatory Expertise ►AUSTRALIA Include Me Out: Exclusion clauses, Reinsurance, and Section 18B of the Insurance Act CLAYTON UTZ ►CANADA Focus Renewable Energy Program Ontario Election FRASER MILNER CASGRAIN ►CHINA Common Mistakes Made by Foreign Investment Enterprises Utilizing Duty Exempt Goods KING & WOOD ►COLOMBIA Govt Approves Authorized Economic Operators BRIGARD & URRUTIA ►INDONESIA Tax Holiday for Select Pioneer Industries ABNR ►NEW ZEALAND Cartel Criminalization One Step Closer SIMPSON GRIERSON ►TAIWAN Key Points of Amendment to Company Act LEE & LI UNITED STATES ►Digital Millennium Copyright Act Update: Copyright Office Proposes Changes to Agent Registration System to Qualify for Copyright Safe Harbor for User Generated Content DAVIS WRIGHT TREMAINE ►Customs Alert: Customs Proposes New Rules on Transaction Value Imports from Related Parties HOGAN LOVELLS ►Human Trafficking and Your Supply Chain: New Disclosure Requirements for Companies Doing Business in California LUCE FORWARD ►Delaware Court of Chancery Grants $1.2 Billion Damage Award WILSON SONSINI GOODRICH & ROSATI

P R A C T O O L S T O U S E

PRAC Contact Matrix PRAC Member Directory Conferences & Events

Visit us online at www.prac.org

C O N F E R E N C E S & E V E N T S

Pacific Rim Advisory Council

October 2011 e-Bulletin

MEMBER NEWS

● 2011 October 31 - PRAC Members Gathering @ IBA Dubai

● 2012 April 21-24 - 51st International PRAC Conference - Houston

Hosted by Baker Botts LLP

● 2012 May 5 - PRAC Members Gathering @ INTA Washington

● 2012 October 20-23 - 52nd International PRAC Conference - Buenos Aires

Hosted by Allende Brea

Details at www.prac.org

PRAC Conferences and Events are open to PRAC Member Firms only

M E M B E R D E A L S M A K I N G N E W S

COUNTRY ALERTS

October, 2011

Rodyk & Davidson hosted the 50th International PRAC Conference in Singapore October 15-18. PRAC delegates gathered from around the

world to attend the four day program covering several current legal issues confronting clients and also included an address by Singapore

Attorney General Mr. Sundaresh Menon and an invitation only Public Seminar on Data Privacy Laws attended by local clients.

Rodyk managing partner, Philip Jeyaretnam said “With globalisation giving rise to more complex and diverse cross-border transactions and

litigation, this PRAC Conference will further examine the changing face of the legal industry where national and international law firms have

to refresh survival strategies address the challenges of a global market. “

Rodyk’s hosting coincides with the celebration of its 150th year. Established 1861, Rodyk enjoys the distinction of being Singapore’s first

and oldest law practice. As one of Singapore’s largest full service law firms, Rodyk’s team of about 170 lawyers serves clients in the prac-

tice areas of corporate, finance, litigation & arbitration, real estate, intellectual property and technology.

For additional information visit www.rodyk.com

R O D Y K & D A V I D S O N H O S T S P R A C S I N G A P O R E 2 0 1 1 5 0 T H I N T E R N A T I O N A L C O N F E R E N C E

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Veteran China-U.S. Attorney Fraser Mendel Joins Firm OCTOBER 5, 2011 – Fraser Mendel, an attorney with 15 years’ experience advising clients on conducting business in China and handling China-to-US investments and acquisitions, has joined Davis Wright Tremaine LLP as a partner in the firm’s Seattle office.

Mendel, who is fluent in Mandarin Chinese, spent over a decade practicing in China, primarily with Morrison & Foerster, where he helped diverse companies enter the market, particularly in the technology sector. He spearheaded over a hundred venture capital and M&A transactions, oversaw intellectual property and licensing claims, and advised U.S. businesses concerning Chinese regulatory, telecommunications, privacy, and employment issues.

“I’m pleased to enhance the longstanding commitment that Davis Wright has demonstrated to China,” said Mendel. “The firm’s strong presence in the technology and media sectors, together with its strong capabilities in tax, employment and IP, are highly complementary to my practice, and will allow me to bring a full range of service to my clients.”

“Fraser’s detailed understanding of the fastest-growing market in the world, and his extensive contacts in that country, will be extremely valuable to our clients across the U.S.,” said Joe Weinstein, Practice Group Chair of Davis Wright Tremaine’s Business and Corporate Finance group. “Having Fraser join our team further cements Davis Wright’s leading position in China.”

Since returning to the U.S. in 2008, Mendel has advised international companies seeking investment from Chinese sources, and also represented Chinese clients in acquiring the assets of U.S. firms. He’s been both general counsel and vice chair of the Executive Committee of the Washington State China Relations Council, a state-wide trade association.

“We have become a market leader in advising major U.S. companies on technology, media and intellectual property matters in China,” said Norm Page, chair of Davis Wright’s China practice. “We are also handling an increasing number of investments in the U.S. by Chinese entities. Fraser’s long experience in these areas will provide further critical depth and knowledge for our clients.”

Mendel earned his J.D. from the University of Washington School of Law and an LL.M. in tax law from New York University School of Law. He is admitted to practice in New York and Washington.

For more information, visit www.dwt.com

D A V I S W R I G H T T R E M A I N E

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P O I N S E T T R E T U R N S T O B A K E R B O T T S S P E C I A L C O U N S E L G O V T R E L A T I O N S

AUSTIN, October 17, 2011 – Royce Poinsett, who has developed a broad range of government relations expertise in handling federal, state and local issues, has returned to Baker Botts L.L.P. as special counsel based in the firm’s Austin office.

"Royce’s wealth of experience in government relations will further strengthen this practice area for the firm," said Baker Botts Managing Partner Walt Smith. "Royce will help our clients prepare for the 2013 Texas legislative session. He will also work with clients as we continue to grow this practice area in our Texas and Washington offices."

Poinsett began his legal career in 1998 as an associate with Baker Botts. He left the firm for public service at the Texas Capitol, serving as counsel and policy advisor to Governor Rick Perry and then to Speaker of the Texas House of Representatives Tom Craddick through 11 regular and special legislative sessions. Poinsett served elected officials from both sides of the political aisle, including Texas Governor George W. Bush, U.S. Senator Kay Bailey Hutchison, U.S. Congressman Sam Johnson, and Baltimore City Councilman Martin O'Malley, now Governor of Maryland.

Texas Capitol Inside named Poinsett a "Rising Lobby Star to Watch" in 2009. In recent years, Poinsett has provided government relations representation to major corporations and trade associations, including ExxonMobil, Nestle Waters North America, Gaylord Entertainment, Brocade Communications Systems, Texas Motorcycle Dealers Association, National Association of Theatre Owners and Pew Charitable Trusts.

Poinsett earned his Juris Doctor from The University of Texas at Austin, where he was a member of the Texas Law Review. He earned his undergraduate degree from The Johns Hopkins University and a master’s degree from the London School of Economics. He was named a finalist for the Austin Under 40 "Austinite of the Year” award in 2011, and is a member of the board of directors of the Ronald McDonald House Charities of Austin and Central Texas. Before returning to Baker Botts, Poinsett was at McGinnis Lochridge & Kilgore, LLP. For additional information visit www.bakerbotts.com

N A U T A D U T I L H P A R T N E R A P P O I N T M E N T S

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NautaDutilh has announced the appointment of four new partners at its annual Shareholder Partners’ meeting on 16th September.

David van Ee (1976) - Real Estate & Infrastructure - David van Ee specialises in procurement, contracting and litigation relating to infrastructure, industrial construction and real estate. David plays a coordinating role in the NautaDutilh team that advises on major PPP projects in the Netherlands. He also litigates on construction and procurement issues on behalf of contracting authorities and large Dutch contractors. David graduated from Leiden University in 2000 and joined NautaDutilh in the same year. David is a member of the International Project Finance Association. He is also a lecturer at the Academie voor de

Rechtspraktijk and publishes regularly on his areas of specialisation.

Jean-Marc Groelly (1974) - Taxation - Jean-Marc Groelly has now been appointed as partner of NautaDutilh after he became a local partner in the Luxembourg office in 2008. He specialises in international tax law, with a particular focus on the tax aspects of structured finance, M&A, private equity, investment funds, real estate and IP transactions. Prior to joining NautaDutilh in January 2006, Jean-Marc worked for more than six years for several well renowned Anglo-American law and consultancy firms. After obtaining his master's degree in business law in 1997, he later earned a post-graduate degree in business and tax law from Jean Moulin University (Lyon III). Jean-Marc regularly publishes and lectures on

subjects in tax law.

Anne Marie Verschuur (1978) - Intellectual Property - Anne Marie Verschuur has been working as a lawyer at NautaDutilh since 2003 and specialises in intellectual property law. She advises and litigates for national and international clients that are chiefly active in sectors such as consumer goods (in particular food, clothing and luxury goods), biotech and healthcare /life science. Anne Marie has a great deal of experience in trademark, copyright, trade name and patent disputes, as well as in transactions with a strong IP component. She is an active member of various international associations of intellectual property lawyers and publishes regularly on this subject. Anne Marie graduated in both law and history at Utrecht

University and also obtained a LL.M. from Duke University (U.S.).

Diederik Vriesendorp (1973) - Banking & Finance - Diederik Vriesendorp specialises in loan finance transactions, advising both financial institutions and corporate clients. Diederik worked for NautaDutilh in New York in 2001 and 2002. In 2005, he was seconded to a leading law firm in London. He also worked on behalf of NautaDutilh at three Dutch banks. Diederik graduated from Utrecht University in 2000 and joined NautaDutilh in the same year.

For additional information visit www.nautadutilh.com

S I M P S O N G R I E R S O N W E L C O M E S N E W A S S O C I A T E S

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The firm's Auckland banking and finance group is delighted to welcome senior associate Stuart Evans. Stuart has experience in a broad range of domestic and international banking and finance transactions with particular expertise in property and development financing, asset financing and leasing and corporate banking. Stuart has worked at "magic circle" law firm Allen & Overy's London office, and more recently at another leading national law firm.

Simpson Grierson is delighted to welcome the return of associate Sarah Scott to its Wellington resources and infrastructure department and associate Charlotte Miczek to its Auckland commercial department. Sarah's background is in Resource Management Act and local government related matters and she will continue to specialise in those areas for a variety of infrastructure and local government clients.

Charlotte joins the firm from another leading New Zealand law firm and brings with her a broad range of experience in corporate and commercial law. Charlotte will specialise in sales and marketing law, including advertising, sales promotions, sponsorship and distribution. She will also be advising on climate change issues with a particular focus on the forestry sector. Born and raised in Germany, Charlotte left for New Zealand as an exchange student and has been living here for just over 12 years.

For additional information visit www.simpsongrierson.com

T O Z Z I N I F R E I R E A P P O I N T S O I L & G A S H E A D ; A D D S N E W T A X A T T O R N E Y S

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Pedro Dittrich, one of the coordinators of the technical group that drafted the pre-salt bills at the Chief of Staff Office of the President of Brazil, is the new head of TozziniFreire’s Oil & Gas Practice Group, and will be based at the firm's Rio de Janeiro office. In addition to his expertise as a lawyer in the energy, biofuel, and oil and gas sectors, Dittrich also worked for seven years for the Brazilian Government, including the Ministry of Mines and Energy, and was an audit board member at energy companies and a legal adviser to draft the Regulation of the Gas Sector.

Graduated in Law and in Electrical Engineering from Universidade Federal do Rio Grande do Sul, and specialized in International Law from the same university, Dittrich has a master’s degree in Corporate and Business Law from Pontifícia Universidade Católica de São Paulo and is about to receive a Masters’ in Oil Law from Dundee University, Scotland.

Jerry Levers de Abreu has over 16 years of experience in the tax area and joins the São Paulo team. He has built part of his career at TozziniFreire as a senior associate and worked for “big four” audit firms, such as Coopers & Lybrand (current PwC) and Arthur Andersen (current Deloitte). He graduated from the Law School of Universidade São Francisco in 1999, and specialized in Tax Law from Pontifícia Universidade Católica de São Paulo (PUC-SP) in 2009.

Marco Antônio Ruzene, who will head the Tax practice group at the firm’s Campinas office, brings 4 more lawyers with him. In addition to his expertise in the tax area, Marco Ruzene is also experienced in Administrative Law. Marco worked at the Public Ministry of the State of São Paulo, and is a reporting judge of the 3rd Section of the XVII panel of Ethics and Discipline of the Brazilian Bar Association - São Paulo. He coordinates the Universidade Paulista School of Law – Limeira, and is a Professor of Universidade Paulista School of Law – Campinas. Marco Ruzene graduated from the Pontifícia Universidade Católica de Campinas School of Law in 1992, specialized in Civil Procedural Law from Pontifícia Universidade Católica de São Paulo in 1995, and in Tax Law from Centro de Extensão Universitária – São Paulo in 2001. He also has a master’s degree in International Economic Relations Law from Pontifícia Universidade Católica de São Paulo (2003).

For additional information visit www.tozzinifreire.com.br

W I L S O N S O N S I N I G O O D R I C H A N D R O S A T I E X P A N D S R E G U L A T O R Y E X P E R T I S E

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-- Donald Vieira, Former Chief of Staff of the DOJ's National Security Division, Joins Firm

PALO ALTO, CA (October 3, 2011) - Wilson Sonsini Goodrich & Rosati, the premier provider of legal services to

technology, life sciences, and growth enterprises worldwide, is pleased to announce that Donald L. Vieira has become a

partner at the firm. The former chief of staff of the Department of Justice's National Security Division (NSD), Vieira

primarily will focus on regulatory and enforcement issues related to foreign investments, export controls, privacy, and data

security. He also will work on matters involving white collar crime and other government investigations.

"Don has broad and deep expertise in a number of areas of prime importance to many of our clients, such as cyber

security, export controls, sanctions, foreign investments, and other national security matters related to private enterprises,"

said CEO Steve Bochner. "He is a proven leader in his field and, as the global marketplace continues to expand, Don will be

a valuable asset to our highly regarded regulatory practice. It is my pleasure to welcome him to the firm."

Vieira has served in senior national security positions in both the executive and legislative branches of the federal

government. At the Justice Department, as NSD chief of staff and counselor to the Assistant Attorney General for National

Security, he was responsible for the day-to-day management of the division. His duties included providing counsel on issues

related to cyber security, export controls and sanctions, counterterrorism, counterintelligence investigations, electronic

surveillance, and a variety of other intelligence matters. Vieira also supervised the NSD's Foreign Investment Review Staff,

which is responsible for representing the Justice Department on the Committee for Foreign Investment in the United States.

In addition, he managed the NSD's legislative portfolio and served as the division's primary liaison to Congress, working

closely with that legislative body on policy issues.

Prior to joining the Justice Department as the NSD's chief of staff, Vieira served as deputy chief counsel to the House

Permanent Select Committee on Intelligence (HPSCI) and staff director of the HPSCI's Subcommittee on Oversight and

Investigations. He also served as a federal prosecutor in the Justice Department's Counterespionage Section, where he

participated in the successful prosecution of numerous espionage and export enforcement matters. He has received many

awards and honors for his prosecutorial and national security work, including ones from the Department of Justice, the

Federal Bureau of Investigation, the Central Intelligence Agency, the Director of National Intelligence, the Office of the

National Counterintelligence Executive, the Naval Criminal Investigative Service, the Department of State, and Congress.

Vieira began his legal career as an associate at Williams & Connolly, where he focused on litigation, white collar criminal

defense, and Foreign Corrupt Practices Act investigations. He earned his J.D. at Georgetown University Law Center and a

B.A. in political science from Boston University.

For additional information visit www.wsgr.com

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B A K E R B O T T S S E C U R E S S U M M A R Y J U D G M E N T F O R F R A N K L I N E L E C T R I C C O .

October 4, 2011 -- On September 30, 2011, the United States District Court for the Northern District of Ohio granted summary judgment for Baker Botts L.L.P. client, Franklin Electric Co., Inc., in a lawsuit initiated in 2009 by its rivals, Sta-Rite Industries, LLC and Pentair, Inc.

The complaint alleged that Franklin Electric, a leading manufacturer of submersible motors and pumps, had violated a Settlement Agreement entered into between the parties in October 2004 to resolve an antitrust lawsuit and, furthermore, that Franklin Electric had tortiously interfered with Sta-Rite's contracts with its key distributors. A copy of the Court's Memorandum Opinion is attached.

In her 23-page opinion, issued after extensive discovery followed by oral argument in April 2011, Judge Benita Pearson rejected as a matter of law the plaintiffs' claim that Franklin Electric had violated certain pricing provisions in the Settlement Agreement by selling submersible motors directly to distributors at more favorable prices than Franklin Electric provided to the plaintiffs, who previously had resold the same Franklin products to distributors.

She ruled that the agreement was clear and unambiguous in allowing Franklin Electric to do so, even if such direct-to-distributor pricing enabled Franklin Electric to compete business away from the plaintiffs through low pricing. Separately, the Court also granted summary judgment in Franklin Electric's favor on the tortious interference claim. According to the Court, the plaintiffs' claim that Franklin had tortiously interfered with their key customer accounts by abusing its alleged monopoly power in motors was barred by the applicable two-year statute of limitations.

For additional information visit www.bakerbotts.com

51st International Conference Houston

April 21-24, 2012

Hosted by Baker Botts L.L.P.

 

T O Z Z I N I F R E I R E A D V I S E S B A N K O F N O V A S C O T I A

TozziniFreire Advogados assisted The Bank of Nova Scotia (Scotiabank) in the acquisition of the Dresdner Bank Brasil S.A. - Banco Múltiplo (“DBB”) from Commerzbank AG.

Scotiabank will be the first Canadian financial institution to operate in Brazil. The acquisition is part of Scotiabank's ex-pansion strategy into Latin America.

While DBB has operated as a wholesale bank, it also has a multiple banking license, enabling it to offer a range of fi-nancial services. Scotiabank retains this license as part of the acquisition and will operate as Scotiabank Brasil S.A. Banco Multiplo, once the change of name is approved by the Banco Central do Brasil.

The status of the deal is completed and its value is not disclosed.

About Scotiabank Scotiabank is one of North America's premier financial institutions and Canada's most interna-tional bank. With more than 70,000 employees, Scotiabank Group and its affiliates serve some 18.6 million customers in more than 50 countries around the world. Scotiabank offers a broad range of products and services including per-sonal, commercial, corporate and investment banking. With assets above $567 billion (as at July 31, 2011), Scotiabank trades on the Toronto (BNS) and New York Exchanges (BNS). For more information please visit www.scotiabank.com.

About DDB Dresdner Bank in Brazil, based in São Paulo, had assets of $400 million at the end of last year and 50 employees. Dresdner is a unit of Commerzbank AG, Ger-many’s second-biggest bank.

Partner Antonio Felix de Araujo Cintra and Luciana Maria Agoston Burr and associate Barbara da Cunha Xavier acted in the transaction. For additional information visit www.tozzinifreire.com.br

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Perth, 3 October 2011: Clayton Utz is advising ASX and TSX listed copper producer Anvil Mining Limited in connection with an all-cash A$1.3bn takeover bid by Minmetals Resources Limited, announced to the market on 30 September. Under the bid, Minmetals has agreed to make a cash offer to acquire all common shares of Anvil at a price of C$8.00 (approximately A$7.88) per share. Minmetals has also entered into a lock-up agreement with Trafigura Beheer B.V., Anvil's largest shareholder. Anvil's Board of Directors has concluded that the offer is in the best interests of its shareholders and has unanimously determined to recommend to shareholders that they accept the offer. Anvil's operations are based in the Democratic Republic of Congo, where it has been in production since 2002. Clayton Utz Perth partners Matthew Johnson and Gary Berson are advising Anvil on the transaction. For additional information visit www.claytonutz.com

C L A Y T O N U T Z A D V I S E S A N V I L M I N I N G O N A $ 1 . 3 B I L L I O N B I D B Y M I N M E T A L S

Post Conference Materials Now Available online:

One on One Meetings Series of prescheduled half hour meetings between firms

Litigation/Dispute Resolution PRACtice Group

“Negotiating the Arbitration Clause in an International Contract- What Is the Best Seat Selection?"

Banking &Workouts PRACtice Group "Creditor Workouts in Asia—How They Work or Don’t Work"

PRACtice Management - Strategic Planning for Law Firms

“National v. International Law Firms - Strategies and Challenges in a Global Market”

Public Seminar Topic co-sponsored by Business Investment & International Trade PRACtice Group "New Developments in Privacy Laws - The Public Fights Back"

www.prac.org

Page 9 P R A C M E M B E R N E W S

C A R E Y Y C I A C O U N S E L T O D E U T S C H E B A N K A N D H S B C S E C U R I T I E S ( U S A ) I N U S $ 1 B I L L I O N B O N D R E P L A C E M E N T

Carey y Cía. acted as local counsel to Deutsche Bank Securities Inc. and to HSBC Securities (USA) Inc., as underwriters, in the US$1 billion international bond placement by the Republic of Chile and the reopening of a US$350 million peso-denominated bond placement announced at the same time.

Carey y Cía. partners Diego Peralta, Salvador Valdés and Francisco Ugarte led the team, along with the assistance of associates Fernando Noriega and Sebastián Monge.

For additional information visit www.carey.cl

21 October 2011 - NautaDutilh's energy team advises Netherlands based VTTI BV (a Vitol/MISC joint venture) and Summa Capital (headquartered in Russia) on the formation of their joint venture Shtandart TT BV, and its contract with the Port of Rotterdam Authority relating to a planned USD 1 billion investment comprising a crude oil and oil products tank terminal in the Rotterdam port area. Team members include Jaap Jan Trommel, Harm Kerstholt, Matthijs Nieuwveld, Paul Verkleij and David van Ee. For additional information visit www.nautadutilh.com

G I D E L O Y R E T T E N O U E L A D V I S E S G L L R E A L E S T A T E P A R T N E R S O N S H A R E D E A L A C Q U I S I T I O N F R O M A E W E U R O P E

Gide Loyrette Nouel advised GLL Real Estate Partners on its share deal acquisition from AEW Europe of a real estate portfolio comprising eight logistics warehouses totalling a surface area of approximately 280,000 sq.m. for EUR 177 million.

Gide Loyrette Nouel advised on the acquisition with a team led by Christopher Szostak (partner), David Sabatier, Romain Courlet de Vregille and Constantin Miliotis, and on the financing aspects with David Malamed (partner) and Aude Manzo-Keszler. For additional information visit www.gide.com

Member Event Reminder

Monday, October 31, 2011

5:30 pm – 7:30 pm

PRAC @ IBA Dubai Qamardeen Hotel

The Old Town, Downtown, Emaar Boulevard - Pool side -

Info: events@prac.org

Co-hosted by PRAC Member Firms

Baker Botts L.L.P. and Hogan Lovells

Invitation open to PRAC Member Firms only

N A U T A D U T I L H A D V I S E S V T T I A N D S U M M A C A P I T A L O N J O I N T V E N T U R E

Page 10 P R A C M E M B E R N E W S

F R A S E R M I L N E R C A S G R A I N A C T S F O R C A P I T A L P O W E R U S F I N A N C I N G L P I N U S $ 2 9 5 M I L L I O N P L A C E M E N T O F F E R I N G

On June 15, 2011, Capital Power U.S. Financing LP, an indirect subsidiary of Capital Power L.P. (a limited partnership that directly and indirectly holds substantially all of Capital Power Corporation's assets, Toronto:CPX.TO), completed a private placement offering in the United States of US$295 million principal amount of long term senior unsecured debt securities ("notes") to certain US institutional investors (collectively, the "Purchasers"). The notes are guaranteed by Capital Power L.P. and its general partner, Capital Power GP Holdings Inc. (collectively with the Issuer, the "Capital Power entities"). Bank of America Merrill Lynch was the sole placement agent for the offering.

The net proceeds from the notes will primarily be used to fund growth initiatives including the recent acquisitions of three New England facilities and for general corporate purposes.

The Capital Power entities were advised by Kathryn Chisholm (Senior Vice President, General Counsel and Corporate Secretary), Leah Fitzgerald (Associate General Counsel and Assistant Corporate Secretary), Patricia Leeson (Senior Legal Counsel) and Bruce McPherson (Legal Counsel, Corporate). Fraser Milner Casgrain LLP provided external legal advice to the Capital Power entities with a team lead by Bill Jenkins which included Stephanie Campbell, Bill Gilliland and Elizabeth Burton. Headquartered in Edmonton, Alberta, Capital Power has interests in 34 facilities in Canada and the U.S. totalling nearly 4,900 megawatts of generation capacity. Capital Power and its subsidiaries develop, acquire and optimize power generation from a wide range of energy sources.

For additional information visit us at www.fmc-law.com

S K R I N E A C T S F O R P U N C A K O I L & G A S S D N B H D

SKRINE represented Puncak Oil & Gas Sdn Bhd, a wholly-owned subsidiary of Puncak Niaga Holdings Berhad (a Main Market listed company) which entered into agreements to acquire 40% of the issued capital in Global Offshore (Malaysia) Sdn. Bhd. and KGL Ltd. from Global International Vessels Ltd., a subsidiary of Global Industries, Ltd. (a NASDAQ listed company) for a total cash consideration of US$23.6 million (RM70.8 million). Corporate partner, Faizah Jamaludin, led the SKRINE team. For additional information visit www.skrine.com

August 30, 2011 - Lancy Group successfully completed an A-share IPO on the Shenzhen Stock Exchange SME Board (stock ticker: 002612). Lancy Group listed 50 million shares at a price of RMB 35 per share, raising a total of nearly RMB 1.66 billion.

Lancy Group is China' s first high-end women' s clothing company to be listed on a stock exchange. Lancy Group is dedicated to serving the high-end women' s clothing market, and determined to become an industry leader. Lancy operates a multi-brand development strategy. Its three main brands include its own "LANCY" and "LIME," as well as "ZOOC," for which Lancy has obtained sole licensing right in China. King & Wood served as PRC legal adviser to the Lancy Group. Zhang Mingyuan and Peng Jin were lead partners on this deal. For additional information visit www.kingandwood.com

K I N G & W O O D L A N C Y G R O U P C O M P L E T E S I P O O N S H E N Z E N S T O C K E X C H A N G E S M E B O A R D

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LONDON, 19 October 2011 - Hogan Lovells has advised long-standing client SABMiller on a strategic alliance with the Anadolu Group and Anadolu Efes Biracılık ve Malt Sanayii A.Ş. (Anadolu Efes) to transfer its Russian and Ukrainian beer businesses to Anadolu Efes in a transaction worth approximately US$1.9bn which signed yesterday, Tuesday 18 October 2011. The transaction is subject to confirmatory due diligence, execution of legally binding documentation, definitive documents, regulatory approvals and approval by Anadolu Efes's shareholders, and is expected to complete by year end. Anadolu Efes operates in Turkey, Russia, the CIS, Central Asia and the Middle East and the alliance will result in a number 2 market position in the large Russian beer market, and leading market positions in Turkey, Kazakhstan, Moldova and Georgia. Under the terms of the alliance SABMiller will transfer its Russian and Ukrainian beer businesses to Anadolu Efes who will in return issue a loan note. Following shareholder approval, 142,105,263 new Anadolu Efes shares will be transferred to SABMiller, representing a 24% equity stake capital increase in the enlarged Anadolu Efes. The proceeds of the capital increase will then be used to immediately redeem the loan note. SABMiller and the Anadolu Group will enter into a shareholders' agreement to ensure that the Anadolu Group will continue to exercise majority control over Anadolu Efes after completion of the capital increase and business contribution, controlling 42.81% of Anadolu Efes's enlarged share capital. SABMiller will be represented on the Anadolu Efes Board and the two will share best practice to develop SABMiller's international brands in the regions. SABMiller will have customary minority investment protection rights and will also be represented on the board of the combined business in Russia, with both parties agreeing to provide appropriate rights of first offer at fair market value in the event of either party seeking to sell any shares in Anadolu Efes. The Hogan Lovells team advising SABMiller was led by London corporate finance partner Maegen Morrison, assisted by partner Andrew Pearson, senior associate Matthew Williams and associate Fiona Carlyle; tax partner Karen Hughes and associate Natalie Psaila; and competition Of Counsel Simon Barnes. Commenting on the transaction, Maegen said: "We are pleased to have advised SABMiller on another important transaction this year which will enable them to capitalize on the potential growth opportunities in the region and command a stronger market position." Hogan Lovells is also advising SABMiller on its ongoing bid for Australian brewer Foster's Group Limited. For additional information visit www.hoganlovells.com

H O G A N L O V E L L S A D V I S E S S A B M I L L E R O N U S $ 1 . 9 B I L L I O N S T R A T E G I C A L L I A N C E

Page 12 P R A C M E M B E R N E W S

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Send to editor@prac.org.

Deadline is 10th of each month.

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10 October 2011

Include me out: exclusion clauses, reinsurance, and section 18B of the Insurance Act

Exclusions and limitations have a precise meaning separate to the scope of cover, according to the High Court's latest

decision on exclusion clauses. The decision in Westport Insurance Corporation v Gordian Runoff Ltd [2011] HCA 37

gives valuable guidance on when exclusions and limitations in insurance policies will – and won't – be allowed to

operate via section 18B of the NSW Insurance Act 1902.

What was the policy?

Gordian Runoff wrote a seven-year Directors & Officers (D&O) liability run-off policy for FAI. Westport then wrote excess

of loss reinsurance treaties over three layers for Gordian Runoff. Gordian Runoff asked Westport to expand the

reinsurance cover to include D&O policies written for up to three years. Did any of the reinsurance treaties cover the FAI

policy, which covered claims made and notified to Gordian within an extended period of seven years?

A key issue in the dispute was the effect of section 18B of the Insurance Act 1902 (NSW). Section 18B was intended to

allow a court to permit an insured person to remain indemnified in the face of clause in an insurance contract that

specifically excludes or limits the liability of the insurer, where there is no connection between the loss and the event or

circumstances triggering an exclusion or limitation.

When the dispute went to arbitration, the arbitrators said that the FAI policy was outside the terms of the reinsurance

treaties. Nonetheless, the agreement to extend cover for D&O policies to include those issued for up to three years was

a "limitation" or "exclusion" of others, and that triggered section 18B.

In effect, this meant that the three-year time period in the reinsurance treaties was irrelevant. So long as the claim for

which Gordian Runoff sought indemnity was made and notified in the first three years of the policy, the reinsurers were

bound to provide cover to Gordian for any D&O policy, of any length.

How does section 18B operate with limitations and exclusions?

The High Court was given two issues to consider:

first, what triggers section 18B?•

secondly, what sort of connection is required between the loss and the trigger for the limitation or exclusion?•

Section 18B marks off exclusions and limitations from the content of the "contract of insurance". In this case, the FAI

policy was outside the terms of the reinsurance treaties. The treaties excluded "policies issued for periods longer than

36 months". There could therefore be no three-year claims within the terms of the reinsurance treaties, because they

were made under a policy to which the treaties didn't apply.

The treaties did not exclude or limit the reinsurers' liability to indemnify Gordian by reason of the circumstance that

the FAI policy had the seven year period, so that Gordian thereby was disentitled to what otherwise would have been

its right to indemnity under the treaties. As a result, section 18B didn't apply, and the reinsurers were off the hook.

As for the connection required, the High Court said it did not have to decide this issue. It did however indicate some

support for Justice Allsop's views in the NSW Court of Appeal: "the definition of cover was excluded or limited by

reference to the circumstances of underlying policies of insurance with reporting periods of more than 3 years. That

Page 1 of 2

limitation was inserted because the circumstance, in the view of reinsurers, was likely to increase the risk. There was a

policy of such a description. That policy gave rise to the claims. In that sense the loss can be seen to be caused by the

circumstance: the existence of an underlying policy with an extended reporting period."

So what does this mean for insureds?

This continues the High Court's sensible and commercial approach to insurance law. It will be interesting to see how the

Court deals with similar remedial provisions, such as section 54 of the Insurance Contracts act, in the future

For treaties of reinsurance, this decision doesn't matter, as the Insurance Regulations 2009 (NSW) now exempt

reinsurance contracts from section 18B. But it still is an important one on the nature of exclusions and limitations, both

for insureds and insurers.

First, the High Court's decision means that it is harder to use section 18B to get around exclusions and limitations if the

contract of insurance doesn't actually cover something in the first place, which was what happened here.

Secondly, it suggests that it will take a hard look at the connection between the loss and the event or circumstances

triggering an exclusion or limitation, and could take an expansive view of that connection. As a result, it could be even

harder for insureds to use section 18B.

You might also be interested in ...

Gordian Runoff v Westport important for the insurance industry and arbitration users in all sectors•

What's covered, and what's excluded? Contracts of reinsurance and section 18B•

Disclaimer

Clayton Utz communications are intended to provide commentary and general information. They should not be relied

upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising

from this bulletin. Persons listed may not be admitted in all states or territories.

Page 2 of 2

 

© 2011 Fraser Milner Casgrain LLP 

 

Focus onRenewable Energy

OCTOBER 2011 

 1 Ontario Election 2011 ‐ Renewable 

Energy 

2 Contact Us 

 

Ontario Election 2011 ‐ Renewable Energy 

Introduction 

The Ontario Election 2011, held on October 6, has resulted in the Ontario Liberal Party being  re‐elected with a minority Government, winning 53 seats, one shy of a majority mandate. The Progressive Conservatives finish with 37 seats, and the New Democratic Party with 17. 

Prior to the calling of the election campaign, the Ontario Liberal Party held a clear majority in the 107 Member Legislative Assembly with 70 seats, the Progressive Conservatives 25, the NDP 10 and 2 vacancies. 

Renewable Energy Programs & Policy Two existing major renewable energy initiatives have been at the centre of political debate both prior to and during the recent provincial election campaign. 

Enabled through Ontario’s Green Energy and Green Economy Act, 2009 the Feed‐in Tariff (FIT) Program is the main policy instrument designed to encourage growth in the renewable energy sector, assist Ontario in phasing out coal‐fired electricity, and stimulate the development of new green technologies. The program aims to achieve this by offering “stable prices under long‐term contracts for energy generated from renewable sources, including biomass, biogas, wind, solar, and water.” Individuals, proprietorships, partnerships and corporations that meet the eligibility requirements of the program, are to be paid for each kWh of electricity generated from the renewable energy project. The program has two streams: The FIT Program is designed for projects over 10 kW while projects under 10 kW fall under the microFIT Program. FIT is currently administered by the Ontario Power Authority. 

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Japan and the European Union have complained to the World Trade Organization, calling a key part of the FIT program, its local/domestic content rules, an illegal subsidy. 

In January 2010, the Ontario Liberal Government announced a $7‐billion Green Energy Investment Agreement with Samsung C&T Corporation and Korea Electric Power Corporation (the "Korean Consortium"). This was the single largest investment in renewable energy in provincial history and this was hailed by the Liberal Government as a fundamental initiative to kick start and build a "green economy" in Ontario. The agreement aims to: build 2,500 MW of wind and solar power, deliver an estimated 110 million megawatt‐hours of emissions‐free electricity over the 25‐year lifetime of the project, create more than 16,000 new clean energy jobs to supply, build, install and operate the renewable generation projects, and lay the groundwork with major partners to attract four manufacturing plants. According to the original deal, the Korean Consortium will receive $437‐million in incentive payments over the 25‐year life of the deal if it fulfills its contractual obligations. 

Party Platforms/Commitments During the recent campaign, the three major political parties in Ontario took the following positions in relation to renewable energy policies: 

Liberals The Ontario Liberal Party has committed to following through with the FIT Program. Through this and other mechanisms they have committed to creating 50,000 clean energy jobs and replace coal powered plants over the next three years. The Ontario Liberals also commit to staying with and building upon the Korean Consortium. Further, during the election campaign the Liberals announced that they had renegotiated the original deal and that instead of paying the Korean Consortium a $437‐million incentive over 20 years, the province has negotiated that figure down to a maximum of $110 million. 

The Liberals forecast renewable sources such as wind, solar and biomass will produce 12.8 percent of the province's energy by 2030, up from three percent last year. 

Progressive Conservatives The Progressive Conservatives have committed to ending the FIT Program. They view the initiative as an unnecessary tax burden as well as a mechanism which warps the usual cost of hydro. Though they commit to its elimination, they have stated that all existing contracts, beyond a certain stage of development, will be honored. 

New Democratic Party The Ontario NDP have committed to the stated policy aims of the FIT Program, however, take issue with general cost of electricity and rising public sector CEO compensation in the energy sector. Though they contend small private producers, co‐operatives and others who want to sell power back to the grid will continue to play a role, they argue that large‐scale electricity generation must be publicly‐owned, "publicly accountable and affordable". They commit to honoring existing contracts. 

The Ontario NDP has committed to building‐up the green energy sector.  

Analysis Very early indications are that the Liberal minority government will attempt to govern by seeking the support of one or other opposition party on an "issue by issue" basis rather than attempting to strike a larger bargain with one of the opposition parties in order to secure support for its agenda. 

The Government's key policy initiatives on renewable energy, as summarized above, will almost certainly be interpreted as contributing to Liberal electoral losses in this election, particularly in rural and southwestern Ontario. The full effect this has on the Government continuing in its agenda is yet to be seen. For now, the FIT Program would not appear to be in jeopardy of 

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being discontinued or reversed. However, there will certainly be renewed pressure on the minority Government to proceed cautiously with new initiatives in the area of "green energy" and progress on already stated goals, projects and initiatives may be at risk of being slowed.   

It is highly doubtful that either the NDP or Progressive Conservatives will make green energy policy the "make or break" issue for keeping the Government alive, at least for the next 12 to 18 months. 

Next Steps Ontario Premier Dalton McGuinty will look to form a new Cabinet in the coming days, almost certainly within the next two weeks. There will be a new Environment Minister named to Cabinet (the incumbent lost his seat in the election) and possibly a new Energy Minister (incumbent Brad Duguid was re elected). The Government will also proceed with a "Speech From the Throne", likely near the end of October, which will outline with greater precision its priority themes and approach to navigating the Legislature in light of the new political configuration. 

 

Contact Us 

For further information, please contact a member of our National Renewable Energy Group.  

01

01 Common Mistakes Made by Foreign Investment Enterprises Utilizing Duty-Exempt Goods

C

By Liu Xinyu and Jing Yunfeng

China Law Insight http://www.chinalawinsight.com/

on special goods” refers to goods imported into China that enjoy a reduction or exemption of duties in specified areas and enterprises or for special purposes until the expiration of customs supervision over such goods. Special goods which are subject to reductions or exemptions are divided into many

According to Articles 56 to 581 of the Customs Law of the People’s Republic of China (“Customs Law”) 2, there are three categories where duties may be reduced: statutory duty abatements or exemptions, deductions or exemptions on special goods, and temporary duty reductions or exemptions. “Deductions or exemptions

ommon Mistakes Made by Foreign Investment Enterprises Utilizing Duty-Exempt Goods

Intellectual Property Issues Arising from Initial Public Offerings

September 2011 VOL 51

© 2011 King & Woodwww.kingandwood.com

KING & WOOD

Dedicat ion Teamwork Pract ical Solut ions Excel lence. . .Feng Ai

Next Issue

By Cecilia Lou and Steven Yao

By Zhang Shouzhi, Zhang Mei and Li Xiang

By He Wei and Zeng Ying

By Liu Xinyu and Jing Yunfeng

A comprehensive understanding of China’s import duties and tariffs can result in substantial savings for businesses. Foreign investment enterprises may be eligible for an exemption or reduction of duties for certain imported goods and equipment that are used within specified geographical areas, in specified industry sectors, or for specified purposes. However, enterprises sometimes face unanticipated legal consequences when they use such goods and equipment in such a way that causes their exempt or reduced-duty status to be lost. Since such legal liabilities are often substantial, this article discusses common pitfalls that foreign investment enterprises should strive to avoid when dealing with exempt-status goods and equipment.

02

categories according to the region, use of the goods, nature of the trading business and source of funds. According to related regulations, if the imported goods fall within certain product categories encouraged by the government, the foreign investment enterprise can apply for a preferential policy of deduction and/or exemption of duties.

However, in practice, some foreign investment enterprises, being unaware of customs supervision rules, receive penalties from China Customs offices for improper handling of these special goods that are otherwise eligible for reductions or exemptions of duties. Therefore, it is important for foreign investment enterprises to understand the relevant regulations concerning special goods that are el igible for deductions and exemptions.

I. Regulations on Special Goods Eligible for Deductions and Exemptions

Paragraph 2 of Article 57 of the Customs Law provides three “Specific Uses” for special goods eligible for reductions or exemptions: goods used in specified areas, goods used by specified enterprises or goods used for specified purposes. Such special goods must not be utilized otherwise unless relevant parties have obtained the approval of China Customs and duly paid customs duties. In short, the enterprise enjoying the deduction or exemption of duties on special goods shall bear legal liability if the enterprise utilizes the goods outside of the approved areas, enterprises and purposes without first obtaining the approval of China Customs or duly paying the duties.

Art ic le 26 of the Administrat ive Measures of the Customs of the PRC for Duty Reduct ion and Exempt ion for Import and Export Goods (“Administrative Measures”)3 clarify that “an applicant applying for a reduction or exemption of duties, without the permission of a customs office, shall not transfer, mortgage, pledge, use for other purposes or dispose in any other way the goods that are the subject of such an application.”

The provision that an “applicant...shall not transfer, mortgage, pledge…the goods enti t led to duty reduction and exemption” is easy to understand for foreign invested enterprises (“FIEs”) under most circumstances. However, the Customs Law, the Administrative Measures and other relevant laws and regulations do not specify at the meaning of “using for other purposes or disposing in any other way”4. Therefore, different enterprises may have different interpretations of this provision. In practice, some FIEs face administrative liabilities for Customs duties because their use of special goods constitutes a “use for other purposes or disposal in any other way”. A FIE can even incur criminal penalties in the event that the Customs anti-smuggling departments transfer the case to competent judicial authorities.

II. Analysis of Typical Cases

Based on an analysis of cases handled by the China’s customs offices in recently years, acts of “using for other purposes” or “disposing in any other way” are always evidenced by renting, lending, transferring or misappropriating special goods without the approval of customs officials. The following paragraphs will explore the above issue based on a study of typical cases.

A. Using Exempt Equipment for Other Purposes without Approval

A foreign invested beverage enterprise planning to produce juice beverages, tea beverages and drinking water prepared a Feasibility Study Report, which was approved by the Ministry of Commerce (MOFCOM). The enterprise then obtained the Confirmation Letter on Domestic or Foreign-funded Projects Encouraged to Develop by the State (“Confirmation Letter”). In the Confirmation Letter, the “Project Specifications” were written as “fruit processing”. Later, the enterprise imported $4 million worth of filling equipment, which enjoyed a special deduction of duties. However, due to the decline of the domestic market, the enterprise, without the approval of customs officials, used the

03

equipment to produce bottled water. The Customs Investigation Department discovered such illegal acts while they were conducting a verification procedure on goods subject to duty reductions and exemptions. Customs officials initiated an investigation over this issue and determined that the production changes by the enterprise were an act of “using the goods for other purposes”. The Customs Office imposed a fine of RMB 1.07 million according to the Regulation of the People's Republic of China on the Implementation of Customs Administrative Punishment5, and ordered the enterprise to reimburse the customs duties payable during the period of “using the equipment for other purposes”.6

T h e e n t e r p r i s e a p p l i e d f o r a d m i n i s t r a t i v e reconsideration on grounds that “the feasibility study report approved by MOFCOM contains drinking water, therefore using the equipment to produce bottled water does not constitute the act of using for other purposes”. The General Administration of Customs (“GAC”) rejected the enterprise’s reconsideration request and reaffirmed the administrative sanctions.

Therefore, FIEs must strictly comply with the “Approved Items of Project Industry Policy” and “Project Specifications” provided in the Confirmation Letter. Otherwise, the enterprise may violate the provision for “using for special purpose”, and thereby conduct an act of “using for other purposes” as determined by customs officials.

B. Changing Entities and Areas without Approval

An overseas enterprise established ten FIEs in Shanghai, Ningbo and other cities. From July 2001 to August 2003, four of the ten enterprises, according to the foreign parent’s arrangement, allocated to six other subsidiaries 79 sets of duty-exempt food processing equipment without the approval of customs officials. The four enterprises also issued a Group Fixed Assets Relocation Sheet, and claimed that the ownership of fixed assets did not transfer, and took no fees from the other 6 enterprises. Customs officials determined

the four enterprises’ behavior constituted an act of using special goods subject to duty reduction and exemption “for other purposes”, imposed a fine on the four enterprises and ordered them to fulfill the goods transfer procedure and fully remit relevant customs duties.

Similar cases occur frequently between parent enterprises and their branch offices. For example, a FIE, without customs approval, uses duty-exempt special goods in other branches (usually processing plants) that are located outside of the approved areas for use of the special goods by customs officials.

In the customs enforcement practice, the enterprise’s transfer or misappropriation of duty-exempt special goods are usually alleged to be a violation of the principle of “Three Specific Uses”, especially the principles of using the goods “in specific areas” and “for specific enterprises”. Certain aspects of enterprise’s behavior may be determined to be an act of “using” the special goods and thus warrant customs penalties.

C. Circumstances of “Disposing in Any Other Way”

From practice experience in customs cases, the modifying, dismantling, or destroying of special goods subject to duty deduction and exemption without customs approval may be deemed as an act of “disposing in any other way”. In addition, there are some specific circumstances in practice that may potentially be deemed as an act of “disposing in any other way”.

For example, a joint venture (“JV”) imported several sets of duty–exempt equipment within the amount of investment, and such equipment was within the customs supervision period. The JV then applied to reduce the amount of investment and registered capital, which had been approved by relevant administrative authorities. The JV subsequently modified its registered capital with the local Industry and Commerce Administration. However, customs

04

officials found that the value of duty-free equipment owned by the JV exceeded the total amount of investment after this reduction of registered capital, and the excess portion did not qualify under the duty reduction and exemption policy. Therefore, the enterprise had to duly remit the customs duties for the excess portions (the depreciation value before the date the administrative authority approves the investment fund reduction shall be deducted from the taxable base of customs duties), and apply to terminate customs supervision over the excess portions.7

(This article was originally written in Chinese, the English version is a translation.)

Liu Xinyu is a partner at King & Wood’s Company Group in BeijingJing Yunfeng is an associate at King & Wood’s Company Group in Beijing

1. Article 56 of the Customs Law: Duty reduction or exemption shall be granted for import or export of the goods and inbound or outbound articles listed below:(1) advertising items and trade samples of no commercial value;(2) materials presented free of charge by foreign governments or international organizations;(3) goods to which damage or loss has occurred prior to Customs release;(4) articles of a quantity or value within the fixed limit;(5) other goods and articles specified by law as items for duty reduction or exemption;Paragraph 1 of Article 40 of the Customs Law:Duty reduction or exemption may be granted for import and export goods of the Special Economic Zones and other specially designated areas. The State Council shall define the scope and formulate the rules for such reduction and exemption.Article 58 of the Customs Law: The State Council shall decide the temporary reduction or exemption of Customs duties which fall under Articles 56 and Paragraph 1 of Article 57 of this Law.

2. The PRC Customs Law (“The Customs Law of the People's Republic of China)”) was adopted at the 19th session of the Standing Committee of the 6th National People's Congress on January 22, 1987, and became effective on July 1, 1987. The Customs Law was revised at the 16th Meeting of the Standing Committee of the Ninth National People's Congress on July 8, 2000, and became effective on July 8, 2000.3. The Administrative Measures of the Customs of the PRC for Duty Reduction and Exemption for Import and Export Goods was issued on December 29, 2008, and became effective on February 1, 2009.4. Some Customs officials and experts consider Paragraph 2 of Article 30 of the Administrative Measures as specifying three circumstances of using the goods subject to deduction and exemption as approved by the Customs offices “for any other purposes”, though there needs to be clarification of the circumstances of using the goods “for other purposes or dispose in any other way” without the approval of China Customs or paying the customs duties as provided in the Customs Law. However, this regulation only reiterates the three “Specific Uses” from the opposite view point. How to determine the circumstances of “using for other purposes” or “disposing in any other way“ is still a myth. Paragraph 2 of Article 30 of the Administrative Measures provide as follows:

(1) Where goods entitled to duty reduction or exemption are delivered for use to any entity other than the duty reduction or exemption applicant;(2)Where goods entitled to duty reduction or exemption are not used for the originally intended purposes and at the originally intended regions;(3) Any other circumstances in which goods entitled to duty reduction or exemption are not used at the specific regions, by the specific enterprises or for the specific purposes.

5. The Regulation of the People's Republic of China on the Implementation of Customs Administrative Punishment was promulgated on September 19, 2004, and was effective since November 1, 2004. 6. See “Reading Customs case” published by General Administration of Customs of the People’s Republic of China, the 2007 edition, page 117 to Page 118.7. See “Customs Supervision”, edited by Xu qiuyan, China Customs Press, 2007 edition, page 208.

III. Conclusion

In summary, parties enjoying a reduction or exemption of duties for special goods must strictly comply with the customs supervision principle of “Three Specific Uses” when they use and manage such goods within the customs supervision period. Any improper disposition of the goods without customs approval may be determined as an illegal activity in violation of customs supervision rules, and the non-compliant parties will bear corresponding legal liabilities.

.

Colombian government approves Authorized Economic Operators

Wednesday, 05 October 2011 00:00

Foreign Trade and Customs News Flash Número: 130 Colombian government approves Authorized Economic Operators

On September 27, 2011, the Colombian Government issued Decree 3568 of 2011, to permit the creation of Authorized Economic Operators (AEO) in Colombia, in accordance with the guidelines set forth by the World Customs Organization (WCO), and already developed by other countries, with the purpose of securing and facilitating global trade. While the new Decree comes into effect on November 1, 2011, it is expected that foreign trade participants with a presence in Colombia will begin to prepare their AEO applications as soon as they have reviewed the requirements for establishment as an AEO that the Colombian Customs Office (DIAN) is supposed to provide before that date. Pursuant to Decree 3568, individuals or legal entities domiciled in Colombia which take part in the international supply chain and either perform activities regulated by the Colombian Customs Regime, or that are supervised by the Superintendence of Harbors and Transportation, the National Maritime Administration or the National Aviation Administration may become qualified as an AEO. Among the benefits granted to AEOs are the following:

Ability of importers and exporters to act directly before Customs Authorities, without a customs broker when they submit any Declaration of Importation or Exportation.

•

Fewer physical inspections and simplified customs procedures.•

Assignment of a Customs Office, Narcotics Police and health authorities (INVIMA and ICA) official to support the AEO’s foreign trade operations and provide safety to the international supply chain.

•

Ability to benefit from mutual recognition agreements with other countries, so that benefits granted to AEOs in Colombia are also awarded by the country of destination of goods.

•

The application to be recognized as an AEO must be submitted to the DIAN. The recognition as AEO will be granted indefinitely, subject to prior verification of certain requirements and provided that the applicant remains in compliance with the conditions and permit requirements under which the recognition as AEO was awarded. Finally, the ability to qualify as an AEO will be implemented gradually and will depend on the type of foreign trade participant, starting with exporters. However, there is no doubt that the AEO framework will bring greater competitiveness and efficiency to those foreign trade participants that obtain such AEO status. Our Customs and International Trade team will gladly provide more information about the AEO framework, and is prepared to assist and monitor the entire application process to be recognized as an AEO.

For further information, please contact:

Carlos Fradique-Méndez cfradique@bu.com.co José Francisco Mafla jmafla@bu.com.co

José Alejandro Quintero jquintero@bu.com.co Juan Pablo Caicedo jpcaicedo@bu.com.co

www.bu.com.co

ABNR - INDONESIA TAX HOLIDAY

28/09/2011

TAX HOLIDAY

The long-awaited tax holiday regulation was finally issued on 15 August 2011 by the Minister of Finance (“MoF”) as Regulation 130/PMK.011/2011

concerning Granting of Corporate Income Tax Exemption or Reduction.

The tax holiday is available for selected “pioneer industries”, which is defined as “industries having extensive interconnection, giving high value added

and externality, introducing new technology, and having strategic value for the nation-wide economy. At this stage, the pioneer industries covered

under the Regulation are:

Base metal industry;

Oil refinery and/or organic base chemical industry, which the sources are from natural oil and gas;

Machinery industry;

Renewable energy industry; and/or

Communication equipment industry

In an effort to encourage further investment in Indonesia, a tax holiday may be granted for 5 up to 10 years as of the fiscal year where the commercial

operation starts. After the tax holiday expires, the taxpayer is allowed a 50% reduction in income tax for the following 2 fiscal years. An additional

period of concession may be granted by MOF in the interest of maintaining the competitiveness of national industry and the strategic value of certain

industries.

In order to take advantage of the tax holiday, the following conditions must be met:

The investment is in a “pioneer” industry;

The approved new investment plan must be at least IDR 1 trillion (approx USD 118 million);

At least 10% of the investment capital must be placed in an Indonesian bank, and it cannot be withdrawn prior to the commencement of the realization

of the investment;

The taxpayer must be in the form of Indonesian legal entity, and it must be established within 12 months prior to the issuance of the regulation or after

the enactment of the regulation.

The taxpayer may utilize the tax holiday if it has realized its investment plan and conduct the commercial production. The tax holiday only applies to the

incomes received from activities that are qualified for the tax holiday – it does not apply to tax withholding and collection obligations; thus the taxpayer

is still required to deduct and collect taxes from other third parties, as stipulated under the prevailing tax laws.

The request for the tax holiday is to be made to the Minister of Industry (“MoI”) or the Head of the Investment Coordinating Board (“BKPM”), who will

coordinate with the relevant ministries. As part of the proposal to be submitted to MOF, the Minister of Industry or the Head of Capital Investment

Board is required to provide documents evidencing the eligibility of the requesting taxpayer, as well as to conduct certain analyses. The prerequisite

analyses include an analysis of the existence of "tax sparing rules" in the country of domicile of the foreign investor. The tax sparing rules is described

to be an acknowledgement of the tax incentive granted by Indonesia in the income tax calculation of the country of domicile. The other analyses are

analysis of:

Availability of infrastructure at the location of the investment;

Absorption of local manpower;

Review of fulfillment of the Pioneer industry criteria by the requesting taxpayer; and

Clear and concrete step-plan for transfer of technology.

A proposal equipped with complete supporting documents is then submitted to the MoF (by the MoI or the Head of BKPM), who will appoint a

“Verification Committee” that is tasked to review the strategic impact of the project on the national economy and to ensure that the above criteria are

met, the minimum required investment has been made, and that commercial production has begun. The Verification Committee will consult with the

Coordinating Minister for the Economy before submitting its recommendation to the MoF. The MoF will then consult with the President before the final

approval is granted. Application for the tax holiday must be submitted by the MoI or the Head of BKPM within 3 years of the date of the regulation. An

application cannot be submitted if the taxpayer has obtained a tax facility under article 31(a) of the Income Tax Law (tax allowance for certain

industries or regions). A taxpayer who has received the tax holiday must submit periodical reports to the Directorate General of Tax and Verification

Committee comprising a report regarding the use of the fund placed in the Indonesian Banking and an audited report of the realization of the

investment. Failure to comply with the above mentioned criteria and reporting obligation will result in the revocation of the tax holiday.

There are a number of important issues which need to be clarified, such as what industries in particular are covered. Given that the application will go

through a Verification Committee, 3 Ministers, BKPM and, finally, the President, the process is likely to be time-consuming and potentially difficult.

Although the regulation is a positive step, it remains to be seen how the bureaucratic procedures will be applied in practice.

(by: Freddy Karyadi)

 

October 2011

01

While the introduction of criminal sanctions for hard-core cartel activity is likely to be the most talked about change, the Bill makes other significant changes to the law surrounding cartels, as well as competition law in general.

BACKGROUND

Many of New Zealand’s major trading partners, such as Australia, the United States and Europe recognise the serious negative effects of cartels by providing for criminal sanctions for breaches of cartel laws. Although New Zealand has been slower to move on this, the importance of harmonising our business laws with those of Australia has seen the government seek to progress this over the last two years.

The Ministry of Economic Development released a discussion paper recommending criminalisation in early 2010. An exposure draft of the Bill was released in June of this year with the Bill being tabled in Parliament, largely based on the exposure draft, on 13 October.

THE BILL

The cartel prohibition

The first major thing the Bill does is clear up uncertainty over what the cartel provisions of the Commerce Act (the Act) cover. The provisions of the Bill replace the current wording of

section 30 with a ban on entering into or giving effect to contracts, arrangements or understandings that contain a “cartel provision”. A cartel provision is a contract, arrangement or understanding between competitors that has the purpose, effect or likely effect of price fixing, restricting output, market allocating or bid rigging.

Exemptions to the cartel provision

The Bill exempts a number of situations from being caught by the cartel provisions. These are collaborative activities, vertical supply contracts and joint buying and promotion agreements.

The collaborative activities exemption replaces the previous joint ventures exemption. Collaborative activities are defined as being enterprises, ventures or other activities in trade that are carried on in co-operation by two or more persons, and are not carried on for the dominant purpose of lessening competition between the parties. The cartel prohibition does not apply to a contract, arrangement or understanding that contains a cartel provision as long as it is reasonably necessary for the purpose of the collaborative activity.

If a defendant is seeking to rely on these exemptions in a proceeding against it for civil penalties, the burden of proof is on the defendant to show that the exemptions apply.

COMPETITION LAW CARTEL CRIMINALISATION ONE STEP CLOSEREarly last year, we signalled proposals to criminalise cartel conduct in New Zealand (see 3 February 2010 FYI). With the recent introduction of the Commerce (Cartels and Other Matters) Amendment Bill (the Bill) into Parliament on 13 October, those proposals are one step closer to reality.

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This newsletter is produced by Simpson Grierson. It is intended to provide general information in summary form. The contents do not constitute legal advice and should not be relied on as such.

Specialist legal advice should be sought in particular matters. © Copyright Simpson Grierson 2011.

A SIMPSON GRIERSON PUBLICATION

Clearance regime for collaborative activities

The Bill adds a clearance regime, much like the business acquisition clearance regime, for people entering into collaborative activities. A person entering into a contract, arrangement or understanding containing a cartel provision will have the opportunity to apply to the Commerce Commission for clearance. If clearance is granted, this procedure will allow people entering into collaborative activities to proceed, safe in the knowledge that the Commerce Commission will not investigate them for breaches of the cartel provisions.

The Commerce Commission may give clearance for a cartel provision if it is satisfied that:

• the parties are involved in a collaborative activity;

• the cartel provision is reasonably necessary for the purpose of the collaborative activity; and

• the collaborative activity will not, and would not be likely to have, the effect of substantially lessening competition in a market.

Criminal penalties

The most talked about change in the Bill is the introduction of criminal penalties for individuals for cartel behaviour. The Bill only criminalises what is often referred to as “hard core” cartel conduct. That is, a person will only be criminally liable if they enter into, or give effect to, a cartel provision with an intention to engage in price fixing, restricting output, market allocating or bid rigging. It is a defence if the defendant honestly believed at the relevant time that an exemption in sections 31-33 (ie collaborative activities etc) applied.

Penalties for those convicted under these provisions include prison terms of up to seven years for individuals. The criminal liability provisions do not come into effect until two years after the Bill is passed.

Other changes

The Bill makes a number of other important amendments to the Act including:

• the time after which a clearance for a business acquisition is deemed to be declined if the Commerce Commission has not responded in writing is increased from 10 to 40 working days;

• while the penalties for companies breaching the restrictive trade practices provisions of the Act remain similar at the greater of $10 million, three times the commercial gain or 10% of turnover, the Bill makes it clear that this latter element is 10% of the turnover in each accounting period in which the contravention occurred;

• exemplary damages can be payable by a defendant even if they are already liable to pay a pecuniary penalty for a restrictive trade practices contravention;

• penalties for failing to co-operate with Commerce Commission investigations are increased from $10,000 to $100,000 for individuals and from $30,000 to $300,000 for companies.

WHEN DOES THE BILL COME INTO FORCE?

Parliament has risen for the election, so the Bill is yet to receive its first reading in Parliament. The Bill could be subject to changes as it works its way through the Parliamentary system. It is unclear when the Bill will pass into law, but it may well be that this does not happen until 2012. We will keep you updated on progress.

In the meantime, companies should be aware of these important changes and take note of the fact that criminal liability for cartel behaviour in New Zealand is imminent. You should begin reviewing arrangements that might fall under one of the four elements of the new cartel provision definition to check whether they could apply to you, and whether any of the exemptions could apply.

Given that jail-time for cartel offences will start two years after the Bill is passed into law, now is the time to revisit compliance programmes to ensure that individuals are fully aware of the cartel prohibition and its requirements.

If you have any questions, please do not hesitate to contact any of the partners listed below.

ANNE CALLINAN – PARTNERT. 09 977 5031 M. 021 403 592 E. anne.callinan@simpsongrierson.com

JAMES CRAIG – PARTNERT. 09 977 5125 M. 021 497 713 E. james.craig@simpsongrierson.com

PETER HINTON – PARTNERT. 09 977 5056 M. 021 446 866 E. peter.hinton@simpsongrierson.com

ELISABETH WELSON – PARTNERT. 04 924 3400 M. 029 924 3400 E. elisabeth.welson@simpsongrierson.com

CONTACT DETAILS

TIM STEPHENS – PARTNERT. 04 924 3525 M. 021 720 920 E. tim.stephens@simpsongrierson.com

KEY POINTS OF AMENDMENTS TO COMPANY ACT◎Julia K.F. Yung

The latest amendments to the Company Act took effect on July 1, 2011. The key points of these amendments are summarized as follows:

If a company is ordered by a court, in a final judgment, to discontinue the use of its name for reasons such as that its use constitutes a trademark violation, it should change its name and register its new name within six months of the date of the final judgment. If the company fails to do so even after the authorities instruct it to do so within another given timeframe, the authorities may issue an order to dissolve the company (Article 10).

If a public issuing company intends to revoke its public issuing status, a special resolution thereon must be adopted at a shareholders meeting (Article 156).

The restrictions that a company may redeem its special shares only with its earnings or the consideration received from issuing new shares are lifted (Article 158).

After a company buys back its own shares for transfer to its employees, the company may prohibit its employees from transferring such shares to third parties within a period of up to two years of receiving such shares (Article 167-3).

In addition to cash, a company may return the reduced capital to its shareholders in other forms of assets (Article 168).

A public issuing company may distribute its shareholders meeting minutes by way of making a public announcement, regardless of how many shares that a shareholder holds (Articles 177 and 230).

Subject to the consent of the party who is entitled to receive the notice for calling a board meeting, such notice can be delivered by means of electronic transmission (Article 204).

A company may, pursuant to a special resolution adopted at a shareholders meeting, issue new shares to its employees with restricted rights (Article 267).

Lee and Li Bulletin_July 2011 Issue

Copyright © Lee and Li, Attorneys-at-Law, All rights reserved.

DMCA Update: Copyright Office Proposes Changes to Agent Registration System to Qualify for Copyright Safe Harbor for User Generated Content

09.30.11

By Adam Shoemaker, David D. Oxenford, and John D. Seiver

On Sept. 28, 2011, the Federal Register published the Copyright Office’s Notice of Proposed Rulemaking (NPRM) and request for comments on a proposal for a new system to register agents designated to receive take-down notices under the Digital Millennium Copyright Act (DMCA). The DMCA protects online service providers (include website owners) from copyright liability for content created by site users unaffiliated with the service provider if they abide by certain provisions of the Act, one requirement of which is to register an agent to receive notices of alleged infringement from copyright owners. This safe harbor from copyright liability is important to all service providers and website operators who allow “user-generated content” to be uploaded onto their services as, without such protections, potential liability issues would stifle the development of this type of platform.

The NPRM proposes to move to an electronic agent registration system. This system will provide for quicker registration by users, and more accessibility to information by copyright holders. The system will also request verification of the registered information on a regular basis to ensure that it remains accurate. If adopted, this system would also require all current service providers to establish an online account with the Copyright Office and re-register their designated agents. This re-registration would be accompanied by a fee, as would all subsequent updates.

Since the DMCA’s enactment in 1998, the registration process has been governed by interim rules. Service providers currently register their agents by means of a paper form whose information is manually entered by the Copyright Office into a list that is available on an official website. From experience, the time from the filing of such a registration to its appearance on the Copyright Office’s website can take several weeks or more. The Copyright Office, in the NPRM, states that it has done some informal checks on the information in its database of registered agents, and has found that the list contains duplicate registrations, registrations for companies or sites that are no longer in operation (service providers are supposed to tell the Office when they stop their operations), and many outdated addresses (service providers are supposed to update their agents as employees change, but apparently they sometimes forget).

In making this proposal, the Copyright Office asks for public comment on a number of issues. These include:

• Should the system be organized based on the name of the service provider, or based on the URLs of the websites registered?

o If registered by website, are “apps” developed for mobile devices all associated with a readily identifiable URL that a copyright holder will know if it wants to file a take-down notice, or should apps be registered differently?

o If registered by service provider, should subsidiaries and alternate trade names be all registered in one filing, or should each have to register independently?

• Should a service provider be able to register an agent who is not an employee (e.g. a law firm or other entity)? The Copyright Office disfavors this approach because such agents may not be diligent in processing take-down notices.

• Must an individual name be provided, or is an office or title at a service provider sufficient?• Should email addresses of the service providers (as well as those of the agents) be provided?

Should email addresses be made public in the Copyright Office's database?• How should the Copyright Office deal with situations where there are duplicate entries, such as

when a seller of a URL does not notify the Copyright Office of its discontinuance of use, and a buyer registers an agent for the same URL?

www.dwt.com

• How can the Copyright Office guard against fraudulent registrations?• What information should be provided in the registration? (Currently legal name, address, alternate

names, phone number and email address of the agent are required)• Should the Copyright Office maintain periodic snapshots of its database (“versioning”) so that

parties can determine whether a proper agent was designated at various times in the past?• The Copyright Office suggests that service providers may need to periodically validate the

information that they have on file. How often should such validation be required?

An automated system, where information is easily retrievable, and which automatically reminds service providers to update their information, may provide a real benefit both to copyright holders (who will be able to more easily access the proper person for take-down notices) and service providers (who will be reminded to keep their information current). There remain many questions to be answered before the new system can be implemented. However, with so many businesses now allowing some form of user-generated content, this is an important process with broad impact.

Comments on the Copyright Office’s proposal are due on Nov. 28, 2011, and reply comments are due by Dec. 27, 2011. If any of these issues may affect your operations, you might consider filing comments. For more information about this proceeding, or for assistance in filing, please contact any of the Communications attorneys at DWT.

Disclaimer

This advisory is a publication of Davis Wright Tremaine LLP. Our purpose in publishing this advisory is to inform our clients and friends of recent legal developments. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.

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Note "Hogan Lovells" or the "firm" refers to the international legal practice comprising Hogan Lovells International LLP, Hogan Lovells US LLP, Hogan Lovells Worldwide Group (a Swiss Verein), and their affiliated businesses, each of which is a separate legal entity. Hogan Lovells International LLP is a limited liability partnership registered in England and Wales with registered number OC323639. Registered office and principal place of business: Atlantic House, Holborn Viaduct, London EC1A 2FG. Hogan Lovells US LLP is a limited liability partnership registered in the District of Columbia with offices at 555 13th Street, NW, Washington, DC 20004, USA.

See note below about Hogan Lovells.

Customs proposes new rules on transaction value imports from related parties On 23 September 2011, U.S. Customs and Border Protection (CBP) proposed to revise the treatment of post-importation adjustments to value in related-party sales. The revised policy has been awaited for several years. CBP is inviting public comments by 24 October 2011, on its pre-publication proposal. Under the current policy, post-importation adjustments to dutiable value between related parties must be supported by strong documentation. CBP has denied adjustments, even when supported by pricing studies, Advance Pricing Agreements and other data supplied by the importers. Downward post-importation adjustments are even more difficult to obtain. The Pre-publication Notice proposes a more expansive allowance of transaction value between related parties, provided that the importer uses reconciliation - an optional prototype developed by CBP about 11 years ago. To obtain further details of the proposal, please contact a member of the Hogan Lovells customs team.

Customs Alert 27 September 2011

Contacts

Lewis E. Leibowitz Partner, Washington, D.C. lewis.leibowitz@hoganlovells.com +1 202 637 5638 Craig A. Lewis Partner, Washington, D.C. craig.lewis@hoganlovells.com +1 202 637 8613 Chandri Navarro Partner, Washington, D.C. chandri.navarro@hoganlovells.com +1 202 637 5640 Julia S. Padierna-Peralta Associate, Washington, D.C. julia.padierna@hoganlovells.com +1 202 637 6442

Visit us at www.hoganlovells.com

Disclaimer This publication is for information only. It is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. So that we can send you this email and other marketing material we believe may interest you, we keep your email address and other information supplied by you on a database. The database is accessible by all Hogan Lovells' offices, which includes offices both inside and outside the European Economic Area (EEA). The level of protection for personal data outside the EEA may not be as comprehensive as within the EEA. To stop receiving email communications from us please click here. The word "partner" is used to refer to a member of Hogan Lovells International LLP or a partner of Hogan Lovells US LLP, or an employee or consultant with equivalent standing and qualifications, and to a partner, member, employee or consultant in any of their affiliated businesses who has equivalent standing. Rankings and quotes from legal directories and other sources may refer to the former firms of Hogan & Hartson LLP and Lovells LLP. Where case studies are included, results achieved do not guarantee similar outcomes for other clients. New York State Notice: Attorney Advertising. © Hogan Lovells 2011. All rights reserved.

e-Update

Human Trafficking and Your Supply Chain: New Disclosure Requirements for Companies Doing Business in California

WWW.LUCE.COM

OCTOBER 7, 2011 PAGE 1

Is your company a retailer or manufacturer with over $100 million in worldwide sales? Do you do even a small part of your business in California? If so, get ready to tell the world what you are doing to combat human trafficking.

On January 1, 2012, the California Transparency in Supply Chains Act (Civil Code § 1714.43) takes effect. Its goal is to eradicate slavery and human trafficking from business supply chains by informing consumers of information which may influence their buying decision. Because January 1 is right around the corner, it’s important to understand whether section 1714.43 will apply to your company, what it will require, and what consequences your company may face if those requirements are not met.

What Companies Must Comply?

Section 1714.43 will apply to companies that meet each of these three criteria:

Retail sellers and Manufacturers: Section 1714.43 will only apply to entities whose principal business activity is either “retail trade” or “manufacturing,” as reported on the entity’s tax return.

$100 Million Gross Receipts: Section 1714.43 will only apply to entities with annual worldwide gross receipts that exceed $100 million.

Doing Business in California: Section 1714.43 will only apply to entities that are “doing business” in California, but the statute sets a pretty low standard. A company is considered to do business in California if any one of the following is true: the company (i) is organized or domiciled in California, (ii) has sales (including by agents or independent contractors) in California that exceed $500,000 or that account for at least 25% of the company’s total sales, (iii) has real property or tangible personal property in California that exceeds $50,000 or that accounts for at least 25% of the company’s total real property or tangible personal property, or (iv) pays compensation (wages, salaries, commission, etc.) in California that exceeds $50,000 or that accounts for at least 25% of the company’s total paid compensation.

The California Franchise Tax Board will yearly provide the Attorney General with a list of retailers and manufacturers who must comply.

What Must You Do?

Essentially, section 1714.43 will require companies to publicly disclose their efforts to combat human trafficking and slavery. These disclosures must be on the company’s website, and the company’s homepage must have a direct link to the disclosures. If a company does not have a website, they must provide written disclosures within 30 days after receiving a request. Companies must disclose:

The extent that the company engages in verification of product supply chains to evaluate and address risks of human trafficking and slavery, and if this verification was not conducted by a third-party, that fact must also be stated;

Jessica L. MackanessAssociate619.699.2414jmackaness@luce.comwww.luce.com/jessicamackaness

John T. BrooksPartner619.699.2401jtbrooks@luce.comwww.luce.com/johntbrooks

e-Update

Human Trafficking and Your Supply Chain: New Disclosure Requirements for Companies Doing Business in California

WWW.LUCE.COM

OCTOBER 7, 2011 PAGE 2

The extent that the company conducts audits of suppliers to evaluate their compliance with company standards for trafficking and slavery in supply chains, and if this audit was not independent and unannounced, that fact must also be stated;

The extent that the company requires direct suppliers to certify that materials incorporated into the product comply with the slavery and human trafficking laws of the countries in which they are doing business;

The extent that the company maintains internal accountability standards and procedures for employees or contractors failing to meet company standards regarding slavery and trafficking; and

The extent that the company provides training on slavery and trafficking to employees and management with direct responsibility for supply chain management.

Section 1714.43 does not require companies to engage in any of the activities described in these disclosures, but the fact that the company does not do so must be disclosed.

Risks

The exclusive remedy for violating the statute is an action by the California Attorney General for an injunction. But the statute expressly provides that remedies that exist under other statutes remain available.

One such risk is a class action based on misleading disclosures - that is, false advertising. If your company complies with the statute but inaccurately describes its practices, that could trigger a class action based on affirmative misrepresentation. Although it is debatable whether a plaintiff could win class certification on such a theory, the expense of such a suit - and the public relations damage - could be significant. So, it’s important to be careful about what you say.

Further, fair trade activists are likely to be aggressive in using the statute to shame corporations that have deficient anti-human trafficking programs. Such activists may push the envelope in litigation to try to find ways to use the statute without Attorney General involvement, or they may use extra-judicial methods to publicize violations. For this further reason, companies would be well advised both to have reasonable fair trade practices in place and, in complying with the statute, to disclose those practices accurately.

WSGR ALERTOCTOBER 2011

DELAWARE COURT OF CHANCERY GRANTS$1.2 BILLION DAMAGE AWARD

Continued on page 2...

On October 14, 2011, the Delaware Court ofChancery issued a post-trial opinion in aderivative action that challenged SouthernPeru Copper Corporation’s acquisition ofMinera Mexico, S.A. de C.V., from SouthernPeru’s own controlling shareholder. The courtfound that defendants failed to meet theirburden under the “entire fairness” standardof review and awarded $1.263 billion indamages.1 We believe this to be the largestsingle monetary award in Chancery Courthistory.

Background

At the time of the acquisition, Grupo Mexico,S.A.B. de C.V., was a controlling shareholderof Southern Peru, a NYSE-listed miningcompany. Grupo Mexico controlled 54.17percent of Southern Peru’s outstanding capitalstock, which represented 63.08 percent ofSouthern Peru’s voting power. Grupo Mexicoalso controlled 99.15 percent of Minera, aMexican mining company. In February 2004,Grupo Mexico proposed to Southern Peru’sboard that it acquire Grupo Mexico’s interestin Minera for 72.3 million shares of SouthernPeru stock, which represented an equity valueof approximately $3.05 billion in market valueat that time.

In response to the proposal, Southern Peru’sboard formed a four-member specialcommittee, tasked it with evaluating theacquisition, and authorized it to retain legaland financial advisors as it deemed fit. Thespecial committee members were highly

sophisticated, prominent individualsexperienced in M&A transactions, includingan M&A lawyer, a consultant for variousfinancial institutions, a former manager ofmultibillion-dollar companies, and a formerofficial of the Mexican government. Theplaintiffs did not challenge the independenceof these members. The special committeealso retained nationally recognized U.S.counsel and financial advisors, as well as amining expert and Mexican counsel.

At the beginning of the process, the specialcommittee’s financial advisors engaged in a“give/get” analysis, which valued the “give”at $3.1 billion based on Southern Peru’smarket price and the “get” at no more than$1.7 billion. The special committee’s advisors,however, abandoned this approach for whatone special committee member described asan “apples to apples” comparison, or relativevaluation analysis. Through this process, thespecial committee’s financial advisors valuedMinera at $2.085 billion using adjustedMinera management projections and themost aggressive assumptions.

Armed with its new valuations, the specialcommittee countered with 52 million sharesof Southern Peru stock (at a fixed exchangeratio) representing $2.095 billion—a fact thatwas not included in the proxy statement.Grupo Mexico rejected the offer and proposed67 million shares, representing $3.062 billion.The special committee responded with a newproposal of 64 million shares representing$2.95 billion, plus (1) a 20 percent collar

around the purchase price, (2) a majority ofthe minority voting provision, and (3) a $1.105billion cap on Minera’s debt.

The final deal negotiated by the specialcommittee included the following terms: (1)67.2 million shares of Southern Peru’s stock,representing $3.08 billion at the time (whichincreased to $3.672 billion as of the mergerdate); (2) a $1 billion cap on Minera’s debt; (3)a $100 million special dividend paid as part ofthe closing; (4) “post-closure corporategovernance changes at Southern Perudesigned to protect minority stockholders,including a requirement for review of related-party transactions”; (5) a super-majority votefor merger approval; and (6) a fixed exchangeratio.

Court of Chancery’s Conclusions

The court agreed with the parties that theappropriate standard of review where acontrolling shareholder stands on both sidesof the transaction is entire fairness, whichrequires a showing of fair process and fairprice despite the existence of the specialcommittee. The more important of the two,the court noted, is fair price. The questionthus became whether the defendantssuccessfully had shifted the burden ofpersuasion to the plaintiffs based on theexistence of a special committee and a super-majority vote. The court held that thedefendants had not successfully shifted theburden of persuasion because (1) the specialcommittee was not “well-functioning,” as is

Austin brussels georgetown, de hong kong new York pAlo Alto sAn diego sAn FrAncisco seAttle shAnghAi wAshington, dc

1 In re S. Peru Copper Corp. S’holder Derivative Litig., C.A. No. 961-CS (Oct. 14, 2011).

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Delaware Court of Chancery Grants $1.2 Billion . . . Continued from page 1...

required under Kahn v. Tremont Corp., 694A.2d 422 (Del. 1997); and (2) the merger votewas not “conditioned up-front on the approvalof a majority of the disinterestedstockholders,” nor was it fully informed, asthe proxy statement omitted materialinformation regarding negotiations betweenthe special committee and Grupo Mexico, aswell as the financial advisors’ valuation.

The court then held that the merger processwas not fair and did not result in a fair pricefor the following reasons, among others:

• The special committee’s mandate wasnarrow, and although the specialcommittee did go further and negotiate,it did not examine any other alternativesthat might have “generated a realmarket check,” all of which “deprivedthe Special Committee of negotiatingleverage to extract better terms.”

• One of the special committee memberswas not “well-incentivized” to engage inhard negotiations because he wasworking with Grupo Mexico on a dealthat would provide liquidity for hisstockholding employer. Although thecourt held that this special committeemember did not act in bad faith, it notedthat he was not the “ideal candidate toserve as the ‘defender of interest ofminority shareholder.’”

• Rather than using the leverage thatSouthern Peru had in its proven marketvalue to force Grupo Mexico to justifywhy Southern Peru should pay $3.1billion for Minera, the special committeeand its financial advisors discountedSouthern Peru’s market price,implemented the relative valuationanalysis, and optimized inputs to makeMinera a more attractive target, but itfailed to do the same for Southern Peru.

• Despite the fact that the specialcommittee retained the right to changeits recommendation in favor of themerger, it failed to update its fairnessanalysis before the merger vote althoughSouthern Peru had greatly outperformedthe projections on which the deal wasbased while Minera had not.

The court found no comfort in the dealconcessions that the special committeeextracted, describing them as “weak” andincapable of closing the fairness gap.

In determining damages, the court crafted anaward that represented the differencebetween the price at which the specialcommittee would have approved theacquisition had the process been entirely fair($2.409 based on a discounted cash-flowvalue, the market value of the specialcommittee’s 52 million share counteroffer asof July 2004, and a comparable companiesanalysis) and the price that the specialcommittee actually agreed to pay ($3.672billion as of the merger date). The remedyamounted to $1.263 billion, which the courtheld that Grupo Mexico could satisfy byreturning the appropriate number of shares toSouthern Peru.2

Implications

This opinion is yet another reminder that inthe context of controlling shareholdertransactions, entire fairness remains theappropriate standard of review. The court willscrutinize closely the actions of thecontrolling shareholder, the board (includingany committee thereof), and the work of itsadvisors in determining whether a transactionwas entirely fair. The opinion further makesclear the potential benefits of conditioningtransactions involving a controllingshareholder on various protective proceduraldevices. Finally, the case highlights thepotential risks if this type of transaction is not

structured correctly, and it shows theChancery Court’s willingness to imposesubstantial monetary damages to remedy anyperceived wrongs.

For more information on this decision or anyrelated matters, please contact your regularattorney or any member of Wilson SonsiniGoodrich & Rosati’s securities litigationpractice.

2 Additionally, the court held that the defendants must add interest to the $1.263 billion award at the statutory rate (5 percent above the Federal Reserve discount rate) from the mergerdate, without compounding, which will significantly increase the award amount given the April 1, 2005, merger date.

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