2011 | World Finance

Greek turmoil threatens Europe’s gas pipe projects

Posted on December 21, 2011 by

Turmoil in Athens threatens plans to bring central Asian gas into Europe through Greece and will slow efforts to reform the country’s energy sector.

Two out of three international consortia – TAP and ITGI – that are competing to build the infrastructure to carry gas from Azerbaijan’s Shah Deniz II gas field to Europe plan to pass through debt-ridden Greece and Italy into the rest of Europe.

Access to Azeri gas is crucial to European Union ambitions to loosen its dependence on Russia for energy.
Should Greece default or exit the euro, ITGI in particular could come under pressure as it partly relies on Greek government-controlled gas company DEPA for finance.

Its other partners are Italy’s Edison, and Turkey’s Botas.

“TAP is clearly in a better position compared to ITGI, as they decided a few months ago to bypass DEPA and build their own pipeline through Greece,” said Massimo Di-Odoardo, analyst at WoodMac; although he added it was not clear whether this would be enough to get awarded the gas contract from Shah Deniz II.
Italian ITGI partner Edison said it stood by the project.

“Edison doesn’t have any specific comment on the ongoing economic situation in Greece but confirms its strong commitment to build the Greece-Italy gas pipeline in order to complete the ITGI transit corridor and to secure the needed gas from Azerbaijan,” a spokesman for Edison said.

ITGI and TAP both aim to transport 10 billion cubic metres of gas a year from Azerbaijan through Turkey and Greece into Italy.

TAP has no Greek partners, but is instead co-led by Norway’s Statoil, Swiss EGL, and Germany’s E.ON Ruhrgas.

“Financing [for TAP] is not linked to the current turmoil in Greece. We continue to offer Greece a solid large-scale project that will bring €1.5bn into the country, [and] this is backed by three very financially sound companies and governments,” a spokeswoman for TAP said.

The Shah Deniz II gas field is co-led by BP and Statoil, and is thought to contain 1.2 trillion cubic metres of gas.

The third pipeline contending for the Azeri gas is the 4,000km Nabucco project, which plans to transport more than 30 billion cubic metres of central-Asian gas through Turkey, Bulgaria, Romania and Hungary, into Austria and western Europe. However, critics say that the project’s costs are spiralling out of control and that there is not enough gas available to fill such as big pipeline.

The Vienna-based consortium’s shareholders are Austrian energy company OMV, German utility RWE, Hungary’s MOL, Romania’s Transgaz, Bulgaria’s Bulgargaz, and Turkey’s Botas.

Energy imports not threatened
Despite the fears of a default and a euro-exit, Greece’s energy imports were not threatened.
Public Power Corp (PPC), Greece’s biggest power producer, said it had no problems securing supplies.
“The crisis has not changed the ability of PPC to purchase all types of fuels or affected our relationships with suppliers and traders. We have always been exactly on time when making our payments,” said Konstantino Chronis, head of the Fuels Purchasing Department at PPC.

The company plans to ramp up purchases of liquefied natural gas (LNG) cargoes in 2012 with the 16 traders and suppliers it has recently concluded master sales agreements with, he said. “We have so far secured seven import slots to bring in LNG and we hope to be able to get most of those quantities.”
Greece also relies on Russian gas imports.

A Gazprom official said, “Greece has its own problems, and gas is not the main one for them. They have been paying for gas, and there were no talks on this (ceasing exports to Greece).”

In August, Russian gas export monopolist Gazprom agreed to lower its long-term gas price and export volumes to DEPA.

Privatisation too slow
Analysts also said that the Greek turmoil would likely further decelerate its planned energy market liberalisation and privatisation.

“The Greek Prime Minister’s announcement that he would call a referendum on the second EU bailout further slowed efforts to reform the energy sector and privatise state firms,” IHS Global Insight reported. “The process was struggling already under the weight of inept institutions, but this move risks further weakening the bureaucracy and driving away any interest from foreign investors.”

Under the terms of the last round of austerity measures passed in June, Greece planned to raise €5bn through state-asset sales in 2011, and €50bn through to 2015, according to IHS. The government plans to sell 17 percent of PPC, bringing its stake in the power monopolist down to 34 percent, and the government also plans to sell at least half of its 65 percent stake in DEPA, as well as its entire 31 percent stake in power transmission system operator DEFSA.

The tricks of the trade agreements

Posted on December 21, 2011August 6, 2019 by

After much political wrangling, US President Barack Obama finally signed into law in October 2011 three separate free trade agreements (FTAs) with South Korea, Colombia and Panama.

A signing ceremony announced for the White House Rose Garden was later switched to the Oval Office – critics claimed this was symptomatic of the unwillingness of US trade union officials to be seen sharing a platform with the President, given their long-running concerns about the various agreements.

Billed as the largest package of its type for 17 years, the administration claims the deals will support tens of thousands of American jobs, while Republican US House Speaker, John Boehner, says US companies will have increased opportunities to hire workers at home as they expand their markets abroad.

The US-Korea Free Trade Agreement (KORUS FTA) – originally negotiated by President George W Bush – was subsequently renegotiated by President Obama after criticism over bilateral trade in automobiles, as well as US beef exports.

Proposed agreements with Panama and Colombia were also revised – tax information exchange being incorporated into the Panamanian deal, and labour rights assurances inserted in the Colombian one.

Tribal suspicions
Despite these revisions, organised labour remains split. In the case of the KORUS FTA, the union umbrella organisation AFL-CIO claims it will destroy US jobs, while the United Auto Workers union, which has long lobbied lawmakers to accept the deal, believes it will benefit the beleaguered US auto industry.

Equally suspicious has been the head of the United Steelworkers Union, Leo Gerard, who in a letter to Congress said that because of NAFTA (the North American Free Trade Agreement) and subsequent trade agreements like it, “large US multinational companies cut their workforces in the US by 2.9 million during the 2000s while increasing employment overseas by 2.4 million.”

Indeed, after NAFTA was passed in 1993, the US trade deficit with Mexico rose substantially and led to the loss of more than 500,000 American jobs over the following 10 years.

Gerard also released details of an emergency alert transmitted to US Secretary of State Hillary Clinton, disclosing heightened death threats against labour leaders in Colombia.

The threats had been confirmed to Gerard by the Confederation of Workers, Colombia’s largest labour federation, following a communiqué issued by the militant right-wing paramilitary group known as The Black Eagles. It said Colombian union leaders are now its “next military objective,” and it would bring “war, blood and fire to their doorstep.”

Also critical of the KORUS FTA has been the Washington-based liberal think-tank, the Economic Policy Institute. In July 2010 it dismissed out-of-hand the US International Trade Commission’s projection that the deal would have a small positive impact on the US trade balance, and “minimal or negligible” impact on US employment.

Claiming that history shows such trade deals lead to rapidly growing trade deficits and job losses in the United States, the think tank’s own calculations at the time indicated the deal would increase the US trade deficit with Korea by about $16.7bn, and displace approximately 159,000 jobs within the first seven years after taking effect.

This is all a numbers game of course, and may be subject to significant change following the subsequent revisions. That said, it still prompted Robert Scott, Economist and Director of Trade and Manufacturing Policy Research at the Economic Policy Institute, to remark after the three agreements were signed: “With 14 million unemployed, these deals will only further burden our domestic economy, which is already teetering on the brink of another recession.”

If one of the major aims of an FTA is to generate a level playing field, as tariffs are reduced, reaching that objective can be costly, and may take a significant amount of time. As the Office of the US Trade Representative notes, South Korea’s tariffs on imported agricultural goods average 54 percent, compared to the typical nine percent levied by the US on the same kind of imports.

Meanwhile, South Korea’s average tariff on non-agricultural goods is more than twice that of the US – 6.6 percent compared to 3.2 percent. “As tariffs are eliminated or reduced under the US-South Korea trade agreement, America’s farmers and manufacturers will become more competitive in the South Korean market, which should help them sell more – and grow more jobs here at home,” it says.

Critics have yet to be convinced just how beneficial these cuts will prove over the longer term, though.

US-Korea FTA
The US International Trade Commission estimates the US-Korea deal will, through the reduction of South Korean tariffs and tariff-rate quotas on goods alone, add an estimated $10-12bn to annual US GDP, and around $10bn to annual merchandise exports to South Korea.

Although these numbers are a matter for debate, what’s clear is that the agreement does call for almost 95 percent of bilateral trade in consumer and industrial products to become duty-free within five years of the agreement coming into force. Most remaining tariffs are set to be eliminated within 10 years.

Most of the headlines in this agreement had been taken up by the potential impact it would have on the US auto industry – long a source of tension between the two countries.

According to Congressional Budget Office data, in 2010 South Korea shipped 515,000 cars to the US, while US automakers exported fewer than 14,000 cars to South Korea. The US ran a $10bn trade deficit with South Korea in 2010, much of it due to the auto sector.

Under the original 2007 agreement, almost 90 percent of South Korea’s auto exports to the US would have received duty-free access. At present, the US auto tariff is 2.5 percent, compared to South Korea’s eight percent.

With the revised agreement, South Korea’s tariff will be reduced to four percent immediately and to zero in year five. Elimination of the duty on South Korean auto exports to the US will be delayed until year five, giving US automakers the time to build a brand and distribution presence – which should reverse decades of South Korean protectionism.

For agricultural products, the FTA will immediately eliminate or phase out tariffs and quotas on a broad range of products, with almost two-thirds (by value) of South Korea’s agriculture imports from the US becoming duty-free upon the agreement’s entry into force.

Excluded from the agreement is rice – South Korea in return pledging to reduce its 40 percent tariff on US beef over 15 years.

In the services sector the FTA will provide “meaningful market access commitments” extending across virtually all major segments, including greater and more secure access for international delivery services, and the opening up of the domestic market for foreign legal consulting and financial services.

While the US has ratified the agreement, which is due to take effect on January 1 2012, at the time of writing it remains stalled in Korea’s National Assembly.

US-Colombia FTA
Ratification of the US-Colombia FTA had long been held up by pressure from US-based human rights groups insisting that the Colombian government provide more protection for workers’ rights in that country. And while steps have been taken to address this through the FTA, Colombia remains one of the most dangerous places in the world for trade union officials. Some critics argue the delays have likely meant the US administration losing the initiative over the longer term.

Human Rights Watch, in a letter last year to Colombian Attorney General Viviane Morales, said a major reason for the ongoing violence has been the “chronic lack of accountability for cases of anti-union violence.” While noting convictions in 185 cases of unionists murdered, this represents less than 10 percent of recorded killings over the past 25 years.

On the economic front, the International Trade Commission estimates tariff reductions in the agreement will expand US exports by more than $1.1bn, support thousands of additional jobs, and boost GDP by $2.5bn.

The agreement, which should provide significant new access to Colombia’s estimated $134bn services market, will see over 80 percent of US exports of consumer and industrial products to Colombia become duty free immediately – the remaining tariffs will be phased out over 10 years. Average tariffs on US industrial exports currently range from 7.4 to 14.6 percent.

Sectors set to benefit from immediate duty-free access include almost all products in agriculture and construction equipment, aircraft and parts, auto parts, fertilisers and agro-chemicals, information technology equipment, medical and scientific equipment, and wood.

In the agricultural commodities sector, more than half of current US farm exports to Colombia will become duty-free immediately, with virtually all remaining tariffs to be eliminated within 15 years.

Duties on wheat, barley, soybeans, soybean meal and flour, high-quality beef, bacon, almost all fruit and vegetable products, wheat, peanuts, whey, cotton, and the vast majority of processed products will be removed immediately. There will also be duty-free tariff rate quotas on standard beef, chicken leg quarters, dairy products, corn, sorghum, animal feeds, rice, and soybean oil.

Curiously – and many would say opportunistically – the FTA for no specific reason includes a clause removing a tax exemption for travellers from Canada, Mexico and the Caribbean entering the US by air or sea. From now on they will have to pay a $5.50 fee each time they visit. The fee, which according to the Congressional Budget Office will raise $1bn over the next 10 years, doesn’t apply to travellers arriving by bus or car.

Canada and Mexico had been exempt from the fee since 1997 under NAFTA, but US politicians, needing fresh cash for government coffers, have resurrected it.

The US stance is that the elimination of this exemption was necessitated by the budget situation and will treat US citizens and foreign nationals alike, just as Canadians and foreigners pay fees at Canadian airports.

Ironically, the return of the tariff comes just as Canada and the US are supposed to be finalising the details of their own ‘Beyond Borders’ deal, aimed at boosting both trade and security.

Expectations are the agreement will come into effect within the next 12 months.

US-Panama FTA
If the Korean and Colombian FTAs have been beset by criticism over exaggerated job creation claims and workers’ rights issues respectively, the US-Panama FTA has courted less controversy, having enjoyed broad support from the Democrats regarding greater transparency for Panama’s tax regime.

Panama has long been a notorious tax haven, but now, for the first time, the US government will be able to obtain information from the Panamanian government on those US taxpayers with Panamanian assets or income.

Not everyone is happy though: some critics have argued that the deal is too much like NAFTA, and that it will have similar implications for jobs destruction in the US.

Roughly 87 percent of US exports of consumer and industrial products will become duty-free immediately, with remaining tariffs phased out over 10 years. The main beneficiaries from immediate duty-free access include information technology equipment, agricultural and construction equipment, aircraft and parts, medical and scientific equipment, environmental products, pharmaceuticals, fertilisers, and agro-chemicals.

Taken as a whole, almost 56 percent of current trade will receive immediate duty-free treatment, with most of the remaining tariffs to be eliminated within 15 years.

Panama will also immediately eliminate duties on high-quality beef, frozen turkeys, sorghum, soybeans, soybean meal, crude soybean and corn oil, almost all fruit and fruit products, wheat, peanuts, whey, cotton, and many processed products.

There will also be duty-free access for specified volumes of standard-grade beef cuts, chicken leg quarters, pork, corn, rice, and dairy products through tariff rate quotas.

US industrial goods currently face an average tariff of seven percent in Panama, with some as high as 81 percent. US agricultural goods face an average tariff of 15 percent, with some as high as 260 percent.

Beyond this, the Panamanian government says it has identified almost $10bn in “other significant infrastructure projects,” in addition to the ongoing $5.25bn Panama Canal expansion project. Construction equipment and infrastructure machinery used in such projects accounted for $280m in US exports to Panama in 2010 and are likely to increase. Tariffs for this sector average five percent, with almost all being eliminated when the agreement comes into force.

The agreement also provides for improved standards for the protection and enforcement of a broad range of intellectual property rights, including state-of-the-art protections for digital products such as software, music, text and videos; and stronger protections for patents, trademarks and test data, including an electronic system for the registration and maintenance of trademarks.

Panama has also pledged to revise its telecommunications regulatory framework, allowing US telcos access on “reasonable and non-discriminatory terms.” This includes the right of US telcos to interconnect with Panamanian dominant carriers’ fixed networks at non-discriminatory and cost-based rates.

Australia’s carbon gamble

Posted on December 21, 2011August 6, 2019 by

Prime Minister Julia Gillard described the legislation passed by Australia’s Senate as “historic,” after years campaigning for what is hoped will create a new platform for companies to trade carbon credits and cut pollution. “This is a win for those who would seek their fortunes and make their way by having jobs in our clean energy sector,” said Gillard. “Today we have made history. After all those years of debate and division, our nation has got the job done.”

The Senate passed the carbon tax by 36 votes to 32. There was applause from supporters in the public gallery as the nine Greens voted with Labour to pass the package of 18 bills. The House of Representatives voted for the package two weeks earlier, though not resoundingly – it passed by 74 votes to 72.

Two previous attempts to pass laws for a carbon price failed in 2009, and were partly responsible for the ruling Labour Party’s decision to dump then Prime Minister Kevin Rudd in favour of Gillard in June 2010.

The vote was seen as a major victory for the country’s beleaguered prime minister. The scheme will impose a carbon tax on around 500 of the country’s biggest polluters from July 2012, before moving to a carbon trade scheme in 2015. It aims to reduce carbon emissions by 159 million tonnes in 2020. Political commentators say that Gillard has staked her minority government’s future on pushing the sweeping economic reform forward, and that she will not win a second term.

Coal reliance
Australia is the world’s biggest coal exporting nation and accounts for only around 1.5 percent of global emissions. However, it is the developed world’s highest per capita polluter due to a reliance on coal for 80 percent of its electricity generation.

The carbon price is the central plank in the government’s plan to cut carbon emissions by five percent of 2000 levels by 2020 in an attempt to help reduce global warming.

The bills set an initial carbon price of AUD 23 a tonne and guarantee billions of dollars of compensation for big business and households, which will face higher electricity prices (although some reports have suggested the measures will reduce personal incomes by just 0.1 per cent a year. The government predicts that average household expenditure will rise AUD 9.90 per week, including AUD 3.30 for electricity and AUD 1.50 for gas). Export-exposed industries such as aluminium smelters and steel makers will receive up to 94.5 percent of carbon permits for free, while liquefied natural gas projects will receive effective assistance for 50 percent of emissions.

The scheme sets up an AUD 10bn clean energy finance fund to leverage private investment in renewable energy. Legislation for the fund will be introduced in early 2012. The scheme also sets aside AUD 1.3bn to help coal mines reduce emissions, and includes an extra AUD 300m to help the steel industry, which is struggling with a high Australian dollar and higher raw material costs. Airlines will also pay the tax indirectly, through a rise in an existing aviation fuel excise, although fuel used for international flights will be excluded.

Furthermore, the scheme will allow the government to buy back up to 2,000MW of electricity from Australia’s dirtiest coal-fired power stations by 2020, encouraging new investment in renewable energy and gas-fired power plants. Agriculture is exempt from the carbon price, although farmers will be able to cash in on the market for carbon offsets.

The carbon plan will see Australia join the European Union and New Zealand with national emissions trading schemes, while the US and Japan have smaller regional schemes. The government and the Greens hoped the carbon tax will reignite momentum for a global emissions reduction agreement at climate talks in Durban, South Africa, in December.

“this tax will go”
The conservative opposition – which opinion polls put on track to win the next federal election in November 2013 – has said it will dismantle the tax if victorious and replace it with an alternative that did not explicitly price carbon. “We can repeal the tax, we will repeal the tax, we must repeal the tax. This is a pledge in blood. This tax will go,” opposition leader Tony Abbott said.

The opposition backs a scheme that rewards polluters for low-cost steps to cut emissions from business-as-usual levels but the government and some policy analysts say a national cost on carbon is needed to drive change in investment.

Climate Change Minister Greg Combet wrote in a commentary in The Australian newspaper that “the investment community knows that if Abbott’s threat were ever realised it would increase sovereign risk. Consequently, Australia would suffer as an investment destination.”

Environmental groups have welcomed the votes. Australian Conservation Foundation chief executive Don Henry said that the vote “is historic for the millions of Australians who, in the face of well-funded scare campaigns, have tirelessly urged successive Australian governments to take action on climate change.”

But business and mining groups vigorously oppose the carbon scheme, and have vociferously argued that it will close coal-mines, cost thousands of jobs, hike power bills and damage Australia’s international competitiveness. “The carbon tax will undermine the competitiveness of Australian coal mines with no reduction in the amount of global greenhouse gas emissions from coal mining,” Australian Coal Association chairman John Pegler said.

The Minerals Council, which represents big mining companies such as BHP Billiton and Rio Tinto, said the vote was a “retrograde step” which would undermine export competitiveness and cost the mining sector AUD 25bn by 2020.

The world’s second-biggest miner has warned that the carbon and mining taxes have increased the sovereign risk involved in investing in Australia. Vale – the Brazilian mining giant that employs 1,500 people at its mines in Queensland’s Bowen Basin and New South Wales’ Hunter Valley – says that the mineral resources rent tax (MRRT) could affect the flow of foreign investment in Australia’s resources sector. Vale has previously stated that it wants to develop greenfield coal projects in Queensland over the next decade.

“The development of legislation to support the MRRT and carbon tax, along with various state government legislation, is contributing significantly to an increase in sovereign risk of investment in Australia’s resources sector,” the company warned in a submission to Treasury on the resource tax reforms.

Business Council of Australia president Graham Bradley has warned that his members – chief executives of top-100 companies – were concerned several policies were adding to sovereign risk. Earlier in the year, other business leaders, including BlueScope Steel and Brambles chairman Graham Kraehe, also warned that sovereign risk concerns had been heightened by the government’s handling of its plans for a carbon price.

Reports to the government by the Investment Reference Group also warned that heightened sovereign risk concerns could lead to energy investors seeking higher returns and the nation to lose important investments to offshore rivals.

Yet according to research by carbon advisory and analytics firm RepuTex, the Gillard government’s carbon tax will hit top-200 companies just as hard as Kevin Rudd’s previous plans, adding AUD 33.4bn to the cost of doing business across its first decade. About AUD 14.6bn of the extra cost is expected to be passed on to consumers, while the remaining AUD 18.7bn will be worn by listed companies, mainly at the smaller end of the S&P/ASX 200 index’s mining and energy sectors.

This sum works out at about one percent of the total underlying profit of the top 200.

RepuTex believes that smaller companies engaged in high-carbon activities will face more immediate competitive challenges, despite government assistance. According to the study, materials, industrials and energy companies will face the biggest burden, carrying 60 percent, or AUD 11.4bn, of the costs that cannot be passed on.

Heavy reporting requirements…
Professional services firms have also pointed out that the new rules will require companies to change their financial reporting and the information they disclose to regulators and investors. Adrian King, national partner in charge of KPMG’s Climate Change and Sustainability Services practice in Australia, said that in the immediate term, CEOs, CFOs and their boards will need to examine the financial reporting implications of the climate change plan, and that “these implications will not be the same for every business.”

According to King, “probably the most important reporting issue is the potential effect on asset impairment testing.” He said that the impact of this on June 2011 financial statements will depend on the directors’ view as to whether they can reasonably estimate how a carbon price mechanism would affect the recoverability of the carrying amount of assets.

“If a carbon price could potentially impair the value of assets, this fact should be disclosed in the financial report. Information about the assumptions made and the nature of key uncertainties identified should be included in the disclosure,” said King.

“What is clear is that a carbon price will lead to additional recognition, measurement and disclosure issues within entities’ financial reports. Reporting entities should make sure they have sufficiently robust and auditable systems and processes to support their financial reporting,” he said.

King also warned that even private companies unencumbered by external reporting obligations should nevertheless consider how the economic realities behind these reporting and accounting issues could affect their credit standing. “Banks and other lenders will certainly be looking into these matters,” he said.

…or boon for investors?
But not every business group believes that the carbon rules will be disastrous. The world’s four major green investment groups – Europe’s Institutional Investors Group on Climate Change, the US-based Investor Network on Climate Risk, Australia’s Investor Group on Climate Change, and the United Nations Environment Programme Finance Initiative – have hailed Australia’s carbon tax as a boon for investors, strongly backing the government’s claim that the scheme will deliver economic benefits. Combined, the four investors represent $20trn in funds.

A new report by British investment expert Rory Sullivan praised Australia’s clear carbon reduction targets, its transparent climate policy and the fact that the carbon-trading scheme would be clearly linked to international markets. The report, commissioned by groups representing 285 pension funds and other institutional investors around the globe, found that Labour’s carbon price and financial assistance for green technology “should provide investors with real confidence” in investing in renewable energy in Australia. But it noted that one of the major risks was “political risk, in particular that the opposition Liberal Party may unwind elements of the proposals if elected.”

Nathan Fabian, chief executive of the Investor Group on Climate Change, one of the four groups that commissioned the report, said: “International investors believe Australia’s policy framework is one of the best in the world for investment certainty. Experience shows that when good policies are rolled back, confidence of investors is undermined for several years… Investors believe that carbon pricing is the only real, long-term policy solution for Australia.”

While the country’s extractive industries may still be lobbying hard against the carbon scheme, political observers believed that there was little doubt that it would pass in November’s key vote.

The only question that remains is how long the legislation will last. If Gillard’s government loses the election in two years, the coalition opposition has vowed to repeal it – and even if it only decides to dismantle parts of the scheme, the effect could be damning.

Erriah Chambers offers international business law expertise in Mauritius

Posted on December 21, 2011 by

As a former French and British colony, the legal system in Mauritius has been influenced to a large extent by the legal systems of both countries. The hybrid legal system is governed by the French Civil Code and English common law. Company law, trust law, criminal procedure, and the law of evidence are mostly imported from the English legal system, while the Code Civil, Code de Procedure Civile and Code de Commerce follow French laws – with some changes brought in over the years to suit the Mauritian context and accommodate local conditions.

In terms of the judiciary, the Privy Council serves as the final appellate court for both civil and criminal cases, while the Supreme Court heads the judicial system as a court of higher jurisdiction and as an appellate court.
The Mauritius legal system and judiciary are currently undergoing major reforms with a view to modernising the system. One notable addition to the judiciary is the Mediation Division of the Supreme Court, inaugurated in June 2011. Mediation aims to provide a prompt dispute resolution mechanism to parties, and in so doing reduce the costs involved in a case, and avoid undue delays.

Recently, the Law Practitioners Act 1984 was amended to provide for the establishment of a Council for Vocational Legal Education, and allow a Mauritian citizen who has obtained a professional qualification equivalent to that of barrister in another Commonwealth country or in America to practise as a barrister in Mauritius. In the near future, Mauritius will see the establishment of an Institute for Judicial and Legal Studies, which will manage the training of prospective magistrates and the ongoing training of judicial and legal officers.
The liberalisation of the legal services market with the adoption of the Law Practitioners (Amendment) Act 2008, enables foreign law firms to establish local offices or joint ventures in Mauritius alongside Mauritian lawyers. This makes Mauritius an attractive jurisdiction. The country is also positioning itself as a regional centre for international dispute resolution, and is actively promoting for international legal practitioners to represent parties and to act as arbitrators in international commercial arbitrations in Mauritius. This will create more opportunities for the Mauritian legal sector and provide a better framework for Mauritius to establish itself in the international legal arena.

Recent business legislation
The global business sector in Mauritius commenced operations in 1992, offering services to both the local and offshore sectors. The Financial Services Commission is the authority responsible for the licensing and regulation of non-banking financial services, including the insurance sector. The Financial Services Act 2007, the Insurance Act 2005, the Securities Act 2005 and the Trust Act 2001 are the governing legislations for global businesses in Mauritius.

The Financial Services Commission of Mauritius issued its codes on the Prevention of Money Laundering and Terrorist Financing, which were subsequently revised and reissued in July 2005, to meet new national and international initiatives. The codes build upon the provisions of the Financial Intelligence and Anti-Money Laundering Act 2002, and set out the preventive measures that financial institutions, trusts and corporate service providers must put in place to counteract money laundering and terrorist financing. These codes also take into account the 40 recommendations and nine special recommendations of the Financial Action Task Force, and various other international standards.

Mauritius is progressively paving its way to establishing a solid investment fund industry in the offshore sector. The banking sector alone is worth over $1bn. About 90 percent of the active funds invest in Indian securities and shares, and more than half of the registered offshore funds are listed on international stock markets. South Africa, the US, India and non-resident Indians represent the major sources of offshore investment.

The Mauritian government took the initiative to amend key legislations, to bring them in line with international business expectations and compete across the markets:
• Offshore companies have been replaced by Category 1 Global Business Companies;
• The concept of ‘offshore trusts’ has also been abolished as a result of the repeal of the Offshore Trusts Act 1992 (now replaced by the Trust Act 2001), which has fused the law relating to domestic trusts and offshore trusts;
• The Banking Act 2004 allows offshore banks in Mauritius to conduct all types of banking business activities with non-residents of Mauritius;
• The Financial Services Act 2007 now provides for the legal framework governing the financial service sector.

World Finance recommends
Erriah Chambers is a law firm specialising in international tax law, international trusts law, international business law and all aspects of offshore business activities. The chambers was set up in response to the demand for Mauritius-based lawyers with international exposure and specialised expertise in the fields of international trusts, international finance, corporate and cross-border insolvency, tracing, and debts recovery.

Erriah Chambers consists of a team of seven barristers, led by managing partner Dev Erriah, and has associateship with many foreign law firms. Dev Erriah is listed as Band I and II individually in Chambers and Partners Global for the years 2008, 2009 and 2010.

Erriah graduated in the UK and holds an LLM in international tax law, company law, and law of international finance and international trusts from the University of London. He undertook his pupillage with Philip Baker QC at Gray’s Inn Tax Chambers.

He was the first Chairman of STEP Mauritius (the Society of Trust and Estate Practitioners), and is a member of the International Bar Association, part of Committee N (for tax) and Committee E (for banking).

More than 80 percent of the chambers’ practice involves advising international clients – including multinational enterprises, international law firms, the top 10 international accountancy firms, management companies, and domestic and international banks. The chambers is also involved in setting up various types of investment funds with very complex structures in jurisdictions in Africa and Asia, and undertakes international litigation such as international bankruptcy, enforcement of international creditors’ claims, money laundering and due diligence in Mauritius and at an international level.

Access Bank: Scaling up sustainable development in Africa

Posted on December 21, 2011August 6, 2019 by

The continent is facing the task of controlling the effects of some of the globe’s harshest social, ecological and economic conditions. But in spite of that – or perhaps because of it – companies in Africa want to become acknowledged as equal partners in the world of global finance.

Access Bank has achieved exactly that. It has proactively looked for responsible business opportunities and incorporated good governance considerations into its daily operations. By doing so, it has significantly raised its profile internationally.

Access Bank believes that a country’s local environment cannot be isolated when addressing issues of sustainability. Factors including government policy, the socio-economic environment and a nation’s political landscape all play a significant role in sustainable development. The bank, which has branches throughout Ivory Coast, DR Congo, Nigeria, Rwanda, Sierra Leone and Zambia, has taken on the role of signatory to numerous international sustainability initiatives. Some of the most widely regarded have included raising finance for renewable energy projects, schemes to encourage female entrepreneurs, and the organisation of events to inspire other Nigerian financial organisations.

Sustainable development first
As an indigenous African company, Access Bank faces unusual tests within its local operating environment. Regardless of these trials, its approach to sustainability has remained versatile and progressive. Access Bank has learned to deal with issues arising out of its locality by balancing economic growth, social development, and environmental protection. Integrating ecological, communal and corporate governance considerations into its investment management and lending activities has impacted positively on the bank’s overall performance.

Sustainable finance underpins Access Bank’s well-planned strategy. The bank recognises its responsibility to drive the operational and economic performance of the company in a manner that values its clients and employees, upholds the financial system, and delivers long-term benefits to its host communities.

It also strives to address the challenge of sustainability so as to ensure that future generations are not compromised by actions taken today. The bank does this by continually reviewing its policies, which allows it to accommodate environmental and geographical realities into its business strategy, while adhering to global best practices.

In developing this plan, the bank has given consideration to a range of principles, including the UN’s Environment Programme Finance Initiative, the UN’s Principles for Responsible Investment, and the Global Reporting Initiative. Access Bank’s policy regarding these principles is also in line with its key strategic objectives, and is consistent with its enterprise risk management framework, which promotes a moderate and guarded risk attitude to guarantee sustainable growth in shareholder value and reputation. This includes positioning itself as a top three financial services group in Nigeria, becoming the employer of choice in Africa, and attaining an Augusto AAA and a Fitch A+ credit rating by the end of 2012.

Setting an example
In order to manage environmental and social risk and improve performance – in spite of how they affect the jurisdiction – Access Bank has introduced organisational learning, and has adopted a comprehensive environmental and social risk management policy. The bank has been in the spotlight for a few years now for contributing to its local communities. Award titles such as Most Socially Responsible Bank, Sustainable Bank of the Year, and Best ESG Asset Manager are just a few of the company’s recent accolades.

The bank and its employees have worked vigorously, and always alongside its clients, to understand what customers require. It has then systematically incorporated this knowledge into the way it conducts its business.
Access Bank is driving the development of a set of Nigerian sustainable banking principles to address environmental, development and social issues. The bank’s policy on sustainability has been very successful: so much so that it has significantly influenced the way other African companies conduct their business in the region.

CSR at the heart of Access Bank
Africa’s health concerns are also taken extremely seriously at Access Bank. The continent is one of the regions most heavily affected by HIV, Aids, TB and malaria. These illnesses are one of the main factors responsible for a decline in productivity, reduced profits and increased business expenditure for small enterprises in the region. The bank has been at the forefront of the private sector response to fight against these diseases in sub-Saharan Africa, and has helped to build and rehabilitate Africa’s health infrastructure.

The group’s CEO, Aigboje Aig-Imoukhuede, has demonstrated the bank’s pledge on different occasions and is widely recognised as a proponent of CSR in the African business community. With his guidance the bank has signed agreements and created close associations with the most essential national and international health organisations in Africa, including GBC Health Initiative.

Additionally, the lender has joined forces with a range of other multinational companies, including Friends of the Global Fund Africa, to help initiate measures for the prevention and treatment of illnesses affecting the continent.

Access Bank achieved this through workplace policy workshops for 2,000 SMEs throughout Ghana, Zambia, Nigeria and Rwanda. The workshops focused on training companies on the development and implementation of workplace policies for the most serious illnesses. The plan also benefited employees and their dependants, who were trained on making informed behavioural and medical choices to help decrease and prevent further spread.

Access Bank’s policy provisions also targeted care and support for workers and their families, and the protection of the rights of those affected by HIV/Aids. The group will continue to be an ardent advocate of responsible business practice, and has become a role-model for other banks to follow.

Rosneft teams up with ExxonMobil in exploration and technology partnership

Posted on December 21, 2011 by

Nothing excites the oil and gas industry quite like a major Russian-American collaboration: something clearly exemplified by the ExxonMobil Rosneft partnership, a deal that will deliver significant benefits to both parties. Rosneft and Russia gain access to the enormous technical capabilities of the US leading oil corporation, while ExxonMobil can tap into Russia’s substantial oil reserves and the local know-how Russia’s largest state oil company can bring to the table.

Although ExxonMobil’s oil reserves are of significant interest to Rosneft, it is the company’s technological prowess and expertise that sealed the deal. Exploration and drilling in offshore environments such as the Black Sea shelf require specialist technologies and equipment that the US company has developed on other sites around the world. ExxonMobil’s understanding of the technological, environ- mental and economic developments in the field is expected to advance both Rosneft’s interests and the Russian industry as a whole.
The deal has struck a clear note with Russia’s hierarchy, who hail the pact as ‘truly strategic partnership’, citing ExxonMobil’s experience in exploiting Arctic reserves in Canada as an example of its work in challenging conditions.

A strong deal for both sides
For Rosneft’s part, the deal creates exceptional financial benefit as ExxonMobil has agreed to take on the preliminary costs of the exploration. But the deal is not a one-sided agreement: ExxonMobil is tapping into significant reserves. According to Houston-based DeGolyer & MacNaughton, a consultancy firm specialising in assessing and auditing the upstream hydrocarbon potential of oil exploration areas, Rosneft’s proven Petroleum Resources Management System (PRMS) reserves represented 2.5 billion tons of oil and almost 800 billion cubic meters of gas at the end of 2010, with Rosneft’s international-standard proven reserve replacement ratio in 2010 standing at 106 percent. Put into tangible figures, at the end of 2010, Rosneft’s hydrocarbon reserves are deemed to last for 25 years, with oil reserves lasting for 21 years and gas reserves lasting for 67 years.

But facts and figures only present one side of the story; the future potential of exploration is also key. Rosneft and ExxonMobil have executed a Strategic Cooperation Agreement under which they will explore and develop hydrocarbon resources in Russia, the US and other countries. The $3.2bn funding of exploration and the development of the East Prinovozemelskiy blocks one, two and three in the Kara Sea and the Tuapse Trough in the Black Sea are at the centre of the agreement. These regions are two of the most promising – and least explored – offshore oil and gas areas in the world, with extremely high potential for the exploration of both liquid and gas fuels.

But Rosneft has struck a particularly good deal. Its equity interest in both of these joint ventures will be 66.7 percent, while ExxonMobil will hold a 33.3 percent stake. The deal will also provide Rosneft with an opportunity to gain an equity interest in a number of operations in ExxonMobil’s assets in North America, including offshore fields in the Gulf of Mexico, tight oil fields in Texas, exploration in Canada and several projects in other countries. Both companies have also agreed to cooperate in the study of tight oil and unconventional reserves in Western Siberia.

In addition, Rosneft and ExxonMobil will implement a programme of personnel exchanges for technical and management employees. This will help strengthen the relationship between the companies and provide valuable career development opportunities for key executives at both companies. In addition, Rosneft will exercise the right to invite ExxonMobil’s employees as consultants on its projects, and both companies will be entitled to send delegates to the various exploration sites.

The arctic research centre
Rosneft will also focus on environmental as well as health and safety concerns. It is looking to create modern safety systems that mitigate the risks of offshore operations and global best practice. The environmentally-sensitive areas of the East Prinovozemelskiy license blocks span over 126,000sq. km while the Tuapse Trough license block covers 11,200sq. km. The companies will be subject to complex ice conditions with winter temperatures expected to reach minus 26 degrees Celsius.

However, Rosneft believes the use of new technologies and the joint expertise of the two companies will help mitigate such environmental obstacles. In order to address this challenge, the partners of Rosneft and ExxonMobil have joined forces to establish an Arctic Research and Design Centre for Offshore Developments in Russia.

The Research and Design Centre, which will be run by Rosneft and ExxonMobil employees, will focus on developing new technology in order to support the joint Arctic and deep water drilling projects in the Black Sea. Both companies believe that such scientific development is of key importance for the future of the company and the industry.

Leading industry experts from both companies will help develop new technologies to facilitate the implementation of the joint projects in the Arctic, including drilling and production vessels and platforms with ice reinforcement, as well as other projects of the Russian state-owned company. Exxon will fund the initial costs of establishing and operating the centre.

Rosneft has placed technological advance- ment high on its agenda because it feels it will help it become more competitive. Gaining access to ExxonMobil’s advanced technology and its pool of knowledge in reducing the environmental impact and improving the safety of deep sea drilling will enable the company to achieve access to previously-unattainable fuel sources. This is vital to developing the company’s own technology, thereby improving working conditions for its employees and enhancing its market capitalisation.

The financial strength of the partnership is also of key importance to Rosneft. The choice of ExxonMobil as a partner, with its unique resource base featuring the largest and most highly capitalised company in the world, reflects its commitment to increase the capitalisation of the company through the application of advanced technologies, to bring an innovative approach to business and to strengthen the human resource capacity.

Rosneft leading the way in transparency and CSR
Aside from the partnership, another notable achievement likely to please Rosneft’s shareho- lders is the fact that the company has now made it to the top of the S&P transparency and disclosure list for Russian companies. But achieving this has not been easy. It was a highly complex process that required a considerable investment of time to understand the requirements of and resolve transparency issues. Barriers had to be lifted internally, which is often a hard task, but the entire team knew that transparency is especially difficult for big companies. Their achievement in terms of disclosure has impressed industry observers and delighted investors.

Rosneft updates its investors regularly and publishes its annual results in line with all the other international companies. Directors point to the drop in the number of enquiries from shareholders for corporate information and clarification as the best indicator of its success in achieving improved governance.

A national role
Aside from maintaining a highly transparent environment for its shareholders, Rosneft is also actively supporting the Russian nation as a whole. For example, an estimated 40 percent of the country’s budget is derived from the contribution of the oil and gas industry, and of this, approximately 20 percent comes from the taxation of Rosneft and its employees. In short, Rosneft is one of the biggest fiscal contributors in Russia.

The importance of this deal for Russia and its oil industry cannot be underestimated. Rosneft has operations that are vital in terms of the viability of the Russian economy. For instance, the refineries in the various regions of Russia are the country’s key employers, and the company makes sure that it is actively involved in local programmes that help finance charities, churches, schools, and universities.

Thaioil to continue sustainability drive

Posted on December 21, 2011 by

A flagship refinery of PTT Plc, Thaioil has evolved since its foundation in 1961: from a petroleum refinery producing a modest 35,000 barrels a day, into Thailand’s largest oil player, with current capacity standing at 275,000 barrels a day. Despite its mature age, the refinery has stood the test of time and has been carefully preserved and modernised to comply with global standards.

But the company has more strings to its bow than an eminent refinery that has aged remarkably well. “Thaioil has changed a lot since it was founded,” says Surong Bulakul, the company’s CEO. “It is no longer based around an oil refinery exclusively: we’re now a fully integrated company that also deals in electricity and sustainable energy.

“The cornerstones of the company are efficiency, flexibility and reliability,” he says. “The flexibility in our operation gives us the ability to produce a high value of products; reliability gives the ability to manage the reliable products and services to our customers. The Thaioil refinery is 50 years old and has been highly utilised at more than 100 percent – efficiency means effectiveness in all areas to make the lowest possible operating cost.

“These are the ablilties that allow us to fully utilise all our assets for the most benefit. Refining is certainly not a sunrise industry, but we are fortunate to be in the middle of a region where demand is still increasing. Asia has immense growth potential,” the CEO says.

A new beginning
With Surong Bulakul at the helm – he took the reins in 2010, after holding a string of executive positions at Thaioil’s parent group, PTT – the company has expanded within new markets and has moved into higher value products. “The business model is quite unique, and we keep modernising it by introducing innovative concepts and products using efficient technologies,” Bulakul says. “We have also given added value to its existing value chain by converting commodity products, such as petroleum, into specialty products.”

Currently the company covers areas including lubricant base oil, petrochemical, ethanol and power generation. So as not to become stagnant on the market, Thaioil constantly re-evaluates its offerings to provide solutions that benefit its clients – and the community in which the company is based.

So what defines the work ethic of Thaioil’s new CEO? “In terms of management I believe that communication is everything, and it will promote a high-performance organisation with excellent teamwork in place,” he says. “It’s crucial to be able to be in top quartile on performance and return on investment, as well as to create innovation and credibility in terms of sustainability. Another crucial part of my role as CEO is to keep our staff happy and to keep them involved in the business operations, as well as allowing them to have a say in community projects.”

Bulakul’s philanthropic leanings rub off across the entire spectrum of the company. Notably, the company has received an award for managing to wholly prevent accidents at its factories in 2010. “The reason … is that we employ preventative and minutely executed measures to avoid accidents,” Bulakul says. “We would be prepared to go to any length to protect our employees and community.”

The future is green
As a leading force in the sustainable stakes, ‘Think Green’ could well be Thaioil’s mantra. To further its position as a green industry maven, the company is taking active measure to develop and provide environmentally-friendly products. “Our expertise in oil and gas has led us to renewable energy, and through to becoming an energy converting company,” says Bulakul. “One of our highest priorities is to adhere to sustainable standards in order to contribute to building a sustainable future. These days, companies, including Thaioil, can’t justify dealing with nasty products that are harmful to the environment and human health.”

“We fully take advantage of the universal eco trend, and our products score higher on the sustainable scale than the set government standard,” he says. “As the journey of Thaioil continues, we will strive to make any changes and improvements necessary to align the business with new requirements.”

In keeping with the government’s policy to support and spur renewable energy production and consumption, Thaioil established Thaioil Ethanol: a wholly-owned subsidiary which functions as the ethanol arm of the business and delivers a string of related products.

The ethanol industry might not be entirely free of controversy, as critics deem it too taxing on farmland that would be better used for food crops. But no one can deny that it comes with obvious benefits such as affordability and sustainable properties. “We’re hoping that Gasohol will outdo fossil fuel in the future, and it is certainly a viable replacement,” stresses Bulakul.

Gasohol is a form of fuel made up of gasoline and ethanol. Currently these are combined in a 9:1 ratio, but to make the product even greener, Thaioil is trying to develop a way to increase the percentage of ethanol. The company is currently spending substantial R&D resources to achieve this particular goal.

In order to increase the production of ethanol, Thaioil is involved in Maesod Clean Energy Company, which boasts a daily output of 200,000 litres of ethanol from inedible sugarcane. It is a joint venture in which Thaioil holds 30 percent, while Petro Green and Padaeng Industry own the remainder part. Thaioil also owns a 50 percent stake in Sapthip, which outputs similar ethanol quantities daily, with the other half belonging to one of Thailand’s major cassava exporters.

A good corporate citizen
The issue of corporate responsibility is close to the heart of Thaioil. Because few middle-men are involved in the production of ethanol, its increased use directly benefits the farmers of the product. Hence, Thaioil’s business model adds value to local farmers, because profits go directly to the individuals working in the Thai agricultural sector, particularly those focusing on farming sugarcane and cassava – approximately 10 percent of the country’s farmers – which are the two main resources used to produce ethanol.

As well as supporting farmers, Thaioil constantly orchestrates projects, large and small, to support people in the community. A recent project saw the company install a micro-turbine generator in a waterfall found in a remote village in Thailand. The resident cabbage and rice farmers benefited greatly from the initiative, since they had previously lived entirely without electricity. “The electricity that is now generated in the village is of the green variety, but most importantly it has transformed the farmers’ lives,” says Bulakul. “At last they are able to benefit from the gadgets of civilisation such as lightbulbs and TVs, and they can now also access the internet, which not only brings them pleasure and a means to communicate, but will enable them to check on current market prices for their stock, as well give them the chance to monitor weather forecasts and other important news.”

About 1,000 people benefited from the arrival of the micro-turbine, and a similar project masterminded by Thaioil in Thailand’s Tak province, on the border with Burma, was endorsed by the UN. In this case, multiple sources of energy were used, including solar, bio and flowing water-generated energy.

Bank secrecy and tax planning an intimate relationship, says Afschrift Law

Posted on December 21, 2011 by

It is difficult to find a subject of a tax nature which raises so many passions as that of bank secrecy. It is true that, in this field, principles and symbols confront in the most evident manner.

On one side, there are those who consider that the state must know everything, and that tax collection must not curtail individual rights. On the other, there are those who insist that private life is a value which must prevail over tax policy considerations.

It is extremely difficult to actually reconcile these two points of view, as it comes to choose between the interests of the state or the ones of the individual. Of course, in theory, this question should never be put on the table, as the state is supposed to protect the individual’s rights – but this is all theory today, as it is obvious that states and individuals have developed by having opposing interests.

Furthermore, from one country to another, the protected values are different, as are the legal frameworks. The only common thing: all of them have tried to reach a balance between secrecy and the interest of the state.

International pressure
Since 2008, and especially after the last G20 summit, an international trend forced the most heavily taxed states to try to eliminate bank secrecy (and every other kind of secrecy); most of the countries had no choice but to review their bank secrecy regulations in order to comply with this trend.

This is how grey and blacklists have been created, and it is also how most of the bank-secrecy protective countries were forced to take several steps back. Switzerland is a perfect example.

There is no doubt: bank secrecy is suffering under a massive attack from governments. Whether directly, by changing the legal provisions specific to bank secrecy; or indirectly, by imposing new obligations to the different actors of the financial sector; governments are forcing banks to comply with an unprecedented number of obligations related to recording financial transactions and even disclosing suspicious transactions to the authorities. J. Wakefield described this situation perfectly when she wrote, in her well-known contribution Follow The Money, that banks had, by law, to “turn into law enforcement agents and give officials access to personal financial information without a warrant or subpoena.”

Bank secrecy is trapped in a vast regulatory and law enforcement network. Even worse, sometimes states will use stolen data or outright aggression in order to achieve ‘transparency.’ It is difficult to forget the example of the Swiss bank which had to collaborate with US authorities in order to avoid the revocation of its licence in the US.

Bank secrecy is also trapped in the international crisis; the causes of which are multiple, but the first of them being the incapacity of modern states to deal with their public finances and the bad management of public funds causing a constant need for new liquidity. These needs generate new taxation measures.

Given that governments collect almost half of their taxpayers’ benefits and spend more than half of them, it is obvious that taxes will rise as, in this economic model, governments are trying to balance budgets by increasing income rather than decreasing spending.

The real problem is that these policies generally lead to a market failure, as private markets are gradually rendered unable to allocate services or goods in an efficient way, as high taxes affect income distribution.

Evolution of optimisation
It is under these circumstances that bank secrecy is currently considered more as a means to commit fraud than an individual right; is it also because they are considered under this scope that offshore jurisdictions are attacked.

It is in this difficult context that tax optimising had to evolve, as taxpayers cannot afford to become the passive spectators of this situation: solutions must be found, provided that legal provisions must also be respected, as fraud is in any case not an option.

It is obvious that to do so, taxpayers will not try to hide their money, but will instead move it to a country that levies taxes more leniently, or to use it in the most tax-optimised way. Funds will depart to places like Singapore and Hong Kong, which are not concerned by the savings guideline; or to Luxembourg, a country where lawmaking is done in an ingenious and innovative way, and where a number of interesting tax rules do not depend on the status of the bank secrecy regulation.

In years to come, a number of different attitudes and approaches to tax optimisation will emerge.

In the first place, taxpayers will try to use the favourable provisions of the law of their actual country of residence. For example, in Belgium, the taxpayer’s little-to-profit principle provides that any taxpayer has the right to choose the most suitable route in order to generate the least taxes, as long as the legal consequences of this way are respected; this principle prevails in Belgium over the principle of “substance over form.”
Furthermore, Belgian holding companies can benefit, under certain conditions, from the exemption of the withholding tax on dividends and capital gains, while at the same time deducting the interest of the loans taken out by the company – even if these loans were taken in order to acquire shares.

When the legal system of the country of residence appears insufficient to satisfy the taxpayer’s planning needs, he will probably establish in a country with lower taxation.

For example, a major shareholder will consider moving to Belgium, where he will have to pay only 15 percent on the Belgian-source interest and 25 percent on dividends, while avoiding tax on capital gains and wealth tax.
As for (professionally inactive) wealthy individuals, they will likely move to Switzerland and benefit from the Swiss lump sum taxation system, paying thus exclusively every year, under certain conditions, a fixed amount, calculated on the rent paid or the rent value of their property in Switzerland, without any kind of relation to their real income or wealth.

Or the taxpayer could consider settling in Israel, where foreigners who establish there and nationals who return can benefit from tax exoneration for a 10-year period after the date of immigration to Israel.

Capital transfers
Nevertheless, as it is not always easy to leave one’s country of origin, sometimes only the capital will travel abroad. Most of the time this will be transferred to different structures of a foreign jurisdiction, such as the SPF Private Wealth Management Company of Luxembourg – intended for individuals and patrimonial entities, and ideal for important holders of shares and equity portfolios wishing to benefit from a zero percent constitution capital duty of one percent, and an exemption of income, communal and wealth tax.

The inheritance can also be transferred to a discretionary and irrevocable trust. Israeli trusts are extremely interesting because of their advantageous tax situation since, insofar as the settler and the beneficiaries are foreign residents, the assets held by the trust will be considered to be held by a foreign resident. The consequence will be that the income and non-Israeli benefit of the trust (and sometimes even certain investment income of Israeli origin) will not be taxed in Israel.

As for companies, important possibilities of tax planning and optimisation can arise from the use by companies or groups of companies of Belgian and Luxembourg companies.

More particularly in Luxembourg, the professionals of the investment can use professionals-oriented companies, such as SICAV; and specialised funds of investment, which are given total income, communal, commercial and wealth tax exoneration.

Professionals will also consider the constitution of a Soparfi (company of financial participations), which can benefit from the provisions of double taxation convention and those of the directive mother-subsidiary guideline, and whose financial transactions (dividends, capital gains) can, under certain conditions, be exonerated from any kind of taxation.

Taxpayer power
The struggle against bank secrecy does not mean that taxpayers are powerless; on the contrary, they still have effective means of action against the increasingly aggressive national and international tax provisions.

Taxpayers, whether companies or individuals, cannot just hope that a better regulation of public finances will lead in the future to lower taxes and a subsequent return of the traditional value of protection for private life.
Confronted with a government which seeks more and more transparency without showing any, taxpayers have no other choice than to put in place an effective strategy of tax and asset planning.
Our role at Afschrift is to help our clients achieve these targets.

Power Corporation diversifies to boost shareholder value

Posted on December 21, 2011August 6, 2019 by

Founded in 1925, Power Corporation initially had interests in hydroelectric services. As the industry was gradually nationalised in the decades after, Power Corporation used the resulting capital to invest in a range of companies. Meanwhile, Paul Desmarais Sr was building his own business throughout the 1950s and 60s with a regional bus company at its core. In 1968, he exchanged his various investments with Power Corporation to acquire a majority interest in the company and became its CEO.

Paul Desmarais Sr developed a new strategy for the corporation, shedding assets he felt were not core to its new focus in the financial services, industrial and communications sectors. He turned Power Corporation into a multinational, expanding it into Europe and Asia.

Desmarais’s sons, Paul Jr and André, became co-CEOs in 1996. Among the company’s key assets in the early 90s were Great-West Life, an insurance company, and Investors Group, in the mutual fund business.

The Desmarais brothers set out to consolidate Power Corporation’s position in these two sectors and launched a series of measured, highly strategic acquisitions – ultimately propelling the Power group to the number one position in Canada in both life insurance and mutual funds over the course of a decade.

Power Corporation today
Through its subsidiary Power Financial Corporation, Power Corporation today has a majority stake in life and health insurer Great-West Lifeco and its North American and European subsidiaries, Great-West Life, London Life, Canada Life, Putnam Investments, and Great-West Life & Annuity Insurance. Power Financial’s subsidiary IGM Financial holds its asset management and financial advisory services companies, Investors Group, Mackenzie Financial Corporation, and Investment Planning Counsel.

In Europe, Power Financial and the Frère family group jointly hold 62.9 percent of the voting rights in Pargesa Holding SA, the Pargesa group’s parent company based in Geneva, Switzerland. Pargesa, through Groupe Bruxelles Lambert, in turn holds significant interests in six major companies: Lafarge (cement and building materials), Imerys (industrial minerals), Total (oil and gas), GDF Suez (electricity and gas), Suez Environnement (water and waste management) and Pernod Ricard (wines and spirits).

In 2005 Power Corporation was named as a qualified foreign institutional investor by the Chinese government; the first Canadian company to be granted such status.

Business philosophy
Power Corporation’s investment philosophy is driven by its long tradition of deep fundamental analysis. The company places great emphasis on strategy, effective human resource management, judicious deployment of capital, and a conservative approach to balance sheet management. Where appropriate, such as with the Frère group in Europe, the Corporation partners with like-minded investors to pursue new business opportunities.

Power Corporation’s management philosophy is predicated on a business model that encourages active involvement on the boards of directors of the companies it invests in. It is a philosophy informed by a prudent risk management culture and a long-term perspective.

The company had 2010 consolidated revenues of $32bn and operating earnings of $1bn. Total assets under administration at year-end 2010 were over $600bn.

CSR
Power Corporation has a long tradition of acting in a responsible and ethical manner, and of being actively and positively present in the communities where it operates. The company consistently donates more than one percent of its pre-tax domestic profit annually to some 800 charitable organisations.

Strategic vision
Power Corporation is committed to enhancing shareholder value through the active management of long-term investments and responsible corporate citizenship. These objectives are best achieved and risks minimised through sector and geographic diversification.

The company believes that the future belongs to those corporations having a well-defined strategic vision anchored in strong core values. These principles guide the corporation in all of its investment decisions.

Baiduri Bank: the importance of partnerships and tech innovation

Posted on December 21, 2011August 6, 2019 by

Since its beginnings in 1994, Baiduri Bank Group has shown impressive growth in business volume and activity, earning numerous international awards along the way. For three consecutive years since 2009, Baiduri has been named the Best Banking Group for Brunei by this magazine. And in March 2011, World Finance named Baiduri Bank as the Company of the Decade for Brunei for the period 2001-2010, reflecting the bank’s outstanding performance during the decade.

The banking group started out with nine staff members and one location in the Brunei capital, Bandar Seri Begawan, offering corporate banking services to import businesses and project financing needs for its customers. A few years later, while maintaining its leadership position in corporate banking, it diversified its services to include retail banking, which included card acquisition and issuance. In 1996 it established its wholly owned subsidiary, Baiduri Finance, and today it has already captured a significant portion of the automobile financing business and is now the leader in the automobile financing industry.

With a strong combination of local commitment and global expertise derived from the bank’s shareholders – Baiduri Holdings, Royal Brunei Airlines, Royal Brunei Technical Services, and BNP Paribas, the group grew quickly to become one of the largest providers of financial products and services.

Payment-card leader
The group began seeking new opportunities in the Brunei market, in particular the card-issuing and merchant-acquiring business.

Being the first debit cards issuer in the country since 2001, Baiduri Bank saw an opportunity to expand its debit cards with the issuance of a Prestige MasterCard debit card, and recently acquired the UnionPay card brand. Baiduri launched the UnionPay Debit card in 2010, and became the first bank in Brunei to offer PIN-based security.

In 2010, Baiduri Bank saw a double-digit increase in the issuance of debit cards, reflecting the popularity and necessity of payment cards in the market. Further analysis showed that the current lifestyle of consumers in Brunei to make payments by cards and perform online shopping has contributed to the significant growth for all payment cards, in particular the debit and prepaid cards.

Today, Baiduri Bank has the largest number of cardholders and merchants in the country. It is the only bank in Brunei to hold franchise for four major card brands – American Express, Visa, MasterCard and UnionPay – offering the widest range of payment cards covering prepaid, debit, and credit cards to meet consumer needs and lifestyles.

Investment in technology
Technological advances within the past years have encouraged more and more people to carry out their banking errands on-the-go and make bill payments over the internet.
Today, Baiduri Bank has one of the largest ATM networks in the country – 37 ATMs at 29 locations, providing wide and easy access to the public. Equipped with cash and cheque deposit, cash withdrawal, bill payment and fund transfer functions, they are available 24 hours a day. Baiduri ATMs have provided a convenient way for consumers to carry out their banking errands at any time.

In addition, the bank also offers a user-friendly, secured internet banking service – personal i-Banking and business i-Banking; and a mobile phone banking service – FAST; thereby allowing consumers to bank online via their computers and smart phones.

Consistent strong performance
The desire to strengthen its relationship with its clients in order to always meet their needs, the desire to streamline processes to improve customer services, and the bank’s responsiveness to market changes, have all contributed to its success as a leader in innovation and pioneering activities. Another crucial factor is the strong leadership provided by a management team with a proven track record, strong execution and local knowledge.

All these, together with the ability to offer a complete and diversified range of products and services to suit individuals, companies, government and the public under one roof created the winning combination for continued success.

Baiduri Bank is an award-winning local bank, using local resources, market intelligence and adopting international best practices to deliver world-class innovative services to the people of Brunei Darussalam.

For more information – Tel: (673) 226 8300; Email: bank@baiduri.com; www.baiduri.com

Law office Ana Kolarević: EU report commends Montenegrin progress

Posted on December 21, 2011August 6, 2019 by

Law Office Ana Kolarevic has been recognised for years as the leading corporate law firm in Montenegro and as one of the best law firms in south-east Europe. Ms Kolarevic personally has been recognised as the best lawyer in Montenegro, and was awarded The New Economy legal award for Best Business Lawyer in Montenegro, 2009, and the World Finance legal award for Best Lawyer in Montenegro for 2010, 2011 and 2012. Her firm was named the World Finance Best Corporate and Commercial Firm in Montenegro for 2011 and 2012, and was awarded the Acquisition International legal award for the Best Corporate Law Firm in Montenegro for 2011. It is worth mentioning that these awards were granted by people outside of Montenegro who certainly have a more objective and more realistic view than those inside its small system.

Ana Kolarevic’s law firm continued developing along the well-paved path of assisting important foreign clients who are investing in the Montenegrin economy, and who make up the bulk of the firm’s clients.

Dynamic legal framework
Montenegro is a state going through a period of transition: it is making fast progress towards EU and NATO membership. In such dynamic conditions, where institutions of the system are constantly adapting to Euro-Atlantic standards and where legislation is constantly changing accordingly, foreign clients need adequate legal assistance with their investments.

High professionalism, permanent learning, understanding the culture of foreign clients and excellent understanding of the circumstances in the country, with an absolute dedication to its clients, are the factors that give Ana Kolarevic’s law firm a unique position in the Montenegrin market and, more widely, in south-east Europe.

The feature that makes Law Office Ana Kolarevic special is the diversity and quality of the services Ms Kolarevic and her firm provide to their clients, as well as her several-decade-long experience that she gained in law practice and in the judiciary, holding as she did one of the highest judicial offices of state in Montenegro. The Law Office team is composed of young professionals that Ms Kolarevic transfers her experience to. They analyse every legal matter thoroughly in order to understand every aspect and to make risk assessments which are necessary for their clients’ success.

Ana Kolarevic’s firm provides a wide range of services in the field of administrative law, commercial law and all branches of civil law. It also hires external consultants in the field of finance, tax policy, urbanism and architecture. The key services the firm offers include:

Representation before the courts;
• Assistance in establishing companies, drafting internal documents of the companies, and changes within companies;
• Legal counselling and assistance in the field of labour;
• Assistance in privatisation processes, acquisition and due diligence processes;
• Preparing contracts in the field of civil law and commercial-legal relations;

Activities related to zoning and planning;
• All other legal services for legal persons and private individuals.

EU report
Montenegro is a small Mediterranean country which aspires to become a full EU and NATO member. Last year Montenegro achieved some foreign policy success. In October 2011 Stefan Füle, the European Commissioner for Enlargement, after meeting with the European Parliament Committee for foreign policy, stated that after hard work Montenegro has made significant progress, and proposed to the European Council that a date be set for opening accession negotiations with Montenegro.

Füle said that Montenegro had worked hard, and that the European Commission is satisfied that progress has been made in all fields. Accordingly he recommended Montenegro for the beginning of negotiations, noting only that this is not the end, but the beginning of a very demanding process.

The European Commission said that the institutional and legal framework has been improved and that the Montenegrin parliament did a good job, particularly by adopting election legislation harmonised with the EU constitution, and that it is successfully implementing EU legislation. Progress has been noted in the economy as well, in terms of achieving macroeconomic stability.

The report also said that it is necessary to continue structural reforms and it partially criticised the high unemployment rate and recommended a reduction in structural weaknesses.

The European Commission reported positively because Montenegro has strengthened institutions such as the rule of law – important in creating a sense of security, and one of the key preconditions for attracting FDI.

Removing business barriers
Foreign investments are of vital importance to the Montenegrin economy; therefore, by assisting important foreign companies present in Montenegro, Ana Kolarevic’s firm gives its modest contribution to the development of Montenegro’s economy.

It is obvious that a lot has been done lately in removing business barriers and in creating an even more favourable environment for foreign investments. Lawyers like Ms Kolarevic have contributed to the effort by indicating to the institutions the existence of certain business barriers that had to be removed.

Due to constant changes in legislation, Law Office Ana Kolarevic has to interact constantly with the institutions of the Montenegrin state, with a view to developing clear and efficient legislation and creating better market conditions. Ms Kolarevic and her team of lawyers provide advice to their clients about newly adopted national legislation, particularly in their interpretation.

One of the preconditions for attracting foreign investments is security. Security is particularly important for investing in such a frequently unstable territory as south-east Europe. In order to ensure security, Montenegro set the NATO membership as one of its foreign policy priorities and made significant reforms not only in the field of defence, but also by adopting Euro-Atlantic standards and values so that it can become a NATO member.

In the period after submitting the Annual National Plan within the first Membership Action Plan cycle, Montenegro continued implementing comprehensive reforms, with a view to further democratisation of its society, and achieving its strategic priorities in European and Euro-Atlantic integration. Encouraged by the positive reactions to its Annual National Plan, presented in Brussels in October 2010, and by the wording of the Declaration of the NATO Lisbon Summit, Montenegro continued intensive implementation of reforms, going fast towards full membership in NATO.

As the country approaches full EU and NATO membership, the number of foreign and international law firms in the Montenegrin market increases. Of course, competition is not something to be afraid of: it is a precondition for higher-quality service, and the presence of foreign law firms will lead to the establishment of more objective and more realistic parameters.

Integration processes will affect the aspiration of an increasing number of law firms to specialise in certain fields. That is something that will be determined by the market. Law Office Ana Kolarevic has already made a kind of specialisation, since it does not deal with any criminal law.

Company vision
Following the integration processes, Law Office Ana Kolarevic established a cooperation agreement with Lansky, Ganzger & Partner, one of the most reputable law firms in Austria; and in so doing became part of an international network of law experts with both strong international experience and sophisticated local knowledge.

Ms Ana Kolarevic and her team work consistently on their training and follow all developments thoroughly. In a transition society like Montenegro, legislation is constantly changing due to the need to adhere to European standards. It is therefore necessary to follow the developments and to be aware of all these changes.

High professionalism, hard work, trust and absolute dedication, alongside providing security to its clients and a commitment to continued education, are the fundamental values the firm is based on. Numerous awards received by Ms Kolarevic and her firm confirm that they are both going in the right direction.

Law Office Ana Kolarevic remains faithful to the fundamental principles it is based on, but it will also be flexible enough to adapt to new conditions and circumstances. The plans for the future include further development and extension of the firm, which means bringing new young professionals on board.

The team of lawyers led by Ms Kolarevic will continue developing along the same path, and will continue providing highly professional services to local, international and foreign companies helping them to enter the Montenegrin market, and to stay there.

The crocodiles are coming

Posted on December 21, 2011August 6, 2019 by

Eric Wong, who helps run his Hong Kong family’s money through an investment office, TCG Capital, looks like a hedge-fund manager’s dream. He’s rich, young and, having been to university there, comfortable with American ways – just the type of investor that Western hedge funds looking for Asian expansion have set their sights on. He is not, however, very interested. Real estate is the “best pension plan my family ever had,” he says. Why change?

Where they are not greeted with apathy, Asia-minded hedge funds often face antipathy. Since the financial crisis of the late 1990s, ‘fund’ has been a four-letter word throughout Asia. George Soros, the famous hedge-fund investor, is still reviled for aggravating and profiting from the crisis.

When the Chinese refer to hedge funds as ju e, or ‘big crocodiles,’ it is not by way of a compliment on their killer instincts.

Despite muted interest and outright scorn, though, more and more hedge-fund managers are determined to make their mark on Asia. They see a lot of money to be made, a lack of entrenched competition and a vast number of potential clients.

Ravenous growth and maturing equity and credit markets should mean Asia offers a lot of opportunities. “Our investable universe has doubled in the last five years,” says one happy executive at a fund that recently launched in Hong Kong. At the same time there is little by way of an asset-management industry in much of Asia. Investors’ portfolios mostly consist of just property and stocks, which leaves lots of room for hedge funds’ offerings. And there are vast numbers of millionaires to whom such offers can be made.

If the hedge funds succeed they could help spur Asian capital markets to grow bigger and more versatile. Few parties have more of an interest than they in seeing Asian markets become more liquid and more complex, since trading is how they make their livelihood. A wider range of financial products could in time also prove a boon for Asian pension funds and others taking stock of the issues raised by the ageing population’s future needs. But building the industry up will not be an easy task; it will take new local knowledge, new approaches to investing and new levels of performance.

Getting beyond the graveyard
It is not as if hedge funds had previously ignored Asia. They have just done poorly there. “Asia is a hedge-fund graveyard,” one executive says matter-of-factly. Another corpse is about to be buried: Perry Capital, a big American hedge fund, recently announced plans to close its Hong Kong office. Assets in Asia-focused hedge funds now stand at $130bn, well below their 2007 peak (see chart above), and account for less than eight percent of the $1.8trn invested in hedge funds globally. They saw just $11bn of net inflows in the past 12 months. The number of funds, once soaring, has in the past few years merely held steady.

New attempts to buck this trend come not just from an appreciation of Asia’s promise. The lack of promise elsewhere plays a big part, too. Hedge funds have suffered some stormy years in their traditional stomping grounds of New York, Greenwich and London. Having once guaranteed investors ‘absolute returns,’ or performance regardless of the market conditions, their returns over the past three years have been mixed and often dismal. Finding American and European investors willing to pay high fees and write big cheques is hard.

So new managers are arriving in Hong Kong and Singapore each week to seek out prospective clients and preach the importance of portfolio diversification. And since the start of 2010 many funds have been opening offices in Asia, including giants like Moore Capital, GLG and Paulson & Co. A slew of new funds has also launched in Hong Kong and Singapore. In April Azentus Capital, a Hong Kong hedge fund, was able to raise over $1bn in Asia’s largest-ever hedge-fund launch. Bill Lu, president of Hong Kong-based hedge fund Ortus Capital and former head of hedge-fund investing for China’s sovereign-wealth fund, CIC, expects the assets funnelled to hedge funds in Asia to double in five years.

This is in part because Asian governments have recently been more supportive of the funds. Earlier this year Shanghai’s government sent a delegation to Connecticut to study how Greenwich became a hedge-fund mecca, a trick the city would like to pull off itself one day. Hong Kong and Singapore are keen to become hedge-fund capitals to rival New York and London, and are working hard to craft regulatory regimes that will help. They require hedge funds to register, but aren’t as demanding as America and Europe, which have passed new rules that increase the cost of starting and running funds. And income-tax rates for high earners in Hong Kong (17 percent) and Singapore (20 percent) are much lower than in Britain (50 percent). That’s a powerful argument to a footloose trader.

The enthusiasm is not just in market-oriented cities. South Korea recently changed rules to allow onshore hedge funds for the first time. Asian sovereign-wealth funds, including not just Singapore’s GIC and Temasek but also China’s CIC, have in the past couple of years started to funnel money into hedge funds.

What’s in a name?
Despite some signs of government enthusiasm, both the Western hedge funds making inroads in Asia and the native funds sprouting up there face markets that are tricky to navigate. Each Asian country has different regulations. Whereas Europe has its UCITS funds, accepted in all EU countries, there is no pan-Asian marketing vehicle for hedge-fund managers. Taiwan doesn’t allow offshore hedge funds to invest there, or to market themselves. The sixth-largest equity market in the world, Shanghai is at present mostly off-limits to investors outside mainland China, though optimists predict some restrictions will ease in the next few years.

Then there’s the bad reputation. Investors may be willing to sit down with crocodiles and hear their pitch, but they are often not eager to invest afterwards. Many, like Mr Wong, don’t see why they should pay a manager high fees (usually two percent of assets and 20 percent of profits) when they have been handling their own money pretty successfully. It doesn’t help that many big Western hedge funds are accustomed to asking for tens of millions of dollars at a time. Asia’s wealthy like to start with a small allocation to test the waters. And the waters they prefer to test may be those of private-equity firms, with which entrepreneurs who made their fortune building companies are often more comfortable. KKR, an American buy-out firm, has plans to raise a $6bn Asian fund, an amount the crocodiles would kill for.

The rocky track record of some iconic hedge funds has further troubled potential investors, says Daniel Jim of Tripod Management, which advises Hong Kong investors on hedge funds. Those who invested in hedge funds before 2008 recall bitterly how some of them ‘gated’ investors, refusing to let them take out their money. One manager had the chutzpah to come back to Hong Kong recently and ask a client with money still locked up in his fund for more. The investor went to his office, got the fund’s legal documents and threw them at him.

Some hedgies try to dodge these negative associations. “We try not to emphasise in presentations that we’re a hedge fund,” says Jimmy Chan, the boss of Value Partners, a publicly listed hedge fund and long-only manager. Yang Liu of Atlantis Investment Management, a $4bn fund that reportedly counts bigwigs like the Bill and Melinda Gates Foundation among its investors, insists she offers “absolute-return products” and “not really hedge funds.”

Another risk for foreigners is how well they know the countries and companies they’re invested in. Take, for example, John Paulson, the hedge-fund guru who made billions of dollars predicting America’s housing crisis. Recently he faced losses to the tune of $500m after a short-seller alleged that a company Mr Paulson invested in, Sino-Forest, didn’t have the timber stocks it claimed: its shares tanked before the Toronto stock exchange, on which it was listed, suspended trading in it. Yet an outside eye can sometimes see things that locals can’t or won’t. Sniffing out fraud and shorting its perpetrators has been a nice earner for Asia’s hedge funds.

For home-grown hedge funds the big problem is not being wrong: it is being small. Around 41 percent of funds in Asia manage $20m or less, and only two percent manage more than $1bn, according to Eurekahedge, a research firm. This means they are going to be less attractive to sovereign-wealth funds; and big institutions – which write large cheques – do not want to be too much of a fund’s investor-base and are often expressly looking for exposure outside Asia.

That makes foreign investors wanting some Asian growth an attractive prospect for small funds keen to grow. But in the aftermath of the Madoff scandal many investors are loath to put their money with any fund that does not have rigorous (read: costly) compliance and reporting schemes.

And hedge funds are not in principle the place for bullish bets on Asian growth. In a bull market hedges should diminish returns. Paul Smith of TripleA Partners, which advises foreigners on investing in Asian funds, says there is twice as much money looking for long-only funds as for hedge funds.

For that minority which wants the security that hedging offers, the Asian hedge-fund record is still not compelling. They tend to tank when the markets fall. Asian funds are more invested in equities than hedge funds in general, and they take long positions more than short ones – hence the correlation.

Since investors in search of an equity roller-coaster ride can buy index-tracking products a lot cheaper, hedge-fund managers need to demonstrate their investment skill better, and offer strategies besides just going long or short on equities. Funds are trying to distinguish themselves by focusing on countries (Japan and China) or instruments (emerging-market currencies).

Many managers have learned lessons from the trauma of the past few downturns and tried to devise ways to cope with the volatility of Asian markets. “If you manage money in Asia, you ought to expect the market to go down 50 percent every three to four years,” says John Ho, the founder of Janchor Partners, a large hedge fund. Investors in Janchor have agreed to lock up their capital for longer, around 2.6 years on average – an eternity in hedge-fund land. This means Mr Ho won’t have to worry about investors running for the exit the next time the market goes down. But until such approaches have a track record of success investors may stay skittish.

The Orient express
Enthusiasts think eventual success for the hedge funds would bring wider benefits. In moving away from equities towards corporate bonds, currencies and new derivatives the funds should add to the liquidity and sophistication of Asian markets. Raising capital will be easier and cheaper when there are more hedge funds hungry for debt or equity. Hedge funds sniffing out fraud will be good for other investors, too.

And then there are changes in the markets which could alter the prospects for hedge funds. Recent signs pointing to trouble in the Asian equity and property markets could move investor sentiment their way. A serious slowdown could show wealthy Asians the merits of putting money into assets other than just equities and property.

According to one hedge-fund executive, “I think a slowdown… in Asia could be the best thing to happen to hedge funds here.” For that to pay off, though, the funds will have to ride out the falls in asset prices well. Asia may yet come to love its crocodiles. But they will have to show that they can swim in choppy waters.

Moody’s: Eurozone a danger to UK’s AAA rating

Posted on December 21, 2011 by

Britain’s AAA credit rating could be at risk due to the crisis in the eurozone, Moody’s said in its UK end of year assessment late on Tuesday.

In spite of a “stable” rating, Moody’s warned that Britain may face a downgrade if no policies are implemented to help stabilise markets.

According to the agency, the current rating is based on its strong institutions, government finances and low susceptibility to external event. It cautioned, however, that the future of the ranking is dependent on whether or not a resolution is found for the sovereign debt crisis.

“The significant increase in the government’s deficit and debt stocks since 2008 has eroded its ability to absorb further macroeconomic or fiscal shocks without rating implications,” the ratings agency said.

AT&T kills $39bn takeover bid for T-Mobile

Posted on December 20, 2011 by

After months of opposition from regulators and rivals, AT&T late on Monday dropped its controversial $39bn takeover bid for T-Mobile USA, the company said.

The FCC, which was against the takeover since it was announced in March, said that the bid would reduce competition and choice, and increase prices for consumers.

AT&T announced it will now have to take a $4bn charge for dropping the offer, of which a $3bn breakup fee will go to T-Mobile’s parent company Deutsche Telecom.

In addition, AT&T said it plans to enter into a roaming agreement with T-Mobile.

SEC sues ex-Freddie Mac and ex-Fannie Mae executives

Posted on December 19, 2011 by

The Securities and Exchange Commission late on Sunday filed securities fraud charges against six former Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) executives.

The SEC court filing showed that executives had claimed that their company’s exposure from 2007 to 2008 was between $2bn and $6bn, when it was actually as high as $244bn.

Those alleged of fraud include former Fannie Mae CEO Daniel Mudd, vice president of Single Family Mortgage, Thomas Lund, and chief risk officer Enrico Dallavecchia. The names for Freddie Mac executives include CEO Richard Syron, Vice President Patricia Cook, and Single Family Guarantee Vice President, Donald Bisenius.