News from the IBA - April 2012
IBA Asia office in Seoul officially opens
On 21 March, the IBA officially opened its Asia office in Seoul, South Korea, with a ceremony in the city hosted by IBA President, Akira Kawamura, and its Executive Director, Mark Ellis. Sponsored by the Seoul Metropolitan Government and the Korean Bar Association (KBA), the event took place at the Ritz-Carlton Hotel.
Mark Ellis, IBA Executive Director, commented: 'The opening of the IBA's third regional office represents another milestone for the Association. Our new Asia Office ensures the IBA's ongoing role as the global voice of the legal profession. The new office is also an acknowledgment of the dynamic, open and growing legal market in South Korea and our belief that Seoul is the best location to spearhead the IBA's growing regional activities.'
South Korea's Minister of Justice, the Deputy Minister of Legal Affairs, and the Mayor of Seoul attended the ceremony. Also in attendance were the current and former Presidents of the KBA, the President of the Seoul Bar Association, and the Deputy Secretary-General of the Japan Federation of Bar Associations. The IBA has received widespread support from officials and supporters in Seoul with the Mayor, Mr Park, commenting: 'We are delighted to welcome such a prestigious organisation as the IBA to Seoul. Its aims of promoting human rights, justice and cross-border exchange in knowledge and trade are close to our hearts in Seoul and we look forward to a long and rewarding working partnership.'
Young-Moo Shin, President of the Korean Bar Association, said: 'We cordially congratulate the IBA on the opening of its Asia Office, which is going to be a key channel to link Asian regional legal professionals with international legal professionals to network and communicate with each other. Together with the rapidly increasing economic significance of the Asian region, we have high expectations of the office's role in the development of the Asian legal profession.'
The IBA anticipates that the new office will be successful in supporting the Association's global objective of bringing together law experts on a regional and international basis. The office will work closely with bar associations in its regions to host quality conferences and events that meet the demands of its global community of members. As a first step in this direction, the IBA Asia Office will co-organise a major seminar with the Korean Bar Association and the Seoul Metropolitan Government in January 2013.
Dodd-Frank 'puts a Grand Canyon between the US and the rest of the world'
The so-called 'Volcker rule', intended to reduce banks' ability to take excessive risks by restricting proprietary trading and investments in hedge funds and private equity, is due to take effect in the US by 21 July 2012. Named after Paul Volcker, a former chairman of the Federal Reserve, it's one of the reforms included in the Dodd-Frank Act, signed into law by President Obama in July 2010 as a response to the financial crisis.
There's just one small problem – the regulators won't have finished working on it by then. That's according to Ben Bernanke, current chairman of the Federal Reserve, who told a committee of US politicians last month that 17,000 comments on the rule had been submitted during a recent consultation period. 'We have a lot of very difficult issues to go through, so I don't know the exact date', he said.
This is symptomatic of the painfully slow process that implementing Dodd-Frank has become. According to law firm Davis Polk & Wardwell, only about a quarter of the 400 rule-making requirements mandated by Dodd-Frank have been finalised so far. Deadlines have been missed for more than 150 of them.
In addition, legal challenges to the new rules have started to arrive in US courts. Wall Street banks and other financial institutions have brought a range of lawsuits challenging new rules on the basis of an alleged lack of cost/benefit analysis in their drafting. The Commodity Futures Trading Commission (CTFC) is facing such a challenge from the International Swaps and Derivatives Association and the Securities Industry and Financial Markets Association, which lobby on behalf of derivatives traders including JP Morgan, Goldman Sachs and Morgan Stanley.
Dodd-Frank has been met with criticism from some quarters. 'The regulatory reform in the US is so comprehensive that we have divided it up among ourselves just to survive', says Randall Guynn, head of the Financial Institutions Group at Davis Polk & Wardwell and a member of the IBA's Task Force on the Financial Crisis. Guynn has advised the US's six largest banks on the impact of Dodd-Frank.
'The regulatory burden in the US is getting very heavy', he says. 'The proponents say it is worth it. The opponents think the costs far outweigh the benefits, and are particularly concerned that the US is so far ahead of the rest of the world that we are creating a problem for ourselves and for others', he warns. 'At a recent conference that included many top US Government officials, the distance was described as a Grand Canyon'.
After The Economist came out in opposition to the bill, one of its co-authors, former Connecticut Senator Christopher Dodd, defended the legislation in the publication's letters page. He argued that nothing short of a comprehensive overhaul of the US regulatory structure would suffice. Repealing the Act would mean 'returning to a world where taxpayers bail out failing financial firms, predatory lenders and unscrupulous brokers prey on vulnerable homeowners, the public absorbs losses because of Wall Street's risky behaviour, and regulators are left in the dark, unable to prevent another global financial meltdown', he said.
Webcast with Kalidou Gadio, African Development Bank General Counsel
On 13 February, in the first IBA webcast interview of 2012, African Development Bank General Counsel Kalidou Gadio discussed efforts to promote sustainable growth in Africa, and critical links between law and development. Mr Gadio also explained projects such as the African Legal Support Facility, which addresses the issue of vulture funds. The interview was conducted by international broadcaster Zeinab Badawi.
The IBA has now staged 11 webcasts featuring prominent personalities associated with the legal profession, all of which are available to view on the IBA website. These include interviews with:
The most recent webcast with Chris Saul, Senior Partner at Slaughter and May, is featured in this edition of IBA Global Insight
Hugh Verrier, Chairman of White & Case;
Mark Pieth, Chair, OECD Working Group on Bribery in International Business Transactions;
Peter Rees QC, Legal Director of Royal Dutch Shell
Justice Richard Goldstone, former chief prosecutor of the UN International Criminal Tribunal for Rwanda and the former Yugoslavia.
IBA webcast series
Romney's tax returns raise familiar questions over offshore havens
Few people outside the US have heard of Debbie Bosanek. There are probably quite a few Americans who haven't heard of her either. But her name is likely to become much more familiar this year as the battle for the White House intensifies.
The reason for this is simple: as the secretary of legendary investor Warren Buffett, she has become the symbol of the alleged unfairness of the US tax system.
'Right now, Warren Buffett pays a lower tax rate than his secretary,' said President Barack Obama in his State of the Union Address last month. 'Right now, because of loopholes and shelters in the tax code, a quarter of all millionaires pay lower tax rates than millions of middle-class households.'
Obama's adoption of the so-called 'Buffett rule' could be embarrassing for Mitt Romney, the man who at present looks the most likely to be his opponent in the US Presidential election later this year.
The Republican hopeful's tax returns for 2010 reveal that he pays a surprisingly low tax rate of 14 per cent. To help limit the rate, Romney used carried interest, or the share of profits that partners in private equity firms, hedge funds and real estate developments receive as most of their compensation. That income is taxed at the 15 per cent capital gains rate in the US, rather than at ordinary earned income rates of up to 35 per cent.
The documents released also showed that Romney keeps some of his financial assets offshore in the Cayman Islands and in a Swiss bank account. One advantage of using offshore accounts is that they help to attract foreign investors who do not want to be subject to the US tax system.
During his campaign for the Presidency in 2008, Obama indicated that he would crack down on the use of offshore accounts. However, getting measures through Congress has proved difficult. The Foreign Account Tax Compliance Act (FATCA) was passed in 2010 but has proved very difficult to implement. It requires foreign banks to find any US account holders and disclose their balances, receipts and withdrawals to the US Internal Revenue Service or be subject to a 30 per cent withholding tax on income from US financial assets held by the banks.
In any case, there seems little chance of any tax increases being enacted until after the Presidential election. But if President Obama is re-elected and makes gains in Congress, then those who benefit from offshore arrangements and carried interest may need to be on their guard.
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First global report examining online social networking and the legal profession
The IBA Legal Projects Team, based in the London office, has published its first comprehensive report examining the role of online social networking within the legal profession and legal practice. The report, entitled The Impact of Online Social Networking on the Legal Profession and Practice, also assesses whether there is a need to set principles regarding usage.
The popularity of online social networking sites and their increased use by those involved in the administration of justice has become both a local and an international issue. It is against this background that the IBA Legal Projects Team surveyed the opinions of some of the bodies at the vanguard of the legal profession representing a multitude of legal experts. In all, 60 bar associations/bar councils/law societies from 47 legal jurisdictions were canvassed. The survey contained 31 questions relating to the appropriateness of the use of online social networks by legal actors, with a particular focus on judges and lawyers.
In an interview with the IBA, Mark Stephens CBE, media law specialist and Vice-Chair of the IBA Art, Cultural Institutions and Heritage Law Committee, said that the publication of The Impact of Online Social Networking on the Legal Profession and Practice is the beginning of a 'big conversation' that needs to take place at the highest levels. In response to a question about the feasibility of international guidelines, given that ideas about freedom of information and media laws differ across jurisdictions, he responded: 'The basic principles of openness and justice and fairness, which apply to every legal system on the planet, must apply in an online world. The question is, how do we meet that challenge?' His suggestion: 'The senior judiciary in every single country is going to have to confront this. The bars and law societies are going to have to set the rules and constraints that work for their systems.'
There was also a dedicated session discussing this issue together with the findings of the report and next steps, at the recent IBA Latin American Regional Forum Conference, which took place in Bogotá, Colombia on 14-16 March.
Read the report
Watch interview with Mark Stephens CBE and Anurag Bana, the IBA Senior Staff Lawyer who spearheaded the report
Court clarifies legality of foreign lawyers' activities in India
In a judgment that will be generally welcomed by international law firms, an Indian court has clarified the rules governing foreign lawyers and legal outsourcing companies.
As reported by IBA Global Insight in October 2011, the issue of foreign lawyers operating in India has long divided local practitioners in the country. In 2010, a case was brought to the Chennai High Court naming 31 foreign law firms and claiming that India's law and Bar Council rules allow only properly registered advocates to engage in any kind of legal practice in the country.
The writ claimed that even so-called fly-in/fly-out activities, under which foreign lawyers visit India for short periods to advise clients on foreign law issues, should be outlawed.
The Chennai High Court agreed with an earlier judgment of the Bombay High Court (Lawyers Collective v Reserve Bank of India, Chadbourne, Ashurst, White & Case, and Others (2009)) in which it was held that 'establishing liaison office in India by the foreign law firm and rendering liaisoning activities in all forms cannot be permitted.' [sic]
However, the Chennai High Court pointed out that the issue of fly-in/fly-out activities by foreign lawyers 'was neither raised nor answered by the Bombay High Court' and went on to find that such activities did not contravene the rules.
'I think it is a step in the right direction, but there is still uncertainty as to what the practice of law means under the 1961 Advocates Act,' said Richard Gubbins, a London-based partner of Ashurst who heads the firm's India practice. 'Until that Act is amended to reflect modern commercial reality, that uncertainty will remain.'
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