News from the IBA - IGI February 2012

 

  City of London buys into Year of the Dragon

City lawyers in London have welcomed a deal struck with Beijing to transform the UK into an offshore trading hub for China’s renminbi (RMB), but stress it is only the first step in a long-term process.

Linklaters partner and capital finance specialist Nigel Pridmore calls the deal ‘one of the most significant developments in the international financial markets this century’.

George Osborne, UK Chancellor of the Exchequer, signed the agreement with the Hong Kong Monetary Authority on 16 January. The aim is to put London on a level playing field with Hong Kong, currently the main offshore region permitted to exchange the currency.

Since China opened itself up to international trade in the 1980s, it has kept tight control over the RMB to protect it from unpredictable market fluctuations and help boost the country’s domestic export sector.

‘It is important to see this as part of a longer process, starting with the liberalisations of 2010,’ Linklaters’ Pridmore tells IBA Global Insight.

‘London’s participation will enhance the access to renminbi of UK and European corporates and accelerate internationalisation of the currency through its use in trade settlements, as well as deepening liquidity in the foreign exchange market.’

As part of the deal, Hong Kong has agreed with London to set up a forum of key private players to meet twice a year to explore ways the two financial centres can join up to develop an offshore RMB business in the UK.

Banks and businesses have heralded the move, which will cement London’s reputation as a leading centre for currency exchange, while giving China access to more sophisticated foreign exchange and bond markets.

Figures from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) reveal London’s growing influence. The UK saw its share of RMB payments increase from 22.1 per cent in the first quarter of 2011 to 30 per cent in the fourth quarter.

Conversely, Singapore’s share dropped from 52.9 per cent to 30.6 per cent over the same period.

‘This deal will help the establishment of London as the main gateway for Asia into the European Union – China’s largest trade partner – for the development of RMB denominated financial products and trade finance,’ says Pridmore.

Read the full article at: tinyurl.com/riseofchina.


Colombian Government seeks expert assistance from IBA on Legal Profession Bill

The Bar Issues Commission is working in consultation with the Colombian Government on its new Legal Profession Bill for which a new draft law will be presented on 16 March 2012.

The government, which noted the IBA’s International Principles on Conduct for the Legal Profession, approached the IBA Legal Projects Team in London, seeking expert advice on the development of this bill.

A Taskforce has been organised, involving members of the BIC Policy Committee and Professional Ethics Committee, to provide the high-level expert assistance the government seeks. The Colombian Minister for Justice, Juan Carlos Esguerra Portocarrero, said:

‘The outstanding qualifications and experience of the lawyers appointed by the IBA will guarantee that the bill to be presented by the Government before the Colombian Congress meets international standards. By enriching our country’s debate on legal ethics, we expect to pass a modern law suited to a globalised world.’

When the final version of the bill is ready, bilateral meetings will be organised to discuss the project with members of the Ministry of Justice and the Congress in conjunction with the biannual conference of the IBA’s Latin American Regional Forum in March.

To read the IBA’s International Principles on Conduct for the Legal Profession, see tinyurl.com/IBAPrinciplesOnConduct.


South Korea: controversy over free trade agreement

Fierce arguments over dispute resolution clauses in the recently ratified South Korea-US free trade agreement threaten to weaken South Korea’s image as a country under the rule of law, say lawyers.

At issue are the agreement’s investor-state dispute (ISD) clauses which essentially allow for disputes to be heard, in closed session, by a panel of arbitrators in a third country.

Such clauses are by no means unusual: they date back to the time of the North American Free Trade Agreement and are found in countless other global free-trade agreements (FTAs) and bilateral investment treaties (BITs) worldwide.

They can be used by a disgruntled private investor from one of the states which is party to the agreement to seek damages for actions by the other state which are inconsistent with the terms of the agreement.

Opponents in Korea have claimed that the clauses will violate the country’s legitimate sovereign rights, with one left-wing lawmaker going as far as setting off tear gas during the vote over FTA ratification.

‘I think what happened is that opposition politicians seized on this as something they could manipulate – something they could characterise in the way that they wanted because the general public didn’t know much about it – and it seems to have worked,’ said Benjamin Hughes, senior foreign attorney and co-chair of the international dispute resolution practice group at Shin & Kim.

‘The image of tear gas being let off in the National Assembly does not reassure investors that they are going to get a fair shake in Korea,’ he continued. ‘Protesters who break the law to make their point are really undermining their own argument that Korea is a place with the rule of law.’

Read the full article at tinyurl.com/IBAnews-southkorea.

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