agenda country briefingsmainly in the cities. v practice restricted to geographical vicinity and...

Marketing Agenda of 1 New Delhi / Agra 2004

MARKETING MEETING

Agenda

New Delhi / Agra Conference Tuesday, November 2, 2004

8:45 am – 10:00 am Hotel Oberoi New Delhi – Ballroom

Topic: "Law Firm Marketing Initiatives and Experiences"

Co-Chairs: Jorge Perez-Taiman, Muniz Forsyth Ramirez Perez-Taiman & Luna-Victoria – Lima, Peru John Shirbin, Clayton Utz – Sydney, Australia Speakers: Manjula Chawla, Kochhar & Co. - New Delhi, India Satnam S. Sachavirawongse, Tilleke & Gibbins International Ltd – Bangkok, Thailand Overview:

Manjula Chawla will deliver a presentation on the experience of marketing the Kochhar & Co. firm.

Given that Kochhar & Co. is the antithesis of a conservative Indian firm we expect this to be an interesting session for all members but especially for members from jurisdictions with conservative professional rules and standards. The presentation would deal with:

1. The role of the marketing function in the firm;

2. How marketing has related to and supported the priorities/objectives of the firm;

3. Personal experience in marketing the firm in a jurisdiction which has conservative professional rules;

4. How the Indian business community and peer firms have perceived Kochhar & Co;

5. How (1), (2), (3) and (4) have changed as the firm has gone through different stages of growth;

6. The marketing activities which have been successful and those which have not been;

7. How in the last 10 years other Indian firms have changed their marketing.

Satnam S. Sachavirawongse, Business Development Manager from Tilleke & Gibbins International Ltd. will respond with his reflections on Manjula's presentation.

We expect Manjulas’ presentation and Satnam's response to be followed by an active discussion involving all Delegates present at the session.

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PRAC 2004

Kochhar & Co.Advocates & Legal Consultants

Law Firm Marketing: An Indian Perspective

Presentation by Manjula Chawla, Senior Partner ,Kochhar & Co.


PRAC 2004

Overview of the Presentation1. Concept of Law Firm Marketing In India 2. The Legal and Regulatory Framework3. How we did it in Kochhar & Co.?4. Emerging trends and future direction


PRAC 2004

Legal Practice in India: Over the Yearsv Traditional family centered proprietorship

concerns based on the skill and expertise of 1 or 2 individuals.

v Transfer of goodwill, clients, etc; from father to son.

v Isolated cases of partnership structures –Mainly in the cities.

v Practice restricted to geographical vicinity and focused on litigation and conveyancing.


PRAC 2004

Advertising or Marketing by Lawyers“ The cannons of ethics and propriety for the legal

profession totally taboo by way of soliciting advertising, scrambling and other obnoxious practices, subtle or clumsy, for betterment of legal business. Law is no trade-briefs, no merchandise and so leaven of commercial competition or procurement should vulgarize the legal profession".Justice Krishna Iyer: Bar Council of Maharashtra Versus M.V.Dabholkar

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PRAC 2004

Marketing by Lawyers in Indiav Terms such as “marketing” and “advertising”

still not considered appropriate.

v Applicable Rules outdated and vague, with no clarity on what is permitted and what is not.

v Lack of consistency in the interpretation and implementation of Rules by Bar Councils in different states.

v Ambiguities exist on listing in international law directories, maintaining websites, printing brochures, etc.


PRAC 2004

The Emerging Changev Globalization of the Indian economy and

demand for specialized legal services for international corporations.

v “Beauty parades” adopted for identification of law firms, as in the case of engaging advertising agencies, investment bankers, etc.

v Government departments/companies floating bids for legal services, in the case of disinvestments projects, etc.

v Law firms, both traditional and modern, networking in national and international conferences.


PRAC 2004

The Legal and Regulatory Frameworkv The Advocates Act, 1961, an umbrella

legislation, enacted to unify the legal profession and give the Indian bar a national character.

v As per the Act, an advocate is controlled by the code of ethics formulated by the Bar Council of India/State Bar Councils.

v State Bar Council Rules govern advertising & marketing activities undertaken by lawyers registered with the concerned State Bar Councils.


PRAC 2004

Bar Council of India RulesStandards of Professional Conduct and Etiquette Rules

under Section 49(1)(c) of the Advocates Act specify that:

v Advocate shall not solicit work or advertise, either directly or indirectly, whether by circulars, touts, advertisements, personal communications, interviews not warranted by personal relations, furnishing or inspiring newspaper comments or producing his photographs to be published in connection with cases in which he has been engaged or concerned.

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PRAC 2004

v Advocate’s signboard or nameplate should be of a reasonable size.

v The sign-board or name-plate or stationery should not indicate that he is or has been President or Member of a Bar Council or of any Association or that he has been associated with any person or organisation or with any particular cause or matter or that he specializes in any particular type of work or that he has been a Judge or an Advocate General.

Bar Council of India Rules- Contd.


PRAC 2004

Concept of “Networking”at Kochhar & Co.

v There was no formal or structured “marketing plan” in the beginning.

v The initial focus was on introducing the firm and practice areas to leading players (clients and law firms) in different jurisdictions.

v Marketing has become an integral part of the firm with the passage of time.


PRAC 2004

v The need to create, build and nurture relationships in an organized manner was felt over a period of time, leading to the establishment of the Corporate Relations Department.


PRAC 2004

“Networking” at Kochhar & Co.v Perhaps the first law firm in India to set up a

dedicated Corporate Relations Department headed by a Director;

v Marketing plans and strategies carefully designed, keeping in mind the applicable laws and regulations.

v Truncated firm brochures that merely introduce the lawyers, without any reference to clients or transactions.

v The website initially created was discontinued after the Bar Council of Delhi raised a concern; some other firms continue to retain it.

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PRAC 2004

Corporate Relations Departmentv Extensive database on existing and potential

clients as also law firms, categorized on the basis of jurisdiction, industry, specialization, etc.

v Tracking international law firm mergers, partner movements, Etc.

v Creating and managing the media profile of the firm, ensuring visibility for the firm and its partners, etc.

v Creating and promoting the brand image, logo, etc. of the firm.


PRAC 2004

v Tracking national and international conferences that the firm can participate in and exploring presentation / speaking opportunities.

v Organizing conferences, seminars, etc. to showcase the skills of the firm.


PRAC 2004

Marketing Resourcesv The firm commits time and resources for

international conferences, seminars, etc., more than any other law firm in India.

v Partners and associates are encouraged to visit potential clients & law firms to develop one-to-one relationships.

v Encouraging and incentivising lawyers to make presentations at various international seminars & conferences.


PRAC 2004

v The firm sponsors the membership of lawyers with international associations such as IBA, IPBA, AIJA, etc. and domestic ones such as the British Business Group, Chambers of Commerce and Industry, Society of Indian Law Firms, etc;

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PRAC 2004

Secondmentsv The first Indian law firm to have an extensive

secondment programme.

v Lawyers seconded to leading law firms such as Hale & Dorr, Hogan & Hartson, Lovells, Nagashima Uhno, Clayton Utz, Kojima Law offices, TMI Associates, etc;

v The firm has hosted lawyers from various international firms.


PRAC 2004

v The secondments have helped to improve the visibility of the firm within the host firm, reinforce existing relationships and forge new ones, implement international level quality standards in systems and processes, etc.


PRAC 2004

Lawyers and Marketingv Lawyers are encouraged to share knowledge

with clients on policy developments, regulatory changes, etc. by way of newsletters.

v Take business / bidding opportunities to existing and potential clients, with the help of the database of the Corporate Relations Department.


PRAC 2004

Client Satisfaction Initiatives & Marketingv The firm has evolved and adopted a “Client

Satisfaction Manual”, which is unique in the Indian legal market.

v The Manual sets out various client servicing rules that each attorney is required to strictly adhere to in every client assignment.

v While the Manual was not conceived as a marketing tool initially, it has helped to spread tremendous goodwill among clients.

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PRAC 2004

Indirect Marketing in Law Schoolsv The firm recruits the best talent from premier

law schools in India;v Pre-placement talks and presentations have

helped to improve the visibility of the firm among law students.

v The firm encourages its lawyers to take academic projects and lecture assignments in law schools.


PRAC 2004

How Did Piers & the Business Community Perceive Kochhar & Co.?v Our efforts to pro-actively reach out to

potential clients were not appreciated by many of the pier firms.

v The Indian business community, especially the traditional ones, liked our philosophy and approach, but were hesitant to upset their long-standing relationships with other law firms.


PRAC 2004

v International law firms and companies appreciated the firm’s business oriented approach and “language”, which they had not heard from many other Indian law firms.


PRAC 2004

How Have Things Changed in the Indian Legal Services Sector?

v The idea of law firms showcasing their skills and credentials is gaining increasing acceptance.

v Globalization of the Indian economy and the demand for specialized legal skills have significantly changed the rules of commercial law practice.

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PRAC 2004

v Even the ‘traditional’ law firms have started actively bidding for projects, competing on pricing, networking at conferences, circulating brochures, etc

v Unlike the earlier practice of involving lawyers only in a conflict situation, Indian corporates increasingly involve lawyers at the transactional level.


PRAC 2004

How Have Things Changed vis-à-vis the Firm?

v The firm has in the recent past laid emphasis on representing Indian companies, many of whom have International operations.

v Setting up of nation-wide offices have helped leverage brand identity and derive economies of scale as regards marketing efforts.


PRAC 2004

v The Firm has laid emphasis on building a talent pool in specific practice areas.

v The marketing focus has also become practice area oriented.

v The firm’s participation in national and international conferences has become more practice area focused (INTA, Computer Law Association, etc.) and intense (i.e., organizing and speaking at conferences than merely participating).


PRAC 2004

Successes & Failures in Our Effortsv The secondment programme has not been

entirely successful largely because of difficulties in matching the expectations of the returning lawyer.

v The marketing efforts in the initial days was targeted at the overseas market, which did not help the visibility of the firm within India.

v Representing the Government and public sector organizations could have also helped build the firm profile, even if not lucrative.

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PRAC 2004

Marketing by Indian Law Firms: Emerging Trends

v The public debate on foreign law firms into India has also brought to focus the need for “level playing field” for Indian lawyers.

v Kochhar & Co. was instrumental in the formation of an association of Indian law firms called the “Society of Indian Law Firms”, which has taken up with the Bar Council of India the cause of law firms on issues such as brochures, web sites, Martindale listings, etc.


PRAC 2004

v While even the smaller Indian firms want to be known as “Full Service Firms”, the trend of targeted marketing focused on niche practice areas is fast catching up.

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TILLEKE & TILLEKE & GIBBINSGIBBINS

Lawyers in Thailand since 1893Lawyers in Thailand since 1893

Bangkok, ThailandHanoi & Ho Chi Minh City, Vietnam

“Business Development Summary”

Business Development StrategyBusiness Development StrategyHow We Keep Current Clients (CRM)?

• Client Visit (Client Team: Up-selling and Cross-selling)• Client Survey (Loyalty Management)

How ERM could Help Enable CRM?• Forum for lawyers/depts to share success stories• Inter-dept sharing of legal and industry knowledge• Objective? Cross-selling via inter-dept client team

Business Development StrategyBusiness Development StrategyHow We Get New Clients (Market Mining)?

• Prospect Visit

• Marketing to In-house Counsels

• Referrals from legal/business associations

• Events: seminar speech/exhibition/networking events

Business Development StrategyBusiness Development StrategyHow We Publicise/Advertise (+Media Relations)?

• TV : Nation TV, CNN, BBC, NHK, etc.(Museum of Counterfeit Goods)

• Radio (Radio Thailand World Service)

• Newspapers (Bangkok Post) & Magazines

• Web (www.tillekeandgibbins.com )

• “wooden” CD

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Success Rates: Business DevelopmentSuccess Rates: Business Development

How successful is our strategy?Client visits yield 1 case for 4 visits (25%)

• Prospect visits yield 1 case for 6 visits (17%)

• Referred prospects from client visits yield100%

Thank YouThank YouSatnam S. Sachavirawongse

Business Development Manager

Tilleke & GibbinsTilleke & Gibbins Building64/1 Soi Tonson, PloenchitBangkok 10330, Thailand

Tel.: +66 2263 7747Email: [email protected]

www.tillekeandgibbins.com

Litigation Agenda Page 1 of 1 New Delhi / Agra 2004

LITIGATION PRACTICE GROUP MEETING

Agenda

New Delhi / Agra Conference

Tuesday, November 2, 2004 10:00 am – 11:00 am

Hotel Oberoi New Delhi - Ballroom

Topic: "Enforcement of Foreign Awards and Judgments in PRAC Jurisdictions" Co-Chairs: Patrick Sherrington - Lovells Ross Perrett - Clayton Utz Agenda/Speakers: Surender Mann, Kochhar & Co, New Delhi (15 minutes) Bruce Johnson, Davis Wright Tremaine, Seattle ( 15 minutes) Open Forum Discussion ( 30 minutes) Overview: At the Peru meeting, there was an excellent suggestion from one of our delegates that the creation of a matrix as to the enforceability of foreign awards and judgments in each of the PRAC member firm jurisdictions would be a useful reference resource for use by lawyers (and particularly litigators) from member firms. For example, is a judgment or award obtained in Japan enforceable against a defendant's assets located in Chile; What are the PRAC jurisdictions whose judgments or awards are capable of enforcement in New Zealand? What needs to be proved and what steps need to be taken to enforce such judgments? At our New Delhi meeting, we will be looking to launch this project, with a view to completing it by the time of the Hawaii 2005 conference. To set the ground for a discussion of the issues that should be considered, and the information that would be useful to member firms, we will have presentations from our host firm and from Davis Wright Tremaine as to the position regarding enforcement of foreign awards and judgments in India and in the United States. It would be most useful if Delegates attending this session could also undertake preliminary enquiries as to the enforcement regime in their own home jurisdictions prior to the conference so that we can have the benefit of a range of contributions to the topic during our open forum discussion.

•1

ENFORCEMENT OF FOREIGN ARBITRAL AWARDS & JUDGEMENTS IN INDIA

The PRAC CONFERENCENew DelhiNovember 2, 2004

by

Kochhar & Co.S-454, Greater Kailash – IINew Delhi – 110 048Phone : 2921 1606, 2921 5477Fax : 2921 4932, 2921 9656

Bangalore Chennai Mumbai

ENFORCEMENT OF FOREIGN AWARDS

• Arbitration and Conciliation Act, 1996 (Part II) deals with enforcement of foreign awards

• Chapter I implements the New York Convention 1958

New York Convention Awards

•2

Foreign award means an arbitral award:

• On differences arising out of legal relationships• Considered to be commercial under the law in force in India• In pursuance of an arbitration agreement in writing• Made in one of such territories which being a party to the New York Convention has a reciprocal arrangement with India

Procedure for Recognition & Enforcement of

Foreign Award

• Enforcement requires recognition by the Court that the award

is enforceable

• Enforcement is a three phase process:

(a) Application alongwith requisite evidence

(b) Party opposing enforcement is required to furnish the

requisite proof of one or more defenses

(c) Court on being satisfied that the award is enforceable

will enforce the award as a decree

Evidence for Enforcement

•3

The claimant is required to produce the following documentary evidence alongwith the application for enforcement:

• The original award or a duly authenticated copy thereof

• Original arbitration agreement or a duly certified copy thereof

• Such other evidence as may be necessary to prove that the award is a foreign award

• Duly certified English translation of an award made in a foreign language

Defenses to Resist Enforcement

• The defendant seeking to resist enforcement may prove any of the following:

(a) Incapacity of the parties

(b) Invalid arbitration agreement

(c) Due process not followed

(d) Jurisdictional defect

(e) Composition of the tribunal and procedure

(f) Ineffective award

If any of the above is proved, the Court may refuse enforcement.

The Court may also refuse enforcement of a foreign award if it

finds :

(i) Non-arbitrability

(ii) Contrary to the public policy of India

•4

•An award would be in conflict with the public policy of

India if the making of the award was induced or affected by :

(i) Fraud

(ii) Corruption

Enforcement of Non Convention Award

• An arbitral award which does not satisfy the requirements

of the definition of the foreign award is not a foreign award

for the purposes of enforcement

• The award is enforceable in India if it is complete and is

enforceable in the country where it was made

• In order to enforce an award, claimant has to prove:

(i) There was an arbitration agreement

(ii) The arbitration was conducted in accordance with the agreement

(iii) The award was made pursuant to the provisions of the agreement

(iv) The award is valid according to the lex fori of the place where the arbitration was concluded and the award made

(v) A suit should be filed on the award and judgement obtained thereon

•5

Issues

• Party opposing enforcement make objections mechanically

• After Foreign Award is filed for enforcement, absence of any provision in the act for security in respect of the amount awarded

• Requirement of proof by the objector in support of his objections leads to fresh appraisal of evidence

• Procedural uncertainties as law not settled

• Procedure is time consuming

Public policy grounds for refusing enforcement have been expanded to include :

(a) Fundamental policy of Indian law

(b) The interest of India

(c) Justice or morality

(d) The award is patently illegal

(e) The award is so unfair and unreasonable that it shocks the conscience of the Court

FOREIGN JUDGMENT/ DECREE

•6

• Foreign Judgment has been defined in the Civil Procedure

Code, 1908 (“CPC”) as a Judgment of a foreign Court

• That is, a Court situated beyond the limits of India, which

has no authority in India and is not established or continued

by the authority of the Government of India

• Foreign Judgment shall be executable in India if it is a

Judgment passed by a Court in a reciprocating territory

• That is any foreign country or territory which has been declared by the Central Government to be a reciprocating territory

• In case the Foreign Judgment has not been passed by a Court of any reciprocating territory, the party to the Foreign Judgment would have to file a fresh suit on the basis of the foreign decree

• The foreign decree shall be considered as conclusive evidence of the matters directly adjudicated upon

REQUISITES FOR ENFORCEABILITY

• It should be a Money Decree

• It should be passed by a Superior Court

• The Court passing the Decree should be of a reciprocating

territory

• The Money Decree should be filed for execution before an

executing Court in India

• Executing Court would be the District Court being the

principal civil court of original jurisdiction

• The executing Court will entertain the execution petition as if

the foreign decree was passed by itself

•7

A FOREIGN JUDGMENT SHALL BE CONCLUSIVE EXCEPT

• Where it has not been pronounced by a Court of competent

jurisdiction

• Where it has not been given on the merits of the case

• Where it appears to be founded :

•On an incorrect view of international law

•Refusal to recognize the law of India in cases in which

such law is applicable

• Where the proceedings are opposed to natural justice

• Where it has been obtained by fraud

• Where it sustains a claim founded on a breach of

Indian law

Presumption

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Unless it appears to the contrary from the record or proved

otherwise the Court shall presume that the foreign judgment

was pronounced by a Court of competent jurisdiction.

Foreign Judgements passed by Courts in Non-Reciprocating Territories

Any person in whose favour a judgement has been passed by a

Court in a non-reciprocating territory would have to file a suit

upon such judgement in India

The Judgement-Debtor will be precluded from disputing matters

which were directly and substantially in issue in the suit before

the foreign Court unless

• Where the Judgment was opposed to natural justice

• Where it has been obtained by fraud

• Where it sustains a claim founded on a breach of any

law in force in India

•9

Thank you

Surender MannKOCHHAR & CO.DELHI OFFICES-454, GREATER KAILASH-II NEW DELHI - 110 048 (INDIA) TEL: (91-11) 2921 1606 / 2921 5477 FAX: (91-11) 2921 9656 / 2921 4932 EMAIL: [email protected]

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Enforcement of Foreign Judgments and Arbitral Awards in the United States

Bruce E. H. JohnsonPRAC Conference, New Delhi

Nov. 2, 2004

Hilton v. Guyot, U.S. Supreme Court, 1895

“Where there has been an opportunity for a full and fair trial abroad before a court of competent jurisdiction, conducting the trial upon regular proceedings, after due citation or voluntary appearance of the defendant, and under a system of jurisprudence likely to secure an impartial administration of justice between the citizens of its own country and those of other countries . . .

Hilton v. Guyot (continued)

and there is nothing to show either prejudice in the court, or in the system of laws under which it was sitting, or fraud in procuring the judgment, or any other reason why the comity of this nation should not allow it full effect,” then U.S. courts should enforce the foreign judgment. (The Hilton court, however, declined to enforce a French judgment because of lack of reciprocity.)

State or federal law, common law or statute law?n State law controls, but actions may be

brought in federal courts if there is subject matter jurisdiction;

n In many states, common law applies but the Uniform Foreign Money Judgments Recognition Act is adopted in 30 states (AK, CA, CO, CT, DE, DC, FL, GA, HI, ID, IL, IA, ME, MD, MA, MI, MN, MO, MT, NJ, NM, NY, NC, ND, OH, OK, OR, PA, TX, VA, and WA), plus DC and Virgin Islands.

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Basic rules of enforcement

n Personal and subject matter jurisdiction;n Proper notice given to all parties;n Foreign proceedings conducted in

impartial manner;n No fraud in foreign proceedings;n Final judgment (appeal may be pending);n Enforcement is not contrary to U.S. state’s

public policy.

Contrasting due process cases from England and Korean In Society of Lloyd’s v. Ashenden, 233

F.3d 473 (7th Cir. 2000), Judge Posner noted that the effort by a Lloyd’s “name” to impugn the English legal system “borders on the risible.”

n But, in Choi v. Kim, 50 F.3d 244 (3d Cir. 1995), the court declined to enforce a Korean judgment that allowed a creditor to obtain an order of execution without notice.

Somportex case: public policy exception is narrow

Applies only when enforcement would clearly “injure the public health, the public morals, the public confidence in the . . . administration of the law, or . . . undermine that sense of security for individual rights, which any citizen ought to feel.” Thus, the Third Circuit, in 1987, enforced a UK default judgment, although costs ( i.e., attorneys’ fees, unavailable in US law) were awarded.

Other examples of the narrowness of the public policy exceptionsn In 1958, New York enforced a Québec

judgment for seduction even though such claims were not valid in New York;

n Similarly, a Colorado judgment debtor in 1995 was unable to persuade the court that Belgium’s 30-year statute of limitations was repugnant to the state’s public policy.

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DWT media lawyers have convinced courts to reject UK libel judgmentsn In Bachchan v. India Abroad Publications,

Inc., a New York court in 1992 refused to enforce UK libel judgment by Indian plaintiff against NY news service, because UK libel law was contrary to US First Amendment on issues of truth and fault.

n Also, in 1997, in Telnikoff v. Matusevitch, a Maryland court refused to enforce a UK libel judgment, noting “stark contrast” with First Amendment rules.

In later cases, US courts have refused to grant preventive reliefn Dow Jones v. Harrods (2d Circuit 2003)

affirmed decision dismissing declaratory judgment action brought by Dow Jones that an article concerning Harrods was not libelous (trial later took place in London);

n Yahoo v. La Ligue Contre (9th Circuit 2004) reversed trial court order against French litigants for lack of personal jurisdiction.

Preclusion rules may also operate

n Foreign judgments also may be recognized through preclusion rules;

n According to the Restatement (2d) of Conflicts of Law: “It is unsettled whether an American court will apply the foreign court’s rules of res judicata and collateral estoppel when called upon to recognize a foreign court’s judgment.”

U.S. courts may also assist foreign judicial proceedings with orders

28 U.S.C. § 1782(a) states: “The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation. The order may be made pursuant to a letter rogatory issued, or request made, by a foreign or international tribunal or upon the application of any interested person . . .”

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Some non-recognition issues

n Some US courts may consider whether foreign court was seriously inconvenient;

n Refusal to enforce forum selection clause may also present defense;

n States are split on reciprocity – in some Uniform Act states, for example, proof of reciprocity is required (GA, MA) or lack of reciprocity may be considered (FL, ID, OH, and TX);

n Service issues are determined by Hague Convention on Service Abroad or by forum law;

n Due process issues are analyzed under US constitutional law.

Other enforcement problems, opportunitiesn One risk is whether forum state imposes time

limit for enforcing judgments;n Forum state may refuse enforcement if it does

not have jurisdiction over the judgment debtor, but some states will not consider this issue;

n Some states allow enforcement to the extent the debtor has assets (in NY in 2001, a $23.35M arbitration award was enforced for five cents);

n Domestication in one state may enable enforcement in others under Full Faith and Credit Clause.

Foreign arbitration awards

n Different from current procedures for judgment enforcement;

n Convention on the Recognition and Enforcement of Foreign Arbitral Awards;

n Federal law controls enforcement of Convention (9 U.S.C. § 201 et seq.);

n Also, forum selection issue may be governed by Bremen v. Zapata (1972).

Future developments?

n Hague Conference on Private International Law is considering international convention;

n Current draft also defines jurisdiction (similar to Brussels Convention in EU), which may present constitutional problem in US;

n In rem jurisdiction is another potential problem.n Implementing legislation (as drafted by American

Law Institute) would be adopted as federal law;n If enacted, enforcement would be governed by

US, not state, law.

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The End

For further information, please feel free to contact

[email protected]

Appendix

Enforcement of judgments from PRAC member nations: a sampling

Argentina

n Osario v. Harza Engineering (1995 federal case applying IL law refuses enforcement to Argentine judgment for attorneys’ fees because of failure to present copy of Argentine judgment).

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Australia

n Farrow Mtge. Services v. Singh (in 1995, MA enforces NSW judgment over objection of inconvenient forum “to the extent it grants . . . a sum of money” but not the award of costs because the NSW court did not determine specific amount);

n Phillips USA v. Allflex USA (federal court in 1996 applies KS res judicata principles and holds Australian judgment bars tortious interference claims);

Australia (continued)

n Pure Fishing v. Silver Star (in a 2002 decision, an IA federal court refuses to grant summary judgment enforcing an Australian judgment against a Korean corporation because the assignee of the judgment creditor failed to prove that the Korean debtor had “minimum contacts” with Australia to satisfy due process).

Belgium

n Ingersoll Mill. Mach. Co. v. Granger (a federal case from 1987 applying IL law enforces Belgian judgment for employee against company, rejecting an argument that Belgium was a seriously inconvenient forum for the parties);

n Van den Bogaerde v. Staub (NY court in 1981 rejects challenge to Belgium judgment in labor dispute, despite employer’s claim that parties had agreed to arbitration).

Belgium (continued)

n Chase Manhattan v. Hoffman (1987 MA case held that Belgian money judgment did not constitute “fine or other penalty” and would be enforced even though underlying action was primarily criminal).

7

Brazil

n Paramedics Electromedicina Comercial v. GE Medical Systems (federal appeals court in 2004 affirmed an order compelling Brazilian company to arbitrate claims against US manufacturer, enjoining Brazilian lawsuit, and imposing civil contempt sanctions against Brazilian company and its president).

Canada

n Desjardins Durcharme v. Hunnewell (1992 MA decision that award of costs to law firm is not “fine or other penalty” and is enforced, although litigation is ongoing);

n Alberta Securities Comm’n v. Ryckman(2001 AZ decision that Alberta judgment was final, although on appeal);

n Fiske v. Ajello (1989 CT case allowing Quebec judgment despite different procedures

Canada (continued)

n K&R Robinson v. Asian Export (1998 MA federal decision finds genuine dispute regarding claim of ineffectual service);

n Vrozos v. Sanatopoulos (IL court in 1990 denies enforcement because of objections to service and jurisdiction – debtor’s brother had hired lawyer);

n Bank of Nova Scotia v. Tschabold (1988 WA case enforcing judgment where due process issues were litigated in Canada);

Canada (continued)

n Attorney General of Canada v. Gorman(2003 NY case holds that conclusory, hearsay affidavits by NY lawyer regarding personal service were insufficient);

n CIBC v. Saxony Carpet (1996 federal court applying NY law enforces judgment although negotiations were in NY and states that exceptions to recognition of sister common-law jurisdiction are narrowly construed);

8

Canada (continued)

n Bank of Montreal v. Kough (in 1977 CA federal court held that BC was not a “seriously inconvenient forum” although the court acknowledged that BC bank could have litigated case in CA);

n NH Rev. Stat. Ann. § 524:11 grants all Canadian judgments full faith and credit to the extent Canada enforces NH judgments.

Hong Kong

n Hernandez v. Seventh Day Adventist Church (2001 TX decision enforces HK hospital bill, holding that judgment is final even without registrar’s signature);

n Kwongyuen Hangkee v. Starr Fireworks(SD court holds in 2001 that judgment is enforceable under “comity” rule and rejects debtor’s argument that HK “reverted to communist Chinese rule” and effort “to cast doubt on Hong Kong’s system of law”).

India

n New Central Jute Mills v. City Trade (1971 NY decision enforces Indian judgment confirming arbitration award over due process objection);

n Kalia v. Kalia (OH court in 2002 enforces Indian divorce decree on “comity” grounds over First Amendment objections to Hindu Marriage Act and Equal Protection objections to support rules for male and female children).

Japan

n Mayekawa Mfg. Co. v. Sasaki (1995 WA decision that judgment enforceable in Japan is not “final” but “preliminary” because objection had been filed);

n Ashton Optical Imports v. Incite International (2003 federal case, applying NE law, holds that prior dismissal of Japanese lawsuit did not preclude new lawsuit by different parties);

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Japan (continued)

n Nippon Emo-Trans Co. v. Emo-Trans, Inc.(federal court in NY in 1990 rejects challenge to Japanese judgment on personal jurisdiction grounds, noting debtor’s “voluntary” appearance in Japanese court after losing on issue of jurisdiction).

Korea

n Jeong Suk Bang v. Joon Hong Park (1982 MI decision that Korean divorce decree involving solatium was not enforceable because Act excluded family and matrimonial matters);

n Korea Water Resources v. Lee (2004 CA case rejecting Korean definition of “final and conclusive” and holding that Korean Supreme Court decision remanding case meant that judgment was not “conclusive”);

Korea (continued)

n Choi v. Kim (a 1995 federal court ruling refuses to enforce a Korean execution order issued without notice, holding that this procedure violates the debtor’s due process rights under NJ law).

Mexico

n Pentz v. Kuppinger (1973 CA case holding that Mexican judgment awarding alimony to wife after remarriage was repugnant to CA public policy – also conflicted with CA judgments);

n International Transactions v. Embotelladora (2003 federal decision that refused enforcement to Mexican bankruptcy ex parte order obtained without proper notice);

10

Mexico (continued)

n Southwest Livestock and trucking Co. v. Hargrove (1999 federal court decision holds that Mexican judgment on loan agreement usurious under TX law is enforceable because cause of action on promissory note does not violate TX public policy);

n Gutierrez v. Collins (1979 case holding that enforcement of Mexican judgment did not offend TX law despite dissimilarities in legal systems).

Netherlands

n Biggelaar v. Wagner (1997 federal court decision in IN enforces Dutch judgment where defendant had appeared, fully litigated his issues, and accepted a money judgment from the Dutch litigant);

n Rapture Shipping v. Allaround Fuel Trading (in 2004, NY federal court refuses to hear action in tort and contract because same facts had been asserted in Dutch suit and remitted to arbitration).

Philippines

n Ever-Gotesco Resources v. PriceSmartTrading (in 2002 decision, federal court in CA finds that Philippine court’s determination of arbitrability issue is entitled to collateral estoppel effect in US injunction litigation relating to Australian arbitration award);

n In re Custody of R. (in 1997, WA appeals court refuses to enforce Muslim court custody decree, noting public policy favoring child’s best interests).

United Kingdom

n Society of Lloyd’s v. Mullin (PA federal court in 2004 enforces “pay-now-sue-later” reinsurance contract against claim that judgment was fraudulent);

n Society of Lloyd’s v. Webb (TX federal case held in 2001 that “name” waived due process claim);

n Society of Lloyd’s v. Ashenden(2000 IL federal appeal court denies due process objection);

n Society of Lloyd’s v. Hudson (NV 2003 decision also rejects “name” objections);

11

United Kingdom (continued)

n Dart v. Dart (1997 MI case enforces “final” divorce judgment rejecting claim that women are second-class citizens in UK);

n Overseas Development Bank v. Nothmann(1985 NY decision enforces UK default judgments over “staleness” objection);

n Colonial Bank v. Worms (default judgment enforced by NY federal court in 1982, after defendant had failed to pay solicitors and they withdrew);


n CIBC Mellon v. Mora Hotel (2002 NY decision refuses to enforce UK judgment against Netherlands company with no UK presence, rejects Mareva injunction);

n Guinness PLC v. Ward (1992 federal court applying MD law states that ex parte TRO does not violate due process);

n Hunt v. BP Exploration (1984 federal case, applying reciprocity rule, determines that UK would enforce TX judgments);


n DSP Prop. Co. v. DeLorean (in a 1990 decision, a federal court in MI refuses to reconsider decision to enforce UK judgment after UK court vacated the judgment);

n Dynamic Casette v. Mike Lopez (NY federal court in 1996 enforces UK default judgment, noting that England’s tribunals were “fair and impartial”);

n Manches v. Gilbey (in 1995 MA court rejects due process objections).

Intellectual Property & Licensing Agenda Page 1 of 2 New Delhi / Agra 2004

INTELLECTUAL PROPERTY & LICENSING PRACTICE GROUP MEETING

Agenda

New Delhi / Agra Conference

Tuesday, November 2, 2004 11:15 noon – 12:15 pm

Oberoi Hotel New Delhi - Ballroom

Topic: "IT Outsourcing: Recent Developments from the Provider and the Customer Perspectives”

Co-Chairs: Takemi Hiramatsu – Asahi Koma Law Offices Jorge Contreras – Wilmer Cutler Pickering Hale and Dorr LLP Speakers: Jorge Contreras – Wilmer Cutler Pickering Hale and Dorr LLP – Boston, USA

Takemi Hiramatsu – Asahi Koma Law Offices - Tokyo, Japan Gabriela Kennedy – Lovells – Hong Kong, PRC Tarvinder Singh – Kochhar & Co. – New Delhi, India

Overview: Enterprises large and small are seeking to achieve cost savings, skilled work forces and around-the-clock support by “outsourcing” an increasing array of information technology services to specialized providers in other countries. This panel brings together speakers from two countries (Japan and USA) that are typical “customers” of outsourced services with speakers from countries (India and Hong Kong) that are typically “providers” of outsourced services. The panel will discuss the latest developments regarding IT outsourcing in their respective countries and invite discussion as to the future of this powerful business trend. Outline: 1. India (Tavinder Singh, Kochhar & Co.) India has emerged as a key player as a “Provider” entity in the IT outsourcing industry. The speaker intends to highlight the local IP regime affording protection to various categories of IP such as Copyrights, Trade Marks etc., as well as the lack of protection under the Indian IP umbrella in the specific context of Proprietary Data, Confidential Information & Trade Secrets. The presentation will also cover the issue of disputes regarding ownership of IP rights between the Provider and the Customer by sharing with the group Live cases. 2. Japan (Takemi Hiramatsu, Asahi Koma Law Offices) Japanese corporations have been developing IT outsourcing practices, including those with foreign corporations, in order to effectively and flexibly meet rapidly changing IT technological needs. To date, Indian corporations have been their best partners in such international IT outsourcing, partly due to the recent support by the two governments, such as their mutual acknowledgement of certain qualifications for engineers and certain loosening of the immigration regulations of Japan. However, there still are some issues to be further resolved, such as those relating to differences in their business customs, protection of confidential and proprietary information and costs associated with frequently requested changes to specifications.

Intellectual Property & Licensing Agenda Page 2 of 2 New Delhi / Agra 2004

3. Hong Kong (Gabriela Kennedy, Lovells) a. A practical overview of doing business in China - legal regime; work permits; exchange control and currency risk; import/export restrictions; grants and tax free zones b. Setting up a Company, JV just contracting with LocalCo c. Specific issues to be considered (tax including having a taxable presence because of servers located in China/tax free zones, real property issues, employment law and practice etc); d. Protection of IPRs; recordals; arbitration vs litigation in the PRC under local law for "stolen" IPR. 4. United States (Jorge Contreras, Wilmer Cutler Pickering Hale and Dorr LLP) U.S. companies are among the largest users of outsourced services and the amount of offshore outsourcing is predicted to continue to grow rapidly in the years ahead. However, there has been an increasing political debate within the U.S. regarding the desirability of outsourcing critical IT functions offshore. As a result, there have been numerous legislative initiatives seeking to limit the ability of U.S. companies to outsource their operations offshore, both on grounds of preventing loss of U.S. jobs and protecting sensitive data. We will discuss the current status of this proposed legislation and its potential effect on outsourcing from the U.S. All members are invited to join in the open forum discussion which will follow the presentations .

1

IP ISSUES IN OUTSOURCING

TARVINDER SINGHPartner & Head - Intellectual Property Department

Kochhar & Co.INDIA

DELHI OFFICES-454, GREATER KAILASH-II

NEW DELHI - 110 048 (INDIA) TEL: (91-11) 2921 1606 / 2921 5477FAX: (91-11) 2921 9656 / 2921 4932

EMAIL: [email protected]

CHENNAI OFFICE# 503, 5 th Floor,

Sigma Wing, Raheja Towers,177 Anna Salai, Chennai 600002

Tel: 91 44 28605777Fax: 91 44 28607588


BANGALORE OFFICE # 202 Prestige Meridian II

30 M.G. RoadBangalore 560001

Tel: 91 80 51124994Fax: 91 80 51124998


MUMBAI OFFICE17th Floor

Nirmal Building Nariman Point, Mumbai 400021

Tel: 91 22 56370031Fax: 91 22 56559705


OUTSOURCING

Outsourcing takes place when an organization transfers the control of a business process to a supplier. This definition distinguishes Outsourcing from other business relationships in which the buyer retains full control

CONTRACTUAL ISSUES

• Clearly identify the nature of IP rights which may be generated in an outsourcing transaction.

• Clearly provide for Ownership of the IP rights-Joint/Single.

• Conduct periodic IP audits to ascertain the nature of IP rights generated and follow up action required for registration, etc.

CONTRACTUAL ISSUES (Cont...)

• Contract must provide for assignment or licensing of IP rights including escrow arrangements for ‘source code’ for software upon termination so that parties can run their respective businesses post separation.

• Provisions regarding liability of Contractors or Sub-Contractors be made as strict as possible.

2

COPYRIGHTS IN INDIA

• India grants protection to original artistic, literary, dramatic and musical works.

• Computer Software is protected as ‘Literary Work’.

• Protection granted for the life term of the author and for 60 years after the death of the author.

REMEDIES FOR INFRINGEMENT OF A COPYRIGHT

CIVIL REMEDIES• Suit for an Injunction and damages

CRIMINAL REMEDIES• Imprisonment for a term of six months

extendible to three years• Fine of Rs. 50,000/- extendible to Rs.

2,00,000/-

TRADE SECRETS/ CONFIDENTIAL INFORMATION

• No legislation under the IP umbrella to protect Trade Secrets and Confidential Information in India.

• Protected by the general law of Contract.• Theft of proprietary Information can lead to

criminal prosecution under the penal laws.• An outsourcing contract must therefore provide

for detailed provisions on trade secrets and maintaining confidentiality.

PATENTS

• Indian law does not grant Patents for novel business processes and Software per-se.

• Software can be Patented if coupled with novel hardware.

• Software will be a subject matter of copyright protection as mentioned earlier.

3

IT IS IMPORTANT TO ENGAGE A RIGHT SERVICE PROVIDER ON TERMS WHICH PROVIDE

BOTH SIDES ALL THE INCENTIVES TO PERFORM

NO PREMARITAL AGREEMENT CAN PREVENT OR FIX A BAD

MARRIAGE

1

PACIFIC RIM ADVISORY COUNCILNew Delhi, November 2, 2004

Information Technology Outsourcing:Recent Developments in the United States

Jorge L. Contreras

1

Growth of IT Outsourcing in the U.S.

• Deloitte Consulting 2003 Financial Institution survey

• $356B or 15% of financial services industry cost base to move offshore by 2008

• 75% of the world’s largest financial institutions to offshore some IT functions by 2005

• Offshoring yields average cost savings of 39%, with 1 in 4 attaining savings of 50%+

2

Perceived Legal Risks/Costs of Outsourcing

• Data Privacy and Security

• Protection of Intellectual Property

• Regulatory Compliance

• Export Controls

• Difficulty of Contractual Enforcement

• Job Loss

3

U.S. Job Loss

• Dire Predictions§ Forrester Research: 3.3M white collar jobs to

move overseas by 2015§ Deloitte Consulting: 2M U.S. financial sector

jobs lost by 2009§ UC Berkley: 14M US jobs at risk

• Responses§ US businesses benefit from cost savings§ US workers re-allocated to higher value jobs§ Foreign outsourcers are new customers of US

goods

2

4

U.S. Legislative Reactions to Offshore Outsourcing

• Federal (12+ bills)§ Outsourcing of Federal contracts§ Outsourcing of Personal Information§ Outsourcing Call Centers

• State (180+ bills in 38 states)§ Complete Offshoring bans§ Limited Offshoring bans§ Foreign Call Center Bans§ Data Collection on Outsourcing

(statistics as of July, 2004)

Public Seminar Final Agenda to follow from Kochhar & Co.

1

Going Public in the United States

A Guide for Indian Companies

n With over 430 lawyers, Davis Wright Tremaine has offices in the technology corridors of Seattle and Portland, and offices serving Silicon Valley, Northern Virginia, and New York’s Silicon Alley and Shanghai.

Seattle &

Portland

Los Angeles

New YorkWashington D.C.

San Francisco

Anchorage

Bellevue

Davis Wright Tremaine LLPDavis Wright Tremaine LLP

Representative Clients Overview

n The U.S. Regulatory Systemn IPO Timelinen Pre-IPO Preparationn Managing the Due Diligence Processn The Registration Statement and Prospectusn Valuationn American Depository Receipts ( ADRs)n External and Internal Communicationsn Your Employees and the IPOn Life in the Public Fishbowl

2

The U.S. Regulatory System

n The Securities Act of 1933 (the “1933 Act”)n The Securities Exchange Act of 1934 (the

“1934 Act”)n Self Regulatory Organizations (“SRO’s)n Securities and Exchange Board of India

and the Reserve Bank of India

Leading the Way

IPO Timeline

Pre-IPO Planning 4-8 weeks

All Hands Drafting Sessions Filing with Meeting SEC 5 weeks

SEC Roadshow SEC Review Preparation Comments & Response 3 weeks

Roadshow Pricing Closing 25 days

Quiet Period

Pre-IPO Preparation

n Corporate Structuren Corporate Domicilen Foreign Exchange Limitationsn Tax Considerationsn Capital Structure

n Board of Directors

n Sarbanes – Oxley Legislation

3

Pre-IPO Preparation (continued)

n Board Committeesn Audit Committeen Compensation Committeen Corporate Governance Committee

n Stockholder Protection Measuresn Staggered Boardn Anti -takeover Mechanisms (e.g., poison

pills)n India Takeover Code

Managing the Due Diligence Process

n What is Due Diligence?n Why Is It Important?n How to Manage the Processn Preparationn Forthrightness

n Customer, vendor calls

The Registration Statement and Prospectusn The Registration Statement

n Forms F-1 and F-6n Signed by CEO, CFO and Board of Directorsn Exhibits

n The Prospectusn Contained in Registration Statementn Describe terms of offering (price, securities, use of

proceeds)n Narrative Disclosure of Business and Corporate

Structuren Management Compensationn Financial Statementsn Management’s Discussion and Analysis of Financial

Condition and Results of Operations (MD&A)

Valuation

n “Red Herring” Sets Target Pricing Rangen Key Factors Affecting Initial Valuationn 2003 results, 2004 projectionsn P/E ratios of “comparable companies”n Projected growth raten Predictability of earningsn Overall market factors

4

Valuation (continued)

n Actual Pricing Based on Strength of Investor Demand -- As Gauged by Syndicate Manager of Lead Investment Bankn Long-term institutionsn Momentum investors

n High Valuation Carries High Risk of Stock Price Collapse at Slightest Hiccup

American Depository Receipts (ADRs)n Represent ownership of securities held by

a depositary institutionn ADRs are traded in U.S. public markets

but represent ownership of underlying foreign securities

n Proceeds must be repatriated to India n No requirement to be or remain public in

India.

External Communications

n Pre-IPOn “Gun-Jumping” or “Conditioning the Market”

Forbiddenn All Statements that Create Public Expectations

Must Be Carefully Considered

n After Initial Filing/Before Effective Daten Nothing in Writing, Except Preliminary Prospectusn Oral RoadshowPresentation with Slides is

Permittedn No Projections by Companyn Analysts will Handle Estimates

External Communications (continued)n Post-IPOn 25 Day Quiet Periodn Quarterly and Annual Reports to

Stockholdersn Periodic SEC Reports: 10-K, 10-Q

and 8-K OR 20-F and 6-Kn Disclosure of Material Eventsn Ongoing Dealings with Analysts, Financial

Community, and Public

5

External Communications (continued)n Avoiding Publicity Problemsn Designated Spokesperson or Small

Number of Spokespeople n No Unusual Publicity Campaigns Near

Time of IPOn Ordinary Course PR and Marketing

Activities Generally OKn Consult Counsel and Underwriters on All

Publicity Matters Before and During IPO

External Communications (continued)n Avoiding Publicity Problems: Impact of

the Internet on International Offeringsn Your SEC Examiner will surf the Webn Scrub Web site before filing and monitor

content throughout offering processn Risk of errant e-mails during registration

process

Internal Communications

n Changes are inevitablen Avoid Insider Trading

n Insider trading policyn Window periodsn Preclearance

n Avoid Selective Disclosure Through Leaks of Material Inside Informationn Information dissemination policiesn Control of sensitive information

Your Employees and the IPOn Education

n Education Regarding IPO Process and Effectsn Education Regarding New Corporate Policiesn Dealing with Fluctuations in Stock Price

n Liquidityn Lock-Upsn Rule 144 (trading in the U.S.)n Regulation S (offshore trading)n Insider Trading Rules and Window Periods Can Restrict

Liquidityn Officers and Directors Subject to Additional Restrictionsn Cashless Exercise of Options Through Brokers

6

Life in the Public Fishbowln Develop IR Strategy Earlyn Develop Reporting Systems, Controls and Disciplines

n Disclosure and Financial Certifications now required under new rules

n Follow Consistent Disclosure Policiesn Performance and Credibility are Everythingn Business Hiccups are Rarely Fatal, But Loss of Credibility

May Ben Market Rewards Consistent Performancen Negative Surprises Are Brutally Punishedn Under Promise and Over Delivern Character-Building Disclosure Issues

Thank You

1

AMS O 27218 / 1

Prospectus Directive

Presentation by

Willem Sodderland,NautaDutilh

i EU Financial Services Action Plani Terminology

• CESR• EU Commission• Directive• Regulation

Lamfalussy Procedure

i Level 1 Community legislation - directive- regulation

i Level 2 Technical measures, CESR

i Level 3 Recommendations CESR

i Level 4 Supervision EU Commission

Key Objectives Prospectus Directive

i Europe-wide retail market• European passport• no further approval/review• especially equity side

i Bond market: “if it ain’t broke, don’t fix it”• consolidate existing market

i Implementation by 1 July 2005

2

Central Requirement

A prospectus is required to be published:1. where an offer of securities is made to the

public; or2. securities are admitted to trading on a

regulated market.

Exemptions:articles 3 and 4, for certain securities being offered and for certain offers being made

Opportunities for Indian Companies

Main issues:i Choice “Home Member State”

i Prospectus format & contents:IOSCO Standards and equivalence test

i Historical Financial Information

Choice Home Member State Non-EU Issuers

i Non-equity securities with denomination of = EUR 1,000:

• Member State where the public offer is made• Member State where the securities are admitted

to tradingi Equity securities and non-equity securities

with denomination of < EUR 1,000:• Member State where these securities are offered

for the first time after 31 December 2004• IPMA Notice

Prospectus Format & Contents for Non-EU Issuers

i Article 20 Prospectus Directive

i Prospectus drafted in accordance with non-EU legislation will be considered equivalent/approved if drafted following international standards, including IOSCO standards

3

Historical Financial Information –Non-EU Issuers

i Financial information presented in accordance with national accounting standards if these are recognised as equivalent to IAS/IFRS

i Otherwise: restate in accordance with IAS/IFRS

i Equivalence: judged by mechanism to be established. US GAAP will probably be accepted.

Market Expectations

i Institutional market: Rule 144A-like

i Two stage offers

i Special regime debt with denomination = EUR 50,000

i Position of third country issuers?

1

PRAC Presentation 11

New Delhi, IndiaNew Delhi, IndiaNovember 2, 2004November 2, 2004

:: andand ::

International Finance for International Finance for Indian Companies: Issues Indian Companies: Issues

Relevant to US Venture Capital Relevant to US Venture Capital Investments into India Investments into India


Overview of PresentationOverview of Presentation

I.I. INTRODUCTIONINTRODUCTIONA.A. Professional BiographyProfessional BiographyB.B. Amount of VC Investment in IndiaAmount of VC Investment in IndiaC.C. HistoryHistory

II.II. THE REGULATORY BACKGROUNDTHE REGULATORY BACKGROUNDA.A. IndiaIndia--Domiciled FundsDomiciled FundsB.B. Offshore Domiciled FundsOffshore Domiciled FundsC.C. Operational Restrictions on SEBIOperational Restrictions on SEBI--Registered FundsRegistered Funds

III.III. STRUCTURE OF VENTURE CAPITAL INVESTMENTS IN INDIASTRUCTURE OF VENTURE CAPITAL INVESTMENTS IN INDIAA.A. US Deal Structures and Practices PredominateUS Deal Structures and Practices PredominateB.B. Investment ProcessInvestment ProcessC.C. EntrepreneursEntrepreneurs’’ Main ConcernsMain ConcernsD.D. Venture CapitalistsVenture Capitalists’’Main ConcernsMain ConcernsE.E. Concerns for Both Companies and VCConcerns for Both Companies and VC’’ssF.F. Special Due Diligence and Process IssuesSpecial Due Diligence and Process Issues

IV.IV. CLOSING REMARKSCLOSING REMARKS


INTRODUCTIONINTRODUCTION


RAYMOND J. BATLA, JR.RAYMOND J. BATLA, JR.PARTNER, LONDON AND WASHINGTON, D.C.PARTNER, LONDON AND WASHINGTON, D.C.

P R O F E S S I O N A L B I O G R A P H YP R O F E S S I O N A L B I O G R A P H Y

Raymond Batla is the managing partner of the international offiRaymond Batla is the managing partner of the international offices of Hogan & ces of Hogan & Hartson. Over the past several years, he has advised clients on Hartson. Over the past several years, he has advised clients on a wide range a wide range of business transactions in the energy, telecom, and manufacturiof business transactions in the energy, telecom, and manufacturing sectors, ng sectors, including dozens of privatizations, mergers and acquisitions, coincluding dozens of privatizations, mergers and acquisitions, corporate rporate restructurings, crossrestructurings, cross--border equity and debt investments, and international border equity and debt investments, and international joint ventures. With nearly two decades of experience in energy joint ventures. With nearly two decades of experience in energy matters, matters, Raymond is especially active in international energy project finRaymond is especially active in international energy project financings.ancings.

Raymond served as a member of the International Observer DelegatRaymond served as a member of the International Observer Delegation to the ion to the 1990 National Elections in the Czech and Slovak Federal Republic1990 National Elections in the Czech and Slovak Federal Republic, jointly , jointly sponsored by the National Republican and Democratic Institutes fsponsored by the National Republican and Democratic Institutes for or International Affairs. He founded the firmInternational Affairs. He founded the firm ’’s Prague office in 1991 and was s Prague office in 1991 and was resident in Prague through 1993 when he moved to the firmresident in Prague through 1993 when he moved to the firm’’s London office. s London office. Raymond has published over 30 articles and contributed to two boRaymond has published over 30 articles and contributed to two books on a oks on a variety of subjects relating to energy matters. He is a frequentvariety of subjects relating to energy matters. He is a frequent lecturer at lecturer at p ro fess i ona l semina rs , i n s t i t u tes , and i ndus t ry mee t ings .p ro fess i ona l semina rs , i n s t i t u tes , and i ndus t ry mee t ings .

2


Amount of VC Investment in IndiaAmount of VC Investment in India__________________________________________________________________________________________

•• According to the Indian Venture Capital Association, According to the Indian Venture Capital Association, total venture capital investment in India for the year total venture capital investment in India for the year ended March 2003 was ended March 2003 was US$765 millionUS$765 million. .

•• Another source states that VC funding in India in Another source states that VC funding in India in calendar year 2003 was in the calendar year 2003 was in the US$500US$500--600 million600 millionrange, a drop from range, a drop from US$1.1 billionUS$1.1 billion in 2002 and in 2002 and US$900 millionUS$900 million in 2001in 2001

•• Over Over 80% of such investment80% of such investment was in was in profitable profitable companiescompanies rather than rather than ““startstart--upsups””, with internet , with internet companies in the minority and business process companies in the minority and business process outsourcing (BPO), media, entertainment and outsourcing (BPO), media, entertainment and healthcare companies enjoying increased popularity.healthcare companies enjoying increased popularity.


History of Venture Capital in IndiaHistory of Venture Capital in India______________________________________________________________________________________________________________

•• Shift from Governmental Funding to Institutional Investors Shift from Governmental Funding to Institutional Investors ⇒⇒ Historically, the primary sources of venture capital in India weHistorically, the primary sources of venture capital in India were All India re All India

Financial Institutions (Financial Institutions (AIFIAIFI’’ss), multilateral development agencies (), multilateral development agencies (MDAMDA’’ss) and ) and Indian Scheduled Commercial Banks (Indian Scheduled Commercial Banks (SCBSCB’’ss) )

⇒⇒ However, since 1997 there has been a pronounced trend away from However, since 1997 there has been a pronounced trend away from AIFIAIFI ’’s, s, MDAMDA’’s, SCBs, SCB’’s and other quasis and other quasi--governmental funding sources and towardgovernmental funding sources and towardinstitutional investmentinstitutional investment , primarily venture capital funds raised overseas and , primarily venture capital funds raised overseas and investment banking arms of foreign banksinvestment banking arms of foreign banks

⇒⇒ Examples include Examples include Draper Fisher JurvetsonDraper Fisher Jurvetson, , Walden International Walden International Investment GroupInvestment Group, , Carlyle Asia PartnersCarlyle Asia Partners , , CS First BostonCS First Boston

•• Role of Indian Engineers/EntrepreneursRole of Indian Engineers/Entrepreneurs⇒⇒ Many Indian engineers have emigrated to the US, joined existing Many Indian engineers have emigrated to the US, joined existing technology technology

companies or started their own technology companies, some of whocompanies or started their own technology companies, some of whom were m were extremely successful and went on to become leading VCextremely successful and went on to become leading VC’’s or angel investors. s or angel investors.

⇒⇒ A prominent example isA prominent example is Vinod KhoslaVinod Khosla, an India Institute of Technology: New , an India Institute of Technology: New Delhi graduate who was the coDelhi graduate who was the co--founding CEO of founding CEO of Sun Microsystems Sun Microsystems and is now a and is now a General Partner at General Partner at Kleiner, Perkins, Caufield and ByersKleiner, Perkins, Caufield and Byers


Regulatory BackgroundRegulatory Background________________________________________________________________________________________________________________________

•• IndiaIndia-- Domiciled Funds Domiciled Funds

⇒⇒ Securities & Exchange Board of India (Securities & Exchange Board of India (SEBISEBI) Guidelines of 1996 interpreting the ) Guidelines of 1996 interpreting the Indian Trusts Act of 1882 (for venture funds organized as trustsIndian Trusts Act of 1882 (for venture funds organized as trusts) and the ) and the Company Act of 1956 (for venture funds organized as companies) iCompany Act of 1956 (for venture funds organized as companies) i s credited with s credited with enabling the creation of USenabling the creation of US--style venture capital funds in India.style venture capital funds in India.

⇒⇒ SEBI GuidelinesSEBI Guidelines require all venture funds making investments in India to be require all venture funds making investments in India to be registered with the SEBI.registered with the SEBI.

⇒⇒ Eight domestic venture funds registered with the SEBI in 1996Eight domestic venture funds registered with the SEBI in 1996--1998 and fourteen 1998 and fourteen domestic venture funds registered with the SEBI in 1999domestic venture funds registered with the SEBI in 1999--2000. 2000.

⇒⇒ Central Board of Direct TaxationCentral Board of Direct Taxation governs issues pertaining to income tax on governs issues pertaining to income tax on the proceeds of Indianthe proceeds of Indian--domiciled venture capital funds.domiciled venture capital funds.

⇒⇒ Income Tax Act of 1961Income Tax Act of 1961exemptsexempts the income of SEBIthe income of SEBI --registered venture capital registered venture capital funds from Indian income taxfunds from Indian income tax .


Regulatory Background Regulatory Background ______________________________________________________________________________________________________________

•• OffshoreOffshore-- Domiciled FundsDomiciled Funds

⇒⇒ Reserve Bank of India (RBI)Reserve Bank of India (RBI) Foreign Investment Division Guidelines used by Foreign Investment Division Guidelines used by nonnon--Indian domiciled venture capital firms to establish venture fundIndian domiciled venture capital firms to establish venture funds investing in s investing in India.India.

⇒⇒ Many offshore funds are based in Many offshore funds are based in MauritiusMauritius , an island nation off the southeast , an island nation off the southeast coast of Africacoast of Africa

⇒⇒ MauritiusMauritius has the has the Avoidance of Double Taxation TreatyAvoidance of Double Taxation Treaty with India, allowing with India, allowing venture capital firm based in Mauritius to avoid taxation on Indventure capital firm based in Mauritius to avoid taxation on Indian venture capital ian venture capital investmentsinvestments

⇒⇒ SEBI Foreign Venture Capital Investor Regulations of 2000SEBI Foreign Venture Capital Investor Regulations of 2000 require require registration with SEBI of any registration with SEBI of any ““Foreign Venture Capital InvestorForeign Venture Capital Investor””, defined as any , defined as any entity seeking to make venture capital investments in Indian comentity seeking to make venture capital investments in Indian companiespanies

3


Regulatory Background Regulatory Background ______________________________________________________________________________________________________________

•• Operational Restrictions on SEBIOperational Restrictions on SEBI--Registered FundsRegistered Funds⇒⇒ Restrictions on Types of InvestmentsRestrictions on Types of Investments . SEBI. SEBI--registered venture funds cannot registered venture funds cannot

invest in: (i) real estate; (ii) noninvest in: (i) real estate; (ii) non--banking financial services; (iii) gold financing; banking financial services; (iii) gold financing; (iv) activities not permitted under the industrial policy of Gov(iv) activities not permitted under the industrial policy of Government of India; or ernment of India; or (v) other activities specified by the SEBI(v) other activities specified by the SEBI

⇒⇒ Restrictions on Allocation of Investments within FundsRestrictions on Allocation of Investments within Funds . SEBI. SEBI--registered registered venture funds may not invest more than 25% of investable funds iventure funds may not invest more than 25% of investable funds in any one n any one company; at least 75% of investable funds must be invested in nocompany; at least 75% of investable funds must be invested in nonn--listed stock; listed stock; and no more than 25% of investable funds may be invested in IPO and no more than 25% of investable funds may be invested in IPO shares or any shares or any debt securities of a portfolio company debt securities of a portfolio company

⇒⇒ Restrictions on Type of Instruments Used to Make InvestmentsRestrictions on Type of Instruments Used to Make Investments. Under . Under the SEBI regulations, convertible debt investments must be structhe SEBI regulations, convertible debt investments must be structured as tured as mandatorily convertible notes (not convertible at the option of mandatorily convertible notes (not convertible at the option of the holder) the holder)

⇒⇒ Restrictions on Materials Used to Raise CapitalRestrictions on Materials Used to Raise Capital . To raise capital from . To raise capital from investors, SEBIinvestors, SEBI --registered venture funds must use offering documents including registered venture funds must use offering documents including certain provisions specified by regulation, and must file copiescertain provisions specified by regulation, and must file copiesof these of these documents with the SEBIdocuments with the SEBI

⇒⇒ Proposed Easing of RestrictionsProposed Easing of Restrictions . Changes to reduce many of these . Changes to reduce many of these restrictions were recently proposed by an advisory committee estrestrictions were recently proposed by an advisory committee established by ablished by SEBI, which is chaired by Dr. Ashok Lahiri, chief economic advisSEBI, which is chaired by Dr. Ashok Lahiri, chief economic advisor of the Ministry or of the Ministry of Finance of the Government of India.of Finance of the Government of India.


STRUCTURE OF VENTURE STRUCTURE OF VENTURE CAPITAL INVESTMENTS CAPITAL INVESTMENTS

IN INDIAIN INDIA


US Deal Structures and Practices US Deal Structures and Practices PredominatePredominate

________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

•• Despite venture capital investments being governed by local law,Despite venture capital investments being governed by local law,such investments made by US venture capital firms in India are tsuch investments made by US venture capital firms in India are typically ypically structured and negotiated in accordance with US practices.structured and negotiated in accordance with US practices.

•• As a result, a typical Indian venture financing transaction is:As a result, a typical Indian venture financing transaction is:

⇒⇒ a minority investment (i.e., nona minority investment (i.e., non--controlling) in the targetcontrolling) in the target⇒⇒ structured as purchase by the investor of preferred stock ofstructured as purchase by the investor of preferred stock of the targetthe target⇒⇒ the preferred stock is convertible into the targetthe preferred stock is convertible into the target’’s common stocks common stock


Venture Capital Investment ProcessVenture Capital Investment Process________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

•• The venture capital investment process, which can take as littleThe venture capital investment process, which can take as little as as one month but typically takes three to six months, typically proone month but typically takes three to six months, typically proceeds as ceeds as follows:follows:

⇒⇒ Presentation of Presentation of business plan business plan and and executive summaryexecutive summary to VC (typically through to VC (typically through a referring intermediary)a referring intermediary)

⇒⇒ First meetingFirst meetingbetween VC and company executives between VC and company executives ⇒⇒ Level 1 business due diligenceLevel 1 business due diligence–– analysis by VC of market and projections; analysis by VC of market and projections; visit to company offices visit to company offices ⇒⇒ Level 2 business due diligenceLevel 2 business due diligence–– discussions between VC and customers and discussions between VC and customers and suppliers; detailed analysis of technologysuppliers; detailed analysis of technology⇒⇒ VC pitchVC pitch concerning proposed investment to fundconcerning proposed investment to fund’’s partners/investment s partners/investment committee committee

⇒⇒ Presentation of Presentation of term sheetterm sheetby VC to company and negotiation of term sheetby VC to company and negotiation of term sheet⇒⇒ Legal due diligenceLegal due diligence–– analysis of corporate documents; confirmation of validity analysis of corporate documents; confirmation of validity of intellectual property filings, etc.of intellectual property filings, etc.⇒⇒ Negotiation of investment documents and Negotiation of investment documents and closingclosing

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EntrepreneursEntrepreneurs’’ Main ConcernsMain Concerns________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

•• In negotiating venture capital investments into their companies,In negotiating venture capital investments into their companies,some of the main concerns of entrepreneurs are:some of the main concerns of entrepreneurs are:

⇒⇒ loss of management loss of management controlcontrol

⇒⇒ dilutiondilutionof foundersof founders’’ ownership stakes in the company ownership stakes in the company ⇒⇒ repurchaserepurchase of foundersof founders’’ ownership stakes in the company upon employment ownership stakes in the company upon employment termination (whether voluntary or involuntary) termination (whether voluntary or involuntary) ⇒⇒ obtaining obtaining sufficient financingsufficient financing to be able to achieve business objectives to be able to achieve business objectives ⇒⇒ security interestssecurity interests being taken by investors in key assets of the company being taken by investors in key assets of the company ⇒⇒ future capital requirements and resulting further future capital requirements and resulting further dilution of foundersdilution of founders’’ownership ownership stakes in the companystakes in the company⇒⇒ intangible and indirect intangible and indirect benefitsbenefitsof venture capitalist participation (i.e., of venture capitalist participation (i.e., reputational benefits and access to key industry contacts and fureputational benefits and access to key industry contacts and future rounds of capital) ture rounds of capital)


Venture CapitalistsVenture Capitalists’’ Main ConcernsMain Concerns________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

•• In negotiating venture capital investments, some of the main In negotiating venture capital investments, some of the main concerns of venture capitalists are:concerns of venture capitalists are:

⇒⇒ current and projected current and projected valuationvaluationof the companyof the company⇒⇒ level of risklevel of risk associated with the investment, including competition and barriassociated with the investment, including competition and barriers to ers to entry in the companyentry in the company’’s market segment s market segment ⇒⇒ alignmentalignment between the proposed investment and the fundbetween the proposed investment and the fund’’s investment s investment objectives and criteria objectives and criteria ⇒⇒ projected levels of projected levels of return on investmentreturn on investment⇒⇒ VCVC’’s ability to influence and, in some cases, s ability to influence and, in some cases, controlcontrolmanagementmanagement’’s strategy and s strategy and decisionmaking process decisionmaking process ⇒⇒ transparencytransparencyof investment, company financials (i.e., US GAAP financial of investment, company financials (i.e., US GAAP financial statements) and reliability of other information received statements) and reliability of other information received ⇒⇒ downside protection measuresdownside protection measures such increased Board representation and taking such increased Board representation and taking security interests in company assets in the event of business disecurity interests in company assets in the event of business distress or failure stress or failure ⇒⇒ protection of the firmprotection of the firm’’s ability to s ability to participate in future funding roundsparticipate in future funding rounds if the if the company meets or exceeds projections through contractual precompany meets or exceeds projections through contractual pre--emptive rightsemptive rights⇒⇒ VCVC’’s ability to s ability to exit the investmentexit the investment , either through a sale of the company or a , either through a sale of the company or a public offering of the companypublic offering of the company ’’s stock on a stock exchange s stock on a stock exchange


Concerns for Both CompaniesConcerns for Both Companiesand Venture Capitalistsand Venture Capitalists

________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

•• Concerns shared by both companies and venture capitalists in Concerns shared by both companies and venture capitalists in negotiating venture capital investments include:negotiating venture capital investments include:

⇒⇒ retention of retention of key members of the management teamkey members of the management team (and recruitment of any (and recruitment of any key missing links)key missing links)⇒⇒ resolution of any resolution of any conflicts among the syndicate of investorsconflicts among the syndicate of investors (especially where (especially where there is a lead investor representing several venture capital fithere is a lead investor representing several venture capital fi rms) rms)

⇒⇒ financial strengthfinancial strengthof the company, postof the company, post--investment investment ⇒⇒ the the tax ramificationstax ramifications of the proposed investment, including the ability to of the proposed investment, including the ability to repatriate the investment proceeds out of India repatriate the investment proceeds out of India


Special Due Diligence and Process Issues Special Due Diligence and Process Issues in Indian VC Investmentsin Indian VC Investments

________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

•• Bridging the Geographic GapBridging the Geographic Gap –– VCVC’’s without local offices need to establish s without local offices need to establish systems of communication, monitoring and information exchange wisystems of communication, monitoring and information exchange wi th portfolio companies th portfolio companies to ensure that effective communication is maintainedto ensure that effective communication is maintained..

•• Local Regulatory MattersLocal Regulatory Matters –– VCVC’’s need to educate themselves on local s need to educate themselves on local employment and other regulatory law differences and adjust to loemployment and other regulatory law differences and adjust to local bureaucratic processes cal bureaucratic processes (i.e., remnants of the so(i.e., remnants of the so--called called ““License RajLicense Raj””).).

•• Intellectual Property ConcernsIntellectual Property Concerns –– Indian intellectual property protections, Indian intellectual property protections, although getting stronger, are not as strong as intellectual proalthough getting stronger, are not as strong as intellectual property protections in the US perty protections in the US and the EU. As a result: and the EU. As a result:

⇒⇒ Venture capitalists need to Venture capitalists need to understandunderstandIndian patent, trademark and copyright Indian patent, trademark and copyright processes and assist portfolio companies in performing processes and assist portfolio companies in performing costcost--benefit analysisbenefit analysisconcerning obtaining patent, trademark and copyright protection.concerning obtaining patent, trademark and copyright protection.⇒⇒ In making this costIn making this cost--benefits analysis, benefits analysis, some investors have considered some investors have considered intellectual property protection concerns to beintellectual property protection concerns to be less of an issue in India than in less of an issue in India than in ChinaChina, for example, because the focus in India is on , for example, because the focus in India is on IPIP--enabled servicesenabled services , as , as compared to the Chinese focus upon compared to the Chinese focus upon manufacturemanufacture of technologyof technology--related products.related products.

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Special Due Diligence and Process Issues Special Due Diligence and Process Issues in Indian VC Investmentsin Indian VC Investments

______________________________________________________________________________________________________________

•• Initial public offerings have provided a means for venture capitInitial public offerings have provided a means for venture capital al investors to exit their investments.investors to exit their investments.⇒⇒ TThe he Indian IPO marketIndian IPO markethas has reboundedrebounded after a decline in 2002: Indian firms after a decline in 2002: Indian firms

raised approximately raised approximately US$1.2 billionUS$1.2 billion through new equity offerings in fiscal 2003through new equity offerings in fiscal 2003⇒⇒ The largest recent public offering of an Indian technology compaThe largest recent public offering of an Indian technology company was the ny was the

approximately approximately US$45 millionUS$45 million initial public offering of initial public offering of II--Flex Solutions, Ltd.Flex Solutions, Ltd., a , a Mumbai and BangaloreMumbai and Bangalore--based provider of IT services to financial institutionsbased provider of IT services to financial institutions

•• However, mergers and acquisitions (M&A) remains the traditional However, mergers and acquisitions (M&A) remains the traditional exit strategy for investment in Indian companies.exit strategy for investment in Indian companies.

•• ““India has a healthy track record of strategic buyIndia has a healthy track record of strategic buy-- outs of services outs of services companies, either by larger Indian players or by international companies, either by larger Indian players or by international companies looking to kick start operations in India.... Over thecompanies looking to kick start operations in India.... Over the past past 12 months, the Indian stock market has shown significant upswing12 months, the Indian stock market has shown significant upswingand it is expected that many more companies would explore publicand it is expected that many more companies would explore publiclisting as a means of exit for VCs in India.listing as a means of exit for VCs in India.””

---- Kanwaljit SinghKanwaljit SinghVice President, Carlyle Asia Venture PartnersVice President, Carlyle Asia Venture Partners


Closing Remarks/QuestionsClosing Remarks/Questions* * * * ** * * * *

Raymond J. Batla, PartnerRaymond J. Batla, PartnerHogan & Hartson, LLPHogan & Hartson, [email protected]@HHLaw.com

LondonLondon::

One Angel CourtOne Angel CourtLondon EC2R 7HJLondon EC2R 7HJEnglandEnglandTel: +44Tel: +44 --2020--73677367-- 02020202

Washington, D.C.Washington, D.C. ::

555 Thirteenth Street, N.W.555 Thirteenth Street, N.W.Washington, D.C. 20004Washington, D.C. 20004USAUSATel: +1 (202) 637Tel: +1 (202) 637-- 57455745

agenda country briefingsmainly in the cities. v practice restricted to geographical vicinity and...

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