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SEPTEMBER/OCTOBER 2003 e-BULLETIN Page MEMBER NEWS • Chairman’s Welcome – New California Member – Morgan, Lewis & Bockius LLP 2 • Fraser Milner Casgrain’s Leslie Johnson Among Canada’s Top 15 Women Lawyers to Watch 3 • Muniz Forsyth Ramirez Perez-Taiman & Luna-Victoria PERU 2004 Conference Invitation 4 • Simpson Grierson Biotech Talent Seconded to Hale and Dorr 6 MAKING NEWS • Carey y Cia. New Issuance of Subway Bonds US$97million 7 • Clayton Utz – McCabe/Cowell v BATAS Appeal Judgment Upheld 7 • NautaDutilh Advises Air France on Share Exchange Offer for KLM Royal Dutch Airlines 7 COUNTRY ROUNDUPS • BRAZIL - Tozzini Freire Teixeira e Silva New Oil & Gas Regulations Deal Penalties 8 • CHILE – Carey y Cia. Second Capital Market Reform 10 • CANADA – Fraser Milner Casgrain – Canadian Competition Law – Similar but Diffierent 12 • NEW ZEALAND – Simpson Grierson – New Zealand Stock Exchange Launch Preparations 14 • INDONESIA – Ali Budardjo Nugroho Reksodiputro – State Owned Enterprise Law 15 • UNITED STATES – Davis Wright Tremaine – Flat Rate Doctrine Ruling 16 • UNITED STATES - Luce Forward Hamilton & Scripps LLP – Employment Law Update 17

MEMBERSHIP • Vancouver 2003 Conference Materials NOW AVAILABLE @ www.prac.org

• PERU 2004 – Advance Programm e NOW AVAILABLE - Early Registration On Line @www.prac.org • INDIA 2004 CONFERENCE (New Delhi - October 30-November 3, 2004) Tools to Use

• PRAC Contacts Matrix & Email Listing - October Update (member version only) 18 • PDF version Directory 2003-2004 Member Firms available at PRAC web site • Expert System 2003 available at PRAC web site Private Libraries

PRAC e-Bulletin is published monthly and emailed to all PRAC Primary, Practice Group & Marketing contacts Send member contributions to susan.iannetta@fmc -law.com on or before the 15th of each month

Visit the PRAC web site www.prac.org to view this edition and other information on line

October 9, 2003 MORGAN, LEWIS & BOCKIUS LLP JOINS PRAC

TO ALL PACIFIC RIM ADVISORY COUNCIL MEMBERS Dear Colleagues: Following unanimous approval of the Board at the Vancouver meeting of the PRAC Board of Directors, I am pleased to confirm that MORGAN, LEWIS & BOCKIUS LLP has accepted membership in PRAC for the San Francisco/Palo Alto, California jurisdiction effective November 1, 2003. Morgan, Lewis & Bockius LLP is a leading United States law firm with San Francisco and Palo Alto offices serving a diverse client base ranging from Fortune 500 companies to emerging start-up enterprises across a broad range of industries, including financial institutions, professional services firms, technology businesses, the life sciences sector, the oil and gas industry, transportation, real estate development, and manufacturing companies. Their experienced litigators have successfully solved extraordinarily complex cases by drawing upon the resources of one of the nation’s largest law firms. We are both pleased and honored to have a firm of their distinction as a member of PRAC. The Primary and contact information for Morgan, Lewis & Bockius LLP is as noted below:

Primary Contact (San Francisco) Primary Contact (Palo Alto) Paul Finigan, Partner Tom Kellerman, Partner Direct Line: 415 442 1336 Direct Line: 650 843 7550 Email: vfinigan@morganlewis.com Email: tkellerman@morganlewis.com

San Francisco Address: One Market Street Palo Alto Address: 2 Palo Alto Square Spear Street Tower 300 El Camino Real Suite 900 San Francisco, California 94105 Palo Alto, California Main Telephone: 415 442 1000 Main Telephone: 650 843 4000 Main Fax: 415 442 1001 Main Fax: 650 843 4001

Web Site: www.morganlewis.com Morgan Lewis has indicated that they will be represented at Peru’s Conference later next year. In the meantime, I encourage each of you to express your welcome to our newest member of the PRAC family. Jan Willem Sodderland Chairman, Pacific Rim Advisory Council NautaDutilh

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FRASER MILNER CASGRAIN’S LESLIE JOHNSON AMONG CANADA’S TOP 15 TO WATCH

Toronto/September 10, 2003 - Leslie Ann Johnson has recently been recognized as one of Canada's top 15 up-and-coming women lawyers. Leslie, a partner in Fraser Milner Casgrain's Toronto office, practices in the areas of securities regulation and corporate law and has been with FMC since she graduated from Queen's University Law School (LL.B.) in 1990.

Johnson was identified by LEXPERT Magazine following an extensive survey and assessment process involving feedback from more than 2,900 practitioners and in-house counsel. The results were published in the September 2003 issue of LEXPERT, the well-known bus iness magazine for Canadian lawyers.

"It's an honour being recognized by my peers and being included among such a distinguished group of lawyers," said Johnson. "Fraser Milner Casgrain has always had a strong reputation for mentoring and developing its younger lawyers and I have certainly benefited from having worked with some truly remarkable colleagues over the years."

"FMC's corporate commercial team in Toronto, and across Canada, is top-notch by any standard," Johnson added. "In many respects, it is the depth of top legal talent we have - across all six full-service FMC offices - that is really being recognized when FMC lawyers are acknowledged like this."

"Having exceptional people like Leslie on the FMC team is a big part of our competitive advantage," said Jeff Barnes, FMC's Chair. "Client-focused and results-driven - that's the approach which has guided Leslie from day one and remains her trademark within the firm and among clients. On behalf of all her colleagues at FMC, as well as her many clients, congratulations Leslie on being recognized for your many accomplishments over the years and, specifically, for being named one of Canada's top 15 women lawyers to watch."

About Fraser Milner Casgrain LLP

For over 160 years, Fraser Milner Casgrain LLP has distinguished itself as one of Canada’s leading business law firms. With more than 550 lawyers in six full-service Canadian offices, and a representative office in New York, FMC offers the depth of experience and trusted legal advice to help clients succeed.

MUÑIZ,

FORSYTH,

RAMIREZ,

PEREZ-TAIMAN &

LUNA-VICTORIA

ATTORNEYS - AT - LAW

May 15 - 21

thPRAC 35 INTERNATIONAL CONFERENCELima Cusco, Peru

th stMay 15 21 , 2004

It gives us great pleasure to be the host of the 35 Pacific Rim Advisory Council Conference to be

Cusco, a fascinating city steeped in history, tradition and legend, is now the oldest inhabited city in

the American continent. The heart of the once mighty Inca Empire, it is the archaeological capital of

the Americas, and reveals the various stages and cultures of its Pre-Inca, Colonial and Republican

history. The conference program also includes activities in Machu Picchu, the Lost City of the Incas,

declared a Cultural and Natural World Heritage Site by UNESCO. The beautifully preserved ruins

consist of an enormous stone city hidden by a spectacular terraced green mountain plateau

surrounded by three towering peaks. Social events included in the program will present to you

To assist you in planning your trip, we are enclosing our Preliminary Conference Agenda, Early

Indication Form and the Pre & Post Travel Tour Options. Please note that the deadline for the Early

We look forward to welcoming you in our country, sharing with you our cultural and

geographical variety, and extending to you our traditional Peruvian hospitality.

held in Lima and in the historic city of Cusco, Peru, from May 15 to 21 , 2004.

Andean typical dances, songs and meals from the different regions of Peru.

Jorge Pérez-TaimanHost Committee Chair

MUÑIZ,

FORSYTH,

RAMIREZ,

PEREZ-TAIMAN &

LUNA-VICTORIA

ATTORNEYS - AT - LAW

Dear PRAC Members:

Indication Form is October 31 , 2003. VISIT WWW.PRAC.ORG FOR COMPLETE DETAILS.

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SIMPSON GRIERSON BIOTECH TALENT SECONDED TO HALE AND DORR

NZ Biotech Talent Seconded to Washington Biotechnology lawyer Dr Anna Jellie is heading to Washington for a three month secondment with top United States biotech legal firm Hale and Dorr. Anna is a key member of Simpson Grierson’s x-tech group which incorporates the firm’s biotechnology, intellectual property, telecommunications and information technology practices. With a strong science background, including a PhD in biotechnology, Anna has a unique and valuable mix of scientific, legal and commercial skills. The Washington placement is at the invitation of the Vice Chair of Hale and Dorr’s Intellectual Property Department, Henry Wixon, whose practice involves counseling start-up and small-to-medium -size biotechnology companies on intellectual property and technology transfer issues. Mr Wixon says, “we’re delighted that Anna will join us at the Washington office of Hale and Dorr in September and expect that her secondment will further solidify the working relationships between our firms. New Zealand biotech companies can only benefit from increased access to, and insight on, the financial and regulatory landscape in the United States.” Anna says it’s both challenging and exciting to work alongside a legal practice that has forty years experience advising the biotechnology sector. Around 75 of Hale and Dorr’s 500 attorneys are involved in ‘life sciences’ work, and overall more than 70 of its attorneys have degrees in technical or scientific fields. “The United States market is vital to New Zealand biotechnology companies so this is a great opportunity to learn more about the way US legal firms are working with this sector. Hale and Dorr is using its mix of scientific, legal and commercial knowledge to help clients through every stage of a company’s life cycle, just as Simpson Grierson’s xtech group does here.” x-tech partner, Michael Sage, says that while New Zealand’s biotechnology sector is in its infancy, there is increasing demand here for legal services delivered by people with a science and technology background who readily understand the business. “These specialist companies still require core legal advice common to all companies such as commercial structuring, employment and regulatory issues, but are also looking for legal advisers who speak their language.”

ENDS For further information please contact Glenda Macdonald, Marketing Director, Simpson Grierson on 09 977 5127 or 021 550 542 or Dr Anna Jellie on 09.977 5019.

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CAREY Y CIA. – New Issuance of Chilean Subway Bonds for US$97 million

On September 3, 2003, Empresa de Transporte de Pasajeros Metro S.A. (“Metro S.A.”), Chile’s subway company, placed in the local financial market among several institutional investors, bearer bonds adjustable on inflation with a term of 25 years, in an amount of approximately US$97,000,000. This transaction corresponds to the fourth issuance of bonds made by Metro S.A., and obtained an interest rate of U.F. plus 5.14% per annum. The funds obtained by Metro S.A. from the issuance of the bonds will be invested in the construction of Line 4 of the company, which includes the construction of 33 kilometers of rail lines and 27 new subway stations. The payment of the bonds issued by Metro S.A. was guaranteed by the Republic of Chile. The demand for these bonds exceeded three times the amount of bonds offered, which demonstrates the confidence of the investors in the management and projections of Metro S.A. Carey y Cía. acted as legal advisor of BanChile Asesorías Financieras S.A., which was the arranger of this fourth issuance of bonds by Metro S.A., through partner Diego Peralta and associates José Miguel Carvajal and Felipe Moro.

CLAYTON UTZ – McCabe/Cowell v. BATAS Appeal Judgment Upheld

Media Statement from Mr. David Fagan, Chief Executive Partner of Clayton Utz MELBOURNE, 3 October 2003: “Clayton Utz welcomes the decision of the High Court of Australia to refuse leave to appeal against the decision of the Victorian Court of Appeal in the matter of McCabe/Cowell v. BATAS. “The Court of Appeal judgment stands. The judicial process on these matters has now been exhausted. “As one of Australia’s pre-eminent law firms we have always been committed to upholding our reputation for providing clients with the highest standards of professional and ethical advice. “We look forward to continuing to provide our clients with outstanding professional service”. For more information please contact: Elizabeth Weaver, Corporate Affairs Manager (National) Tel: +61 2 9353 5451 Fax: +61 2 8220 6700 Email: eweaver@claytonutz.com NAUTADUTILH Advises Air France on Share Exchange Offer for KLM Royal Dutch Airlines

NautaDutilh's Amsterdam office is acting as Dutch counsel for Air France in the latter's share exchange offer for KLM common shares. The transaction will lead to the creation of Europe's leading airline group, to be called Air France-KLM, capitalising on two well-known names in the airline business, major hubs and complementary networks. Air France and KLM expect to finalise the transaction within the next few weeks. The NautaDutilh team is made up of corporate partners Erik Hammerstein and Lieke van der Velden, along with Wijnand Bossenbroek (civil law notary) and a number of senior associates.

August 25, 2003

Oil and Gas

BRAZIL: NEW REGULATIONS DEALING WITH ADMINISTRATIVE PENALTIES

The Brazilian National Petroleum Agency (Agência Nacional do Petróleo – ANP) recently approved new regulations establishing the relevant procedures for the imposition of administrative penalties with respect to oil and gas activities.

The new regulations provide that ANP may impose the following administrative penalties: (a) warning; (b) monetary fines, which may vary from R$ 25,000 (approximately US$ 8,300) to R$ 1,000,000 (approximately US$ 330,000); (c) temporary, partial or total suspension of activities; (d) temporary suspension of the right to participate in future biddings for new concessions and to contract with ANP; (e) shutdown; (f) seizure; and (g) termination of the concession agreement.

An example of a serious breach that may cause the fines to be increased is the burning or loss of petroleum or natural gas above the limit authorized by ANP, which could result in the payment of twice the amount of gas or petroleum burnt or lost. Since gas is associated with petroleum in most production fields, this risk is very significant.

Temporary suspension may be applied when the relevant company performs acts deemed to be incompatible with the purposes of the original bidding procedures of a given concession, or when it fails to deliver copies of data and reports required under the concession agreement. ANP may suspend the participation of the company and its affiliates in concession biddings, as well as refuse to enter into agreements with such companies. The suspension will apply for a minimum period of six months and a maximum period of five years, provided that such period may be extended by ANP if the corresponding violation remains uncured.

All violations shall be investigated in an administrative proceeding, which will determine the nature of the violation, the responsible party and the seriousness of the penalty to be imposed. Defendants shall always be entitled to fully defend their case. The statute of limitations for administrative sanctions is five years from the date of the violation.

The regulations provide that, in the case of consortia, the operator will be primarily liable for the administrative sanctions imposed by ANP, without prejudice to the joint and several liability of the remaining consortium members.

The enactment of the regulations described above provides ANP with an effective instrument to discourage violations and demand performance of various obligations stipulated in concession agreements and bidding documents. Consequently, interested companies should ensure that their operations are diligently conducted in order to mitigate the risks of administrative penalties being imposed by ANP.

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Corporate CounselThe Metropo l i tan

Volume 11, No. 10 © 2003 The Metropolitan Corporate Counsel, Inc. October 2003

®

in each jurisdiction are the cartel enforce-ment provisions. Such provisions seek toaddress conspiracies to lessen competi-tion, especially agreements among com-petitors to fix prices and allocate marketsor customers. The provisions are criminalin nature and subject to prosecution by theauthorities. Defendants are also subject tocivil actions for damages. Unlike the U.S.,the current Canadian conspiracy provi-sions require proof of likely anti-competi-tive effects in all cases – there are noagreements which are per se illegal.

“Canada does not have a history of jail-ing offenders for antitrust offences, butCanadian competition authorities haveindicated that, in appropriate cases, theywill insist on jail sentences in addition tofines for offenders,” says Randal Hughes,another senior competition lawyer inFMC’s Toronto office.

On the civil side, treble damages arenot available in Canada. Plaintiffs are lim-ited to their actual damages and legalcosts. “Historically, Canada has tended tobe less litigious than the U.S.,” saysHughes. “However, individuals or firmswho suffer harm as a result of a violationof the criminal provisions can sue fordamages.”

Like the U.S., Canadian law providesfor the review of mergers which couldlessen competition substantially. InCanada, the Competition Tribunal hasjurisdiction over mergers and otherreviewable practices, such as abuse ofdominance and tied selling.

“We have a merger review regime for

substantial merger transactions in oraffecting Canada that is subject ultimatelyto determination by our Competition Tri-bunal,” says Houston. “Canada has othercivil provisions also dealt with by theCompetition Tribunal, particularly abuseof dominance. Similar to the EuropeanCommunity, Canada has specific provi-sions dealing with those in dominant posi-tions in their markets who are alleged tohave abused their market power.”

In Canadian merger cases, the Tribunalcan set aside or disallow mergers or forcemerging parties to divest assets. For otherreviewable practices, such as abuse ofdominant position, the Tribunal’s reme-dies tend to be limited to orders to stop thequestionable conduct. The Tribunal can-not presently require payment of fines oraward damages, an issue that is currentlybeing reviewed by the Canadian federalgovernment in the context of proposedamendments to the Competition Act.

Issues And Trends To WatchAs in the U.S., another issue impacting

Canada’s competition laws is globaliza-tion. For example, antitrust authorities inCanada, the U.S. and Europe are increas-ingly cooperating based on a view that aglobal economy requires global enforce-ment of antitrust laws.

This past June, Canada’s federal gov-ernment issued a discussion paper on pro-posed changes to the Competition Actwhich will likely result in the tabling ofamendments in Parliament in the nearfuture. One section of the Act which will

Canadian Competition Law: Similar To U.S. Antitrust Law, But Different

For both domestic and foreign firmscarrying on business in the country,Canada’s competition laws have tradition-ally sought to support a strong and fairbusiness climate. While Canadian lawswill generally be familiar to Americancompanies governed by U.S. antitrustlaws, significant differences do existbetween the two countries.

According to Donald Houston, a seniorcompetition lawyer in Fraser Milner Cas-grain’s (FMC’s) Toronto office, the Cana-dian Competition Act has a variety ofprovisions that are similar but not identi-cal to those in U.S. antitrust law.

At the core of the antitrust legislation

American companies doing business inCanada need to be knowledgeable about thecountry’s competition laws in order to suc-ceed. This article looks at the competition orantitrust legal framework that currentlyexists north of the border and the emergingissues or trends which may impact Americanfirms with a presence in Canada.

Randal T. Hughes and Donald B. Houstonare Partners in the Toronto office of FraserMilner Casgrain LLP and may be contacteddirectly at (416) 863-4446 for Mr. Hughes or(416) 863-4620 for Mr. Houston. Fraser Mil-ner Casgrain LLP is a full service Canadianbusiness law firm with more than 550lawyers in offices in Montreal, Ottawa,Toronto, Calgary, Edmonton, Vancouver andNew York. FMC provides expert legal adviceand counsel across a wide range of practiceareas, including competition (anti-trust) law.

By Randal T. Hughes and Donald B. Houston

Volume 11, No. 10 © 2003 The Metropolitan Corporate Counsel, Inc. October 2003

receive particular attention is section 45,which deals with conspiracy. The currentprovision makes it an offense for parties toenter into an agreement which is likely to“unduly” lessen competition. A concernexpressed by some is that the “unduly”standard may be too vague.

Houston notes that on the one hand,government lawyers have had difficulty insome cartel cases proving an “undue”lessening of competition, while, on theother hand, some businesses are con-cerned that the law may capture pro-com-petitive or efficiency-enhancingarrangements. “They enter into legitimateagreements, but someone may describethem as a criminal conspiracy to undulylessen competition,” notes Houston.

In response to these concerns, theCanadian federal government is consider-ing a controversial amendment to section45 of the Act to make it a criminal offenseto enter into price fixing, market alloca-tion or supply limiting agreements with-out requiring proof of an undue lesseningof competition, or any anti-competitiveeffects. Other agreements would be sub-ject to civil review only, with a competi-tive effects test.

This would, according to Hughes,make hardcore cartel activity a per seoffense similar to that under U.S. antitrustlaws, but would raise other issues. “Isthere a demonstrated need to changeCanada’s conspiracy laws and to importthe uncertainty and litigation that prevailsin the U.S. with respect to per se conspir-acy violations versus those consideredunder a rule of reason analysis?,” asksHughes rhetorically.

Another change under consideration isthe addition of administrative monetarypenalties (fines), restitution orders and/ordamage claims in cases of abuse of domi-nance and other reviewable practices.Like the proposed changes to section 45,these proposals are controversial.

Finally, the government is also consid-ering decriminalizing certain pricing prac-tices, notably predatory pricing and pricediscrimination, which have not beenactively enforced under criminal law inCanada. Such cases would be treated ascivil rather than criminal matters.

Another significant development inCanada has been the growth of civil classactions in anti-trust matters. Quebec –Canada’s predominantly French-speakingprovince – used to be the only provincewith effective class action legislation.

That is no longer the case and the expec-tation is that class action legislation willsoon be the norm across the country.

Consolidating or rationalizing classactions in the various provinces involvingthe same claims will prove challenging,says Hughes. “You can have overlappingclass actions arising in multiple jurisdic-tions where the class that seeks certifica-tion can be a national class and caninclude people who would be includedwithin the class certified in another juris-diction,” he says. “We have not sorted outhow those situations should be handled.Clearly, it is unfair to defendants to besubject to liability to the same plaintiffsfor the same activity in different jurisdic-tions and to incur the costs of defendingoverlapping and contemporaneous pro-ceedings.”

There have recently been several highprofile cases in Canada (in which Hughesand Houston have been directly involved),that may be of interest to Americans.

Chadha v. BayerThis case concerned the ability of

“indirect purchasers” to pursue classactions in competition matters. Itinvolved a proposed class of indirect pur-chasers who alleged price-fixing activityinvolving iron oxide, a coloring pigmentadded to some types of bricks. The claimwas brought on behalf of homeownerswho alleged they paid more for theirhouses as a result of price-fixing of theiron oxide component of the bricks. Theplaintiffs sought to bring a civil actionwhere there had been no criminal chargeslaid.

The case culminated in a decisiondenying certification of the class. TheCourt stressed that it was not deciding thatindirect class actions could never be certi-fied, but that certification was not appro-priate in that case. Leave to appeal thatdecision was denied by the SupremeCourt of Canada in July, 2003.

Houston believes this will be a signifi-cant case for future proposed class actionson behalf of indirect purchasers. “We donot have the Illinois Brick decision andHanover Shoe decision in which the U.S.courts said that indirect purchasers cannotrecover, but the Chadha v. Bayer decisionmeans that it is going to be more difficultfor indirect purchasers to get certificationin Canada,” he says.

VitapharmThis case concerns the ability of Cana-

dian plaintiffs to gain access to discoveryin parallel U.S. proceedings.

It arose in the contest of an allegedprice-fixing cartel involving vitamins.Canadian plaintiffs went to the U.S. andsecured intervener status in a U.S. case foraccess to discovery documents and tran-scripts. The U.S. Court ruled that theplaintiffs could intervene, subject to theviews of the Canadian Court. The Cana-dian court then declined to prohibit theCanadian plaintiffs from proceeding in theU.S. The case is now at the SupremeCourt of Canada awaiting a decision onleave to appeal.

Houston predicts this case could have adramatic impact in future cases involvingparallel proceedings in multiple jurisdic-tions. U.S. procedural rules allow muchbroader discovery rights than those whichexist in Canada. Effectively importingthese rights into Canada would be a sig-nificant development.

Commissioner v. Air CanadaInitiated by the Canadian Commis-

sioner of Competition, this case is a preda-tory pricing claim under Canada’s abuseof dominance provisions. The Commis-sioner alleged that Air Canada, the domi-nant domestic airline in Canada, addedflights and reduced fares in responding tocompetition from discount carriers, so thatit was operating below its avoidable costs.

In July 2003, the Tribunal found thatAir Canada had operated below its avoid-able costs, and thereby committed an anti-competitive act. A similar claim by theU.S. Government against American Air-lines under similar circumstances was dis-missed earlier this year.

In the Air Canada case, only the firstphase of the case has been decided. In thesecond phase, the Tribunal will determinewhether Air Canada’s actions resulted in asubstantial lessening of competition. Cur-rently, Air Canada is under bankruptcyprotection and the second phase will notproceed until the airline’s situationchanges.

Once again, amendments to Canada’scompetition laws in the coming monthsmay significantly change the competitivelandscape in Canada, as will the appoint-ment of a new Commissioner of Competi-tion to replace the outgoing Konrad VonFinckenstein, who has been appointed as aJudge of the Federal Court of Canada.

With Permission . For additional information visit www.fmc-law.com

Page 11 of 24

CHILE – CAREY Y CIA. – SECOND CAPITAL MARKET REFORM

Second Capital Market Reform In recent years, Chile has made considerable progress in regulating and modernizing its capital market. A law on tender offers (OPA) was approved in 2000 and the first capital market reform later implemented, which concentrated on promoting domestic savings and fostering development and competition on the financial market. At this time, a second bill of capital market reform is under analysis, which includes several legal initiatives and new regulations to develop, and modernize the venture capital industry, and avoid situations that jeopardize the stability of the financial system. The bill of law to be discussed and analyzed over the coming months, which would result in an amendment to 14 laws, aims to achieve 5 objectives that are outlined in further detail below.

1. Incentives to Encourage Institutional Investors to Participate in the Venture Capital Industry The bill foresees the creation of tax incentives, principally a reduction in taxes. Those incentives would be available if

certain requirements are met. The Production Development Corporation (CORFO), in conjunction with the Multilateral Investment Fund of the Inter-American Development Bank (MIF), will secure debt issued by eligible investment funds, who may assume debt up to twice their equity. Installments of capital and debt of the investment fund will be offered jointly to investors, who will buy one installment of capital and two of debt in each package. This type of vehicle is expected to be highly attractive to institutional investors, such as pension fund asset management companies and insurance companies.

2. A Reduction in Transaction Costs and Sophisticated Commercial Contracts New flexible forms of corporations will be created and the existence of new contracts between private persons will be

regulated in which their agreements will prevail, including, among other matters, the interests in capital, the administrative structure and the role of shareholders’ meetings. For example, this will allow certain decisions in a company to be controlled or a shareholders’ meeting convened without having to be the controlling shareholder. These forms of corporation and contracts will be particularly useful to companies in which there are a few, but sophisticated, shareholders. A new pledge without conveyance law is also proposed as well as the creation of a unique national pledge registry that will facilitate the grant of guarantees according to international standards.

3. Widening of Reforms on Corporate Governance The process to modernize and update Chilean laws in connection with corporate governance will expand even

further. That expansion will now include regulation of the distribution of information, corporate rights, transactions with related parties, the use of privileged information and the attributions of the Superintendency of Securities and Insurance in controlling crimes relating to these matters.

4. Strengthening of Voluntary Retirement Savings Mechanisms Associative savings plans will be implemented in which the employer can make complementary contributions to the

voluntary savings of its workers and enjoy a tax benefit consisting of the recognition of those contributions as an expense required to generate revenue.

5. Strengthening of Mechanisms of Audit, Control, Sanction and Coordination Initiatives are proposed to encourage the electronic or dematerialized issuance and transaction of high-value

securities and to raise the operational standards of financial intermediaries via an increase in the minimum capital requirements and a perfection of the mechanisms for internal control of stock exchanges. The system to rate institutions entering the financial market will also be established, which will be conditioned to standards of suitability and solvency. There is also an intent to expand the authority of the Superintendency to decide on the grant of licenses to establish banks, insurance companies and pension fund asset management companies.

Page 12 of 24

In connection with auditing, there is a desire to create a preventive, coordinated supervision of the market. The intent is to give Supervisors appropriate information on the companies that are managed and the solvency of their principal shareholders. It is proposed that information be shared between the Superintendents of Securities and Insurance, Pension Fund Asset Management Companies and Banks and the authority of Superintendency of Banks be perfected to inspect activities that are conducted by bank subsidiaries.

Finally, there will be interaction between the regulatory and supervisory authorities and the work of three instances of

coordination will be expanded: the Superintendents Committee, the Capital Market Committee and the Financial Stability Committee.

These initiatives will encourage the development of the venture capital industry in Chile, reduce transactions costs,

improve corporate governance, perfect audit mechanisms and promote alternative types of voluntary retirement savings. The result will be a new modernization of the capital market, an improvement in the actual standards of operation of the country to international levels and an increase in the transparency, competition and capacity of its participants to react.

Page 13 of 24

NEW ZEALAND SIMPSON GRIERSON – New Zealand Stock Exchange Finalising NZAX Market

The NZX has reported that it is in the stages of the launch preparations for the NZAX market and will be ready to open the market for trading on Wednesday, 12 November 2003.

The NZAX is intended to be the alternative or secondary market operated by the NZX - in addition to its main market, the NZSX. The NZAX is set to replace the Stock Exchange's unsuccessful New Capital Market (NCM) that launched in 2000 and also to replace its unlisted securities trading platform or grey market.

The purpose of the NZAX is to provide small to medium sized companies and companies with non-standard structures with access to low cost capital, liquidity for shareholders, high quality pricing and increased profile. The NZX has sought to structure the NZAX to achieve these objectives and to avoid the deficiencies that lead to the failure of the NCM – the NCM currently has only seven participants.

The NZX is currently receiving provisional applications from companies for listing on the NZAX and is intending to run an extensive marketing campaign on the "First 15" companies to list on the NZAX. As well as significant publicity, the First 15 companies will each receive a framed rugby jersey celebrating that they are foundation members of the NZAX.

The NZX has been working with the Securities Commission to finalise an exemption notice from various securities legislation requirements in order to make an initial public offering on the NZAX significantly more streamlined and cost efficient than has previously been the case for small to medium sized businesses in New Zealand. The exemption notice is not due to be published until the end of September 2003. However, the NZX has advised that this will include the following:

• Single offer document: NZAX issuers will only be required to publish a single offer document rather than both a prospectus and investment statement as is currently required. The NZX is currently preparing guidelines for the contents of these single offer documents and intends that these be less onerous than a traditional prospectus and similar to a current investment statement.

• Costs:. The NZX has published its fees for an NZAX listing. The initial listing fee will be $7,500 and the annual listing fee will be $5,000 for companies with market capitalisation of less than $15 million. Other NZX fees for administration, review and approval services will be payable to the NZX. In addition, an NZAX issuer will necessarily incur costs for financial and legal advisers it engages to assist in its listing and for its "Sponsor".

Each NZAX issuer will be required to appoint a Sponsor to assist in its listing or quotation of securities on the NZAX. A Sponsor is an organisation which has been approved by the NZAX and is not limited to traditional broking firms. Other organisations such as banks or accounting firms may apply to become Sponsors. The NZX is currently receiving applications from prospective Sponsors for provisional accreditation.

For further information please contact:

Contact Telephone Email

Richard Nelson (Auckland) +64 9 977 5053

richard.nelson@simpsongrierson.com

James Blair (Auckland) +64 9 977 5264

james.blair@simpsongrierson.com

Stephen Layburn (Auckland) +64 9 977 5312

stephen.layburn@simpsongrierson.com

Don Holborow (Wellington) +64 4 924 3423

don.holborow@simpsongrierson.com

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INDONESIA – ALI BUDIARDJO NUGROHO – State Owned Enterprises Will Be More Accountable

On 19 June 2003, President Megawati Soekarnoputri signed the bill on State Owned Enterprise (“SOE”) into law (“Law No. 19/2003” or the “Law”). This new law cancels three previous laws regarding SOEs, including the famous Indonesische bedrijven wet that was promulgated during the Dutch colonial period.

Law 19/2003 adopts many of the provisions of Law No. 1/1995 regarding Limited Liability Company, but it also touches upon many new aspects of the Indonesian corporate law principles that were never dealt with previously. Many of the important and interesting elements comprise provisions that concern the restructuring and privatization of SOEs, and they reflect the government’s effort to empower SOEs in the Indonesian economy by giving them added value.

Unlike its predecessor, Law No. 19 Prp. 1960, that did little to require SOEs to be profitable, Law 19/2003 introduces a clear profitability requirement in the objectives and purposes of the establishment of the SOE. Law 19/2003 stipulates the following as the objectives and purposes of the establishment of the SOEs:

to contribute to national economic development in general, and state revenues in particular;

(i) to earn profit;

(ii) to manage public benefits by way of the procurement of high quality goods and/or services, which are adequate for the fulfillment of the need of the public at large;

(iii) to be a pioneer of business activities that are not as yet carried out by private enterprises and cooperatives;

(iv) to actively participate in the provision of guidance and assistance to small scale businesses, cooperatives and the public.

Articles 5 and 6 of the Law which contain general provisions regarding the management of the SOEs reflect the government’s response to the current and popular public demand for the good and proper management of public companies. Through these provisions, the Law lays down the general requirement that “in executing their duties, the board of directors, the board of commissioners and the supervisory board must abide by the articles of association of the SOE and the provisions of the law, and they must practice the principles of professionalism, efficiency, transparency, independence, accountability, responsibility, and propriety.”

On the supervisory aspect, the Law requires that all SOEs be equipped with a number of supervisory organs. Articles 67-70 stipulate that an SOE must have an internal audit division and an audit committee and may, in addition, have other committees such as a remuneration committee and a nomination committee.

The Law addresses the need of the government to modernize its own business entities. Articles 72-86 on the restructuring and privatization of SOEs reflect an effort of the government to implement its agreement with IMF to gradually lessen its involvement in commercial activities. The Article lays down clear principles and guidelines for the restructuring and privatization of SOEs that are meant to assist the government in its efforts to rationalize its involvement

in businesses that are more effectively carried out by the private sector.

For additional information, please visit us at www.abnrlaw.com

 

  Energy Advisory Bulletin

California Supreme Court Upholds Settlement Between Southern California Edison Co. and California Public Utilities Commission

By Christopher A. Hilen [Sept. 2003]

On Aug. 21, 2003, the California Supreme Court issued a decision finding that the adoption of a settlement between the California Public Utilities Commission (CPUC) and Southern California Edison Company (SCE) of SCE’s “filed rate doctrine” lawsuit against the CPUC did not violate either the state statute that imposed a retail rate freeze as part of California’s electric restructuring law or the statutes that govern the procedure by which the CPUC makes decisions.

The Court delivered its decision on three issues that the United States Court of Appeals for the Ninth Circuit certified for its review. This unusual sua sponte certification arose in a proceeding that commenced with SCE initiating its “filed rate doctrine” complaint against the CPUC in U.S. District Court in Los Angeles in November 2000. SCE sought an order directing the CPUC to allow SCE to recover in its retail rates all of its costs of its wholesale power purchases.

SCE and the CPUC settled the filed rate doctrine litigation in September 2001. The settlement's essential terms were termination of the litigation in return for SCE being allowed to continue to recover in retail rates approximately $3.6 billion of its unrecovered wholesale power procurement costs. The Utility Reform Network (TURN) intervened in the U.S. District Court proceeding and objected to the settlement. The District Court denied TURN’s claims, and approved the settlement as being “fair, adequate and reasonable.”

On appeal, in September 2002, the Ninth Circuit rejected all of TURN’s challenges to the settlement based on federal law. (See Southern California Edison Co. v. Lynch, 307 F.3d 794 (9th Cir. 2002).) However, in reviewing TURN’s challenges based on California state law, the Ninth Circuit suggested that it would likely find that CPUC’s participation in the settlement violated the Electric Restructuring Statute, the Bagley-Keene Open Meeting Act, and Public Utilities Code section 454 governing the Commission’s adoption of rate changes. The Ninth Circuit certified the following three questions to the California Supreme Court:

l Did the CPUC have the authority to propose the settlement in light of the provisions of AB 1890 (California’s electric restructuring statute), particularly Public Utilities Code §368, by raising retail rates in violation of the “rate freeze” which had been an integral part of the California AB 1890 electric restructuring legislation?

l Did the procedures employed by the CPUC in adopting the settlement violate the Bagley-Keene Open Meeting Act by “changing ” rates in a closed session?

l Did the CPUC violate Public Utilities Code §454 in adopting the settlement by altering SCE’s retail rates without a public hearing and issuance of findings?

This past August, the state’s Supreme Court held unanimously that the CPUC had the authority to enter into the settlement and did not violate Public Utilities Code section 368. The Court rejected TURN’s argument that the settlement violated section 368 by not reducing SCE’s rates at the end of the rate freeze, holding that section 368 does not dictate that rates be reduced, or changed in any way, at the end of the rate freeze period.

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The Court also rejected TURN’s argument that the settlement allowed SCE to recover in the post-rate freeze period costs incurred during the rate freeze period, in violation of section 368. The Court held that the enactment of Assembly Bill 6X in 2001 eliminated any possible restriction section 368 may have imposed on certain rate changes. Giving due deference to the CPUC’s interpretation of Assembly Bill 6X, the Court held that whether the costs authorized to be recovered by SCE under the settlement were characterized as energy procurement costs or as generation-related costs, they are not “uneconomic costs” restricted in recovery by section 368 and, hence, their recovery under the settlement did not violate the statute.

The Court also held 6-1, with Justice Baxter dissenting, that in approving the settlement in a closed-door meeting after secret negotiations, the CPUC did not violate either the Bagley-Keene Open Meeting Act by “changing” rates in a “closed session” or Public Utilities Code §454 by raising retail rates without complying with the statutory requirements for notice and hearing. The Court majority rested this holding on two principal grounds. First, it found that the settlement maintained SCE’s rates at their then-current level; it did not change those rates. Second, the Court held that the Bagley-Keene Act permits the Commission not only to confer with counsel and deliberate on the settlement of pending litigation in closed session, but also to act on that litigation and adopt a settlement of it in closed session without accepting public comment on the proposed settlement.

The matter will now return for final disposition by the Ninth Circuit. Given the Supreme Court’s near unanimity in its decision, it is unlikely the Ninth Circuit take issue with the Supreme Court ’s answers to the Ninth’s Circuit’s certified questions.

The most important aspects of the Court’s decision in future cases are likely the holding on the two procedural issues:

1. The Commission can not only discuss litigation and instruct counsel in closed session, it can settle the litigation in closed session, without identifying in advance the litigation that will be discussed in the closed session and without accepting public comment on it, as long as the Commission immediately announces the vote in public session; and

2. Voting to maintain a utility's existing rates does not constitute a rate change and, therefore, does not trigger the notice and hearing requirements of the Bagley-Keene Act and Public Utilities Code section 454, even if the Commission's action means that rates will not change when they would otherwise would have been reduced in the absence of the decision.

 

Published by Davis Wright Tremaine's Energy Law Group

Any questions about this Advisory should be directed to:

Christopher A. Hilen, San Francisco, (415) 276-6573, chrishilen@dwt.com Steven F. Greenwald, San Francisco, (415) 276-6528, stevengreenwald@dwt.com

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

Copyright © 2003, Davis Wright Tremaine LLP.

 

 

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October 7, 2003 Phillip L. Kossy, Editor

Last month we reported that several employment-related bills had passed the California Legislature and were awaiting consideration by Governor Davis. This past weekend, Governor Davis signed one of those bills, SB 2, now known as the “Health Insurance Act of 2003.” Under existing law, employers are not required to provide health insurance coverage for employees and dependents, other than workers’ compensation coverage for work-related injuries. SB 2 requires that certain employers pay a fee into a state program known as the “State Health Purchasing Program,” unless those employers provide proof of health insurance coverage that meets the minimum requirements set forth in the bill. SB 2 requires large employers (defined as companies with 200 or more employees) to pay the fee into the state fund or provide health insurance coverage for employees and their dependents beginning January 1, 2006. Medium-size employers (companies with 50 to 199 employees) will be required to pay the fee or provide employee-only coverage beginning January 1, 2007. Subject to various conditions and exceptions, the employee’s share of the yet-to-be-determined fee amount or the premium paid may not exceed 20 percent of the total amount owed or paid per employee. If an employer fails to pay the fee or to provide proof of health coverage, the employer will be subject to a penalty of 200 percent of the owed fee.

Click here for the text of SB 2 (Chapter 673), The Health Insurance Act of 2003.

Opposition to this new law is strong, and includes threats by various business organizations to challenge its legality in court. We can also expect legislative efforts to either repeal the measure or to modify some of its requirements, depending on political developments. We will keep you updated on the latest developments and will provide more detailed analysis over time.

If you have questions about this new law, please contact Karen Clemes at 619.699.2402 or kclemes@luce.com, or any member of the firm’s Labor and Employment Practice Area, listed at left.

Karen M.Clemes

LABOR AND EMPLOYMENT PRACTICE AREA THEODORE R. SCOTT CHAIR 858.720.6360 tscott@luce.com KATHRYN A. BERNERT 858.720.6316 kbernert@luce.com KAREN M. CLEMES 619.699.2402 kclemes@luce.com KELLY CAPEN DOUGLAS 619.699.2484 kdouglas@luce.com WILLIAM T. EARLEY 619.699.2590 wearley@luce.com MARIA C. HEREDIA 619.699.2584 mheredia@luce.com NYKIA C. JORDAN 619.699.2455 njordan@luce.com LISEANNE R. KELLY 619.699.2496 lkelly@luce.com MARIE BURKE KENNY 619.699.2408 mkenny@luce.com PHILLIP L. KOSSY 619.699.2433 pkossy@luce.com ROBERT A. LEVY 619.699.2423 rlevy@luce.com MICAH D. PARZEN 619.233.2970 mparzen@luce.com TAMI JOHNSON PENNER 619.699.2523 tpenner@luce.com JULIE A. VOGELZANG 619.699.2472 jvogelzang@luce.com TRACY A. WARREN 619.699.2547 twarren@luce.com JOSHUA R. WOODARD 619.699.2548 jwoodard@luce.com

GOVERNOR SIGNS BILL REQUIRING CERTAIN CALIFORNIAEMPLOYERS TO PROVIDE HEALTH INSURANCE COVERAGE