Afren oil explorer says output ahead of target

Energy exploration firm Afren said production at its Ebok field, offshore Nigeria, had reached around 40,000 barrels per day (bpd), taking its end-2011 net output to some 55,400 barrels of oil equivalent per day (boepd), ahead of target.

An output rate above the year-end goal of 50,000 boepd has been sustained since December 19, it said, as a result of operations in Ivory Coast as well as Ebok and Okoro in Nigeria.

“The group is in a strong position with aggregate net working interest production of 55,400 boepd going into 2012,” Osman Shahenshah, chief executive of Afren, said in a statement on Monday.

He added the company’s forthcoming drilling campaign in Ghana, Nigeria, the Joint Development Zone of Nigeria Sao Tome and Principe, Tanzania, Kenya and the Kurdistan region of Iraq had the potential “to materially transform and increase our discovered resource base”.

In Nigeria, output at the Ebok field has increased to a stabilised rate of around 40,000 bpd following the commissioning and ramp-up of all production wells associated with the initial phases of the development.

In addition, gross production on the Ogini and Isoko fields, onshore Nigeria, has nearly doubled to around 10,500 bpd from 6,000 bpd following technical changes at the start of December.

Over the course of last year, Afren’s share price lost close to half its value, reaching a low below 75 pence in November. A December rally took it to 85.70 pence by the end of 2011, around 15 percent above the November trough.

DoJ approval for Deutsche Börse-NYSE merger

The US Department of Justice has approved a $9bn merger between the NYSE Euronext and Deutsche Börse contingent on divestitures.

For the deal to be fully permitted by the DOJ, Deutsche Börse will need to divest its 31.5 percent interest in stock exchange operator Direct Edge. It is also still awaiting the approval by the European Union.

Deutsche Börse agreed to acquire NYSE Euronext in February, which will create the world’s biggest stock exchange operator.

Hassan Radhi & Associates on the Bahraini legal sector

Hassan Radhi & Associates has carefully cultivated its reputation over a long period of time, progressing organically without the whistling of bells. Quick-fix solutions and bombastic marketing campaigns are certainly not this Bahrain-based firm’s preferred route to success; rather, it has armed itself with deeply rooted expertise and a high level of professionalism – a strategy that has attracted a respectable roster of clients including  Bahrain Mumtalakat Holding Company, Arab Insurance Group, BNP Paribas and Standard Chartered Bank.

The key figure of the firm is founding partner Hassan Ali Radhi, an esteemed attorney and lawyer with 37 years experience. Since establishing Hassan Radhi & Associates in 1974, he has represented a varied line-up of domestic and international clients across the spheres of banking, finance, telecommunication and construction. Aside from his commitments directly related to the firm that he heads, Radhi also sits on several boards, and is a member of many different bodies. Not only is he an ex-resident associate of the former Coudert Brothers, New York, he is also a member of organisations such as the Institute of World Business of Paris-based International Chamber of Commerce, and had sat on the Board of Trustees of the Bahrain Chamber for Dispute Resolution.

Highly specialised, Radhi chiefly deals with cases of commercial litigation and arbitration, and he serves as co-arbitrator, sole arbitrator as well as chairman of arbitral tribunal. Considered something of a big fish in the industry, he is a member of the LCIA Court in the London Court of Commercial Arbitration, and is also actively involved in a number of related bodies, both on his home turf and abroad. Since the head of the firm is so well-versed in arbitration, it is perhaps not surprising that the firm is often the first choice among clients looking for legal assistance in matters related to arbitration.

The arbitration expertise is not the firm’s only strong point – a pronounced talent for language is another of its strengths. The resident team of 17 lawyers covers several languages between them, including English, Arabic, French, Hindi and Bangla – an advantage that has seen the firm grow particularly popular among international clients.

A cut above
Although Hassan Radhi & Associates is indeed one of the most established firms operating in Bahrain, it is not entirely free of rivals. Other key players in the region include the international names Norton Rose, Baker & McKenzie and Trower Hamlins. What measure has the firm taken to heighten its appeal and beat the competition? “Hassan Radhi & Associates is a Bahraini law firm specialising, among others, in the field of  finance and banking, and we have honed our expertise over a substantial stretch of time,” says Radhi. “I believe that our success can be attributed to the fact that we always maintained a professional approach. We strive to provide quality and professional service according to Bahraini laws and court precedents, rather than trying to attract clients via business strategies and elaborate marketing campaigns.”

The quality of which the legal expert speaks is evident not only in the firm’s ability to carefully prepare and complete cases, but it also owes to the firm’s focus on training. “We recognise the importance of staff training, and we consider it imperative that our employees are highly qualified in their respective professional fields, which allows us to provide clients with the highest level of expertise and accuracy,” Radhi says. “It’s a costly approach, but we believe it’s the only way to be able to provide a highly specialised service to our clients and to render a sound legal opinion.”

As a result of the carefully applied training schemes, the firm’s lawyers offer consultation services on every facet of the law of Bahrain – and do so with complete confidence. Local expertise is another important factor at Hassan Radhi & Associates, and the firm would never attempt to diversify into unknown territories only to gain more clients.

Future prospects
Running a law firm focusing on finance and banking in Bahrain makes perfect sense, since the destination serves as the main financial centre in the Gulf Region. Hassan Radhi & Associates was one of the first firms to provide legal services specially catering to clients operating within the local banking sector, and just like the firm itself, Bahrain is well established. “While Bahrain’s roots as a financial hub are firmly established, the advance of Dubai and Qatar has been more instantaneous,” says Radhi. “Still going strong, Bahrain will continue to progress with confidence and astuteness and it will remain the most developed financial centre while at the same time move with the times. Today the market is open and flexible, and foreign investors are increasingly enjoying the privilege of doing business in the tax haven of Bahrain without restrictions.”

Recently, a trade agreement between the US and Bahrain was implemented, a development that reflects the newfound status of the country as a global player. The agreement has also cemented a high level of trust between the US and Bahrain. In terms of the country’s advance as a modern state, the democratic principles and the rule of law have been improved greatly in the past few years, resulting in comprehensive laws being introduced across areas such as banking and commercial activities.

Vision 2030 is another initiative forming part of Bahrain’s commitment to increase the Kingdom’s competitiveness as the financial hub of the Gulf.  “Vision 2030 is an initiative masterminded by Bahrain’s Crown Prince, and he remains the main player within the development of the initiative, personally handling the file,” says Radhi. “He is certainly competent enough to do so, as he is highly skilled and trained and educated in the US. We are very optimistic and confident that the vision will be achieved.”

The cross-section of positive change that has taken place in Bahrain lately has benefited Hassan Radhi & Associates greatly. The firm will no doubt continue to make its mark as a trusted legal force in Bahrain and beyond.

IAG trumps Virgin to €206.8m BMI deal

The owner of British Airways, International Consolidated Airlines, on Thursday beat competitor Virgin Atlantic in the takeover battle for BMI, Deutsche Lufthansa’s loss-making airline.

IAG agreed to buy BMI for €206.8m in cash, but may end up paying less if Lufthansa fails to sell its small regional subsidiaries before the completion date. 

CEO of IAG, Willie Walsh, said: “Buying BMI’s mainline business gives IAG a unique opportunity to grow at Heathrow, one of our key hub airports.” Walsh added there will be job cuts in an effort to stem losses at BMI.

Reports suggest the sale will be completed in the first three months of 2012. 

Esin Attorney Partnership on business principles

Comprising 42 associates and four partners, Esin Attorney Partnership (EAP) is a member firm of Baker McKenzie International. A Swiss Verein (association), it is ideally positioned to assist clients in cross-border transactions.

The firm’s main practice areas are M&A, corporate law, dispute resolution, competition law, real estate and capital markets. The firm also works in other areas, and with prominent counsel and advisers, in Turkey and abroad.

The firm is creative, dynamic and solution-oriented and combines sound legal knowledge with a capacity for understanding business matters to serve its clients in the most effective manner. EAP has a passion for excellence in legal services and strives to create added value for its clients.

Tailor-made thinking
Led by Dr Ismail G. Esin, EAP’s general strategy is to provide high quality legal services to its clients in its core practice areas.

EAP’s services are its main marketing tool. An innovative and high-quality legal service at international standards, amplified by a distinguished business approach and ‘tailor-made’ thinking, makes it one of the preferred law firms in the market. 

EAP’s quality-oriented approach to rendering legal services distinguishes the firm from its competitors. In order to ensure quality, partners lead every transaction and are involved in every meeting and conference call. They are fully focused on each and every detail of the company’s projects.

The firm pays great attention to the training of its associates, and provides them with insights on risk assessment, risk calculation and risk management. To this end, EAP organises seminars with professors of the highest calibre in order to keep up with recent changes in the laws and regulations in Turkey.

Risk focus
EAP makes realistic risk assessments, helping to reduce commercial risk for its clients, and enabling them to concentrate on major business-related risks.

Thanks to EAP’s closing-oriented approach, the firm has closed approximately 90 percent of the deals in which it has been involved within the last three years.

Esin Attorney Partnership’s attitude towards negotiation is fully backed-up by comprehensive legal knowledge.

Esin Attorney Partnership is a member of Baker & McKenzie International, a Swiss Verein. For more information –
Tel: +902123766400; email: info@esin.av.tr

Expert legal advice in the UAE from Hadef & Partners

Hadef & Partners is a full-service business law firm, founded in 1980 by Dr Hadef Al Dhahiri, the current UAE Minister of Justice. It is among the oldest and largest law firms in the UAE, with offices in Abu Dhabi and Dubai.

The firm’s 75 lawyers are predominantly educated – and have practice experience – in the UK, the US, Canada, Australia, New Zealand and South Africa, as well as a range of Middle Eastern jurisdictions. The large team of advocates has rights of audience in all levels of UAE courts and tribunals, and members speak English, Arabic and most other leading business languages. It is this unique combination of local depth supported by a team of highly qualified, experienced and diverse lawyers that makes Hadef one of the UAE’s most trusted advisors, and a firm of choice.

Transparency and integrity
Working with commercial and governmental entities that are shaping the future of the Middle East requires a consistently sensitive and rigorous approach to legal service.

The Hadef & Partners practice is committed to transparency and the highest standards of professionalism, says Dr Faraj Ahnish, the firm’s managing partner. “Lasting relationships and a tradition of adherence to high principles are the foundations on which our firm was built,” he says. “We believe that the keys to successful outcomes are delivering the highest quality of work, building close relationships, being accessible, being commercially aware, and staying on top of market developments.”

Recognising the tougher legal, commercial and technical challenges that clients face, the Hadef team applies its strong legal and commercial acumen to assist clients in making sound decisions about their business objectives as they navigate through the UAE’s currently evolving regulatory regime.

The aim is to deliver the desired results. In the event an appropriate outcome cannot be achieved, the firm’s advocates can draw on strong dispute resolution support – vital in today’s business environment.

Helping the law evolve
Hadef & Partners’ work with the UAE federal government is of particular note: Hadef has been involved in the reviewing, analysing and drafting of major federal and local emirate-level legislation directly impacting the UAE’s commercial sector. As a premiere business law firm, Hadef also advises on a wide range of legal matters, including: corporate, commercial, maritime, aviation, dispute resolution, employment, banking and finance, oil and gas, energy, real estate and construction, M&A and private equity, as well as many others. Hadef has advised some of the UAE’s most prominent commercial entities as well as an impressive roster of Fortune 500 companies operating in the UAE.

“The legal landscape in the UAE continues to evolve, and we are experiencing a growing demand for our specialised legal service and depth of knowledge of local law and practice,” says Dr Ahnish.

“A large part of what we do is helping our clients navigate the laws and regulations of the UAE. We are regularly engaged by government authorities to advise on and prepare important legislation that helps shape the legal landscape of the UAE,” he says, “the relationships that we have developed over many years with UAE federal and local governments are much admired.”

For more information –
+971 2627 6622 (Abu Dhabi);
+9714 4429 2999 (Dubai);
www.hadefpartners.com

Signal the charge

A decade ago, when the iPhone was just a twinkle in Steve Jobs’s eyes, few could imagine that the dull, uninspiring telecommunications industry of yesteryear would revolutionise the world in the 21st century. No one could have imagined how an online social networking service available on the phone could stimulate the Arab Spring and lead to regime change. And surfing the internet on a mobile – well, that was simply impossible.

But somewhere along the way, the impossible rapidly became the everyday, and telecoms became cool again – not just for twittering tweens, but for investors who recognised a lucrative revenue opportunity in a sector that’s now set to join automobiles, food and defence as one of the world’s few trillion dollar industries. The mobile revolution promises to be the most significant technological trend of our lifetimes: by 2020, the number of mobile devices (smartphones, tablets or car electronics) is expected to surpass 10 billion units; in comparison, the PC boom of the 1990s only sold hundreds of millions of units.

Of course, such a market commands fierce rivalry, with each mobile provider battling it out for a slice of the pie. And the competition is only getting hotter; earlier this year, Stephen Elop, chief executive of the now embattled Nokia brand, told staff that they were “standing on a burning platform,” with no choice but to jump into the “icy waters” below.

So what are the trends that will continue to drive growth and determine the battlefield landscape? What will firms need to do to stay competitive? And which firms will emerge victorious, and which will fall by the wayside?

A market of seven billion people
A key trend that will determine the success of mobile providers in coming years will be how they play the emerging markets opportunity.

Over the next five years mobile device subscriptions are expected to hit 7.1 billion, enough for every man, woman and child in the world. With developed markets heavily saturated, the emerging markets of Asia, Latin America and Africa will account for the majority of this growth, something that mobile phone providers have been buzzing about for a while now.

In 2000, developing countries accounted for approximately one quarter of the world’s mobile phones; in 2009, their share had grown to three-quarters. In Brazil, the number of mobile subscribers is expected to grow an astounding 39 percent between 2010 and 2015. Meanwhile, 60 percent of Spanish giant Telefonica’s sales now come from Latin America, while mobile connections in Brazil are expected to grow four-fold in the next decade and reach one billion by 2022.

Perhaps most astonishing is that within a few years, more than 40 countries will have more people with access to mobile networks than with access to electricity.

The emerging markets opportunity is obvious; but how to play it is less well known. Winners will be the mobile providers that recognise the differing needs between their customers in traditional markets and those in emerging markets.

Viva La Revolución
How a customer sees their mobile phone and what they want from it differs tremendously between the developed and developing world, something that Western firms have been slow to realise.

Phones are more valuable to those in poor countries as they provide access to telecommunications for the first time; access to a phone is a revolution rather than an incremental change. According to a recent report by The Economist, adding an extra 10 mobile phones per 100 people in a developing country boosts growth in GDP per person by up to 80 percent.

In rural areas where there is a lack of public transportation, mobile phones substitute for travel by allowing businesses to track deliveries virtually. Phones with SAP software, for example, can break down a buyer’s order without requiring an internet connection; orders can be done via bulk SMS, which can function with even the most basic mobile networks. In essence, applying mobile technology to traditionally labour-intensive activities boosts worker productivity. A customer therefore sees their phone as an investment, valuable for its utility and reliability.

In comparison, rich countries are more likely to prefer a smartphone that offers sophisticated features to build on what’s already available. Consider that while music downloads and mobile gaming are the preferred data services in developed markets, users in developing countries prefer to use their mobiles for agricultural advice, healthcare, and money transfers.

In the past five years, the battle-lines of the mobile technology war have been redefined, with home-grown mobile operators springing up in China, India, Africa and the Middle East, and challenging the previously dominant Western companies. Despite initially being seen as low-cost and low-quality producers, Chinese firms Huawei and ZTE have stolen market share from their Western counterparts, with subscriber numbers growing rapidly as networks in China and India are upgraded from 2G to 3G technology.

Local operators’ structures are different from their incumbent Western counterparts. In particular, nimble Asian firms such as Micromax and ZTE have mastered a business model which enables them to be highly profitable in servicing poorer customers, operating at higher margins than their larger competitors can afford to. Nokia, for example, has virtually been squeezed out of its own emerging markets space by local low-cost phone providers. The company recently made its second quarterly operating loss in a row, and as a last ditch attempt to resurrect itself, unveiled the Lumia 710 in October – the world’s cheapest Windows smartphone. Only time will tell if it will be able to pull itself out of the “icy waters” and back onto land. If Nokia’s plan works, it may just be able to shake up the smartphone duopoly of Apple and Android.

Of course, the success of telecommunications firms in emerging markets will also rely on their ability to recognise that people are aspirational. It would be dangerous to oversimplify the emerging markets opportunity by limiting products to fit today’s customer profile only.

As the middle class in developing economies grows, so too will the consumer’s penchant for more sophisticated products. Research in Motion (RIM) has cottoned-on to the value of the aspirational customer, maintaining the positioning of its BlackBerry line as the fashionable and slightly more expensive phone of choice. The company has had some success using this strategy, with Nigeria becoming one of its fastest growing segments globally. The firm has successfully weaved the brand appeal into the country’s social fabric; the local movie industry Nollywood has even made a movie, BlackBerry Babes, to capture the local youth’s fascination with the brand.

The need for speed
Beyond harnessing the potential of emerging markets, the winners of the new-age technology arms race will be those firms that are the most innovative in a post-PC world.

The convergence of numerous applications – from emails to maps to photos – onto a single mobile device has changed the landscape for technology firms by eroding the importance of the personal computer. It is predicted that by the close of 2012, annual shipments of smartphones will exceed that of PCs. The number of people using their mobile as the sole way to access the internet is expected to increase from 14 million in 2010 to 788 million by the close of 2015; an astonishing 56-fold increase.

This reflects a broader shift in the technology industry as a whole, with Western technology giants desperately trying to adapt to the changing shape of their industry. Mark Dean, IBM’s Chief Technology Officer in the Middle East and Africa, recently stated that the PC was destined to go the same way as typewriters and vinyl records, something he had “never expected” in his lifetime.

For Western power-brokers such as Microsoft, the downfall of the PC has created an inventor’s dilemma. Since the company came into existence, its value proposition has largely been in its Windows operating system; the company is practically wedded to it and up until now has been able to get away with simply rolling out a new version as the answer to every problem. For such a firm, it will be no mean feat to adapt to a world where the PC is less relevant, and it will have to uncover new revenue streams to stay afloat; since the start of the year, Microsoft is down nine percent.

However, Microsoft’s recent deal to provide the software for Nokia’s new Lumia line is a sign that the Western giant is, begrudgingly at least, trying to adapt to the new world order. How its operating system compares to Apple’s new iOS 5 system will make for interesting watching in the coming months.

Redefining innovation
The definition of innovation in the mobile space is quickly changing, and now goes beyond simply ensuring quick time to market.

It also means consolidating and buying up the intellectual property used to create a phone: everything from the design elements (Apple now owns the ‘slide to unlock’ patent on smartphones) to the operating systems (think Google’s very own Android system).

Apple leads the pack in this space, owning its entire phone ecosystem, from the design to the operating system to the software and the hardware. Of course, there is a big question mark hanging over whether Apple’s product innovation – largely rooted in its simplicity – can be maintained without Steve Jobs at the helm. While iPhone 4S sales topped four million within three days of its launch in October, it remains to be seen whether the company’s products will maintain their innovative simplicity and avoid the ‘feature-creep’ (the tendency for new and often unnecessary features which serve only to complicate design to be added to a product throughout development) which Jobs fought so hard against.

The importance of owning the entire bionetwork of product design has been recognised by other large players. Recent takeovers, such as Microsoft’s $8.5bn purchase of Skype and Google’s $12.5bn acquisition of Motorola Mobility were motivated by the need to build up patent stockpiles.

Patent wars are becoming increasingly fierce and the success of mobile firms will depend on how well they can navigate the prickly issues of litigation. The number of handset patent infringement filings to the US courts grew from 22 cases in 2006 to 84 cases in 2010. The speed of innovation has been blamed for the increase in filings, all of which involve an increasing amount of intellectual property as phones continue to add more features: from cameras and internet browsers today, to potentially credit cards in the future.

The latest round of patent wars has seen a number of the larger Western firms line up their legal ranks, including LG, Sony, Ericsson, Kodak and Nokia.

This is not to exclude Apple, however, which has so far been the most successful at protecting its rights through design-related lawsuits. It has filed lawsuits to successfully stop Samsung Electronics from selling its Galaxy Tab 10.1 tablet in the Australian and German markets. The Asian firm has since counter-filed in an attempt to ban iPhone sales in Japan and Australia, but has so far been unsuccessful.

Recently, Microsoft sued Motorola Mobility for use of video coding; the company is counter-suing over Microsoft’s implementation of email and messaging devices. Motorola Mobility is now being taken over by Google, which in turn is being sued by Oracle over Java programming in its operating system.

The heat over ideas and who owns what is perhaps best demonstrated by Steve Jobs, who stated he was “willing to go thermonuclear” over Google’s Android software, elements of which he claimed had been copied from the iPhone.

Victory is spelled survival
The complex web of patent infringements is likely to get more and more tangled as new products continue to be launched.

Mobile companies around the world seem to be heeding Chinese philosopher Sun Tzu’s advice from The Art Of War: “If you are far from the enemy, make him believe you are near.” With firms’ rankings changing almost as quickly as new products are launched, who is near and who is far in the technology race is still up for debate.
In the coming years, the most victorious firms will be those who know how to play the emerging markets opportunity right; those that innovate and iterate their way through a harsh terrain; and those that steer their course successfully through the complex web of patent wars.

Perhaps the late Jobs put it best when he spoke of Apple in 2001, before it had resurfaced: “Victory in our industry is spelled survival… the only way we’re going to survive is to innovate our way out of this.”

Brown Brothers Harriman: misuse of regulation is harming investors

The flight attendant’s safety speech has become so familiar and iconic that most air passengers know it by rote, and very few people ever take the time to listen to it – let alone consider if the safety measures described actually provide safety, as opposed to the illusion of safety. For example, the lifejackets that are conveniently placed underneath the seats are intended to be used in the event of an emergency landing on water – but in the history of commercial aviation, a wide-body plane has never successfully executed a deep water landing. Whereas the most mundane and most ignored part of the safety speech, which is to keep the seatbelt buckled at all times, offers proven security in the event of a sudden burst of turbulence or an emergency landing.

Following the cataclysm of 2008, there were calls for new and better financial regulation. Almost three years later, a number of new regulations have indeed been introduced. The intent of these regulations is to provide investors and markets with a safety net to prevent another financial crisis. But before the industry starts reciting these new regulations by rote, it makes sense to review some of these new safety mechanisms, to determine if they are merely symbolic lifejackets, or infinitely more useful seatbelts.

Remuneration policies
Regulating the remuneration of investment bankers, asset managers, hedge funds and private equity firms is a cornerstone of the regulatory push in Europe. Regulators in both Brussels and London have pushed through new remuneration rules which are designed to reduce risky behaviour. There are three key parts of the new rules:
• At least half of variable compensation must be paid in shares or an equivalent instrument;
• A large portion of the variable compensation (40-60 percent) must be deferred for three to five years;
• There must be claw-back measures to reduce compensation, if there is under-performance in the future, built into compensation schemes.

The regulations were drafted in the wake of the collapse of Lehman Brothers. The logic behind the new regulations is to reduce short-term thinking and align compensation models with risk-management principles and overall firm success. These are all well-meaning goals – but will the policies actually achieve them?

The lesson from history is that the answer is ‘no.’ If we look at what actually happened at Lehman Brothers, these policies would have changed nothing. A majority of Lehman Brothers’ staff’s variable compensation was in the form of restricted stock. This stock was priced at the market price (as of the date of issue) and took several years to vest. By any objective measure, this remuneration policy seems to be a model for the new regulations. Yet, it did nothing to forestall the risk-taking and ultimate collapse of Lehman Brothers. In fact, restricted stock is a mainstay of US financial firms’ compensation models – but the financial crisis happened in spite of it.

The idea of regulating remuneration policies to encourage more prudent risk-taking and long-term thinking is an attractive concept. However, it is likely that such policies will have little actual impact.

Dodd-Frank act: skin in the game
A key element of the US Dodd-Frank Wall Street Reform and Consumer Protection Act is the so-called ‘skin in the game’ provision. In fact, the co-author of the bill, Representative Barney Frank, has called the provision the “single-most important part of this bill.”

The skin in the game provision requires mortgage securitisers to retain five percent of the risk they create when packaging mortgages for sale. This provision was drawn up in the wake of the mortgage-backed security issues that are credited with triggering the great recession. The logic behind the provision is that if institutions are forced to retain some of the risk with mortgages, they will take a more prudent approach to risk management. This, in turn, will reduce the chances of repeating the issues that caused the great recession.

The ideas of encouraging better risk management and prudent lending are laudable goals. However, this provision, while correctly diagnosing one of the causes of the financial crisis, does not resolve the root issue – namely, that the vast majority of industry participants did not view securitised mortgages as risky.

In fact, according to the credit rating agencies, a majority of these securities had AAA ratings. Up until the moment that the crisis truly took hold they were prime investment vehicles. When the true depth of the problem was revealed, most banks and investment funds were pricing mortgage-backed securities at par. Therefore, the skin in the game provision would not have mitigated any risky behaviour because, until it was too late, the investment in mortgage-backed securities was not viewed as risky.

Much like the remuneration regulations in the EU, the logic behind the skin in the game provision appears sound. Unfortunately, the provision does not address the fundamental issue, which was the basic miscomprehension of the riskiness of mortgage-backed securities. The truth is that many banks in the US that issued bad mortgages had large amounts of skin in the game, which may be the reason for the record numbers of bank failures in 2008-9.

Regulation by subtraction
We tend to think of regulation in the context of new rules. However, regulatory change can also come in the form of the removal of regulation. A good example of this is the Dodd-Frank Act’s repeal of Regulation Q, which came into effect on July 21, 2011. Regulation Q was a 1930s-era banking regulation that restricted the interest rate that banks could pay on deposits. There were two main justifications for Regulation Q. First, there was a desire to boost banks’ profits. Second, there was a belief that competition to pay high deposit rates would encourage banks to take too many risks.

However, by artificially holding interest rates below their natural levels, Regulation Q has had some major unintended consequences. First was the development of the Euromarket in London, where lenders and borrowers were free to set rates between themselves. Second was that small investors and corporations moved their savings out of banks and thrifts and into money market funds, which did not face a limit on the rates they could pay.

The intended benefits of repealing Regulation Q are twofold: to create new jobs and help grow small businesses, and to improve the ability of community banks to compete for deposits against larger institutions. A secondary consequence of the repeal is the removal of an artificial distortion in the market. This, in theory, will increase competition between the so-called real banking sector and the shadow banking sector. This competition should prove beneficial to the industry and, in the long run, reduce the systemic importance of money-market funds and the commercial paper market.

Given the history of Regulation Q, it is quite likely that, as happens with all regulation, there will be unintended consequences. There is also an argument that the rise of the shadow banking system was more demand-driven than a result of the restriction of Regulation Q. Ultimately, the repeal may have very little practical impact. However, it is an example of regulatory change that reconsiders regulation rather than adding multiple layers of new regulation.

Drafting successful regulation
Drafting financial regulation can be a thankless task. No matter what decision is taken, it is likely to displease a vocal aggrieved party. To further complicate matters, major changes in financial regulations tend to follow traumatic market events, when emotions are running high. This often leads to the drafting of measures which, though they seem to appeal to the electorate on the surface, do not offer any additional level of safety.

It is said that capital is like water and tends to flow around obstacles. With this view, perhaps the key to drafting successful regulation may be to take measures which are designed less like dams, and more like canals.

For more information – sean.tuffy@bhh.com

The George Clooney of banking?

Mark J Carney has a CV that any central banker would die for. Having succeeded to the top job at the Bank of Canada in late October 2007 – that is, just before the financial crisis – he steered it through the turmoil without a single bank failure.

A graduate of Harvard and Oxford, he’s got another three years to run at the Bank of Canada, but earlier this year was short-listed for managing director of the International Monetary Fund before French finance minister Christine Lagarde won it with the help of strong European lobbying.

However, he got a handsome consolation prize when in November 2011 he was named as head of the Financial Stability Board, the global body that’s laying down the law to the ‘too-big-to-fail’ banks. It’s only a part-time job for Carney, but he will have a big hand in shaping the regulatory environment for decades to come.
Last year he was named by Time as one of the world’s most influential people. And although it’s not something he can put on his CV, he’s undeniably handsome; indeed, the George Clooney of central banking. And he’s still only 46.

No wonder Time wrote: “Central bankers aren’t often young, good-looking and charming, but Mark Carney is all three – not to mention wicked smart.”

What Time left out is that Carney, who worked in top jobs for Goldman Sachs, is totally un-intimidated by the heavyweights of the banking world. It was the Canadian who ticked off Jamie Dimon, head of JPMorgan Chase, in a backroom stoush in September last year when the latter complained about an alleged surfeit of regulation. It was also Carney who marched into the lion’s den – the Institute of International Finance, whose membership counts the crème de la crème of private banking – and basically told his audience to stop complaining, because they’d asked for everything they were getting.

For the sake of posterity, his exact words were: “The complete loss of confidence in private finance – your membership – could only be arrested by the provision of comprehensive backstops by the richest economies in the world. With about $4trn in output and almost 28 million jobs lost in the ensuing recession, the case for reform was clear then and remains so today.”

So saying, Carney went on to demolish in his speech every single objection that this august body has raised to the current, on-going comprehensive reform of the global financial sector. Music to the ears of beleaguered taxpayers who have bailed out the banks, he dismissed the “fatalistic” and “world-weary arguments” that insist any regulation will be arbitraged (exploited in some way), that the deposit insurance that most western banks enjoy must inevitably promote risk-taking, and that financial crises are inevitable.

Clearly, his part-time job is the one that will give Canada’s “rock star” banker – another epithet routinely awarded to Carney – the most influence. And here he’s on a mission. The Financial Stability Board is the first global regulator, and its job is to make sure the reforms thrashed out by the G20 are implemented in letter and spirit. His target includes not just mainstream banks but the shadow banking sector, which he considers extremely dangerous because it sits outside the pale.

In this task, he warned his audience, it has an important role: “Belief by the industry in the appropriateness of the measures will also aid their application. As you are well aware, you have the ultimate duty to ensure your institutions bear responsibility for the risks you are taking.”
If that’s not telling them, nothing is.

Carney has his critics. After all, it’s not as though he single-handedly saved Canada from the banking failures that hit Britain, Europe and USA. He inherited a famously responsible financial sector and a much-respected central bank. And some banking pundits rebuke him for insisting that banks should be allowed to fail while supporting them behind the scenes (in the crisis the Bank of Canada tripled its balance sheet to maintain liquidity in the sector).

But for anybody wanting a global view on just about everything related to systemic risk, he’s the first port of call. As Time says, “wicked smart.”

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

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

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

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

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

Erriah Chambers offers international business law expertise in Mauritius

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

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

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

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

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

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

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

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

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

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

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

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

Looking for the next Infosys

Sachin Bansal and Binny Bansal are not identical twins, or even related, but they should be. They both grew up in Chandigarh in north-west India, studied computer engineering at the Indian Institute of Technology Delhi, and spent a brief stint working for the same American technology firm. Two years after meeting in Delhi in 2005 they took $10,000 of their savings, set up shop in a flat in Bangalore and began an e-commerce business that delivered books to people’s homes – like Amazon, but with an Indian twist.

Making the leap, says Binny Bansal, “wasn’t difficult.” Today the firm they co-founded, Flipkart, is one of India’s hottest internet businesses, selling everything from books to phones. The site clocks up sales of $10m a month from over one million registered users. Flipkart is said to be negotiating a fourth round of funding from venture-capital firms at an appropriately stonking valuation.

Such success stories should be what India is all about. But there is a nagging worry that there are far more consultants, bankers, academics and journalists celebrating India’s entrepreneurial zeal than people actually starting new companies. Take the latest figures from the Indian Institute of Management Ahmedabad (IIMA), India’s leading business school. Of the 314 graduates from its flagship programme, only seven started a business. An amazing 187 joined the gravy train and got jobs in consulting or finance – the kind of statistic common in rich countries, which is now taken as a symptom of their decline. One bigwig at a large Indian firm says he implores his younger relatives: “Make something. Don’t just look at numbers and criticise things.” But he admits defeat. They are all becoming spreadsheet wizards at banks.

The sense that entrepreneurs have not made the kind of mark they should have in the past decade seems to be true across the Indian economy. In a paper published by the IMF in January, three economists, Ashoka Mody, Anusha Nath and Michael Walton, looked at the Bombay Stock Exchange, a decent proxy for India’s formal business sector, with thousands of firms listed on it, many very small. They concluded that in the 1990s there was a surge of new firms without affiliation to established family-controlled houses, but that in the past decade the process of new entry “virtually stopped.”

Similarly, the share of profits from new, independent companies, having risen rapidly in the 1990s, has since stagnated. Many business folk reckon that the relatively few newcomers that have made it big since 2000 are in old-economy “rent-seeking” sectors that require more brawn than innovation.

It’s not difficult to rustle up some possible reasons for all this. India scores abysmally in the World Bank’s global surveys of how easy it is to start a new firm. Given the propensity of established firms to diversify into new areas, it seems likely that start-ups are sometimes crowded out. India’s banks are not huge fans of lending to small firms; they often demand onerous amounts of collateral or security on fixed assets, exactly the kinds of things start-ups cannot provide. There is a decent enough venture-capital industry, but even so, new firms face hurdles that do not exist in other countries, which may require them to invest more heavily upfront. Flipkart is a good illustration of this – with a happy ending.

It began as a Western firm might, as the middleman between book wholesalers and its customers, using third-party couriers to deliver to people’s homes nationwide. But Flipkart soon overwhelmed the local wholesalers and courier firms in Bangalore. To cope, it has now built five warehouses nationwide and hired an army of delivery staff. In India “you don’t have reliable service providers like DHL,” says Binny Bansal. A round of fund-raising in 2009 helped pay for these investments. By 2010 another problem had to be addressed: not many Indians have credit cards, and those that do worry about security. The solution was to accept cash, or more recently credit cards, at the doorstep. Meanwhile, Flipkart must also contend with the big business groups, like Reliance Industries, which are interested in retail. The hope is that Flipkart’s heavy and early investment in its brand, including a big television campaign, will be enough of a defence when the big boys move in.

To succeed in India, then, Flipkart, like most bigger firms, has had to integrate vertically, taking on more processes itself, from storage to delivery and payments. That costs serious money. And from an early stage it has had to anticipate a competitive threat from the big family giants. The upshot is that although India’s e-commerce opportunity is huge, the barriers to small firms are quite big too, requiring more capital, earlier, than might otherwise be the case. In the dotcom industry such funds are at least relatively easy to obtain. Ashok Kurien, the former Thums Up marketer, and since then a serial entrepreneur, is involved with several websites. One of them, called Bollywood Life, received two million unique visitors within 90 days of launch. He has already had “ridiculous offers” from outside investors, he beams.

Outside the dotcom industry, though, raising money is more of a slog. And there are big barriers to entry, just of a different sort. Memories of how much effort it took to succeed are common the world over, but in India, it often seems that an extra push was required. Haresh Chawla, the chief executive of Network 18, a broadcaster, says that when it launched its news channels in 2004-5, in partnership with CNN and CNBC, it threw everything at it. “Consumers only give you one chance,” he says. In 2008 his firm launched Colors, a Hindi entertainment channel that became top-rated within nine months of its launch. It spent $125m up front on programming and promotions rather than engage in a long war of attrition with the established channels. “You cannot tiptoe in India,” he says.

Just fill in a few forms first
Banking may present start-ups with the most formidable hurdles of all, in the form of India’s financial regulators, and consumers’ preference for established lenders, particularly state-owned ones. Rana Kapoor, who in 2004 founded Yes Bank, now one of the larger private players, jokes that getting a licence was a “Himalayan task,” taking over a year, while building the business was a “Herculean” one. “As part of our business culture, nobody helps the underdog,” he says. Yes Bank broke through, Mr Kapoor says, partly by focusing on squeaky-clean corporate governance from day one, and listing the firm as soon as possible to gain attention and credibility.

And yet, for all these barriers, new firms are emerging in unexpected places. Vinayak Chatterjee, who graduated from IIMA in 1981, first joined a consumer-goods firm. After deciding against a life-sentence of selling soap, he went on to establish Feedback Infra, an engineering and consulting firm in Delhi that specialises in infrastructure projects. With 1,250-odd staff, half of them engineers, and a list of blue-chip and government clients, it exemplifies the kind of high-end services that India could excel at. Mr Chatterjee reckons his costs are a quarter of rich-world firms’. Big parts of this business are “no different fundamentally from IT outsourcing,” he says. The priority for now, though, is to build scale at home. With about $50m of revenue, growing by about 30 percent a year, the firm is on its way to that goal. A flotation would be a natural next stage in a few years’ time.

Almost every investor and financial rag has a list of their favourite entrepreneurs. The question for India is whether a few impressive examples here and there add up to a trend. The data for the past decade look disappointing, suggesting that things have deteriorated since the 1990s. The hope is that this is a backward-looking signal about the dynamism of Indian capitalism. Vijay Angadi, a veteran of small-company investing in India who runs Novastar, a $200m fund, is confident that a new generation of firms will come through eventually. He reckons that the first initial public offering of a venture-backed start-up in India took place only in 2004. He is optimistic that the venture-capital industry has become more open-minded, and is no longer obsessed solely with technology firms. Wealthy angel investors are becoming more important, too. A decade ago, approached by an entrepreneur who was not in the family, “they would have laughed him out.” Now, however, they might write a cheque.

And when it comes to small firms, India certainly has a lot of raw material. W. Sean Sovak of Lighthouse, a private-equity fund based in Mumbai that is focused on small companies, reckons there are some 2,000 firms listed on Mumbai’s stock exchange that are active and have market values of below $200m. He first visited India in 2004 and was “blown away” by its vigour. He and his co-founder, Mukund Krishnaswami, an American whose parents emigrated from India, both chucked in careers in America investing in small firms and headed to Mumbai to set up Lighthouse in 2006. Mr Sovak cautions that all is not rosy; many small firms are in commoditised businesses, he says, and even high-quality firms “face lots of challenges” and may struggle to manage their growth. But he too is optimistic. “We’ve seen some of the best entrepreneurs of our lives here,” he says.

Will they succeed? Mr Bansal of Flipkart reckons so. “Between 2004 and 2009 there was not a lot coming out in terms of entrepreneurs,” he says. But over time they will begin to challenge the established business order. “In five to 10 years you will see a shift happening,” he predicts. It is vital for Indian capitalism that he is proved right.

What Costa Rica’s legal reforms mean

Opting for arbitration over costly litigation as a foreign company in Costa Rica has not always been easy. But a new arbitration law in Costa Rica has triggered a huge sigh of relief among the country’s legal community. Oller Abogados is certainly hopeful: the law firm believes that this extraordinary legal development has done wonders for the Costa Rican jurisdiction. It has turned the country into an attractive place for international commercial arbitrations.

Established in 2000, Oller Abogados has borne witness to the region’s transformation over the past decade. Latin America has emerged as one of the globe’s most economically vivacious areas. In this internationally unpredictable financial climate, South America’s emerging nations have managed to avert collapse. Pedro Oller, a founding partner at Oller Abogados, feels that Costa Rica is one of those countries. It has continued to grow at a record pace and is now at the forefront of Latin America’s economic revolution. Costa Rica’s integration into the global economy resulted in a heightened interest in international arbitration and led to an increase in local arbitration institutions and organisations – all of which are clear indicators of the growing importance of arbitration in the jurisdiction.

In recent years this reorganisation of domestic arbitral law and practice has taken on a surprisingly quickened tempo in Costa Rica, according to Oller Abogados. A reformation of laws was needed to render them more internationally competitive, and make them attractive to foreign investors. The near-complete reform that Costa Rica enacted on its outdated and criticised law of arbitration has been among the most noteworthy developments. The legal change is strongly supported by Costa Rican practitioners who recognise the increasing prominence of arbitration in Central America, says Oller.

Costa Rica’s new arbitration law
Oller Abogados has played a key part in the implementation of the new law, which involved timely deliberations before it could be passed. Oller himself discussed the law with the Minister of Justice and Peace, Hernando Paris, years before it was applied.

“Minister Paris was pushing in Congress during the latter stages of the Arias Administration for the act’s enactment,” Oller says. “At the time I took part in two interesting conferences on International Arbitration in Spain and Mexico, where I served as a panellist. When Minister Paris learned of this he invited me to discuss International Arbitration and to help him in his efforts to get the UNCITRAL [United Nations Commission on International Trade Law] model law enacted. I was extremely proud to be of assistance.”

Costa Rica’s new arbitration law is chiefly based on the UNCITRAL model law on International Commercial Arbitration as amended in 2006. Oller says this is a highly advantageous development for the region, as it now places Costa Rica on a level with Mexico, Honduras, Nicaragua, Venezuela, Guatemala, Peru, Paraguay, Chile and the Dominican Republic – all nations that have implemented the arbitration law based wholly or in part on the model law.

The adoption of this model, viewed in the context of the existing arbitration boom that is engulfing Central America, can be interpreted as representing significant progress. The legal society and foreign investors alike see it as an extremely welcome adjustment. Practitioners at Oller Abogados enthusiastically highlight that the new arbitration law will assist Costa Rica in becoming a regional arbitral centre. According to Oller Abogados, it also helps that the country has established a reputation for comparatively steady governance and a well developed transport infrastructure.

In the absence of a Latin American international arbitration centre, and considering Costa Rica’s strategic geographical location and legal culture, the country can position itself as a very good alternative for the region, Oller believes. “The new arbitration law will bring the possibility of international arbitration to Costa Rica. The enactment of the law will slowly begin to evidence its benefits once the country has instituted a credible global reputation and infrastructure; and once the world’s economy peaks again,” he says.

Advantages over previous laws
The country’s previous arbitration law was perceived burdensome even by regional standards. Under the old law it was obligatory that proceedings be held in Spanish and exclusively conducted by Costa Rican lawyers. These burdensome requirements were highly controversial, considering that the nation wanted to be recognised as an international player. But the effect of the 2011 arbitration law reform is certainly unmistakable. “The prohibitions of the old arbitration law were not based on the UNCITRAL model. Through its implementation all of that has now been rectified. We look forward to a striving arbitration culture in Costa Rica,” says Oller.

Oller Abogados points out that Costa Rica’s amended arbitral law departs from the UNCITRAL model law only minimally. The one key variation will serve to protect the various parties involved by requiring that arbitration proceedings be confidential. This is achieved by obliging that in judicial proceedings information regarding the arbitration may be revealed only to the parties and their representatives concerned. Although the new law has been received with open arms within the international arbitration community, its application by domestic courts will have to be closely monitored in the coming years, says Oller.

FDI legislation changes Costa Rica aid standing
Keeping in line with foreign influences has also played a crucial role in the implementation of other legislation in the country. Oller believes that foreign direct investment (FDI) has over the last 10 years significantly altered Costa Rica’s socio-economic and legal environment. “FDI has transformed a traditionally agricultural economy into one focusing on services and knowledge,” says Oller. “The country is currently in third place globally in terms of outsourcing. We primarily provide the outsourcing to G-12 countries.”

But it was not always possible, and at first required legislation that was sympathetic to FDI, says Oller. It was not until the end of 2009 when change occurred in aid of FDI. That was when the Free Trade Zone Regime (FTZR) was reformed to comply with the commitments Costa Rica entered into with the World Trade Organisation.

This legal overhaul brought major innovations in support of FDI to the country, says Oller Abogados, which offers expertise second-to-none in this knowledge area. According to the firm, income tax is now set at a rate of five percent for those enterprises that are part of the strategic sector, or that are in less developed areas. “Companies within the strategic sectors which maintain an investment of $10m, through a programme of investing for eight years and contracting over 100 workers, are able to keep their existing conditions,” says Oller. “Additionally, there is a tax credit of 10 percent for the reinvestment of profits, costs and training. This is done in order to promote the reinvestment of profits in Costa Rica, the training and education of local workers, as well as small companies that supply FTZR entities.”

Impact of international trade agreements in Costa Rica
Other investment barriers in Costa Rica have widely been banished with the signing of vital international trade agreements. “Costa Rica has positioned itself as a key global player with a range of free trade agreements. The CAFTA-DR [the Central America – Dominican Republic Free Trade Agreement] is one of the important ones, but there are others: such as an association agreement with the European Union that includes the various Central American countries,” says Oller. The firm also considers the bilateral FTA with China, Chile, Canada, Mexico and the upcoming agreements with Singapore and Peru are of significant importance. “All these agreements prove the country’s growing commercial strategy and push law firms and lawyers to keep up and be proactive in an international context,” Oller says.

The CAFTA-DR has established a secure and predictable environment for international investors operating in Costa Rica. The country has made important changes in its legal and regulatory framework in order to prepare for future changes and an increased international client base.

To Oller Abogados the impact of CAFTA-DR has been most visible in telecommunications and insurance, two areas the country had previously reserved to be represented exclusively by the government. Under the agreement, Costa Rica made a commitment to open sections of its insurance and telecommunications market, including internet, private network, and wireless services. CAFTA-DR also authorised six insurance companies, including a US-owned company, to compete with the former monopoly state insurance.

Oller Abogados has since observed a swelling interest in both insurance and telecoms, and has made it its business to become closely acquainted with the particularities of those sectors. “We are seeing the difficulty of adjusting to the new realities of a competitive market scene, where supervising entities are still getting their feet wet. The turnaround and specific implementation have proven cumbersome and the rules not exactly clear.”

International developments
In spite of the country’s legal evolution creating onerous new questions, Oller Abogados has stayed on top of new international laws and its clients’ needs. It predominantly serves corporate clients in a variety of sectors, including energy, agribusiness, aviation, banking and finance, IT and the environment. It excels at advising customers in the most important junctures including M&A, corporate reorganisations, litigation and project finance.

The expert team at the firm is not limited by the inflexibility of the law or a customary point of view. It goes the extra mile to apply its experience to the new arbitration law, or any other legal issue thrown at it, in a timely and reliable manner. Its expertise in government agencies and the business world has allowed it to bring a unique perspective to the corporate environment. Both domestic and international clients can rely on Oller Abogados, which has access to any jurisdiction via well-established relationships and resources.

Business, corporate and commercial representations are also at the forefront of services offered at the firm. “At Oller Abogados, we come from a long-standing family tradition within the business world. A commitment to excellence, ethical, and knowledgeable service, are the bedrock values upon which we base all of our work,” says Oller.

Ecuador oil company in ESG drive

Petroamazonas EP (PAM EP) is an Ecuadorian national oil exploration and production company. It started its operations in 2007 in Block 15 of the Ecuadorian Oriente Basin, producing an average of 88,173 barrels of oil per day (bopd), and reflected a market participation of 18 percent.

Nowadays, Block 15 is producing 103,000 bopd, and due to its efficient operation during 2007, 2008 and 2009, the Ecuadorian State has also assigned the operation of Blocks 7, 21 and 18 to PAM EP.

Currently, the company produces an average of 160,000bopd, which is 33 percent of the total national oil production, making it the oil company with the largest oil production in Ecuador.

During the period 2007-11, PAM EP maintained the lowest operating costs in the Ecuadorian market, and has efficiently used its resources, striving to develop the most important capital investment projects (approximately $2,800m during this period) which allowed the company to substantially increase its oil production and directly generate greater oil revenue.

Among PAM EP’s main investment projects are: (1) the Pañacocha Project, which incorporated a production of 18,100 bopd, and has been recognised for its high environmental standards used during the facilities construction and operation; and (2) the electric power generation optimisation project (OGE in Spanish), which allows the use of associated gas for power generation, reducing the oil operating costs, and saving important economic resources to the country by avoiding the use of diesel. In addition, this project brings important environmental benefits, by reducing CO2 emissions to the atmosphere.

PAM EP is also in charge of the development of Block 31, for the exploitation of the Apaika and Nenke fields. Their first oil production is expected in July 2013.

As part of PAM EP’s strategic growing plan, the company is working on the development of several blocks in the south-east of the Ecuadorian Oriente Basin, where there are very high probabilities of increasing the oil reserves to 110 million barrels.

The company is also working in the implementation of enhanced oil recovery techniques to enhance the recovery factor for fields currently in production, and also increase the reserves and production of the block administered by PAM EP.

PAM EP’s main factors of success are its management and administration structure, which highlight its corporate culture and human talent, rigorous internal control systems, modern technological systems, consolidated support processes for operations and administration activities, codes of ethics and transparency, stability and growth at top management levels, and a strong focus on safety, environment and social responsibility.

All of the above have allowed the company to work with the approval of the highest authorities of the country, and due to the important growth of PAM EP during the last four years, it will take over all state-owned upstream operations, becoming the only upstream national oil company in the country, with approximately 64 percent of the Ecuadorian market participation.

Due to Petroamazonas EP’s strength and knowledge of the Ecuadorian upstream petroleum business, the next step for the company will be to seek opportunities to expand its operations to other countries.

Thaioil to continue sustainability drive

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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