Commercial Law International

From us here at Commercial Law International: Have a Happy Earth Day.

Let’s all work together for a prosperous and sustainable future.

By Charles Wanguhu

Well with Ash rising over European skies causing all kinds of travel chaos, it is quite suprising and hard to fathom the impact of one volcano is having on the continent of europe and over its neighbours.

At the Jomo Kenyatta International Airport in Nairobi a stink has engulfed the main cargo centre where once freshly cut flowers and vegetables are now rotting. As of sunday a $12 Million stockpile worth  of vegetables and roses had piled in cold rooms at the airport.

But more suprising is the impact its having on Naivasha a small lakeside town  is all the more uprising. The flower industry is the main employer in the town with an approximate 50,000 employees. With one flower farmer forced to throw 6.5 tonnes of roses into a compost pit and losses being compounded day by day, nerves are already setting in with fears of unemployment rising.

The only hope is that the European airspaces will clear by the peak period of Mothers day. We all are as citizens of the world  really  interconnected.

By: Ainsley Brown

Four white farmers who had their farms unlawfully seized under the regime of President Robert Mugabe are to seek by all accounts gain compensation in South Africa.

A South African court has ruled recently that the farmers have the right to seek out and seize Zimbabwean government property in South Africa. The North Gauteng High Court ruled that the judgment in favour of the farmers handed down in December 2008 by a Southern African Development Community (SADC) tribunal was fully enforceable in South Africa. With this ruling the High Court made it clear, if there was any doubt, that as a signatory of the SADC treaty South Africa has an obligation to uphold and enforce judgments coming from a SADC tribunal.

The ruling clears the path for non-diplomatic property owned by the government of Zimbabwe to be subject to a writ of attachment, seized, and possibly sold to satisfy the judgment. Additionally, it also clears the path for similar moves by other white farmers.

But why South Africa? Zimbabwe is also a signatory of SADC, why not enforce the tribunals judgment there?

The simple answer is that for these farmers South Africa wasn’t so much a matter of choice but one of necessity. In fact the same could be said of the use of the SADC tribunal. The framers only tuned to the tribunal when it was clear that they could not get justice at home – the Zimbabwean judges being either complicit or too afraid to stand up to the Mugabe regime.

The SADC tribunal’s ruled in December 2008 that the farm seizures were racist and were an act of thief. It ordered the government to compensate those farmers that had lost their property and to leave those farmers remaining unmolested to continue their farming activities.

This was a great victory for the farmers, well so they thought until they tried to get the tribunal’s judgment registered and enforced in Zimbabwe. There they encountered the usual judicial opposition, this time with a judge dismissing their application because of the enormity of reversing the President’s land seizures.

Imagine that a judge dismissing your case because of the enormity/implications for an illegal government policy; just imagine. To that I have these words and I shall say them thrice: Rule of Law, Rule of Law, Rule of Law.

Fortunate for the farmers the High Court in South Africa knows and will fully up hold the Rule of Law.

By: Ainsley Brown

The European Union (EU) and Vietnam have now officially stated free trade talks after Karel De Gucht, the EU Trade Commissioner, met with the Vietnamese Prime Minister, Nguyen Tan Dung in Hanoi.

The talks come after the successful conclusion of the 2 year in the making deal signed with South Korea in October of last year. This deal along with the settlement of the long running Banana Wars and the provisional trade deals with Columbia and Peru that are to be finalized at an EU-Latin American summit in May represents a strategic shift  in EU trade policy. In seeking out bilateral talks, the EU is clearly signaling its frustration and it unwillingness to wait for the long protracted and stalled multilateral Doha Round of trade talks in the World Trade Organization (WTO) to be rekindled.

The EU views the fast growing Vietnamese economy as one with consistent and continued growth potential – potential that has to be foster and leveraged to its advantage. Trade between the EU and Vietnam has grown at a rate of 12% from 2004 to 2008 with overall trade being worth €12 billion in 2008.

It will be interesting to see how the EU’s recent decision to continue duties on imports of Vietnamese shoes will affect the tone of the negotiations from the outset?

By: Ainsley Brown

The safety of the people is not the supreme law

While terrorism, terror financing and constitutional principles such as the rule of law and Parliamentary supremacy are not the usual subjects covered here at Commercial Law International, this seeming break from tradition is in fact not such a stretch.

As our moniker indicates Commercial Awareness is Global – it is important to note and as will soon become clear, coverage of this case in no way departs from this.

This landmark ruling is instructive for the “normal” subjects covered on this blog because it illustrates the legal limits imposed on the state – read the government – as it pertains to its ability to interfere with the assets of an individual (natural or juridical). These limits are even justified, as their Lordships have ruled, when combating the scourge of international terrorism. As the Deputy President of the Court, Lord Hope of Craighead, put it: “Even in the face of the threat of international terrorism, the safety of the peoples is not the supreme law.” In other words the government of the day only has as much power as Parliament has allowed it to have; the will of Parliament being express of course in the laws its passes.

The offending powers struck down by their Lordships are the Terrorism (United Nations Measures) Order 2006 and the Al-Qaeda and Taleban (United Measures) Order 2006. The Orders were issued by the then Chancellor of the Exchequer and now Prime Minister Gordon Brown in response to United Nations (UN) Resolutions passed in response to the September 11th attracts. The Resolutions sought global co-operation on combating the financing of international terrorism.

Unlike in many other countries the United Kingdom under its UN obligations did not pass legislation in order to give effect to the Resolutions. Instead, the Chancellor issued these Orders, empowering Her Majesty’s Treasury (Treasury) to seize the assets of suspected terrorist, Al-Qaeda and or Taleban members or supporters. The seizures could take place on mere suspicion without an hearing and would not be under scrutiny of the courts through judicial review.

The case was the first to be heard in the newly minted Supreme Court when it opened last year. The appeal was brought by five men whom successfully argued their case in the High Court that the Orders were unfair and breached their fundamental right guaranteed by the laws of Britain; however, they were later over turned by the Court of Appeal.

The question before their Lordships though a simple one was non the less a profound one. And it was this when Parliament empowered the Treasury to make orders did it in turn give the Treasury the power to “interfere so profoundly with individuals fundamental rights without parliamentary scrutiny[?]”

With word such as “oppressive,” “paralysing” and “draconian” peppering the decision, their Lordships answered the question with a resounding NO!

In a nation such as Britain, with a “unwritten constitution” it must always be remembered that Parliament is supreme and it is only through Parliament that the government has the exercise power. Moreover, when such power involves the interference with an individual’s basic rights such authorization cannot be implied but must be explicit. In any democratic-capitalistic society access to the courts and property rights are sacrosanct. As Lord Phillips of Worth Matravers, the President of the court put it: “Access to the court to protect one’s rights is the foundation of the rule of law.” And without the rule of law there can be no liberal-democracy.

For those that would say that this ruling is just another example of judges legislating from the bench in breach of Parliamentary supremacy, Lord Philips has a stern rebuke. His Lordship countenanced with “on the contrary it upholds the supremacy of Parliament in deciding whether or not measures should be imposed that affect the fundamental rights of those in this country” without explicit grant by Parliament.

It is important to not that Supreme Court are not saying that these laws are in and of themselves illegal – not at all. However, what their Lordships are saying is that if the government of the day wants exercise such extensive powers they much first seek and then be granted Parliamentary approval. Lord Hope put it best: “If the Executive considers that such far-reaching measures are necessary or expedient for combating terrorism or honouring the United Kingdom’s international obligations it must obtain approval for them form Parliament.”

In response to the judgment the Gordon Brown’s is rushing through Parliament the Terrorism Asset-Freeze (Temporary) Provision Bill which is expected to have retrospective effect and by and large mirror the quashed Orders. If all goes to plan the Bill will become law some time this week.

By Charles Wanguhu

In the current financial crisis the role of offshore havens have been placed in the spotlight and quite rightly so. The lack of transparency in their dealings has meant that these centres have not only been used for tax evasion, money laundering, but also as bases for special purpose entities. The role of British offshore havens has of late been highlighted with regards to the ownership of football clubs.

The Riddle of Leeds Football Club ownership has played out quite interestingly in the Royal Court of Jersey.  In January this year the Leeds Chairman Ken Bates told the court that he jointly owned the club’s holding company, Forward Sports Fund. However in an affidavit sworn for the same court in May, Bates states that he did not own any shares in Forward and that the previous statement was “incorrect” and “an error” on his part.

An interesting point to note is that Forward Sports Fund is a Cayman Islands-registered outfit, with its administrators in the very transparent capital of Switzerland. Château Fiduciaire the administrators/trustees on being pushed to reveal the beneficial owners of Forward indicated that;

“Understandably, it is not the policy of this company, a fully regulated Swiss fiduciaire, to release information on ultimate ownership without an appropriate court order, valid in Switzerland.”

The ownership of Leeds United has been routed via a network of offshore companies ever since Ken Bates arrived at Elland Road club in 2005. Bates in his affidavit states that:

The real owners

“Neither I, Mark Taylor or Shaun Harvey are able to confirm who the ultimate beneficial owners of Forward are.”

The above not only makes a mockery of the Football associations “fit and proper test” of Club owners but just goes to show the lack of transparency in football administration.

A similar tale is being played out at league two Nott’s county club with the shareholding behind the Qadbak investment trust that now owns the club remaining unclear. A Pakistani businessman has come out to deny any shareholding in the club despite the club declaring that he was one of the key backers of the club. Qadbak, is surprise suprise registered in the British Virgin Islands.

As it stands Leeds football club is owned by the shareholders of a company registered in the Cayman Islands, administered in Geneva by trustees who pending a court order valid in Switzerland will not reveal the ultimate beneficial owners.

By Charles Wanguhu

In many international forums the developed nations are always pushed to provide more aid in the fight against poverty. Several reviews on the effectiveness of aid have proved time and time again its ineffectiveness in poverty eradication. The latter has led to current aid driven projects to often try and include sustainability options in all projects undertaken.

The identification of the problem is usually the easy part the “how do we do it” is the more complex part.  A bike building operation in Zambia however offers an innovative opportunity for local Zambians to get job opportunities and may in the end offer a route out of poverty.

The key feature of the enterprise is the use of locally grown Bamboo plant in the bike manufacturing process. One of the advantages of using local material is that it was low cost and readily available. Mr Calfee a co founder of the company believes that the bikes will be a great hit based on advanced orders that he has received.

However a great challenge remains in the business environment and is the entry point for African policy makers. Bureaucracy greatly hinders innovators with a myriad of licensing requirements, lack of tax relief on upcoming projects, corruption and a lack of access to capital. African governments have to take the lead in these reforms if aims of uplifting its citizens out of poverty are to be achieved.

The bikes aptly named Bamboosero may yet prove that Innovation and not aid may be the best route out of poverty.

By Charles Wanguhu

The doctrine of Forum non conveniens offers a court the opportunity to decline, in the interest of justice, to exercise jurisdiction, where the suit is between aliens or nonresidents, or where for kindred reasons the litigation can more appropriately be conducted in a foreign tribunal.

Placing the above in context, what is Kenya’s interest in a British ship flagged in Bermuda, carrying goods destined to India, with a Filipino crew? Well the US and the EU have both signed protocols with Kenya in a bid to secure the Indian Ocean and the Maritime trade routes. The latter has facilitated the arrest, investigation and prosecution of suspected pirates. So far at least three groups of Pirates have been brought before magistrates courts at the Kenyan port of Mombasa. The total number of captured pirates currently stands at 111 handed over to Kenyan authorities.

A concern often raised in applications of the forum non conveniens doctrine is the matter of forum shopping, or picking a court merely to gain an advantage in the proceeding. Well it could be argued that there is no suitable forum and therefore the courts of Kenya are the closest available to be ceased of the criminal actions. The latter argument would lack merit on the grounds that the US transported a Somali pirate to the US for a trial after they successfully hijacked the Maersk Alabama and its American crew.

Suitable forum

In Spiliada Maritime Corp. v Cansulex Ltd one of the tests stipulated for the doctrine to apply was that: English judges will have to decline jurisdiction when a trial is likely to be more suitable elsewhere for the interests of all the parties and for the benefit of justice. As a caveat the defendant must show to the court that another forum with these characteristics is available. Somaliland anyone?? The Somaliland courts have tried pirates before and have actually incarcerated several pirates.

One would think that the restoration of a stable government in Somalia would be the top priority on the current international agenda and not the transfer of individuals from one neighbouring country to be imprisoned in the next.

In this particular instance I believe that the US and EU have managed to indulged themselves in forum shopping and the Kenyan government has fallen foul of the bargain hunter/windowshopper.

Note: The doctrine is used for only indicative purposes as it is largely used in civil cases between two parties.

By: Ainsley Brown

First France, now the UK. The L´Oreal v eBay counterfeiting war goes on with yet another victory for eBay, this time in the English High Court.

In L´Oreal Takes eBay To Court I mused: While I will admit that I do not have the full particulars of the case, I just have a feeling that L’Orèal is going to win this one. But eh you never know… There is just no such thing as: a sure thing in litigation. I could not have been more wrong, well in part. I guess it’s a good thing I did the lawyerly thing by first admitting that I did not know the particulars of the case and secondly leaving open the possibility that pronouncement (read: lawyer´s educated guess, though we rare admit this point) could indeed be incorrect.

At the end of the day it would seem that eBay´s argument that it is merely a trading platform and is in no way directly involved in the sale of the goods, won the day over L´Oreal´s counterfeiting and consumer danger one. However (hey its law, there almost always is an however), if this is all you read from this judgment, you have missed two very important inter-related points.

The first is that while Judge Richard Archer did rule that eBay cannot be held responsible for its users´ actions, he did agree with L´Oreal that eBay could do more to prevent the sale of counterfeit goods. The judge went as far as suggesting, that is suggested not ordered, ten measures that eBay could take to beef up its anti-counterfeiting measures. These include requiring sellers to disclose their name and addresses in all listings and filtering auction lots before they are put on the site.

The second point, which flows from the first, is that any new anti-counterfeiting measures implemented by eBay would require a degree of co-operation from L´Oreal and other brands to be of any success. Just look at the measures suggested by the judge to see my point. This seems to be a consentient theme with these cases, as in their French skirmish, the French judge suggested this very thing.

The question now is, will L´Oreal and eBay kiss and make up or will they continues their war fought out in battles in courts all over the world?

This does not seem like a promising prospect any time soon, no matter how much the legal and better yet commercial sense it makes. Evidence: legal proceedings continue in both Spain and Germany.

By: Carsten Lexa, LL.M.

During the last several months, some German midsize companies have turn to the UK to undergo insolvency proceedings. They seem to be quiet happy with their decision and, more importantly, they were successful: Today, companies like DNick Holding (formerly Deutsche Nickel AG) or Schefenacker (today separated into the two independent companies odelo and Visioncorp) prosper and even pay out dividends. Utilizing UK insolvency proceedings was made possible by the European Insolveny Regulation. It states that if insolvency proceedings are being commenced in one EU country, it cannot be commenced in another EU country.

Although Germany has very sophisticated insolvency proceedings, there must be reasons why German companies want to “go UK” for applying UK insolvency proceedings. And there are a few:

First, the proceedings in the UK are far more flexible than and they don´t take as long as in Germany. Very often, in the UK three months into the proceedings it becomes clear whether a company can be saved or not. In Germany, very often after three months one has just received the court order of the disclosure of the proceedings.

Second, there is one very special instrument of the UK insolvency proceedings that German companies are interested in: the “Dept for Equity Swap”. With this instrument, dept can be changed into equity by majority vote: New share capital can be made from dept. And the required majority in the UK is only 75% of the attendant share capital. Therefore, major shareholders can force the creditors to become shareholders (Germany also has provisions for “Dept to Equity Swaps; but the German provisions require the dept claim to be of certain value, meaning that there must be a good chance that the claims can be honored by the company – something that is rarely the case for a company in danger of becoming insolvent). Turning dept into equity is very often an important requirement for the financial recovery of a company.

But needless to say, not every company can exert UK insolvency proceedings. According to article 3 of the European Insolvency Regulation, the law regarding  insolvency proceedings of that state apply, in which the company has its “Comi”, its “Center of Main Interest”. According to the German version of the Regulation, this is the place where the company “usually pursues the administration of its interests” – a very elastic term. That does not mean that each an every employee must be relocated to, in this case, the UK. But having only a mailbox in a city somewhere in the UK is clearly not enough. And it is not sufficient only to  transform a German company into a UK private company limited by shares but continue the business in Germany without modifications.

Therefore, if a company wants to “go UK”, it should consider the costs for the relocation of the place of residence and for the reorganisation of the administration. These costs must be weighted against the advantages of the UK insolvency proceedings. It should be clear that the decision of whether to “go UK” or not should be made with the help of competent advisors.

For inquiries please contact the author: kontakt@kanzlei-lexa.de