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NEWSLETTER(Page 12)
Main Index
Index:
* IBA Madrid conference 2009
Thursday 8
* IBA Madrid conference 2009
Thursday 8
| Merely the voice of millions - Preserve tax privacy Thank lawyers for the Thyssen - Helping to create space hotels A way into the UN - Abusive tax arrangements Change the system, not bonuses |  |
In a moving and passionate speech yesterday lunchtime, Morgan Tsvangirai, the Zimbabwean Prime Minister and head of the Movement for Democratic Change (MDC) talked of his hopes for the future of Zimbabwe and the importance of upholding the rule of law.
Speaking at a lunch by the Legal Practice Division, Tsvangirai explained his decision to share power with Robert Mugabe and outlined the coalitions achievements to date. I am not an angel, I am merely the voice of millions of Zimbabweans that have held onto an idea for 10 years: to restore dignity to Zimbabwe, to restore security to Zimbabwe and to restore hope.
I will be happy when we can sleep without fear of being abused
Im sure that we are not far off giving Zimbabweans the hope they expect and deserve, he said. Tsvangirai, whose speech was received with a standing ovation from the packed room, described how much the country had achieved since he took office in February 2009.
Zimbabwes hyperinflation has been brought under control, pulled back to just 3%; hospitals and schools have started to reopen; and supermarkets are being restocked. All this has been achieved without descent into large-scale organised violence, of which Tsvangirai is rightly proud. Myself and colleagues, despite being abused, have always been committed to democratic change, he said. Change has often been characterised in Africa by taking up arms.
My country has refused to solve conflict through arms and has chosen peaceful means. Mugabes Zanu-PF party has been widely condemned for instigating beatings, murder and rape as political weapons against the
MDC. Pictures circulated in March 2007 in the run-up to the 2008 presidential election show Tsvangirais swollen face after being arrested and beaten by the police.
In Africa, the issue of opposition is almost a declaration of war. That is the cause of the problems in Zimbabwe. Elections are rigged with impunity and crimes are committed, but people get away with it as they are part of a particular political party, he said. Changing this attitude is essential if Zimbabwe is to become a democratic country.
Tsvangirai called on those present to exert national and international pressure on Zimbabwe to restore the integrity of the judiciary and the police force. He commended the outstanding work of the IBA over the past years in monitoring the human rights abuses in Zimbabwe and helping to devise the rule of law index to provide
an objective perspective on the progress of his country and others.
I will be happy when we can sleep in our homes without the fear of being abused, said Tsvangirai. I will be happy when lawyers can do their jobs and not be abused as common criminals. I will be happy when my country becomes a democratic nation.
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LEGAL PRIVILEGE
Preserve tax privacy
Lawyers need to uphold and understand client privilege even more than before, amid fears that tax authorities are hungry for revenue and adopting aggressive audit tactics. Speaking at a session yesterday entitled Preserving confidential access to legal advice in a world of transparency, panelists outlined how documents created for transfer pricing and tax planning should be managed to avoid granting tax authorities access to internal considerations of legal issues and audit strategies that should remain privileged.
Session co-chair Reeves Westbrook, of Covington & Burling in Washington DC, opened the panel by explaining the importance of maintaining lawyer-client confidentiality at a time when global efforts to promote tax transparency and international tax cooperation have increased.
Following the onset of the financial crisis, tax authorities have adopted aggressive audit strategies due to falling national tax revenues. This has led to a rise in audit activity and, thanks to a crackdown on tax avoidance and evasion, greater cooperation between countries through the use of tax treaties and tax information exchange agreements. Despite greater scrutiny on tax transactions and planning, lawyers were urged to re-familiarise themselves with basic principles of clientlawyer privilege so that the tax authorities do not gain access to confidential information.
Bill Thompson, of Minter Ellison in Australia, explained that the principle of privilege is often misunderstood and that lawyers need to know the basic concept, as well as the exceptions to the law.
Lawyers need to recognise that accounting papers and advice are not of themselves privileged unless prepared for the purpose of litigation or to give or receive legal advice, said Thompson.
It is hoped that the era of increased tax transparency will result in reduced tax evasion and criminal activity, but not at the expense of client-lawyer privilege.
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Art Law
Thank lawyers for the Thyssen
If you find yourself marvelling at Czannes Portrait of a Peasant at the Thyssen-Bornemisza museum this week (Paseo del Prado 8, metro Banco de Espaa), or examining the brushstrokes on Van Goghs Evening
Landscape, make sure you spare a thought for the lawyers that made it possible. Because behind the neoclassical faade and temperature- controlled rooms of the Villahermosa Palace lies a legal story that started more than 20 years ago, and made changes to the statute of the Kingdom of Spain.
Yesterdays International Sales Committee session on The collector and dealer: buying art the worldwide market became a fascinating art history lesson when Ura Menndez partner Fernando Prez de la Sota began his presentation.
The connection between the Thyssen- Bornemisza family and the Spanish art world was formed in 1986, when German industrialist Baron Hans Heinrich Thyssen- Bornemisza was approached to contribute to a fund to reacquire a collection of Spanish art that had been illegally exported from the country. His terms could not be met for that transaction, but during negotiations he mentioned to Spains Minister of Justice that he was hoping to move his vast collection of art works from Switzerland and find a suitable location for their permanent display.
The Thyssen-Bornemisza collection had been built over several decades by Hans Heinrichs father, but was dispersed among his heirs following his death. Hans Heinrich had bought out his siblings to bring the collection back together, and was determined that it would never be split again. Legal provisions were already in place to protect this ambition; ownership of the collection was transferred to a trustee, and agreements were signed with the younger generation of Thyssen-Bornemiszas to honour the pact.
But Hans Heinrich had added to his fathers collection over the years, and no longer had a space large enough to store or exhibit it in its entirety. With a value estimated at the time as between $1 billion and $1.5 billion, the collection is a comprehensive history of more than eight centuries of art, and includes masterpieces by Czanne, Van Gogh, Picasso and Caravaggio. It was a tantalizing proposal for any major gallery, but Hans Heinrichs stringent conditions excluded many potential candidates from the outset. The collection could never be dispersed, nothing could be disposed of or added, it could only be exhibited alone and in its entirety, and a permanent link must be established between the collection and the
Thyssen-Bornemisza family. At the time, Spain wanted to fill the gaps left by collections already housed in the Prado and the Reina Sofia, and, as Prez de la Sota explained: complete the triangle of great galleries that now exists on the Paseo del Prado.
But there were problems. Both the Kingdom of Spain and the Thyssen- Bornemisza family were reluctant for direct negotiations to take place, so a private foundation was established to act as a neutral zone
in which all parties would interact. The foundation had a board of 12 trustees six representing the Kingdom of Spain and six representing the family. Decisions could only be made on a unanimous basis.
The second problem was a cultural one.
As Prez de la Sota explained, rather diplomatically: the family was somewhat mistrusting of the ability of the Spaniards to complete the complex process required to display the works on time. So a two-tier agreement was entered into, with the collection split into two sections. If the Kingdom of Spain successfully shipped, stored and exhibited the first part within an agreed timeframe, then the rest would follow. If not, the contract would be terminated.
The Villahermosa Palace was renovated especially to house the collection, over a period of 23 months from 1989 to 1991. The collection was then moved and hung over the summer of 1992, and by October was ready to go on display. Hans
Heinrich Thyssen-Bornemisza was so pleased with the progress that he agreed to the second phase four months before the opening date. But this was far from simple. The conditions offered by the foundation were acceptable to the government, but could not be auctioned under Spanish law. For a start, the contract was UK governed; this was not allowed. The contract also included a surprisingly low sale price just $350 million. This was offset by the agreement of the government to be fully responsible for the future of the foundation, covering any deficit it might suffer and so effectively guaranteeing the collection indefinitely.
Additional clauses included an agreement that no more than 12% of the collection could be loaned at once, and for no more than six months, excluding four specified works that could be on loan for up to one year. A royal decree was passed by the Spanish parliament to allow the Minister of Justice to sign the contract, changing the statute of Spain to permit clauses that would have otherwise been legally impossible to fulfill.
As Prez de la Sota finished his story, members of both the panel and the audience, which had sat enthralled throughout, retuned their legal brains and began a barrage of questions. Massimo Sterpi of Jacobacci in Rome was concerned that, as the agreement was approved by the changing of the law, a new government motion could cancel it very quickly and nullify its conditions. But it seems the original lawyers thought of everything.
The law was not enacted to protect the Thyssen-Bornemiszas, explained Prez de la Sota, but to change the Spanish laws that prevented the contract. And so a clause is included that if the law was changed tomorrow then sellers rights can only be settled through indemnification, and not a change to the terms of the contract on the collection.
Adrian Parkhouse of UK firm Farrer & Co questioned whether Hans Heinrichs ambitions for the collection conflicted with changing trends in the art world. Citing a UK example where trustees are not allowed to
dispose of parts of collections, he argued that fashions change, and culture changes, so the law will have to change too.
But for the moment, visitors to Madrid can rest assured that when they walk through the doors of the Villahermosa Palace, the works of art on display will be exactly as Hans Heinrich Thyssen-Bornemisza intended.
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Space Law
Helping to create space hotels
The stated aim of Eckhart Brdermann, departing chair of the Space Law Committee, is to try and combine unusual elements in his sessions just to see what comes out. I covered a session of his in Singapore two years ago that looked at the overlap between space law and human rights law through pictures taken from space. An unusual subject, perhaps, but one that has only become more relevant since.
At the time there was mention of Google Maps, which just been launched; today we have Street View, with which Google allows us not just to see the plans of buildings but to see individual people. The session yesterday organised by Brdermann was entitled Commercialisation of space: the future of economy in space on the eve of the Space Protocol to the Cape Town Convention.
Here, the two areas that were brought together were space and commercial law. Representing the former: Sir Roy Goode of St Johns College, Oxford, the father of the Space Protocol in Brdermanns words, and Martin Stanford, Deputy Secretary-General of Unidroit the agency that tries to unify private law around the world, in this case with the Protocol. And representing commerce:
Miriam Murphy, general counsel of SES Axtra in Luxembourg. The Cape Town Convention aims to create international law for interests in mobile equipment. Each industry has its own protocol, of which space is one. Goode and Stanford believe that the establishment of this law will enable secured financing of space assets, particularly for developing countries and smaller companies that dont have the experience, money or local law in this area. Stanford recalled a recent meeting where one speaker said he didnt think it was the role of international conventions to help men make more money.
This drew an emotional response from a South African woman (which still gives me goosebumps as I describe it) replying that the law would help lift many of the worst-off people around the world out of poverty in much the same way that any financing and transport infrastructure helps provide the foundations for an economy.
But the space industry thinks there are enough rules. Murphy explained that position by saying that our projects and transactions function perfectly well without any additional, international conventions. Most countries have rules that apply to these space assets, their security and rights, without any problems. Most countries might have been an exaggeration, but certainly the big economies that launch satellites and whose law often governs contracts between two parties can cope with the issues of space.
The problem is more one of potential growth of financing space assets, and of new countries taking a role in that. Howard Rosen, an English solicitor with a background in leasing law, made an analogy with American football. I deal with both rail and aviation finance. With aviation, the need for an international protocol is a current one it is like the quarterback just passing off the ball to his running back right next to him. It is easy to plan and to predict.
Making rules for space is like making a
long pass to the wide receiver
For rail finance, because of the degree of national involvement still in the railways, the need is more a future one it is like making a long pass to the wide receiver, where you have to estimate the speed of his run, the trajectory of the ball and the path of other players. Space is similar. Were talking about a future, possible need here.
Brdermann was keen for everyone to think about the big picture. Imagine in 2025 we want to send up a satellite, with 100 transponders [the transmitting arms of the satellite], 10 of which are owned by each of 10 different countries. Each country has its own national law, its own financing banks and its own laws that apply to that financing and security in the event of default. The question is: does this industry and humanity benefit from a situation where we could launch that satellite? Because at the moment we cant. Miriam Murphy pointed out that 10 companies would never own part of a satellite. They would either invest at launch, in which case one company would own the asset and the others would have a so-called condominium role, or they would lease the services from the transponders from the central company further down the line.
While true, an arrangement across that number of borders would still be extremely difficult. And Roy Goode pointed out that the legal issues are usually about the services received from the satellites, rather than the assets themselves.
In the end, it is a question of potentiality and opportunity. As Martin Stanford said at the end, this is not like unifying regulations across the EU. It is about creation, not regulation making sure the law does not hold back the development of commercial space use. We never thought Google would map the worlds cities; we might be living in space hotels by 2025.
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INTERVIEW: HANS CORRELL
A way into the UN
An interview with Hans Correll, former UN Legal
Counsel, by Yuan Zhang
Hans Corell, former Legal Counsel and the Under-Secretary-General for Legal Affairs at the United
Nations talks about how the IBA Legal Profession and World Organisations Committee (LPWOC) works to promote the connection between the IBA and the world.
IBA Daily News: What is the LPWOCs mission?
Hans Correll: The duty of the LPWOC is to increase contact between the IBA committees and world organisations, to support the IBA in the pursuit of its goal to promote and protect the rule of law. And meanwhile, we try to encourage all committees and entities of the Legal Practice Division (LPD)
and the Public and Professional Interest Division (PPID) in their interaction with world organisations.
But you shouldnt think that the LPWOC makes its own connections with world organisations. Its aim is to assist other IBA committees and increase their access.
Why was the LPWOC necessary?
The IBA has been trying to call itself the global voice of the legal profession. To live up to that aspiration, I think all committees should think about one question: do we have appropriate contact with related international organisations? If not, why? In some cases, its because committees deal with issues that no specific international organisation is working on. But most of the time, we have discovered, there are international organisations involved in similar issues. So the IBA needs a committee like LPWOC to find out whom to contact, how to work together and what goals the two sides share. Once contact is made, the matter is one of establishing a relationship between the sub-committees and the world organizations in question.
As the co-chair of the LPWOC, what kind of work are you involved in?
I think the main reason the IBA wants me to be the co-chair is my experience working in international organisations such as the UN. That gives me extensive contacts within international organisations, with which I
will help to enhance the relationship between them and the IBA committees.
Can you talk about your previous work as the Under-Secretary- General for Legal Affairs and the Legal Counsel to the UN?
Legal Counsel is the chief lawyer and chief legal adviser to the UN as well as the head of the office of Legal Affairs. The office is responsible for the UN Legal Activities programme, consisting of six sub-programmes. It works on the overall direction and management of legal advice and services of the UN, dealing with contact with the Secretary-General, the General Assembly, the Security Council, diplomatic missions to the UN in New York, the International Criminal Court, the International Court of Justice and so forth, so we have tremendous contacts there.
In addition, the office includes divisions of general legal service, codification of international law, law of the sea and ocean affairs, progressive harmonisation and unification of the law of international trade, and custody, registration and publication of treaties. The Legal Counsel also represents the Secretary-General in judicial and arbitral proceedings, certifies legal instruments issued on behalf of the UN, and convenes meetings of the legal advisers of the UN system and represents the UN at such meetings.
How is your experience at the UN helping your work as the co-chair of the LPWOC?
First of all, the Legal Counsel to the UN has insights into the UN system that very few have. Throughout the system, almost all the questions need legal input sooner or later. So the Legal Counsel is fairly well connected. In addition, when I was the Legal Counsel I had the duty of being the chairman of the committee of legal advisors. In the UN system there are numerous bodies, all of which have a legal advisor. My duty was to call them to a meeting every year and to maintain contact with them. Through them I got to know a lot about the whole UN system.
Another very important and helpful experience from my time at the UN was working in the UN Commission of International Trade Law. The IBA even sent delegates to meetings of the Commission, experienced lawyers and solicitors, because the Commission wants advice on negotiating the agreement. So that acquainted me with various members of the IBA.
What is the LPWOC working on at the moment?
Were setting up a website with the assistance of the IBA secretariat. Its purpose is to list all the IBA committees, with a contact at the world organisations alongside. We will find out specifically who is the officer responsible at the organisation and the closest related committee in the IBA.
We have also been preparing for the IBA conference. LPWOC has a session there and we encourage all IBA committees to be present. We will relate the experiences of IBA members that have had contact with international organisations. On the basis of their thoughts, we can make decisions about our work and draft strategies as to how we can enhance the overall contact between the IBA committees and world organisations.
What other work are you involved in with the IBA?
I joined when I retired from public service in 2004. Right now, besides the LPWOC, I am also a member of
the Council of the Human Rights Institute, the Rule of Law Action Group and the War Crimes Committee
Advisory Board.
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International Tax session
Abusive tax arrangements
INTERNATIONAL TAX SESSION
Olga Boltenko, Hogan & Hartson
Following Tuesdays panel discussing recent attacks against bank secrecy, tax havens and abusive arrangements, Jack Grocott outlines the steps governments have taken to tackle these problems
Governments wanted someone to blame and so tax avoidance was an obvious target
Asignificant increase in public spending after the onset of the global economic downturn left many pointing the finger at tax as the root of the problem. Banking secrecy, tax havens and abusive arrangements were all targeted as contributors to the worlds woes. As government across the world look to protect their own tax revenues, the Global Trends in Direct Taxation:
Part One panel discussed international trends with respect to the view of certain jurisdictions trends for tax
avoidance. One of the definite buzz-words of the last 12 months has been tax. After countries began their recovery from the global economic slowdown, politicians and officials started to ask questions about what had caused the turmoil. Tax was not the number one suspect but it certainly made the line-up. Governments wanted someone to blame and so tax avoidance was an obvious target, says Olga Boltenko, of Hogan & Hartson in the UK, and session chairwoman. Companies have losses and will have losses for a number of years to come and so they are an unlikely source of income.
Three clear tactics have been adopted: international agreements, amnesties and compulsory disclosure agreements. All have, and will, vary in their success rates, Boltenko says.
International effort
The most popular method at improving tax transparency and cooperation has been the increased signing of treaties and information exchange agreements, after the OECD and world leaders put pressure on reluctant jurisdictions to increase transparency.
At a speech on the presidential campaign trail in the US, Barack Obama proclaimed that theres a building in the Cayman Islands that supposedly houses 18,000 corporations. Thats either the biggest building or the biggest tax scam in the world. Obamas desire to rid the world of tax havens dates back to 2007, when he co-sponsored the Stop Tax Haven Abuse Act, aimed at preventing the use of offshore financial centres and improving tax transparency.
Then, at the G20 meeting in London in April, world leaders echoed Obama and warned that action would be
taken against those that did not comply with international tax standards. After the meeting, the OECD identified four tax havens Uruguay, Costa Rica, Malaysia and the Philippines.
The Organisations progress report on adherence to global standards on the exchange of tax information had an immediate effect. Within a matter of days the four tax havens had been removed from the OECDs blacklist of uncooperative tax jurisdictions. Speaking at a press conference only five days after the report was published,
Angel Gurria, OECD Secretary-General, said: I am very happy to share with you today that those four jurisdictions have now made a full commitment to exchange information according to the OECD standard. We congratulate all the jurisdictions who took this decision, they are brave decisions and they are correct decisions.
The OECD also announced it would scrutinise each jurisdictions efforts to improve their information exchange.
It said that each one had to sign at least 12 tax information exchange agreements (TIEAs) to become a fully compliant jurisdiction.
This list sparked a flurry of activity from the worlds tax havens, all looking to improve their image. Now a week barely goes by without another TIEA being signed or a tax treaty renegotiated to strengthen its provisions on information exchange. Russia renegotiated its double tax treaty with Cyprus recently, while Switzerland signed similar treaties with France and the UK.
However, the Organisations tax chief said information exchange and transparency were not only about the number of agreements a jurisdiction signed. Jeffrey Owens, director of the OECDs Centre on Tax Policy and Administration, said: It is not a numbers game; we will not accept secondrate commitments.
The report, published the evening the G20 meeting ended, also included a separate grey list of countries that have agreed to improve transparency standards, but who have failed to implement any measures substantially. The list included Belgium, the Cayman Islands and Switzerland.
Switzerlands President, Hans-Rudolf Merz, said: Switzerland is not a tax haven. It always meets its obligations and is always ready to engage in dialogue. The fact that Switzerland, as a founding member of the OECD, was never included in the discussions on drawing up lists is particularly strange.
The grey list includes jurisdictions that agreed to the OECD standard a number of years ago but who have yet to sign any agreements that would allow for the exchange of tax information. However, opinions are split as to whether TIEAs are an effective method for creating greater tax transparency.
The rest of the report outlined the white list of countries that have substantially implemented the international tax standard. The list includes the UK, US and China. However, the list also contained the UK Crown Dependencies: Jersey, Guernsey and the Isle of Man. These islands have been subject to much criticism in recent months for their low-tax regimes and the perception that they do not supply tax information readily.
Alternative agreements
Despite the concerted effort by the OECD to improve transparency, critics have described the target of 12 TIEAs as arbitrary and ineffective. To rectify this, tax havens have begun drafting their own agreements with jurisdictions to improve tax cooperation. The panel at the IBA confernce will discuss the different approaches to these agreements to see how effective they can be.
Liechtenstein has stepped forward and has signed an agreement with the UK that will allow UK taxpayers to disclose, without fear of prosecution, any accounts that they have in Liechtenstein banks. This acts as a tax amnesty. The money will only be backdated 10 years and will be subject to standard UK taxation. This is in contrast to previous attempts by the UK government to recover revenue held in tax havens.
Opened on September 1, HM Revenue and Customs New Disclosure Opportunity allows funds from offshore
accounts to be repatriated to the UK. However, details of taxpayers that have deliberately understated more than 25,000 ($36,000) of tax will be published as part of a wider name and shame tactic as outlined by Chancellor Alistair Darling in the UK budget in April. Liechtensteins foray into automatic exchange is likely to put pressure on other tax havens, including Switzerland. It is still unknown how effective these two steps will be in generating extra tax revenue for the UK.
Tuesdays panel sparked much debate between speakers that discussed the virtues of each countrys approaches to tackling banking secrecy and fighting against tax havens. Temperatures rose, partly due to ineffective air conditioning, as tax advisers from the US and Switzerland batted questions back and forth over the exchange of tax information between the two countries.
Panelists also outlined the varying interpretations of tax evasion in different jurisdictions, ranging from tax evasion not being a crime in Panama to the threat of criminal proceedings in the UK and US.
Discussions continued on the approaches taken by governments to eliminate secrecy. Speaking about the efforts by politicians to increase transparency, Boltenko said: They [politicians] are like the wind. They say one thing and then change their mind.
So we will have to see how much progress is made in this new era of tax disclosure and improved international tax cooperation.
Part two of the panel takes place this afternoon in the Berlin room
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Bank Reform
Change the system, not bonuses
Finding a banker that will describe his swap as standard is like finding a parent that will describe their child as average
Despite the financial crisis of the past two years, politicians have not tackled the real causes of the recession. Rather than focus on the financial sectors compensation culture, reformers should change the system that created it. Speaking at a session on Bank bailouts yesterday, Geert Noels of Econopolis argued that greater reform was necessary, particularly to the way that risk has been transferred. Real systemic overhaul is needed, not just bonuses and CEO pay. The world of shadow banking needs to be addressed and some big institutions need to be broken down, he said.
A later speaker, Russell Da Silva (right) of Lovells in New York, agreed that bonuses were not the crux of the issue: The rules on compensation are more political that central to the issues at hand.
Rather, structured products and off-balance sheet vehicles were used before the crisis to redistribute risk away from banks and other institutions. That risk did not just vanish. It was parcelled up and effectively bought by investors, many of whom did not realise that the notes they purchased only gave them recourse to a pool of assets.
This opaque world has been criticised by many governments for failing to inform investors of the risk they were buying and for irresponsibly creating a disconnect between the risk and reward of an investment.
However, Noels argued that governments have been distracted by the populist issue of multi-million dollar bonuses and executive compensation. They have not adequately addressed risk transfer, or the structure of the institutions that created this practice.
The momentum last year was not used to change these systemic problems, so the real causes of the crisis have not been solved, he warned. They are still out there and will be a problem in one or two quarters, or in one or two years.
Toxic assets, however, are one concrete part of structured finance that governments have attempted to tackle. As another speaker, John Kettle for Mason Hayes + Curran, discussed, Ireland is the latest jurisdiction to set up a bad bank to buy devalued assets. Ireland has created Nama (National Asset Management Agency), which will give banks 54 billion in paper in exchange for bad mortgage loans, property investments and other failed assets.
The banks can then exchange this paper with the European Central Bank for cash. Ireland has been slower to act than countries such as Germany, which set up a bad bank in May, and the US which set up Tarp in October 2008. But the full impact of the recession in Ireland was recognised later
than in the US, for example. As Da Silva of Lovells said: I feel like Im an emissary from a toxic waste dump.
Da Silva proceeded to outline some of the regulatory steps that the US is taking to deal with the issue of failed assets and to try and monitor risk transfers more effectively in the future. These reforms will inevitably influence the approach of other countries, such as Ireland, to regulatory change.
While outlining some of the important aspects of US reform such as the concurrent supervision of the SEC and CFTC, the regulation of credit rating agencies and the introduction of a Consumer Financial Protection Agency Da Silva pointed out some of the gaps that remain.
There are still loopholes, especially on derivatives, he said. Only standardized derivatives will be overseen. But finding a banker that will describe his swap as standard is like finding a parent that will describe their child as average. While Da Silva broadly welcomed all the US reforms, arguing that many were long overdue, he was concerned that they might increase bureaucracy (citing the Financial Services Oversight Council, which will be a committee of committees rather than a fresh regulator) rather than improve transparency.
Elsewhere in the session, Philip Wood of Allen & Overy put todays financial crisis into historical perspective. As he eloquently pointed out with the help of slides on the development of law across the world, the present financial crisis will not prompt a step back to the dark ages.
Weve lost three years GDP but its not as if the entire population is living in tents by the river, he said.
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