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NEWSLETTER(Page 18)
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* IBA Daily news - Th u r s d a y,O c t o b e r 7
Vancouver Conference 2010
* IBA Daily news - Th u r s d a y,O c t o b e r 7
Vancouver Conference 2010
| UN insolvency law failed us First pro bono prize to A&Os Angeline Welsh How companies and First Nations co-exist Recession threatens pro bono Set a good example Judging Goldstone A new world order Deadly track changes |  |
Europe doesnt have it, the US doesnt use it, and it has little benefit in the UK. The UNs model cross-border insolvency law could have been a lifeline in the recent wave of global bankruptcies, by encouraging judges in different countries to work together. But discussion in yesterday mornings session Cooperation and communication by courts in cross-border insolvency cases revealed its many shortcomings. Civil law countries have yet to adopt the model law and although panelist Klaus-Peter Busch of the Amtsgericht Detmold Bankruptcy Court demonstrated how its principles can be read into German regulations, the countrys courts are
not urged to cooperate with their international counterparts. The US implemented the model law five years ago, and while there is a degree of cooperation and information sharing with Canadian courts (spurred on by a number of US cases that encourage this), Judge Allan Gropper said this is usually based on the common law concept of comity.
Although there is cooperation in fact amongst the English speaking courts, there has been no direct reliance on the provision modeled on the model law, he said. And in the UK, the prevalence of out-of-court restructurings means most insolvency cases are beyond the ambit of the model law. Audience member Derrick Tay, Ogilvy Renault, pointed out that administrators in the UK are empowered to act as they see fit, binding the estates falling within the jurisdictions, and only go to court when they desire. This is in stark contrast to the US and Canada where court involvement is needed for most things non-business related.
But as administrators are not caught by the model law, its application in the UK is of limited use. What the courts see is the tip of the iceberg, Tay said. In the UK there is no court that is up to speed with what is happening, he added. This is because they are often excluded from insolvency matters.
On top of the jurisdiction-specific challenges, the model laws fundamental problem is it does not deal effectively with corporate groups. It is designed for single entities operating in many countries, leading Canadas Justice Geoffrey Morawetz to say: Because we have no recognised way of dealing with insolvent groups, the upcoming challenges are obvious.Justice Morawetz and Judge Gropper said the insolvency proceedings of Nortel Networks, in which the former is presiding, gives a glimmer of hope that the model law can help insolvent groups.
The case is being heard as a joint hearing in a US and Canadian court, and has reached the stage of asset realization rather smoothly. But the audience agreed that this is largely because creditors and estate agents want to cooperate to maximize the sale value.
The next step is creditor claims in different countries (Nortel Networks operates in 140 countries) and asset allocations, plus dealing with any challenges to the relief granted in each court. This is where the cooperation can dissolve, he said when substantive law comes into play and parties interests diverge.
The effectiveness of the model law cannot be fully judged until the end of the case, or the model law is revised to cover corporate groups (which Judge Gropper said the UN is busily doing now). Judge Morawetz suggested another session be scheduled for the IBA annual conference in five years to consider these developments.
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First pro bono prize to A&Os Angeline Welsh
The IBA Pro Bono and Access to Justice Committee gave its first annual award for outstanding individual achievement yesterday morning. Allen & Overy litigation lawyer, Angeline Welsh took the prize, during the groups session, The future of legal aid: and justice for all? Welsh, a senior associate in Allen & Overys international arbitration practice, created a volunteer program at her office where trainees and associates answer queries on human rights infringement. Now in its seventh year, the program has 82 volunteers and has answered close to 1,400 queries.
Welsh also works with Bail for Immigration Detainees, a charity challenging UK immigration detention, and has represented death row and extradition cases personally in Jamaican and Belize courts of appeal. Session co-chair Robert Stein of the University of Minnesota Law School said that Welshs accomplishments stood out in an impressive field of candidates. It would have done your heart good to read these nominations and see how much good work is going out around the world, Stein told the audience, but Angeline was a clear choice for the judges.
The awards season continues today and tomorrow with the IBA Young Lawyers' Committee Outstanding Young Lawyer of the Year Award and the IBA Human Rights Award 2010. All three awards are sponsored by LexisNexis.
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ABORIGINALS
How companies and First Nations co-exist
The Canadian Supreme Courts duty-to-consult provision has finally given First Nations groups a voice in major projects in the country. In a session entitled: Quotas, minorities, government and the private sector: how should government regulate working and commercial life, speaker David Brown of Stikeman Elliot in Vancouver explained the impact of the Courts ruling on Canadian First Nations.
If a government is required to give approval to a company carrying out a major project in Canada, and a First Nations groups interest is affected by the actions of that project, the government must consult with the First Nations party first. It is then obliged to seek to accommodate the group where possible.
For instance, if a logging operator wanted to build a road in the country that would pass through a First Nations sacred site, a red flag would be raised. The government body responsible for granting the licence for the road would then need to consult the aboriginal group, and make concessions where possible. In one particular case, build the road a mile away from the site, said Brown.
However, the ruling has not solved the problem entirely. The duty to consult is purely procedural. There is no obligation for the government party to seek a compromise. The pressure on the government agent to act is proportional, and based on two things: the strength of the First Nations claim and the potential harm the new project would cause the group. According to Brown there is also a problem with motives behind the government and companies actions, and this distorts the procedure. Governments arent that motivated to make First Nations happy, he said. Companies are though, because doing so will smooth the progress of their project.
So instead of waiting until the government agent begins the consultation process with the group, the company seeking the licence will often approach them first. This gives the group a seat at the table, said Brown. Although the group has no veto rights or property rights on the project, there is real value in them being able to say: yes, we are okay with this, said Brown.
There can also be economic benefits for First Nations groups. Often they will be offered an equity participation in the project or employment guarantees, whereby the group will comprise a set percentage of the workforce. These measures are welcome. Aboriginals in the country are shown to have higher unemployment and mortality rates. Between 1997 and 2004 aboriginals made up 3% of Canadas population, yet represented 21% of those incarcerated for provincial crimes, and 18% for federal crimes.
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LEGAL AID SYSTEMS
Recession threatens pro bono
ABORIGINALS
According to all speakers at yesterdays Future of legal aid session, one issue is clear: pro bono work is no substitute for government supported legal aid services. And in a time of austerity when most nations are cutting back funding for public services, lawyers must identify new sources of finance.
Among suggestions considered was the introduction of contingency fees to traditionally free services, referred to as low bono. Futoshi Toyama, director of international affairs at Japans Federation of Bar Associations, said the Japanese legal aid services are expected to be compensated by users of the system. Japans legal aid is not a benefit or a gift, but a loan, Toyama said. When asked what happens when loans cannot be repaid, he said: the centre has lots and lots of bad loans. These may be a problem in a few years.
Dmitry Shabelnikov, Director of the Public Interest Law Institutes Moscow office, said the cost of legal aid could be reduced by giving more direct legal work to paralegals, which do much of the work behind the scenes already.
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HUMAN RIGHTS
Set a good example
Shannon Minter
In a powerful session organised by the IBAs Lesbian, Gay, Bisexual and Transgender (LGBT) Issues Working Group yesterday, lawyers and human rights advocates from around the world called on the legal community to lead the way in encouraging laws to support the LGBT community. A key role of lawyers is to give the right legal advice and support to give people dignity, and let them live a life free of violence, said Monica Mbaru of the International Lesbian and Gay Human Rights Commission in Kenya.
But she also insisted that a fair legal framework was not enough, with local attitudes and cultural prejudices meaning discrimination was still rife, even in jurisdictions with supportive constitutions. Mbaru cited South Africa as such an example, explaining that although it is viewed as a good example, the reality is less positive. Because of the framework people are flocking there from other parts of Africa to escape discrimination,she said. But once they arrive they find difficulties at immigration and in the community if they are open about their sexuality.
Boris Dittrich of Human Rights Watch agreed that legal statutes were just the first step towards creating an equal society. Laws and policies really do protect vulnerable communities but there needs to be something more, he said. Thats where lawyers have an important role in setting a good example.
Speakers also emphasised the low (and sometimes non-existent) prosecution rate for hate crimes against LGBT people, particularly those carried out by government and public figures. In Honduras for example, the first ever successful prosecution took place last month, when an off-duty policeman was sentenced to up to 13 years in prison for stabbing a transgender woman. Despite the sole conviction, hate crimes in the country are depressingly common, with 19 similar murders carried out in public places since 2004 alone.
And its not just developing countries that are reluctant to act on cases involving sexual orientation and gender identity. Only last year the US state of Colorado made its first hate crime prosecution for the murder of a transgender teenager, having added gender identity to its statute as a protected class of citizen. But though the letter of the law may be headed in the right direction, it can be undermined by the negative attitudes of those implementing it. Even during the trial in Honduras the prosecutors were very disrespectful to the deceased, and wouldnt refer to her by the correct pronoun, said Shannon Minter of the National Center for Lesbian Rights in
San Francisco. This case in the US was the first time Ive seen a prosecution be more respectful.
Dittrich then recounted the frightening story of a proposed private members bill in Uganda that would reintroduce the death sentence, and require anyone with information about someone elses sexuality to reveal it to the police within 48 hours. The idea for the bill was first formed during a preaching session by a far right-wing US mission group, at which a Ugandan MP was present. During the teaching ministers emphasised that homosexuality was wrong and a sin, inspiring the MP to draft the bill and present it to the government. Its unclear where the bill is now, because there are no scheduled meetings on it and MPs are divided, said Dittrich. But in the run up to an election where political impetus was required it could quickly be pushed through and accepted.
Despite the bill not yet being enacted, Uganda is already a hostile environment for LGBT people to live in. Just last month a prominent national magazine printed a list of the countrys top 100 gay and lesbian citizens, complete with names, photos and information about their locations. In the wake of the article, which claimed that gay men were recruiting local children, targeted attacks were launched with no repercussions for the aggressors.
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INTERVIEW: RICHARD GOLDSTONE
Judging Goldstone
Justice Richard Goldstone, South African former judge and pre-eminent human rights advocate, speaks to Danielle Myles about the fundamental challenges of counter-terrorism and his belief in the IBA
Hes known personally to Nelson Mandela, was entrusted by the UN to prosecute the generations most notorious war crimes, and has a trophy cabinet crammed with humanitarian accolades. Yet despite a busy and illustrious career in human rights, Justice Goldstone has held four positions in the IBA and finds time to promote its annual conference as an invaluable resource for lawyers.
Lately his name has become synonymous with the UN Gaza Report, but this doesnt overshadow Goldstones fast-tracked career and his valuable insights into the law of terrorism and the IBAs role in its abolition.
Your achievements since being appointed to South Africas Supreme Court are well documented, but how did you start out?
I had a firm commitment from my youngest days to be a barrister. After graduating from the University of the Witwatersrand in Johannesburg I immediately began to practise at the Johannesburg bar. I was appointed to the bench when I was 40.
Why the switch from commercial to humanitarian law?
It was a result of having been appointed to investigate politically contentious events during the four years of South Africas transition to democracy between 1990 and 1994. That in turn led to my appointment as chief prosecutor of the International Criminal Tribunal for the former Yugoslavia.
Youve been involved with the IBA since 2002 in a number of roles. Whats the most interesting work you have done over that time?
The most interesting work I have done for the IBA was to co-chair its Human Rights Institute for five years. It was exciting work involving human rights issues on every continent. It was also a privilege and exciting to chair the two task forces on terrorism. The problems raised by combating terrorism without unnecessarily infringing human rights is a challenge to every democracy. It calls for sober assessments of the risks and a search for balanced responses.
Governments are often criticised for over legislating in this area. Has the balance suffered from over-precautious legislators?
Yes I think it has. No political leaders like courting blame for not having taken sufficient precautionary measures to ensure the security of the people. That is both natural and understandable and makes the work of those attempting to protect human rights all the more difficult.
The task forces activities evolved to respond to the most recent terrorist events. Is it possible that the task forces, and indeed the law, will always be playing a game of catch-up?
By its nature, the law is always reactive. That is why the law alone is not able effectively to combat terrorism or crime generally. It is the causes of crimes, including terrorism that has to be tackled.
Aside from the law, how is this done?
By identifying and addressing those complaints that are justified. I have in mind, for example, discrimination on grounds of race or religion.
According to the task force, what areas of the law need further attention and development?
The areas are generally the powers given to law enforcement agencies and officials. These powers have the potential for violating fundamental human rights and there has to be appropriate oversight of their use.
The task forces examine terrorism from a legal perspective which can be more an academic exercise. How practical are the reports intended to be?
Both reports set out to be practical rather than academic or philosophical. It was for this reason, among others, that at least one member on each of the task forces came from a policing background.
And how did the task forces come to be created?
Mark Ellis [IBAs executive director] and I were together in London on September 11 2001. That led to the establishment of the first task force of terrorism.
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GLOBAL LAW MAPS
A new world order
Philip Woods Global Law Maps offer new perspectives on global regulation. He talks to Tom Young about the maps and why regulating past crises is fruitless
Why did countries with intense regulatory regimes suffer the worst in the financial crisis? And why have those same countries ratcheted up their banking regulations following the crisis, despite their rules failing? One of the more interesting studies carried out within the area of law over the last few years has been Philip Woods Global Law Maps. Wood is the head of Allen & Overys Global Law Intelligence Unit, having led the firms banking group in the 1990s.
The maps are a series of comparisons in international laws and finance across the globe. More specifically,
they measure the increase in types of laws and their enforcement in different countries, with the strength of these countries frameworks denoted by different colours. According to Wood, each map takes effectively 10 years to produce, and still doesnt cover all 320 jurisdictions.
As well as being a fascinating tool for practitioners, the maps raise some important questions. As the two maps illustrate on the right, the intensity of financial regulation appears to have had no positive effect on preventing the latest financial crisis. Does this render financial regulation useless? No, but it does question the usefulness of using laws in reaction to previous crises. I have nothing against bank regulation in normal times, says Wood. But if the global economy fails, these little rules wont do a thing.
While Wood agrees that capital requirements needed to be raised, he cites the example of Merrill Lynch as proof that they would not have prevented the crisis at their new rates. Merrill needed almost three times the amount of capital reserves required under new Basel rules. And the belief that increasing the amount of reserves banks must hold wont increase the cost of lending is absurd, says Wood. And what about breaking up banks? If you break
up banks, and GDP doubles in the next few years, where do we all put our money? Under the mattress?
Its ridiculous. How about the new whistleblowing rules in the US, which reward those reporting parties to the Securities and Exchange Commission? I find giving bounties to people for whistleblowing morally repulsive. So regulating against past crises is a fruitless pursuit. Many of us believed this already, but Woods maps prove its undeniable. And they give our evidence a little more colour too.
How the maps work
The main purpose of the maps was to provide a dramatic and synthesised statement in a striking way. They compress data and they also simplify the law. Wood does this by usually using only four grades, blue, green, yellow and red as a type of advance traffic light system. You just could not get that level of impact by reading the pages of legal detail, he says. He intended to grade legal systems in a way which was backed up by his own very in-depth research but to make it look simple and also to remove all the realistic and patriotic prejudices that people feel about their legal systems. My intent was to bring the truth as much as I could because so much rubbish is uttered.
The research for one of the maps took Wood 15 years, and according to him it still isnt right. They have to be meticulously resourced, although frankly few of them are perfect. And it is actually hard to colour in 320 jurisdictions.
The template of the world took Wood about two years to develop. The design is non-geographic it had to be in order to recognise the very large numbers of tiny micro-jurisdictions. For instance, Hong Kong, Luxembourg and Singapore would only be a dot or a sliver on a geographic map but they are hugely significant.
There is also a large amount of geographic distor- tion, although according to Wood, people tend not to notice it. Thus, Europe is 35% bigger than its real size and the Caribbean islands arc wide out into the Atlantic, way out from their root near the coast of Venezuela.
GLOBAL LAW MAPS
My intention was to bring the truth as much as I could because so much rubbish is uttered
Bank insolvencies: 1980-2005
Intensity of financial regulatory regimes pre-crisis in 2007
Intensity of legal reactions to the financial crisis post in 2007
Wood then simplified the longitudes and latitudes but still tried to keep the feel of the size of countries, plus as much accuracy as he could build in as to their actual borders and whether they are coastal. The map records jurisdictions (about 320), but not nation states (194). I use the elementary colours of childrens plastic toys because I wanted it to look elementary, he says. In fact, they are very difficult.
Woods other invention was to use precise legal indicators to organise the jurisdictions of the world into legal families. I think that my classification and methodology is much more accurate than that of the great comparative lawyers who in my view largely missed the point, says Wood. There are well over 100 maps now and the number is climbing rapidly now. Wood has been helped considerably the Global Law Intelligence Unit at Allen & Overy.
There are some fundamental changes happening. Many people are not even aware of them, or of their impact on the practice of law in the future.
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US DRAFTING
Deadly track changes
A recent decision by the Delaware Court of Chancery provides a stark reminder over drafting. By Neil Cummings of Proskauer Rose
Ajune 2010 decision of the Delaware Court of Chancery highlights the importance of carefully reading the terms of both final contracts and preceding drafts. In Cambridge North Point LLC v Boston and Maine Corporation, Vice Chancellor Strine refused the request of an aggrieved party to invalidate an allegedly unagreed term that the other party had quietly inserted into a near-final draft of an agreement. The party that had inserted the term had not provided a blackline showing the change.
The change eliminated certain conditions to the obligation to make a $3.5 million payment. The Vice Chancellor did not find the failure of the drafting party to provide a blackline reflecting the changes persuasive. His conclusion was, at least in part, driven by the facts presented.
The Vice Chancellor held that the challenging party had been actively involved in the negotiation of the section containing the disputed term, and, given the circumstances, should not have been surprised by the fact that the other party might want to change the disputed term.
The Vice Chancellor noted that the agreement was short, and that both the challenging party and its counsel could easily have discovered the change by reading the entire revised draft agreement, requesting a blackline showing the changes from the prior draft, or running their own computer or manually generated blackline. The Vice Chancellor noted that it was clear that significant changes had been made from the prior draft since the section had undergone significant revisions and the original documents length had increased by almost 50%.
The Vice Chancellor focused his analysis on the facts presented. As a result, it is unclear whether he would have reached a different conclusion had the disputed language not been at the heart of the discussions between the parties.
The more conservative view is to assume that a Delaware court would have little sympathy for such challenges to written contracts (absent fraud or misrepresentation), given the strong societal value of holding sophisticated parties to the terms of their written agreements that are negotiated by counsel, and the ready availability of blacklining software. The Vice Chancellor pointedly noted that this courts job is not to refashion contracts into the form that parties with the benefit of hindsight wished they had scrivened, or to reward counsel for their own lack of diligence.
Two claims
In the case at hand, the challenging party invoked two legal claims to seek to revise or reform the disputed provision. The first was that the conduct of the other contracting party in its quiet revision constituted a material misrepresentation upon which the challenging party reasonably relied. The second was that the challenging partys misunderstanding of the final contractual terms was itself grounds to rewrite the agreement to remove the disputed term. The court dealt with both arguments in short order. In doing so, the court applied Massachusetts law, which was the governing law of the agreement; however, the decision is likely to be the same under the law of other states.
On the first argument, the court found there had been no misrepresentation since there was no evidence that the other party had represented that the disputed term would not be part of the contractual terms. The court was particularly unsympathetic, given that the other party had reflected its proposals in the form of specific language. The court stated that there was no plainer way of communicating during a negotiation than the back and forth exchange of drafts that included suggested text.
On the second argument, the court ruled that it could only rewrite a contract to revise a disputed term on the basis of unilateral mistake if the other party knew or had reason to know of the mistake. The court concluded that, even if the challenging party did make a genuine mistake, there was no reason for the other party to know about it. The challenging party had actively participated in the negotiations, including by providing comments on successive drafts of the agreement, and was represented by sophisticated counsel.
What are the lessons to be drawn from this decision? First, parties and their counsel must closely scrutinize drafts of agreements as they evolve into definitive documentation. If a mistake is made, it will generally be very hard to unwind that error in court, particularly if lawyers were involved in the preparation and review of the disputed agreement. The onus is on the challenging party and it is extremely difficult to satisfy that burden in the absence of very specific evidence of fraud or material misrepresentations.
Second, particularly on longer or more complex documents, all parties should take advantage of readily-available blacklining software that clearly shows changes made between drafts. While it is not a substitute for reading an agreement, it can help flag subtle changes that can escape the readers attention, and avoid costly mistakes. In addition, blacklining can pre-empt another partys ability to argue that it was duped by the inclusion of terms that were not brought to its attention.
US DRAFTING
The court stated that there was no plainer way of communicating during a negotiation than the back and forth exchange of drafts that included suggested text
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