Brian Hengesbaugh, a Partner in our Chicago office, explains why he doesn’t expect the Trump administration will make any significant changes to the EU-US Privacy Shield in the near future. For more, read his latest interview in Bloomberg BNA.
Doing business globally presents challenges and opportunities for Indian firm
India and Indian investors from both public and private sectors have become important players in the Latin American (Latam) region.
This highly-populated area which has fascinated and captivated historians, writers and philosophers is also attracting aggressive investing in the Latam region.
Ranging from energy, mining, manufacturing, pharma, and agriculture to IT and technology, Indian companies have started to create a footprint in the Latam region. This investment trend is expected to grow over the coming years as Indian firms take advantage of the opportunities that Latam offers.
Latam governments, in general, have designed policies and strategies to attract Indian investment in their respective countries.
Argentina, Brazil, Colombia, Mexico, Venezuela, and Peru, among others, are countries with bilateral treaties currently in effect with India. These agreements are designed to promote and protect Indian investments in various areas of the economy or to the set the rules for simplified tax treatment, protocols for avoiding double taxation and in some cases reducing export duties to promote trade and commerce with India.
Specific challenges for Indian investors
Indian investors encounter several challenges when doing business in the Latam region. Most Latam countries are highly regulated jurisdictions with the Government assuming an important role in the economy. Along with a variety of anti-corruption and money laundering regulations, there is plenty to consider when investing in Latam.
The intensity of Government oversight and regulation varies from country to country. However, generally speaking, investors should expect to deal with complex regulations that require careful planning before making any investment decision.
In extreme cases such as Venezuela, there may be Exchange Control regulations that affect the ability to repatriate profits earned in the country. With this in mind, Indian firms and investors should conduct due-diligence before investing to minimize the impact on the investor’s venture.
Labor protection is another crucial area where the investors must plan ahead. Labor laws in Latam are very protective and apply the principle of “substance over form” to characterize any individual relationship as labor contracts.
Due to the frequency of Government intervention in economic matters Indian firms and investors should be prepared for a fluid compliance landscape. The possibility of compliance violations is real and should be at the forefront in making investment decisions in Latam.
Government contracting is another significant area of concern because most of the regulations provide for complex procedures to participate in bidding processes with the state, and imply adherence to contractual provisions fixed by the respective government without any room for negotiation by the contracting party.
Investors from India must also be aware that several laws in the Latam jurisdictions contain provisions holding directors and officers personally liable for actions performed by the investment vehicle. You can find personal liability provisions in environmental, labor and consumer protection laws.
The importance of selecting an appropriate corporate structure is critical in managing tax liabilities. Understanding the tax implications in regards to the various organizational structures in each jurisdiction can significantly minimize associated risks.
Find out more about Doing Business Globally
You can contact me to discuss your market entry options for Latin America.
Doing Business Globally is part of our global seminar series that explores cross-border opportunity and risk with market leaders and legal experts. Find out more about Doing Business Globally India.
In recent times, nations around the world have experienced a marked rise in cybercrime. With the ever-evolving threat and sophistication of cyber attacks on corporations across the globe, it has become critically important for businesses to adopt robust pre-emptive measures to counteract the schemes of cyber criminals.
We have witnessed Governments taking action to address the growing risk of cybercrime which is often seen as a growing threat to national security. Recently, Singapore adopted a new cybersecurity strategy to create a robust framework in respect to cybercrime. Government action alone cannot address the risks associated with cybersecurity.
What are steps that a business can take to address the growing risk of cybercrime?
Basic steps to managing cybersecurity
Firstly, it is easy to forget basic but crucial steps. The company should regularly update its operating systems and backup its files. It is also important to implement advanced authentication and ensure that all sensitive data is encrypted.
In this regard, businesses ought to establish cyber security frameworks to manage cyber security threats. For instance, the National Institute of Standards and Technology (NIST) Cybersecurity Framework consists of guidelines which focus on identifying, deterring, detecting, responding to and recovering from cyber security attacks.
Next, companies may consider instituting mandatory cyber security breach readiness training and simulation, to prepare for any breach that may occur. All employees should be trained to detect and report cyber security threats.
Importantly, managing cyber risk is a business critical activity and as such, cyber security should be regularly discussed at the highest levels. For example, management needs to receive and review frequent and adequate cyber risk reports. It may therefore be prudent to appoint a Chief Information Security Officer to take charge of the security programme.
Additionally, businesses can consider purchasing cybersecurity insurance to help mitigate the financial impact of cybercrimes when they do occur. Companies should look to negotiate specialized cyberinsurance products that suit their risk profiles, cover first and third-party losses, and provide for breach response experts.
Finally, information sharing is an efficient way to improve threat awareness and intelligence. In this respect, it would be beneficial for companies to collaborate with other organizations to share best practices.
As the old adage goes, prevention is better than cure. There are numerous initiatives which businesses can adopt to guard themselves against cyber crime, and it would only be wise to start now.
Cybersecurity is one of the subjects that we will be addressing at our Doing Business Globally series in India this February.
As Indian businesses expand globally to capitalize on it’s growing business and economic influence, the need to navigate a host of unfamiliar regulatory environments, decide how to protect assets and make sound investment decisions will increase. These are just some of the areas in which we provide insights and guidance so that Indian companies can successfully do business globally.
To help businesses prepare for the road ahead, Baker McKenzie recently launched Trump on Trade, a new online resource with information on the business implications of the Trump administration’s anticipated trade policies.
The page outlines some of President Trump’s statements on international trade and investment issues, as well as questions business should begin asking in the short term to “identify the potential risks – and opportunities – presented by the incoming administration’s international trade and investment agenda.”
The page also provides numerous recommendations to companies, with a focus on:
- Global supply chains. A renegotiation of at least some NAFTA provisions is likely. Accordingly, US manufacturers whose operations rely on NAFTA should consider how best to engage in this process.
- Immigration. If NAFTA is renegotiated, companies may face hurdles related to the movement of professional talent.
- Data privacy. An overhaul of NAFTA and the withdrawal from TPP could conceivably lead countries to implement rules under the guise of data protection but with an underlying intent and/or practical effect to restrict trade with the US.
- Sanctions. Investments in increased dialogue among multinational banks and their Cuban and Iranian counterparts remain key to any longer-term opportunities in Cuba or Iran.
- Energy. The renegotiation of NAFTA could present an opportunity to update NAFTA energy provisions to bring them in line with the foreign investor-favorable legal reforms made in Mexico over recent years.
Budget 2017 is right around in the corner. News channels and various websites are buzzing with expectations and opinions.
India is facing many unique situations (due to both internal and external factors). While team Modi have generally been rated high on delivery (especially by corporate India); they needs to pull a trick or two to get pass the horror stories from demonetization. Thus, I do expect some sweeteners being showered in this budget.
From a political perspective this also ties in well with the upcoming State elections and the fact that the Union election is also not too far. While the global sentiments continue to be jittery, given political developments in the West, I don’t see that coloring the thinking of Indian policy makers for Budget 2017. But of course they can’t be ignored. Increase in interest rates by US Fed and its impact on the balance of trade (due to a stronger dollar) may surely be one aspect that requires some cushions.
Like in most budgets, taxation is likely to hold a prominent stage. No one is expecting much on indirect taxes, given that the Government is so determined to get implement the GST (July 1, 2017 as of now). At best the rate for service tax may go up from 15% to anything between 16 to 18%. I do foresee some action on the direct taxes, wherein India has been trying hard to shed its image of being an aggressive jurisdictions. On this front also, there may be some goodies for salaried individuals and the common man in general (lets not forget demonetization).
For Indian Corporates, it will need to be seen, what all industries are identified as potentially steering economic growth. We saw last year’s budget focusing on start-ups. As regards the foreign investors, tax certainty continues to play high on wish-list.
India will need to walk a tight rope to align itself to global standards of taxations through implementation of Base Erosion and Profit Shifting action plans and at the same time ensuring that tax disputes are kept under check. April 1, 2017 is also expected to see domestic rules on General Anti-Avoidance Rules and Point of Effective Management rules to set. These rules can translate into a lot more litigation, if not managed properly.
As regards transfer pricing which accounts for a substantial quantum of tax disputes, there has been talks to bring in Version 2 of safe harbors. Digital economy businesses may worry about an expanded net of the not so popular equalization levy. In between all these complex Income tax regulations, there is also an expectation that the corporate tax rate may come down.
India Budget 2017 may more be about fine tuning rather than carrying out lots of radical reforms. PM Modi needs to continue on the path of increasing the ease of doing business in India and attract more FDI. At the same time it needs to provide a push forward economic reforms by identifying strategic industries / avenues so that domestic consumption picks up again (post demonetization) and of course keeping in mind the approval ratings for the Government and maintaining fiscal discipline.
In the end what will be in the Budget of 2017, we will know very soon and business need to be geared up spot the opportunities and action upon them swiftly.
Sanjiv Malhotra, Director of Economics will be discussing how both policy and industry capability will drive a rising India on the global plane at our Doing Business Globally India event.
After a flurry of megadeals in the second half of 2015 pushed global M&A deal values to the highest they’ve been since 2007, deal making slowed substantially in 2016 amid major economic and political uncertainty in several key economies, according to a new report from Baker McKenzie.
The Global Transactions Forecast, an annual report that provides corporate leaders and investors with an outlook on M&A and IPO activity globally, found M&A transactions fell 17 percent by value in 2016, and predicted this slowdown will continue before rebounding next year.
“We expect that environment of uncertainty to continue at least for the first quarter of this year and so the forecast predicts deal making to drop slightly in 2017 to USD 2.5 trillion from USD 2.8 trillion in 2016 as global investors wait for clarity over the UK-EU relationship, and the new US administration’s policies on trade and investment,” said Michael F. DeFranco, Baker McKenzie’s Global Chair of M&A.
A few highlights from the report:
- Once greater clarity emerges, global M&A activity is expected to pick up to a peak of US$3 trillion in 2018.
- From a sector perspective, a key driver of global deals will be the tech sector, where M&A is forecast to reach US$415 billion by 2018 — the highest since 2000. Healthcare, particularly biotech and pharma deals, will also fuel the upturn.
- IPO activity is expected to rise modestly in 2017 and bounce back in 2018 and 2019 as companies that postponed their listings return to public markets.
Baker McKenzie’s Cross-Border IPO Index rose by 16 percent to 32.3 for 2016, as cross-border deals gained a larger share of new equity deals this year.
The Index analyzes data by region and industry, as well as by exchanges and private equity. It is calculated as a weighted average of three components of IPO activity data: the amount of capital raised, number of IPOs and number of issuer home jurisdictions involved.
“The story of 2016 is geopolitical instability, particularly as the world waited on the results of the UK referendum and US elections, along with weak economic performance in key jurisdictions, resulting in weaker investor appetite,” said Koen Vanhaerents, global head of capital markets at Baker McKenzie. “Investors have been conservative, rewarding realistic pricing and seeking as much certainty as possible.”
Added Amar Budarapu, North America Head of Capital Markets at Baker McKenzie, “North American exchanges are clearly venues of choice for cross-border megadeals. 2016 has been marked not by economic concern but political uncertainty. Markets have moved higher since the election based on pro-business sentiment and if rate increases come in 2017, equity capital raising could become more attractive.”
A few highlights from the report:
- Issuers raised $30 billion from cross-border IPOs in 2016 through 109 deals.
- Total deal value fell 25 percent on the prior year but proved less volatile than domestic IPOs, which fell by 47 percent to $56 billion.
- Cross-border deals accounted for 35 percent of new IPOs.
- Eight out of the top 10 cross-border listings by value in 2016 were on the Hong Kong Stock Exchange, with two on the New York Stock Exchange. All ten were by Asian issuers.
- The average amount of capital raised by a cross-border IPO in 2016 was $276 million, compared to $160 million for a domestic listing.
What should be in your toolkit for a successful cross-border closing? Our panel at Doing Business Globally in Minneapolis discussed key steps to take for a smooth closing. Panelists included Baker & McKenzie partners Duffy Lorenz and Helen Mantel, as well as leading senior in-house counsel.
- Transfer local businesses efficiently – Prepare sign and close local documents that are based on the master purchase agreement.
- Make borders seamless – Identify, for example, where local closings are actually required, as opposed to desirable.
- Make due diligence a value-add — Identify the jurisdictions where publicly available information provides material intelligence beyond what would be publicly available in the US.
- Be ready for Day 1 – Work with business units to ensure they are thinking of all potential transition issues, such as intellectual property and board seats.
- Use deferred closings to your advantage – Identify which jurisdictions may pose a timing risk.
- Manage cash and working capital – Reassure local management that they will have adequate working capital.
- Keep you global workforce happy – This is one of the most important areas to companies, and defines how they will judge the success of the deal. Therefore, there is heightened attention to the internal communications about the transaction, and it’s a balance between keeping the workforce well informed and complying with legal requirements in various jurisdictions.
Baker & McKenzie Partner Dieter Schmitz led a discussion between General Counsels from leading companies during the Doing Business Globally program in Minneapolis this afternoon. The panelists were:
Karen Park Gallivan, Vice President, General Counsel and Secretary, Graco Inc.
Matthew Revord, Senior Vice President, Chief Legal Officer, General Counsel and Secretary, Potbelly Sandwich Shop
Jim Seifert, Executive Vice President, General Counsel and Secretary, Ecolab
Ivo Daalder, President, Chicago Council on Global Affairs
A few highlights from the discussion:
- Mr. Seifert said business can be a great avenue for peace around the world. The recent US election does not mean that solid, existing business plans are now off track. At the end of the day, the President’s power is limited.
- Ms. Gallivan discussed Graco’s strategy to keep its manufacturing in the US. While the decision may have been unpopular at first because it creates a lot of pressure as a manufacturer due to regulatory burdens and other concerns, it is turning out to be a very good thing for the company.
- Mr. Seifert discussed the growth of China, and that the nation’s GDP will be greater than the US in several years. He also noted the country is the largest purchaser of US debt. As a result, a changing relationship with China could have significant consequences.
- Mr. Revord discussed geopolitical risks and Potbelly’s growth internationally, as it now has more restaurants outside the US than within it. He noted differences in their products in different countries, accounting for changing standards and tastes from one country to another.
Ivo Daalder, president of the Chicago Council on Global Affairs and former Ambassador to NATO, delivered the keynote address at our Doing Business Globally program in Minneapolis this morning to a full room of 150 business leaders and in-house counsel, discussing the unprecedented amount of global uncertainty following the election of Donald Trump.
He touched on the questions regarding who Mr. Trump appoints to key government leadership positions, as well as the possible implications on the US’ relationship with Asia, Europe, and the Middle East.
A few highlights from his remarks:
- Ambassador Daalder asked, is the US going to get into a competitive relationship with China that forces countries to choose between the two nations for business? Asia is one of the most economically dynamic regions in the world, and if it is strong and vibrant, the rest of the world will benefit. However, if it becomes an environment of conflict, it will contribute to global instability.
- Regarding trade, Mr. Daalder noted that it is unclear whether Trump intends to renegotiate existing trade agreements, or do away with them completely. “We just don’t know, and that creates great uncertainty,” he said.
- Perhaps under Trump, this will be a new America, which relates to other countries on a one-to-one basis. This will have significant consequences economically in terms of where companies choose to do business, and in what parts of the world conflict is likely to occur.