Alternative Investment Funds in Cyprus

Cyprus in the last few years is establishing itself as one of the top investment fund centers in Europe.

The Fund management industry is fast becoming one of the most promising sectors of Cyprus economy. The volume of funds and assets under management have shown huge increase, as assets under management have more than tripled from €2.1 billion in 2012 to €6.8 billion in June 2019.  Assets under management are expected to reach €20 billion in the next five years.

What is an Alternative Investment Fund or AIF in short?

Alternative Investment fund is joint investment agreement raising capital from a number of investors with a view to investing it in line with an investment policy for the benefit of the involved investors.

Legal framework.

Alternative Investment Funds legislation has aligned Cyprus legal and regulatory framework with the European directives on asset management enhancing transparency and investor protection.

Cyprus has introduced a new law offering more investment structuring possibilities and upgraded rules for the authorisation, on-going operations, transparency requirements and supervision of Cyprus AIFs. In addition, new rules shape the regulation on the role and responsibilities of their directors, custodians but also external managers.

AIFs that are established under domestic Cyprus fund legislation can be sold on a private placement basis or marketed to professional investors across the EU under the AIFMD passport.

An AIF can take the following legal forms and may be established with limited or unlimited duration:

  • Fixed Capital Investment Company – FCIC
  • Variable Capital Investment Company – VCIC
  •  Limited Partnership – LP
  • Common Fund – CF

A Variable Capital Investment Company (VCIC) and Fixed Capital Investment Company (FCIC) may be set-up as self-managed, or it may be externally managed. A Limited Partnership (LP) and Common Fund (CF) must always appoint an external manager.

Types of Investors.

Professional.

A professional investor is the person who has the experience and expertise to make his/her own investment decisions and assess the risks involved. The investor must also comply with the criteria prescribed in the Markets in Financial Instruments Directive.

Well-informed.

When a person is not considered a professional investor confirming in writing that he is a qualified investor aware of the risks involved with an investment in the relevant AIF. Also, a Well-informed investor has to make an investment of a minimum €125,000 or has been evaluated by a licensed bank, or an authorised investment firm or an authorised Management Company that he has the experience and knowledge in evaluating an investment opportunity.

Retail.

Any investor who not considered either professional or well-informed investor.

Types of AIF’s. There are two different types of AIF’s.

AIF with unlimited number of persons.

  • May be marketed to “retail”, or “well-informed” and/or “professional investors”
  • Freely transferable investor shares
  • Minimum capital requirements of €125,000 or €300,000 if a self-managed fund
  • Must be appointed to a global custodian
  • Can be listed on stock exchange, and AIFs marketed to retail investors can be traded
  • Depending on the investor type and the overall investment policy may fall under certain investment restrictions

AIF with limited number of persons.

  • May be marketed only to “well-informed” and/or “professional investors”
  • Cannot exceed total number of 75 investors / unit holders
  • Freely transferable investor shares, with the condition that their transfer does not result in the AIF having more than 75 investors
  • May not be required to appoint a licensed manager or a custodian in some cases
  • Assets under management do not exceed the AIFMD thresholds of €100 million (including leverage) or €500 million (5-year lock-up period without leverage)

Tax advantages of AIF in Cyprus.

  • Notional Interest Deduction (NID) for new equity may reduce taxable base for interest received by up to 80% (for company-type funds) reducing the effective tax on interest to 2.5%Tax resident funds are eligible to all benefits under a double tax treaty or the EU Directives
  • Services provided by the Investment Manager of fund are not subject to VAT
  • No withholding tax on any type of payments to non-residents
  • No subscription tax on net assets of a fund
  • Extensive network of Double Tax Treaties in place with more than 60 countries
  • Dividends received, capital gains arising from sale of property abroad, capital gains from sale of shares of foreign property companies are excluded from tax

Other advantages of AIF in Cyprus.

  • Easy to set-up, cost-efficient management and operations
  • A framework fully in line with EU directives
  • Full transparency through annual audited reports to CySEC and investors (That includes financial statements, borrowing information, acquiring portfolio information and Net Asset Value)
  • Supervised by a competent and accessible regulatory authority
  • No restrictions imposed by the Regulator on type of investments
  • Can be self-managed – subject to the approval of the Regulator
  • Can be set-up as umbrella funds with multiple compartments
  • Can be listed on Cyprus Stock Exchange and other recognised EU stock exchanges ( in case the number of investors is not limited)

Amendments to Tax Code: Azerbaijan

Law of the Republic of Azerbaijan “on Amendments to the Tax Code of the Republic of Azerbaijan” was approved by the President of the Republic of Azerbaijan on 29 November 2019. These amendments become effective from January 1st, 2020.

The amendments concerns the following matters:

  • E-tax invoice cancellation and application of various types of electronic invoices depending on the nature of the transaction;
  • Application of a single approach to VAT calculation and payment (cash method);
  • Abolition of simplified tax on building;
  • False Transactions and Potentially Dangerous Taxpayer;
  • Changes on excise rates;
  • New tax exemptions;
  • Control of installation of POS-terminals and introduction of new generation cash registers;
  • Improvements in the simplified tax payment;
  • Centralized tax registration;
  • Taxation by state-owned subsidies from residential and non-residential areas;
  • Reporting on transnational group of companies;
  • Carrying out of joint inspections with tax authorities of other state as regulated by international treaties;
  • Editing and refining.

General provisions and new concepts

The following new concepts were added to the Tax Code:

Non-Commodity Transaction – is a transaction disclosed in the course of tax control, concluded for the purpose of concealing another transaction and generating profit without the provision of goods, works and services;

Risky Taxpayer – means a taxpayer regarding whom there is a decision of the relevant executive authority (body) and who meets the criteria approved by the decision of the relevant executive authority (body), as well as a taxpayer who carries out non-commodity and/or risky transactions; A taxpayer may be considered as a risky taxpayer upon respective decision of the competent body.

Transnational group of companies – a group of companies, which includes two or more companies that are residents in different countries, or a company that is resident in one country and operates through a permanent representation in another country.

New provisions (Article 16.1.4-2) to the taxpayer’s responsibilities regarding the Transnational Group of Companies will be added in the following content:

If the total income for the fiscal year of the Transnational Group of Companies exceeds the manat equivalent of 750 million euros, the enterprise, which is a member of a transnational group of companies for the purpose of automated information exchange with the competent authorities of other countries under international treaties supported by the Republic of Azerbaijan and is a resident of the Republic of Azerbaijan, submits the report to the tax authority in the form and manner specified by the relevant executive authority (body).

A tax sanction of 500 manat is applied to the taxpayer in case of failure to submit the electronic report in prescribed manner and time to the taxpayer.

Registration of taxpayers

The article 33.7 (Registration of taxpayers) will be amended in the following content:

The following taxpayers can be registered in a centralized manner by the tax authority as determined by the relevant body (body) of the relevant executive authority:

  1. Natural monopoly subjects;
  2. Enterprises with special tax regime;
  3. Taxpayers who meet one of the following requirements:

– Average number of employees 251 and above;

– The average annual residual value of fixed assets on the balance sheet exceeds AZN 5,000,000.

Persons who have been registered at the place of their taxation are then registered in the centralized order with the previous identification numbers when referring to taxpayers or enterprises with a special tax regime.

Tax registration of taxpayers and branches, representative offices or other economic entities (objects) of the special tax regime, registered in the centralized manner, shall be carried out in the aforementioned manner.

Legal entities, registered at the place of their taxation, are required to apply to the relevant tax authority for centralized registration within 15 days of commencement of activities under the special tax regime.

Centralized re-registration or de-centralization of enterprises operating under special tax regimes, commencement or termination of their activities under a special tax regime shall be made within 15 days from the date of their application to the relevant tax authority.

III. Responsibility for violation of tax legislation

Provisions about the expiration of the term for calling to account for violation of tax legislation and application of financial sanctions (Article 56) will be amended to the following content:

Except for the results of on site tax inspection conducted in accordance with the relevant decision on the conduct of tax inspection in accordance with the criminal procedure legislation, the person cannot be called to account for violation of tax legislation and no tax liabilities may arise if the period of 3 years (the period of 5 years after the relevant information from the competent authorities of foreign countries on income received abroad) had passed from the date of the tax violation.

The period specified in this article covers a period of 3 years preceding the date of the decision of the tax authority to conduct on site tax inspection, irrespective of the date of making a decision on liability in accordance with the article 49.1 of the Tax Code.

Electronic delivery notes and purchase act of goods

The provisions regarding electronic delivery notes (Article 71-1) will be amended to the following content:

In the cases established by this Code, a person providing goods, performing work and rendering services to individual entrepreneurs and legal entities shall issue an electronic invoice to them within the following terms:

– providing goods – time of delivery of goods;

– providing not pre-ordered goods – within 5 days from the date of issuance of the document confirming delivery of goods;

– performing works and rendering services – within 5 days from the date of performance of works and rendering of services.

New provisions to the electronic delivery notes (Article 71-1) will be added in the following content:

When goods (works, services) are delivered to buyer not registered as a taxpayer, he / she will be given a receipt or a check.

Tax invoices are subject to the following types of electronic invoices, depending on the nature of the operation:

on the provision of goods, works and services;

on return of goods;

according to the article 163 of the Tax Code, except for return of goods;

on transfer of goods to agent (commissioner);

provided by agent (commissioner) to buyer of goods;

on acceptance to eventual processing of goods;

according to the article 177.5 of the Tax Code.

Purchase act of goods (Article 71-2) will be added to the Tax Code:

Within 5 days from the date of purchase of goods, purchase act and electronic purchase act (the form of which is established by the relevant executive autority) shall be drawn up for goods purchased for the purpose of economic activity (excluding individual consumption) by legal entities and individuals.

In the event that an electronic purchase act issued by a taxpayer has been printed and signed by an individual not registered within the tax authority, this document shall be considered as a document confirming purchase of goods and a purchase act shall not be drawn up on paper.

White & Case LLP Careers: Together we make a mark

Adoption of EU Money Laundering Legislation

As a Romanian law firm, we are aware of the issues concerning money laundering not only from a professional point of view (know your client), but also from advising clients of their liabilities.  This short article is to highlight issues which may not be immediately apparent and of which clients should be aware and at the same time to draw attention to registration and other requirements required under the Law.  We urge those in the relevant fields to contact advisors for further information as required.  The penalties are not insignificant.

In July 2019 Law no. 129 (“Law”) for the prevention and combating of money laundering and terrorist financing was adopted.

The Law established the national framework for preventing and combating money laundering and terrorist financing, and includes, but is not limited to authorities, institutions and private companies and individuals who carry on business in their own name.  This article is intended to give an overview of the legislation and some guidance as to how it will affect business in Romania and that business needs to be aware of its provisions and impact.

The Law transposed the two European directives, Directive (EU) 2015/849 which amended the Regulation (EU) no. 648/2012 of the European Parliament and Directive (EU) 2016/2258 amending Directive 2011/16.

The following persons and businesses in Romania are now subject to the Law and become reporting entities.  Romanian credit institutions, and branches of foreign credit institutions; Romanian financial institutions and branches of foreign financial institutions; administrators of private pension funds in their own name and for the private pension funds that they manage.  Providers of gambling services; auditors, accounting experts and authorized accountants, auditors, persons providing tax, financial, business or accounting advice.

Public notaries, lawyers and judicial executors if they provide assistance regarding the purchase or sale of immovable property, shares or social shares or elements of the fund; trading in and administration of financial instruments, securities or other assets of clients, transactions that involve sums of money or the transfer of property.

Persons involved in the establishment or administration of bank accounts, savings or financial instruments, organizing the process of underwriting contributions necessary for the establishment functioning or administration of a company.  Those involved in the establishment, administration or management of such companies; collective investment undertakings in securities or other similar structures, as well as participating on behalf of or for their clients in any operation of a financial character or targeting immovable property; service providers for companies or trusts; real estate agents.

Finally other entities and natural persons who trade like professionals in goods and/or provide services who carry out cash transactions whose amount represents the equivalent or more in RON of ten thousand EUR regardless of whether the transaction is executed through a single operation or through several operations that have a connection between them.

It can be seen by these definitions that the provisions of the Law are wide and potentially involve nearly every aspect of commercial life.

The Directives and the Law require that matters are now approached on a risk-based approach. Countries and their competent authorities and banks will have to identify, assess, and understand the money laundering and terrorist financing risk to which they are exposed, and take the appropriate mitigation measures in accordance with the level of risk.

This will mean that these authorities can require that all relevant persons and bodies in Romania who could be involved, even without realising it in such transactions are to report any suspicious or potentially suspicious transaction.  Already several of our clients have been asked to justify certain transactions to their banks and authorities and more stringent reporting requirements will evolve over a period.

The risk-based approach is achieved, at a national level, through establishing the businesses and categories of reporting entities based on the analysis of the risk of money laundering and terrorist financing to which they are exposed and establishing administrative obligations on them in order to mitigate these risks.

The authorities also must assess the fulfilment of these obligations imposed by the measures that have been adopted and applied by the reporting entities according to their individual evaluated risks.

Romania has established its own office in relation to the prevention and combating money laundering (Oficiul Național de Prevenire și Combatere a Spălării Banilor) who will ensure the publication on its own website a summary of the national risk assessment and will transmit to the EU supervisory authorities the relevant elements of the national assessment.

In addition, the National Agency for Fiscal Administration is required to immediately send a report of suspicious transactions to the Office when applying Regulation (EC) no. 1.889 / 2005 regarding the control of cash entering or exiting the European Union and which it knows, or suspects or has reasonable reasons to suspect that the goods/funds come from the commission of offences or related to the financing of terrorism.

The reporting entities as described above have the strict obligation to report to the Office transactions in cash, whose minimum limit represents the equivalent in RON of 10,000 EUR whether in Ron or foreign currency.  Credit institutions and financial institutions defined in accordance with this law will submit online reports on external transfers to and from accounts where the minimum limit represents the equivalent in RON of EUR 15,000.

Customer awareness measures for Reporting entities now impose an obligation to keep in written or electronic format all the records applying these measures.  These can be copies of the identification documents, the verification documentation of a transaction, including information obtained through the means necessary to comply with the know your client principal imposed on businesses.  This information must be retained for a period of 5 years from the date of termination of the business relationship with the client or from the date of the transaction.

The criminal investigation bodies will communicate to the Office annually the stage of resolving the information transmitted, as well as the amount of the amounts in the accounts of the natural or legal persons for whom the blocking was ordered, as a result of the suspensions carried out or of the insurance measures ordered.

The Know your Client measures are divided, according to the law, in standard measures, simplified measures and additional measures, depending on the degree of risk of the client.  The reporting entities must apply the standard measures of Know the client in the case of entities from which they receive funds greater than the equivalent in RON of EUR 1,000.

Another change is the one related to the politically exposed persons.  Not included in this legislation are references to presidential and state councillors but now are introduced members of the governing bodies of the political parties.

The Sanctions under the legislation have also been increased.  They range between 25,000 RON to 120,000 RON in certain cases.

For legal entities, breaches of certain provisions can be sanctioned with a warning or with the fine with a maximum amount of 10% of the total incomes reported for the last fiscal period.  The sanctions can be applied to the members of the board of management and to other people who are responsible for breaking the law.

In the event that any of contraventions committed by a financial institution, other than those supervised by the National Bank of Romania, and if the breach is serious, repeated, systematic or a combination the upper limits of the fines are for legal persons with RON 5,000,000 and for individuals RON 50,000.

Each company who is liable to supply reports and notifications must designate one or more persons with responsibilities in respect of the law.  The communication of the designated person’s identity will be made to ONPCSB only in electronic format.  The obligation to appoint a person does not apply to individuals who have the status of a reporting entity.

All reporting entities whether individual or corporate should establish internal policies and rules for managing the risks of money laundering and financing terrorism.  These should include policies in respect of the following (i) know your client, (ii) rules applicable to reporting, keeping records and all documents in accordance with the law, (iii) internal controls, risk assessment and compliance management and communication,(iv) protection of employees in the process and periodic training and evaluation of employees.

Depending on the size and nature of the company it is required to have an independent audit function for the purpose of testing policies, internal rules, mechanisms and procedures and monitoring these policies, internal rules, mechanisms and procedures.

The application of the above measures imposes the obligation to keep for a period of 5 years from the date of termination of the business relationship or from the date of the transaction in hard copy/electronic format all records obtained through the application of the measures including copies of identification documents.  This can include identification information obtained electronically.

If it is necessary to extend the period of keeping the documents in order to prevent, detect or investigate money laundering or terrorist financing activities, the reporting entity is obliged to extend the period for a further period indicated by the authorities.

At the expiration of any retention period, there is an obligation to delete personal data, except when other legal provisions require the retention of the data.

All the above will impose more administration on business both small and large.  Our advice is to confront the problem now before issues arise.  Money spent now in dealing with this issue will help resolve any problems which may arise in the future.

Montreal

White & Case Advises Hg on Investment in Medical Systems

Global law firm White & Case has advised Hg, the specialist private equity investor focused on software and service businesses, on its agreement for an investment in Intelerad Medical Systems, a leading global provider of medical imaging software and enterprise workflow solutions.

Founded in 1999, Intelerad specializes in diagnostic viewing, reporting and collaboration solutions for radiologists. Headquartered in Montreal, Intelerad serves more than 300 healthcare organizations around the world, including radiology groups, imaging centers, clinics and reading groups, and has a strong and growing presence in hospital imaging departments.

Healthcare technology is a core sector for Hg, and Intelerad represents the fifth healthcare technology investment in Hg’s current portfolio.

The transaction is expected to close in the first quarter of 2020, following satisfaction of customary regulatory approvals.

The White & Case team was led by partner Oliver Brahmst and included partners Frank Lupinacci, Sang Ji, Steven Lutt, Tal Marnin and Arlene Arin Hahn, and associates Adam Plotkin, Jordan Kobb, Brian Fetterolf, Daniel Kozin, Brandon Dubov, Arian Mossanenzadeh, Harry Hudesman, Neeraj Shah, Caroline Cima, Julianne Prisco and Mark Kim (all in New York); partners Rebecca Farrington and Farhad Jalinous, counsel Paul Pittman and Keith Schomig, and associates Ajita Shukla and Daniel Rosenthal (all in Washington, DC); partner Jarlath McGurran and associate Mahir Maini (London); and partners Nirangjan Nagarajah and Michelle Keen, counsel Andrea Reeves, and associate Tiffany Leach (all in Melbourne).

Congress Approves New Disaster-Area Tax Relief

A flurry of tax legislation passed at the end of 2019 as part of an omnibus spending package. You might have already heard about changes to the retirement plan rules and tax extenders that were part of this package.

However, there are some lesser-known changes that you might not know about. Specifically, the disaster-related provisions of the Taxpayer Certainty and Disaster Tax Relief Act provide valuable relief to taxpayers affected by federally declared disasters that happened between January 1, 2018, and January 19, 2020.

Personal Casualty and Theft Losses

Prior to 2018, individual taxpayers that itemized their deductions could write off their unreimbursed casualty and theft losses to the extent that the losses exceeded 10% of adjusted gross income (AGI). In addition, the deductible amount had to be reduced by a “floor” of $100 for each casualty or theft event.

For example, Bill had $100,000 in AGI for 2017. He incurred a $25,000 loss to his home due to hurricane damage in 2017, and his insurance company paid him $10,000 for repairs. So, his unreimbursed loss was $15,000 ($25,000 – $10,000).

Bill itemized deductions on his 2017 tax return. How much was he able to deduct for unreimbursed hurricane damages? His deduction was subject to the 10%-of-AGI threshold of $10,000 (10% of $100,000). He also had to subtract $100 per loss. So, in 2017, Bill claimed a $4,900 itemized deduction for the loss ($15,000 – $10,000 – $100).

Important: A special election allows taxpayers to deduct a loss on a tax return for the preceding year. If you’ve already filed your return for the preceding year, you can file an amended return to make the election and claim the deduction in the earlier year. Decisions regarding this election should be based on an evaluation of 1) whether you need cash quickly, and 2) your overall tax situation in the casualty event year and the preceding year.

TCJA Changes

The Tax Cuts and Jobs Act (TCJA) repealed the deduction for casualties and theft losses for 2018 through 2025 — except for losses suffered in federally declared disaster areas. The special election to speed up the tax relief available to taxpayers in disaster areas remains in effect after the TCJA.

New Relief for Victims

The Taxpayer Certainty and Disaster Tax Relief Act doesn’t restore pre-TCJA law for all casualty and theft losses. However, it does provide the following seven tax breaks to victims in federally declared disaster areas, generally for 2018 through January 19, 2020:

  1. 10%-of-AGI threshold. The new law eliminates the usual 10%-of-AGI threshold on deducting losses from federally declared disasters. It also raises the floor for qualified disaster losses from $100 to $500.
  2. Itemizing vs. taking the standard deduction. Under the new law, you don’t have to itemize deductions to claim a disaster-related loss. You can write off your loss even if you claim the standard deduction for the tax year in question.
  3. Charitable contribution limits. The new law temporarily suspends the tax return limits for charitable contributions associated with qualified disaster relief. For instance, monetary contributions are normally limited to 60% of AGI, but this limit doesn’t apply to qualified donations in a disaster area.
  4. Certain tax credits. A special rule allows taxpayers in designated disaster areas to refer to the preceding tax year for purposes of determining the Earned Income Tax Credit (EITC) or the Child Tax Credit (CTC).
  5. Early withdrawal penalty. Generally, distributions from qualified retirement plans, such as a 401(k) or Simplified Employee Pension (SEP), are hit with a 10% tax penalty in addition to regular tax liability if made before age 59½ — unless a special exception applies. The list of exceptions is lengthy. The new law now provides another exception for qualified disaster relief distributions, though qualified hurricane distributions can’t exceed $100,000.
  6. Cancelled home purchases. The new law permits re-contributions of retirement plan withdrawals for home purchases cancelled due to eligible disasters. It also provides flexibility for loans from retirement plans for qualified hurricane relief.
  7. Extended tax-filing deadlines. An individual with a principal place of residence within a federally designated disaster area, or any taxpayer with a principal place of business in such a disaster area, is granted an automatic 60-day extension for any tax filing. This provision acknowledges that victims probably have other concerns taking priority. The automatic filing extension applies to federal disaster areas declared after December 20, 2019, the new law’s date of enactment.

Special Break for Small Businesses

The new law also creates a special “employee retention credit” for 2018 and 2019. Essentially, a disaster-affected employer is entitled to a 40% tax credit for the first $6,000 of wages paid to an employee from a core disaster area. The maximum credit is $2,400 per worker.

The employee retention credit applies to wages paid regardless of whether services associated with those wages were actually performed. It’s treated as part of the general business credit.

For More Information

This article highlights the key tax breaks available to individuals and small businesses that have suffered losses in a federally declared disaster area. Other special rules may apply. If you’re hit with a disaster, consult with your tax advisor to maximize the benefits for your situation.

Repeal of”Church Parking Tax”

Starting in 2018, a provision of the Tax Cuts and Jobs Act (TCJA) triggered unrelated business income tax (UBIT) on tax-exempt organizations like churches that provide employees with transportation and parking fringe benefits. Now that provision has been repealed under the Taxpayer Certainty and Disaster Tax Relief Act.

The change is effective for amounts paid or incurred after 2017. So, churches and other not-for-profit entities that paid UBIT on applicable transportation benefits in 2018 and 2019 may be eligible for a refund. Contact your tax advisor for more information.

Still on Registration of Foreign Judgments in Nigeria

In Suit No. FHC/ABJ/CS/203/2019; Emmanuel Ekpenyong Esq. v. Attorney General and Minister of Justice of the Federation, the Federal High Court, Abuja Judicial Division by a Judgment dated 10th June 2019, held that the Plaintiff (“Emmanuel”) has not placed before the Court, evidence to show that the Defendant (“the Attorney General”) ought to be satisfied to promulgate an Order to bring Part I of the Foreign Judgment Reciprocal Enforcement Act, 1990 (“the 1990 Act”) into operation pursuant to Section 3 (1) of the 1990 Act which provides that;

“The Minister of Justice if he is satisfied that, in the event of the benefits conferred by this Part of this Act being extended to judgments given in superior courts for any foreign country, substantial reciprocity of treatment will be assured as respects the enforcement in that foreign country of judgments given in the superior courts in Nigeria, may by order, direct:

(a) That this Part of this Act shall extend to that foreign country; and
(b) That such courts of that foreign country as are specific in the order shall be deemed superior courts of that country for the purpose of this part of this Act..”

The Court further held that the phrase “the Minister of Justice if he is satisfied………..may by order direct…..” shows discretion on the part of the Attorney General. The Court found that though in some instances, the word “may” in a document may be interpreted to mean “shall”; the clear wordings of the 1990 Act suggests discretion on the part of the Attorney General on whether or not to promulgate the Order to bring Part I of the 1990 Act into operation.

By a Notice of Appeal dated 29th August 2019, Emmanuel appealed against the Judgment to the Court of Appeal, Abuja Judicial Division. Emmanuel contends that the provisions of Section 3 of the Reciprocal Enforcement of Judgment Ordinance, CAP. 175 1958 (“1958 the Ordinance”) and Section 9 of the United Kingdom’s Administration of Justice Act, 1920 codifies the substantial reciprocity treatment of Judgments of superior Courts of Nigeria on one hand and England, Ireland and the Court of Session in Scotland on the other hand. Section 9 of the 1990 Act codifies the substantial reciprocity treatment of Judgments of superior Courts in Nigeria and other commonwealth countries.

The legal standard of satisfaction required of the Attorney General by the phrase “The Minister of Justice if he is satisfied…” as used in Section 3 (1) of the 1990 Act ought not to be based on an indefinite, unhindered, incontestable and subjective discretion or prerogative of the Attorney General but ought to be based on a reasonable and objective premise of whether there are superior Courts of any foreign country with substantial reciprocity treatment of Judgments with Nigeria.

The common knowledge that superior Courts in England, Ireland, the Court of Session in Scotland and other commonwealth countries have substantial reciprocity treatment of Judgments with Nigerian superior Courts has fulfilled the objective legal standard for the Attorney General’s satisfaction and forms the legal basis upon which the Attorney General ought to have promulgated the Order to extend the application of Part I of the 1990 Act to the Judgments of superior Courts in England, Ireland, the Court of Session in Scotland and other commonwealth countries.

The failure of the Attorney General to promulgate the Order since 1990 when the Act was enacted has made Nigerian Courts to rely on the colonial and out dated 1958 Ordinance as well as its Rules of 1922 for registration of foreign judgments in Nigeria. This has made the process of registration of foreign Judgments in Nigeria to be uncertain and burdensome.

Emmanuel further contended that it is settled Nigerian law that “may” in a legal document may be construed as “shall” so that justice will not be a slave to grammar. Again, if interpreting “may” as used in a legal document as discretionary will result in serious general inconvenience to innocent persons of the public without furthering the object of the enactment; it shall be construed to be mandatory. Furthermore, the Court would interpret “may” as mandatory whenever it is used to impose a duty on a public functionary, the benefits which inures to a private citizen.

Since the failure of the Attorney General to promulgate the Order pursuant to Section 3 (1) of the Act to bring Part I of the Act into operation for the benefit of Nigerians has resulted in serious general inconvenience to innocent Nigerians, especially Emmanuel, without furthering the objectives of the Act, the justice of the case demands that the mischief rule of interpretation ought to be applied in the interpretation of “may” as used in the provision as “shall” so that justice will not be a slave to grammar.

Enforcement of Foreign Judgments in India

Enforcement of Foreign Judgments in India – Inclusion of UAE as a Reciprocating Territory

The Ministry of Law and Justice, Government of India vide its Notification dated January 17, 2020 (“Notification”) declared United Arab Emirates (“UAE”) a “reciprocating territory” for the purposes of enforcing foreign civil decrees in India. The declaration has been made by the Indian government in exercise of powers under Explanation 1 appended to Section 44A, Code of Civil Procedure, 1908 (“CPC”). Pursuant to the Notification, decrees passed by the courts in UAE are now executable in India as if they were passed in India.

CPC lays down the procedure for enforcement of foreign judgments and decrees in India. A foreign judgment is a judgment of a foreign court and a foreign court means a court situated outside India and not established or continued by the authority of the Central Government. A foreign judgment needs to be conclusive for it to be enforceable in India. The test of conclusiveness of a foreign judgment is provided under Section 13 of CPC, which postulates that a foreign judgment shall be conclusive unless:

  1. It has not been pronounced by a court of competent jurisdiction;
  2. It has not been given on the merits of the case;
  3. It appears, on the face of the proceedings, to be founded on an incorrect view of international law or a refusal to recognize the law of India in cases in which such law is applicable;
  4. The proceedings in which the judgment was obtained are opposed to natural justice;
  5. It has been obtained by fraud;

f)    It sustains a claim founded on a breach of any law in force in India.

Broadly, a foreign judgment in India can be enforced in the following ways:

  1. Decrees passed by courts in reciprocating territories: Reciprocating territories enjoy the privilege of direct enforcement of a decree within the territory of India by filing execution proceedings of the decree before an Indian court. A reciprocating territory is any country or territory outside India which the Central Government may, by notification in the official gazette, declare to be a reciprocating territory and the superior courts with reference to any such territory, are the courts as may be specified in the notification notified by the Government. In accordance with the CPC, if a certified copy of the decree of any of the superior courts of any reciprocating territory is filed in a district court, the decree may be executed in India as if it has been passed by the district court. Such foreign judgment to be executable in India must be conclusive (i.e., should not be falling under any of the above stated six categories) and needs to comply with the laws of limitation of India. Also, the decree with reference to a superior court would be any decree or judgment of such court under which a sum of money is payable, not being a sum payable in respect of taxes or in respect of a fine or other penalties, but shall in no case include an arbitral award, even if such an award is enforceable as a decree or judgment.

Some of the countries that have been declared to be “reciprocating territories” are United Kingdom, Singapore, Bangladesh, Malaysia, Trinidad & Tobago, New Zealand, Hong Kong, Papua New Guinea, Fiji, etc.

  1. Judgments passed by non-reciprocating territories: Such judgments can be enforced only by first preferring a lawsuit in an Indian court for a judgment based on the foreign judgment and second, filing for execution proceedings after obtaining the Indian decree. Section 14 of the CPC provides for presumption, albeit a rebuttable one, in favour of the foreign judgment being one passed by a court of competent jurisdiction. For the purposes of Indian courts, such foreign judgment is of evidentiary value only.

Considering that the decrees from reciprocating territories are directly enforceable in India, the inclusion of UAE as a “reciprocating territory” will be beneficial for a UAE decree-holder to enforce the decreed time and cost-efficiently in India. The courts in UAE which will be considered as the superior courts of UAE for the purposes of section 44A of CPC are the Federal Supreme Court; Federal, the First Instance and Appeals Courts in the Emirates of Abu Dhabi, Sharjah, Ajman, Umm Al Quwain and Fujairah; and local courts in Abu Dhabi Judicial Department, Dubai, Ras Al Khaimah Judicial Department, Abu Dhabi Global Markets and Dubai International Financial Center.

It further implies that Indian expatriates in UAE would no longer be able to seek safe haven in their home country if they have a decree against them in a civil case in the UAE. It would also be interesting to see how this development will impact the proceedings under the Insolvency and Bankruptcy Code, 2016 were so far the National Company Law Tribunal (“NCLT”, in the matter of M/s Stanbic Bank Ghana Limited v. M/s Rajkumar Impex Private Limited CP/670/IB/2017), has held that NCLT has no jurisdiction to enforce foreign decree, however, there is no bar in it taking cognizance of the foreign decree. The Notification, however, will have no impact upon enforcement of arbitral awards passed by arbitral tribunals seated in UAE as the scope of Notification is strictly limited to decrees covered under section 44A of CPC.

Brexit and the implications for your Intellectual Property Rights

What will the Brexit mean for your intellectual property (IP) rights? Will Britain leave the European Union (EU) without a deal? Or will the Prime Minister manage to get the British Parliament to vote in favour of a Plan B-deal? The Brexit will have consequences for trademark rights, design rights, copyright and patent rights that involve the UK and the EU. Start prepping to protect your IP before Brexit!

The Brexit does not just impact organizations doing business in or with the UK from a commercial trade perspective (e.g. customs and import). You should also think about the ‘crown jewels’ of your organization (e.g. trademark rights, design rights, copyrights or patent rights) covering the European Union.

Brexit will impact every company having intellectual property, licenses and distribution agreements within the EU or UK scope.

Although the uncertainty about the Brexit remains, you should know that whatever happens, you should start preparations. For instance, what happens with the UK coverage of your EU trade mark and design registrations? Should you amend the territorial scope in your intellectual property contracts? A mere reference to the ‘EU’ may become difficult to interpret. This blog outlines the potential implications concerning your intellectual property rights following a Brexit.

Impact of Brexit on European Trade Marks and Designs

EU trade marks and designs are granted by the EU Intellectual Property Office (EUIPO). Currently, companies and individuals owning a registered EU trade mark or design have their trade mark or design right protected across all EU member states including the UK.

After the Brexit, existing EU trade mark and design registrations will no longer include protection in the UK. However, even in case of a ‘no deal-scenario’, the UK government ensured that the rights in all existing registered EU trade marks and designs will continue to be protected and enforceable in the UK by providing an equivalent trade mark or design registered nationally in the UK.

If you have pending applications for trademark or design rights in the EU at the Brexit date, you may refile your application with the UK Intellectual Property Office under the same terms for a UK equivalent right. For a period of 9 months from exit, the UK government will recognize filing dates and claims to earlier priority and UK seniority recorded on the corresponding EU application.

Impact of Brexit on Copyrights

Various international treaties (such as, the Berner Convention and the WIPO Copyright Treaty) govern the protection of copyright. Under these rules, countries provide cross border copyright protection. These rules are luckily not dependent on the UK’s membership of the EU. As a consequence, copyright protection in the UK for EU protected works will largely remain unchanged.

What about database rights and other EU specific IP legislation?

The EU copyright system is based on EU legislation so it only extends to EU member states. Although the protection rights under EU legislation will be preserved in UK law, cross-border IP protection mechanisms will be different. For example, in the event of a no deal-Brexit, there will be no obligation for EU member states to provide database rights to UK businesses. As a result, owners of UK database rights may find their rights unenforceable in the EU. So companies may need to consider other forms of protection for their databases.

Impact of Brexit on Patents and supplementary protection certificates

Only a few areas of UK patent law are derived from EU legislation. Probably the most important issue here is patented pharmaceutical products and chemical compounds. EU law provides for an additional period of protection after a patent has lapsed, the so-called ‘supplementary protection certificate’.

In addition, EU law provides for compulsory licenses to be granted for UK manufacture of a patented medicine for export to a country with a public health need. Also, EU law demonstrates that certain studies, trials and tests using a patented pharmaceutical product will not be regarded as an infringement of the patent.

Luckily, regardless of the Brexit, any relevant EU legislation (including its implementation in UK law) will remain. This means that the supplementary protection certificates, compulsory licenses and exempted studies and trials will be kept under UK law.

What about the Unitary Patent?

Under the European patent regime, a European patent application essentially forms a bundle of national applications. Each application needs to be validated per EU member state. The Unitary Patent will be one inseparable right covering 26 EU countries. The UK is one of those 26 countries. They ratified the Unitary Patent system only in April 2018 which indicates their desire to be part of this system in spite of Brexit.

However, the Unitary Patent protection cannot be separated from the general principle of the EU’s Internal Market. As a consequence, and especially in the event of a ‘no deal-Brexit’, it is questionable whether the Unitary Patent protection will remain applicable to the UK once it has left the EU. If not, it means that businesses seeking patent protection in the UK will still need to commit to the national UK patent system.

Exhaustion of IP rights after Brexit

Another topic for your business to consider, is the so-called exhaustion of intellectual property rights. ‘Exhaustion’ limits intellectual property rights. Once an IP protected product has been legitimately put on the market anywhere in the EU, the IP rights (e.g. prevent the resell or other commercial use) over such product can no longer be exercised because these rights are exhausted.

In a ‘no deal-scenario’, products rightfully placed on the UK market after Brexit, will not be considered exhausted in the EU. As a result, if your company exports products from the UK to the EU you may still require the IP owner’s consent.

To discuss potential effects of the Brexit on your IP rights, please do not hesitate to contact Lukas Witsenburg from Penrose. Email: l.witsenburg@penrose.law or telephone: +31 (0)20-240 0710.

Koen De Puydt

News Article by Leaders in Law Member – Koen De Puydt

Professional Liability of Intellectual professions in the Construction Sector 

Following the ten-year liability insurance for real estate projects for architects, engineering firms and contractors, which was made mandatory by the “Peeters-Borsus Law” since 1 July 2018, another insurance obligation has been introduced within the construction sector by the “Peeters-Ducarme Law” effective 1 July 2019. 

The title of this law is self-explanatory. It introduces “a professional liability insurance for architects, surveyor experts, safety and health coordinators and other service providers in the construction sector relating to construction works and amends various legal provisions regarding civil liability insurance in the construction sector”, as mentioned earlier also called the Peeters-Ducarme Law. 

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This title shows that this law has in principle a larger scope than the Peeters-Borsus Law. Where the latter applies primarily to contractors and architects in the context of housing projects and for works that require the intervention of an architect, the Peeters-Ducarme Law introduces a professional liability insurance for all intellectual professions within the construction sector, with regard to all construction work. 

Consequently, the Peeters-Ducarme Law does not apply to contractors, but it applies to all kind of real estate work (and therefore not only with regard to housing projects). Thus, as a result of the execution of all real estate works, the principal will enjoy this protection regardless of the final destination of the property or the possible intervention of an architect. 

Compulsory insurance coverage cannot be lower, per claim, than:

  • € 1,500,000 for damage resulting from physical injuries;
  • € 500,000 for the total material and immaterial damage;
  • € 10,000 for the objects entrusted to the insured by the principal.

The law also provides for a posterior coverage on the basis of which the liability for claims must be covered if the claim is filed within three years after the cessation of the activities of the insured service provider . 

Although it could be expected that the Peeters-Ducarme Law has a larger scope than the Peeters-Borsus Law, we must conclude that it is largely eroded by the exceptions that are provided for in respect of the damage that the insurance must cover. 

For example, Article 5 of the Peeters-Ducarme Law states that damages are not covered if it is the consequence of a failure to comply with one or more contractual obligations or if damages resulting from environmental degradation, claims relating to an inadequate budget, or disputes in relation to fees and expenses.

These exceptions erode the potentially extensive coverage provided by the Peeters-Ducarme Law significantly and therefore the latter offers less protection than might be expected at first sight. 

The Peeters-Ducarme law has been published yesterday (26 June 2019) in the Belgian Official Gazette and will enter into force on 1 July 2019. 

Peeters Law (to be soon Seeds of Law) will be happy to provide you with the necessary advice or assistance in this matter. Please contact us via info@seeds.law or by telephone on +32 (0)2 747 40 07.

Koen De Puydt – Toon Delie

Real Estate and Construction Law    Professional Liability     Professional Liability insurance     Intellectual professions     construction sector     architect surveyor expert    safety and health coordinator