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Are the existing Maritime Laws in India sufficient enough to safeguard Maritime Security?

By: Kunjan Makwana

Introduction

India can be deemed to be regarded as a maritime state which has a long coastline that is 7500 kilometres long. Since India is a maritime nation, it has 274 islands that are surrounding the Indian territory in close consonance to the Bay of Bengal and the Arabian Sea, which can also be deemed to be regarded as the top most point of the Indian Ocean. The Indian subcontinent is spread across a massive area comprising 1000 kilometres venturing into the northern part of the Indian Ocean in the form of a wedge and this part can be said to have two distinct subregions.

Mr. K.M. Panikkar once opined that, “It is the geographical position of India that brings about the multitude of changes in the character of the Indian Ocean.”[1]  It is highly imperative to understand that the Indian Ocean plays a very significant role when it comes to the sovereignty of India and it is worthy to note that whenever India has neglected the Indian Ocean, it has had a tough time dealing with its sovereignty and this was quite evident even during the time when the European Powers had a standing in India. The Indian Ocean can be deemed to be regarded as a crucial water body for India as it has enabled India to carry out foreign trade activities and there exists innumerable evidence to support the fact that India has majorly relied upon the Indian Ocean when it came to trading and these evidences can be traced way back to the 9th Century BCE.[2]  In fact, Maritime Trade still plays a significant role in contributing to the economy of India despite there being innumerable geographical shifts when it comes to dealing with India’s patterns of trading with other countries via the sea route. However, it is quite pertinent to consider that a huge number of these commodities that India imports, enter the Indian Territory via sea route and therefore it is quite pertinent for India to take extreme measures when it comes to developing its maritime security as in the coming years it is ought to play a very prominent role which would enable India to develop itself globally. It can be said that the maritime laws in India are their nascent stage and the legislation needs to work towards making maritime laws in India much more comprehensive and robust.

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It is imperative to note that the Government is taking initiatives when it comes to developing the maritime regime in India. Certain initiatives by the Prime Minister, like the Prime Minister’s vision with regards to the Security and the Growth for All in the Region (SAGAR) along with a clear emphasis on the advancements made in maritime infrastructure is something which has received tremendous accolades and these initiatives have thoroughly enabled India to achieve greater milestones when it comes to developing its Maritime infrastructure which needs to be focused upon if India wishes to emerge as an all-round winner in its immediate neighbourhood. India needs to primarily focus on the issues and security concerns that are hovering in the Indian Ocean region, (hereinafter referred to as, “IOR”). It should be India’s primary concern to focus upon its maritime security framework because the current pieces of legislation governing the Maritime Laws regime in India are sadly not robust enough. India needs to bolster its resources when it comes to developing its maritime security in the IOR.

India’s Maritime Interest

In order to understand India’s maritime interests, it is imperative to primarily understand whether the maritime security in India is in place or not. First, it is quite necessary to understand what is meant by maritime interests. Maritime Interests can be deemed to be regarded as those interests which take under its ambit crucial aspects pertaining to a country’s ability to claim its maritime realm, which is extremely imperative when it comes to a country’s survival and development. It is highly recommended that a country takes measures and fosters its resources in order to preserve these interests as these interests could be deemed to be regarded as key interests of a country and they play a major role in securing the national security of any country. India, primarily undertakes its business activities via the sea route and therefore it is extremely necessary for a country like India to closely delve into making military and nationalistic strategies when it comes to its maritime interests.

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Maritime Territory

India is deemed to have a large coastline which extends to 7517 Kilometres and takes under its umbrella, 1200 islands. A lot of these islands can be said to be extremely distant from the main coastline of India, for instance, the Andaman & Nicobar Islands can be deemed to be regarded as those islands which are approximately 1600 Kilometres away from the closest coastline of India. India’s territorial sea occupies approximately 1,93,834 square kilometres and the Exclusive Economic Zone (hereinafter referred to as, “EEZ”) takes under its scope approximately 2.02 million square kilometres (sqkm). The living and the non-living resources that reside in this zone, amount to two-thirds of the landmass that India occupies and these resources, whether living or nonliving, exclusively fall under the ownership of India and they can be deemed to be regarded as a part of India, which also enables India to carry out its transportation activities and this has clearly opened innumerable opportunities for India to carry out its trade activities through this area. This part can also be deemed to be regarded as a part which is home to 51% of India’s oil resources and 66% of natural gas reserves. It is imperative to note that the protection and preservation of these natural resources not only deals with the territorial integrity of the nation but also takes into consideration the safety, which is a highly important factor. These routes act as a safety border which enables India to maintain its territorial integrity and at the same time secures India from potential external threats.

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Sea Lines of Communication (SLOCs)

It is quite imperative to understand the need for Sea Lines as they can be gauged from the fact that the oceans supported about four fifths of the total world merchandise trade pertaining to the year 2014.[3] In a period spanning 10 years, India has diversified itself and has stepped foot in sea trade and its trading activities have multiplied at a constant rate of 3.3 percent. India’s maritime container trading figures have also significantly risen and there has been a steady growth of 6.5 percent which can be deemed to be regarded as a significant growth when compared to the world average of 5.4 percent over the period spanning ten years. On the other hand, the cargo traffic at the ports in India has also seen a massive bull run and it has touched a milestone of 1 billion tonnes per year as compared to the last decade (Financial Year 2005-2015) and it can surely reach the 1.7 billion tonnes per year mark in the next two years, i.e. by the year 2022.[4] These numbers depict that over 95 percent of India’s trading activities lie in the SLOCs and International waters play a major role when it comes to India excelling in the field of trade and commerce via sea routes. The International Shipping Lanes of the Indian Ocean which is used by India requires dire attention and the security needs to be worked upon in order for India to sufficiently continue its trading activities overseas.

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Maritime Economy

Needless to say, the Indian economy is majorly dependent on the energy imports that it has indulged into. Apart from this, the Indian economy also relies on the total domestic oil consumption and it imports oil from other countries and these import activities are eased since India has the Indian Ocean passage when it comes to importing oil. These import activities are undertaken by vessels which travel by the sea and offshore oil gas production can be said to be accounting for almost 80 percent of all domestic gas that is produced. Approximately, 95 percent of the trade that India undertakes internationally by volume and over 70 percent of its value is carried over by the sea routes.[5] India can also be deemed to be regarded as the world’s fourth largest producer of fish and majority of these fishes are imported and come from the sea.[6] The maritime economy of India includes a prominent network of 13 major and approximately 200 minor ports all along the coast. It is imperative at this conjecture to throw light upon the Sagarmala project which has delved into the development of a port and has also significantly contributed towards the quick and efficient transportation of goods and services to and from the ports. It is therefore quite imperative for the Government to build this nascent maritime economy and take initiatives in order to ensure that it is free from impediments and potential external threats.

Maritime Investments

India has contributed in a number of industries such as the infrastructure, energy and services industry in a lot of countries which can be deemed to be regarded as its immediate maritime neighbours. India has also established a research station in Antarctica which enables India to carry out research activities in a wide variety of areas, however, India has majorly worked towards the development of the technology which would enable India to deal with the global climate change issues. India has shown tremendous potential when it comes to venturing into deep sea mining activities and is working in close consonance with the International Seabed Authority, which has accorded it a pioneer status and at the same time has provided 75000 square kilometres of seabed area in the Central part of the Indian Ocean. ONGC Videsh Ltd has ventured into oil exploration activities and has set up its oil exploration plant in the Exclusive Economic Zone (EEZ) of Vietnam. ONGC Videsh Ltd is carrying out these activities within the two blocks which the Vietnamese Government has allocated to it and because of this the Chinese Government is causing disruptions and China has made claims alleging that the activities carried out by ONGC Videsh Ltd along with the Vietnamese Government are illegal and are jeopardising the status of the already in dispute South China Sea. However, India is still in its nascent stages and is taking innumerable efforts when it comes to developing its economy in the maritime sector, however, it is important for India to ensure that it is secure from external threats which could severely jeopardise the inimical interests.

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India’s Maritime Security Concerns

India’s maritime security has been a crucial issue and these issues arise from the threats, which have majorly occurred in the interest of the Indian Ocean and this is in direct consonance to India’s varied maritime interests. It is crucial to understand that a number of these potential maritime threats which are lurking over India have a direct influence on the other stakeholders in the Indian region and this may have a significant impact on India, since India is, “already assuming her responsibilities when it comes to securing the Indian Ocean region.[7]  India faces immense potential threats from its neighbours and these potential threats could seriously harm the national interests of the country during times of war and hostilities which are never taken into consideration since they fall under the scope and the ambit of war fighting, however, what is important at this conjecture is to ensure that the legislature gets out of its lethargy and establishes a robust and comprehensive piece of legislation which governs the maritime activities. There lurks a constant threat to the SLOCs as the SLOCs in the IOR are extremely susceptible to being disrupted by a wide variety of traditional and non-traditional threats over the years. However, India has constantly depended upon the seas when it comes to carrying out trading activities and these threats which are constantly lurking over the SLOCs in the IOR could be resolved if a comprehensive legislation is enacted and put in force. The Legislature needs to enact a law which may act as a shield over all the nefarious activities that could be deemed to be regarded as a potential harm to the maritime security of India. For instance, Piracy, Regional Instability, Trafficking of Goods and Humans, Terrorism, et. Cetera could all be controlled if a proper and a comprehensive law is enacted by the legislature. There have even been instances of illegal unreported and unregulated fishing, which has proven to be a severe issue for the marine communities around the globe and the governments of a number of coastal states are constantly endeavouring towards enforcing international and national maritime laws which are robust and control these aforementioned activities.

Regional Security Architecture in the IOR

India has always been cooperative and has taken a very positive approach when it comes to bolstering maritime security in the IOR. This is evident from PM Narendra Modi’s aim of SAGAR, also known as the Security And Growth for All in the Region.[8] The IOR has innumerable arrangements in this particular area and this area can be said to be restricted for other countries. India has taken innumerable efforts and has developed the IORA which is the Indian Ocean Rim Association, which was launched in the year 1997 and its goal is to promote the growth of intra-regional economy. However, maritime security and safety has not been given much emphasis, but the Indian Ocean Naval Symposium is another initiative which was founded in the year 2008 and it works in the direction of improving the maritime co-operation between the navies of various littoral states surrounding the Indian Ocean Region. However, again this is an initiative by the Navy and there is a clear absence of the government’s participation.

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In a nutshell, a comprehensive and an overarching security framework for the Indian Ocean Region is extremely crucial for the government to develop considering the current geopolitical status and the developmental activities being carried out by the various littoral states. The Legislature needs to emphasize on how important it is for India to have a responsibility of regional states when it comes to maintaining peace, stability and prosperity in the Indian ocean. India needs to make a concerted effort in the form of a robust piece of legislation if it aims to mitigate the innumerable threats lurking over it.

[1] KM Panikkar, “India and the Indian Ocean: An Essay on the Influence of Sea Power on Indian History.”

[2] “The Periplus of the Erythraean Sea”, Longmans Green & Co, 1912.

[3] UNCTAD Review of Maritime Transport 2015, Page 5.

[4] Facts & Figures, Maritime India Summit 2016.

[5] Facts & Figures, Maritime India Summit 2016.

[6] FAO yearbook 2012, Page 9.

[7] ICC IMB Piracy and Armed Robbery against Ships, 01st January-31st December, 2015.

[8] PM Modi’s Speech Commissioning of Mauritius CG Ship Barracuda, 12th March, 2015.

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Impact Of Covid-19 on Insolvency and Bankruptcy Laws of India and the World at Large

By: Anjan Bhandari 

INTRODUCTION:

In the past few months, India has witnessed unprecedent changes being made in almost every sphere; whether it be something as simple as a lifestyle change or something as complex as amending various legislations to safeguard and protect the interests of both the parties. To give you a better perspective, the Central Government on 24th March declared a nationwide lockdown as a preventive step to limit the spread of the infectious coronavirus. In doing so, everyone was required to restrict themselves to their homes thereby bringing our economic structure to a standstill. Nobody knew for how long the lockdown would ensue when it began, but now we do have adequate data that informs us about the manner in which the lockdown was imposed and in how many phases –

  • PHASE 1 : 25th March – 14th April [Nationwide lockdown]
  • PHASE 2 : 15th April – 3rd May [Further extended]
  • PHASE 3 : 4th May – 17th May [Further extended]
  • PHASE 4 : 18th May – 31st May [Further extended]
  • PHASE 5 : 1st June – 30th June [Considerable relaxations from 8th June]

According to the above-mentioned data, it is clear that COVID-19 is the primary reason for all business uncertainties and the economic stabilities at large since the lockdown was continued for so long. All industrial activities came to a standstill because of which the Companies suffered huge losses which either resulted in salary reduction or laying off a major chunk of their employees in order to manage their sustainability. And not just the industrial sector, the outbreak of COVID-19 has caused massive difficulties for all sectors globally, such as the Micro Small Medium Enterprises (MSME’s), healthcare, tourism, automobile, etc. Courts all across the country has prohibited physical hearing to maintain social distancing except a few important cases and has instead resorted to virtual court proceedings. The only thing that can be said with absolute surety is that the brunt of this economic meltdown will be faced by all the financial institutions since its difficult to comment on the overall impact of the lockdown.

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IMPACT OF COVID-19 ON IBC LAWS IN INDIA:

The All India Association of Industries estimated a loss of 2lakh crore by 31st March due to the nationwide lockdown. The Central government has been trying to minimise such drastic blows by bringing in numerous reforms. The virus has indisputably disrupted the performance of contracts and payments consequently creating problems for the financial and operational creditors. It will have a devastating impact on economy if the creditors wish to initiate insolvency proceeding against the corporate debtors at a mass scale amidst this pandemic.

What’s important to notice is that the value of the stocks is declining at a startling rate since the demand has decreased at a global level. It wouldn’t be too far-fetched to suspect that at this point, the financial and operational creditors would move to the National Company Law Tribunal (NCLT) to avail remedies available to them under the Insolvency and Bankruptcy Code, 2016. After approaching the NCLT, initiation of the insolvency proceeding will have a negative impact because then the management of the company would shift from the hands of the corporate debtor to the insolvency resolution professional and as a result, the value adding mechanism by the corporate to the economy gets highly stunted.

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It is imperative to safeguard the interests of the MSME’s because if insolvency proceedings are initiated against them, it would further lead to rise in unemployment in the country. Pre-empting such an impact, our Finance Minister Nirmala Sitaraman had announced that if the current state of affairs continued beyond 30th April, the Central government may suspend a few relevant sections of the IBC for 6 months in order to protect companies from being forced into insolvency proceedings in such force majeure causes of default. Due to these reasons, the Government of India decided that they need to adopt a pragmatic approach in dealing with this problem and came up with the following amendments to the IBC, 2016 –

  • Application under Sections 7, 9 and 10 can only be filed when the default is of Rs. 1 crore or more.[1] Earlier U/S 4(1) of IBC, the minimum amount of default was Rs. 1 lakh which has now been officially increased by the Ministry of Corporate Affairs (MCA).
  • Section 7 : Initiation of insolvency proceedings by financial creditor

Section 9 : Initiation of insolvency proceedings by operational creditor

Section 10 : Initiation of insolvency proceedings by corporate applicant

According to the MCA Notification No. S.O. 1205(E) dated 24th March 2020 the Finance Minister as a relief to the affected industry announced that no petitions would be entertained unless the minimum amount of default is Rs. 1 crore or more.

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  • The Supreme Court on 23.03.2020 opined that the lockdown period should be excludedfor the purpose of counting the timeline. Even the NCLAT ordered the same on 30.03.2020. The order states that “the period of lockdown imposed by the central government in the wake of Covid-19 outbreak shall not be counted for the purposes of the timeline for any activity that could not be completed due to such lockdown, in relation to a corporate insolvency resolution process.”[2]
  • The government may even consider scrapping Section 7, 9 and 10 of the IBC, 2016 so that no insolvency proceedings be initiated by the promoter, operational or financial creditor if the situation continues beyond 30th April, 2020 and if it does, it would be scrapped for a period of 6 months.

The first amendment that came in on 24th March which increased the minimum default vale from Rs. 1 lakh to Rs. 1 crore not only reduced the workload on the insolvency resolution professionals but also turned out to be beneficial for the MSME’s and corporate debtor. However, the fruit to such benefits is only enjoyed by one as opposed to safeguarding equal interest of the parties. Increasing the default value to such a higher threshold causes immense dissatisfaction to the operational and financial creditors. The operational creditor in particular would face hindrances as they won’t be able to utilise this remedy to regain the operational and corporate debt from the corporate debtor. Moreover, their operational debt isn’t generally this high to be able to initiate insolvency proceedings which further puts them on the backfoot. Under Section 9 of the IBC, 2016 the operational creditor cannot even jointly file for an application unlike as mentioned under Section 7 of the Insolvency Code, 2016. Kumar Saurabh Singh, Partner at Khaitan & Co. said that the Central Government shall also cover matters of liquidation in other courts and tribunals besides the IBC process. He said that “A similar approach would also be required to be followed by other courts/tribunals in the country to not allow enforcement and sale of assets of companies which are suffering from the impact of the pandemic situation so that the benefit of suspension of insolvency law is effectively given to the borrowers.”

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After diving deep into the details of the impact of COVID-19 on the IBC laws in India, the question still remains whether the applicants who filed for the insolvency resolution before the pandemic should be affected or not. In my view if it does, then the applicants would rather prefer indulging themselves in outside settlements rather than utilising the provisions under the Insolvency and Bankruptcy Code thereby defying the very purpose of the said statute.

IMPACT OF COVID-19 ON IBC LAWS ACROSS THE WORLD:

  • UNITED STATES – On 19th February, the Small Business Reorganisation Act became effective which seeks to provide an economical and quicker option for reorganisation of businesses with total debts falling within the quantum of $2,725,625. On 28th March, Donald Trump gave a nod to the Coronavirus Aid, Relief, Economic Security (CARES) Act. Apparently, it is the largest emergency aid package ever provided in US history. It includes revised retirement account rules, student loan changes, and the unemployment coverage. There has also been an increment in the debt limit under the CARES Act to $7.5 million for a year in order to allow small business debtors to realign their affairs for a new start.

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  • SINGAPORE – The Ministry of Law in Singapore had announced that they would introduce a bill in the Parliament aimed at finding a way for an organised moratorium so that the obligations that ensue are either suspended or deferred. A distinctive feature of the Bill is that the parties would not be allowed to be represented by lawyers in case of a dispute. Instead, an assessor would be appointed by the Ministry of Law who will decide on an equitable and just outcome without any legal fees. 
  • AUSTRALIA – On 23rd March, the Commonwealth government introduced the Coronavirus Economic Response Package Omnibus Bill 2020[3] which was passed by both Houses of Parliament and received the Royal Assent on 24th Certain temporary amendments were made to the Corporation Act, 2001 which are as follows:
  • Amendment relating to individual in financial distress
  • Amendment relating to businesses in financial distress
  • Temporary relief for directors from the duty to prevent insolvent trading

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  • UNITED KINGDOM – Alok Sharma, Business Secretary announced a package of insolvency measures to be adopted in the future. The UK government has shown keen interest in bringing forward such legislation, but the timing still remains uncertain. It is evident that the government is building up on potential reforms announced in August 2018. The new structuring tools include –
  • To bring in measures safeguarding the suppliers and creditors, thereby ensuring timely payments until a more viable solution is reached.
  • Coming up with a new restructuring plan, and binding creditors to that plan.
  • To introduce a moratorium for companies allowing them a breather from creditors enforcing their debts for a while until they seek a restructure or rescue.
  • To protect their supplies thereby enabling them to continue with their trading activities during the moratorium period.

 Thus, on comparing the impact of COVID-19 on IBC laws in India with the rest of the world, we can deduce that almost similar precautionary steps were adopted by other countries. Some of them increased their minimum default limit required to file for insolvency proceedings, some have thought of implementing a moratorium period, while the others decided to put a bar on initiation of insolvency proceedings after a set particular date.

[1] https://www.ibbi.gov.in/uploads/legalframwork/48bf32150f5d6b30477b74f652964edc.pdf

[2] http://www.mca.gov.in/Ministry/pdf/Notification_30032020.pdf

[3] https://pinpoint.cch.com.au/document/legauUio3230299sl1133168580/regulation-5-4-01aa-temporary-increase-to-the-statutory-minimum-and-statutory-period

 

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Contracts in the Sports Industry and the Clauses Covered Under it

By: Tanisha Yadav

INTRODUCTION:

Sport is that social phenomenon that has existed from a very long time in all levels of society. It represents the country’s culture and affects people’s lifestyle, health, values, social status, country’s relation, fashion trends, etc.

It is a type of game or contest where people get involved and perform physical activities to compete against each other following definite rules and regulations. Cricket, football, basketball, and volleyball are played by the number of people in different parts of the world.

The sport has now taken the industry’s shape from the last few decades to which we often called the Sports industry. It is a market with an economic dimension, which offers products, services, places and ideas related to sport, fitness or leisure time to its consumers[1] which also involves people, organizations and businesses who facilitate, promote, and organize activities and events based on sports.

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Contract in the Sports Industry:

Sports Contracts are similar to those contracts we come across in our everyday life; they are the mutual agreements that legally bind two or more parties.

Generally speaking, the sports industry’s Contract occurs between the sports organization/sports Agent and player/Athlete.

It defines the rights and responsibilities of the various participants in the business of professional sports.[2]

All the sports contracts are express in which parties give their consensus by words either spoken or written to enter into the Contract by way of offer, acceptance and consideration in Contract. Virtually, in sports contracts, implied contracts are not considered as a real contract as its very hard to prove the implied Sports contract.

Apart from offer, acceptance and consideration, an athlete’s capacity, mutual agreement, mutual obligation and subject matter are the essential ingredients in forming the sports contract. If the athlete is an adult, he can sign the contract, but his legal guardian must sign the Contract if the athlete is minor.

In India, Sports Contracts are governed by The Indian Contract Act, 1872, and The Industrial Disputes Act of 1947.

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Following are the considerable areas/ subject matter in which sports contracts takes place[3]:

  • Endorsement and merchandising Contract
  • Contract of Sponsorship Rights
  • Contracts between Player and managers or Agency contracts.
  • Deal of Membership rights in sporting clubs or organizations.
  • Contract of Image rights
  • The contract for appearances by players
  • Contract of Participation Rights and Obligations.
  • Presenter’s Contract
  • Contract of sale of media rights with event managers, Broadcasters and promoters.
  • Endorsement and merchandising Contract
  • Contract of Player transfer
  • Contract of Brand rights.

Player-Agent Relationship:

The player-Agent relationship is significant in sports contracts, as the player is sometimes so occupied in his sports that he doesn’t get time to negotiate Contract and handle everything. Sometimes the player faces difficulty in understanding terms of the contracts too. In that scenario, the player needs a person to trust, who can look and manage a player’s commercial relationships.

Player: Player is a person who actively participates in any sports requires endurance.

Agent: A agent is a person who carries a fiduciary relationship with the player in which he serves a significant role in negotiating contracts of the professional player and handles finances and public relations.

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TYPES OF SPORTS CONTRACT:

Professional Service Contracts: These contracts are also known as standard player’s contracts. These contracts are usually in a “boilerplate” form. The boilerplate form is the standardized forms in which standard or generic language is used.

These boilerplate forms are used where a state of Contract that can be reused in a new context without having any substantial changes in it.[4] Thus, the wording of these contracts can be used again and again without any alteration or reformation. If a professional athlete is part of a team, usually the athlete receives a standard player’s contract.[5] Hence, the professional service contracts are the same for all the athletes except the differences in salary and athletes’ bonus and involve an employer-employee relationship. Furthermore, these contracts also leave the scope of modification that can be modified by introducing collateral agreements.

Endorsement Contracts: Endorsement contracts are the independent contracts which do not require employer-employee relationship. An endorsement contract is one that grants the sponsor the right to use (i.e., license) the athlete’s name, image, or likeness in connection with advertising the sponsor’s products or services.[6]

Appearance Contracts: The appearance contracts are those contracts which pay the player/athlete for his/her appearance in any public event of any organization, institute or company by way of Contract. Thus, it is a contract between the venue and the athlete. It includes Sports camp, sports tournament etc. It sets out the time and dates for the appearance of an athlete on the venue location.

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Besides, if under any of the kind of contract, the contracting party extends beyond the scope of the terms of the Contract, under section 27 of the Indian Contract Act, 1872, i.e., restraint of trade, it would be void and not enforceable.[7]

CLAUSES COVERED UNDER THE CONTRACT:

Title: Its always essential that there should be a title of the Contract, through which one can identify the very nature of the Contract.

Information Clause: Under this clause, the information of the contracting parties is mentioned. Such as the name and address of the parties to the Contract. It also includes the information that on which date the Contract was made.

Player services Clause[8]: What type of service provided by the player is being discussed under this clause.

Player obligations Clause: This clause contains the obligations of contracting parties towards each other. It elucidates the rights, duties and responsibilities of the parties.

Term clause: This clause specifies the Contract’s duration—the time of Contract from the beginning to the end date. After completing the due date, the Contract automatically terminates, although it is subject to the renewal option of Contract to the parties.

Revenue-sharing Clause: If any organization or a company is hiring the player on the promise of sharing revenue, this clause discloses the information about the percentage and related details shared between the parties to the Contract.

Bonus Clause: This clause states that the player would get a bonus amount on his/her exceptional performance in sport.

Arbitration Clause: This clause expounds that if any dispute, controversy or any claim arises or if the issue related to breach of contract, non-performance or interpretation of Contract occurs then in that case, the matter will be resolved by the arbitrator on request of any of the parties. If parties do not agree on an arbitrator in any case, then in that scenario, both the parties will select one arbitrator. Then both the arbitrators shall select a third, and then the third arbitrator shall arbitrate the dispute.

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Board, lodging, and travel expenses Clause: 

This clause deals with the board, lodging and travel expenses of the player. It states that all the costs mentioned above will be borne by the club or organization hiring the player.

Choice of Forum Clause: Under this clause, the choice of law is mentioned through which contracting parties would like to govern, construe and enforce the Contract. As most of the sports contracts affect the parties belongs to different states, choosing a common law or jurisdiction can save parties from any further jurisdictional issues.

Remuneration and other benefits Clause: This clause states the player’s remuneration for his services.

No-Tempering Clause:  A no-tampering clause which avers that one player cannot attempt to entice another employee to enter negotiations with another club while under Contract to a different team.[9]

Confidentiality clause: Most contracts come with the confidentiality clause; certain things need to be confidential between the contracting parties only. Therefore, under this clause, contracting parties agree to keep the Contract’s contents and related matter confidential. This clause binds the parties to the Contract even after the termination of the Contract.

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Player restrictions/Hazardous Activities Clause: Under this clause, the player agrees that during the duration of the Contract the player will not engage in any other sport or any activity which can involve the substantial risk of any personal injury or which can impair the skill of the player in his sport. Apart from that, this clause contains other restriction on the player by the organization or club for the effective enforcement of the Contract. If the player breaches any of the rules and regulation mentioned under the clause or if the player becomes injured as a direct result in taking part in the given activity, the team/organization can transfer the financial risk onto the player.[10]

Non-assignment Clause: Sports contracts are personal services contract, and therefore it cannot be assigned or transferred to any other person, firm, corporation, or other entity without the prior, express, and written consent of the other party.[11]

Termination Clause: A termination clause gives the right to the contracting parties to terminate the sports contract. Commonly, it is based on the failure of the parties’ performance, breach of any material condition, warranties, or the express agreement. Furthermore, in most cases, the contract is terminated because the player is no longer fit for the sport or cannot meet the team’s need.

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Usually, the party seeking to terminate the agreement must give the other advance written notice of his intention to terminate the Contract. As long as the party seeking to terminate the Contract complies with the notice provisions, termination of the Contract is permissible.[12]

Remedies Clause: A breach of Contract can be remedied through monetary damages, restitution or specific performance. Although, the parties seek for the remedial measures which were promised under the clause.

These were the few clauses present in almost every sports contract; there are some other clauses whose inclusion mainly depends on the nature of the sports contract.

CONCLUSION:

In India, the sports industry is at its boom. There are so many sports contracts that are signed every day in this industry. It is quintessential that the contract drafter should take exceptional care while drafting the policies, procedure and clauses under the Contract. Because it prevents the parties from any predicament.

But, it’s so sad that due to lack of proper sports law, Indian sports industry witnesses scandals and unfair dismissal of players. Today, there is a dire need for the introduction of sports legislation. Because it’s the only ray which can address this situation and bring fairness in this industry. Thus, for the Indian sports industry’s consistent growth, a healthy balance in the enforcement of Contract is required.

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[1] IGI Global, What is Sports Industry, IGI Global, https://www.igi-global.com/dictionary/concurrence-of-sports-and-entertainment-industries/43855 (last visited on Jul., 17, 2020).

[2] Avinandan Chattopadhyay, Regulation and Liabilities of Parties in Sports Contract, Social Science Research Network, file:///C:/Users/HP/Downloads/SSRN-id2145520.pdf (last visited on Jul., 17, 2020).

[3] Farleys: Solicitors LLP, Sports Contracts and Agreements, Farleys, https://www.farleys.com/solicitors-for-you/sports-law-for-individuals/sports-contracts-and-agreements/ (last visited on Jul., 19, 2020).

[4] James Chen, Boilerplate, Investopedia (Sep., 03, 2019), https://www.investopedia.com/terms/b/boilerplate.asp.

[5] US Legal, Sports Contracts – Basic Principles, US Legal, https://sportslaw.uslegal.com/sports-agents-and-contracts/sports-contracts-basic-principles/ (last visited on Jul., 19, 2020).

[6] Supra note 6.

[7] Supra note 3.

[8] Anirudh Rastogi and Vishak Ranjit, E-Sports Player Contracts: Common Clauses And Potential Legal Issues In India, Ikigai Law: Mondaq (Jun., 18, 2020), https://www.mondaq.com/india/gaming/955392/e-sports-player-contracts-common-clauses-and-potential-legal-issues-in-india.

[9] Supra note 2.

[10] Adam Epstein & Josh Benjamin, Unique Clauses in Sport Contracts, Sh10an: WordPress, https://sh10an.wordpress.com/2015/04/11/unique-clauses-in-sport-contracts/ (last visited on Jul., 19, 2020).

[11] US Legal, Drafting Suggestions for A Sports Contract, US Legal, https://sportslaw.uslegal.com/sports-agents-and-contracts/drafting-suggestions-for-a-sports-contract/ (last visited on Jul., 20, 2020).

[12] Roshan Gopalakrishna & Vidya Narayanaswamy, Sponsorship Contracts – Reasonableness of Contractual Restraints, The Sports Law and Policy Centre (Feb., 10, 2011), https://sportslaw.in/home/2011/02/10/sponsorship-contracts-reasonableness-of-contractual-restraints/.

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Analysis of Insolvency and Bankruptcy Laws in USA, UK and UAE

By: Anant Tyagi

Earlier, the Insolvency and Bankruptcy law was not very clear in UAE and was very divided into various areas, resulting in complexity and confusion. After 2016 the new bankruptcy law has been created with the strong base to resolve any insolvency issues that the businesses face to protect. The bankruptcy law 2016 was established under commercial companies law to aid enterprises to which range under the small and medium-sized companies based in UAE and are facing economic challenges. The features of the bankruptcy law are as follows:

  1. Financial Recognition

The act aims to boost the concept of Financial restructuring by establishing a regulatory body known as the committee of financial reconstructing. A list will approve this particular committee’s role of experts who are well-versed in bankruptcy and financial reorganization to carry on the task.

  1. Composition

Under the new bankruptcy law, composition approaches are also available to assist the debtor in settling with the creditor. It is up to the creditors to accept the settlement or any part payment. For this arrangement to be possible, a condition must be fulfilled, stating that a debtor must not have stopped payment for more than 30 consecutive days. When the debtor makes an offer of composition, it is submitted to the court, which appoints an expert to analyze whether the composition of finance is sufficient or not.

If the offer of competition is accepted, the court will select an official in charge who will prepare a record of debtor’s creditors to submit to a court. Any composition has to be passed by most creators, which is equal to two-thirds of the debt and equally approved by the court.

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  1. Restructuring and bankruptcy

This particular part of biography law 2016 deals with the restructuring process by aiding the debtors in applying for affection plan for a bankrupt business. It also provides for declaring the bankruptcy to fulfil the obligations. Either of debtor or creditor can request for the commencement of the bankruptcy process. It is required that bankruptcy should be declared within 30 days by the debtor.

When the court accepts the application, the official is selected for selling and reconstruction of business. Insolvency and bankruptcy code process of liquidation starts, the secured creditors are given more preference in the rank than ordinary creditors.

  1. Bounced cheques

Under the UAE law, any non-UAE national person signatory to a bounced cheque faces potential criminal liability. Similarly, in bankruptcy law penal provisions are to be stopped if it is proven that specified check was issued before the commencement of composition/ restructuring. The cheque amount will be added to the total debt of the debtor.

  1. Penalties

The complaint of the new bankruptcy law 2016 has to be backed by a variety of available penalties. The penalty aims to provide both imprisonment and substantial financial fines.

With the help of the new bankruptcy law that gives ample options to bypass bankruptcy, which earlier had a severe penalty for companies going through a bankruptcy is a welcome step in insolvency and bankruptcy. The new is debtor-friendly and provides a way for the companies to repay their debts while continuing the business instead of the older laws that forced companies to shut their operations completely whenever any financial difficulty arose. This law will encourage companies from around the world to enter the UAE market.

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“A new law called corporate information insolvency, and governance act 2020 has been introduced by the United Kingdom with major reforms like “free-standing moratorium” and New Restructure plans. Under the new law, free-standing Moratorium will aid the companies to take shelter from creditor’s action. Under the insolvency and bankruptcy code 2016, whenever a company goes into the Moratorium period, distributor action save the company is not predetermined. Under the new law, free-standing Moratorium will ensure that a company can choose the company’s rescuing. The company is not forced to stick to the formal process, but if there is an informal process to rescue the company, it can even be used. Moratorium period is time-based to ensure that no misuse is taking place and the Moratorium is cancelled if it is final that a company cannot be rescued.” [1]

“Another form that has been introduced under the CIGA is the restructuring plan. The act had introduced a process in which the restructuring plan between the company and creditor required the creditors to vote and sanction the court. However, the cross-class cram-down method has been mentioned that states that the court has the power to give a plan sanction, it requires even if the majority of the class is against it.” [2]A restructuring plan can be approved by the court even if all the creditors are against it if the court feels that the creditors would not be worse off with the suggested Restructure plan than when no Restructure plan was approved.

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The cross-class cram-down method’s possible effect is that the companies will have more flexibility whenever they are proceeding with the restructuring plan even in those situations where the consent of all creditor classes cannot be obtained. But this method also has its challenges because it is mentioned that the court can overrule the descending creditors and sanction the plan if they feel that under the proposed restructuring plan they would not be worse off if no restructuring plan was approved. It burdens court with the responsibility of doing valuations, which is very contentious because a market valuation keeps changing according to the market forces. With the new covid crisis, it will be very problematic for the courts to assume the economic market’s evaluation and outcomes.

One of the significant reforms is that earlier whenever the company was going through financial difficulties and bankruptcy process, the company’s supplier would always seek to get out of the contractual obligation and sever ties with the company rendering the company without any support. The present act will now prohibit the supplier from terminating the contract with the company when it goes into the restructuring plan. The company can focus on paying back their debts and keeping ongoing their business instead of just closing everything down.

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The United States of America constitution has provided the US Congress with the power and authority to enact the laws of bankruptcy in the country. While exercising their power and discretion, the lawmakers passed the bankruptcy Reform Act of 1978 which has largely governed the country’s current bankruptcy law’s bankruptcy issues. The United States bankruptcy code is also referred to as tight 11. It contains the business and individuals’ procedure and practices to follow whenever they are filing for the bankruptcy under the United States Bankruptcy court. Under the US bankruptcy code, both companies and the individuals are allowed to file a bankruptcy petition and seek relief. The most common form of bankruptcy in the United States is mentioned in chapter 7, which also covers the liquidation process. The court appoints the trustee, and the trustee must collect all the non-exempt assets of the debtor.

When the creditors come to know about the company’s condition, it will force a company to file for bankruptcy. Still, apart from the UK and UAE law, the day the petition of bankruptcy is filed in the court, the business will cease to exist. It is up to the court-appointed trustee whether he allows certain operations of the company or not. When it comes to large companies, the trustee may decide to sell the company’s property loss-making division to another flourishing company. The preference is given to the secured creditors, usually the first ones to be paid back. As mentioned before, the US bankruptcy law provides for companies to file bankruptcy and offers individuals to file for liquidation in which they are allowed to keep specific exam properties, but it varies from state to state. The trustee will sell the other assets which are not under the exempt class to pay back the creditors. In the 2005 bankruptcy abuse prevention and Consumer Protection Act, an amendment was made that barred consumer debtors filing bankruptcy because it was felt that this provision would be misused by the credit card companies from losses, resulting in the customers going bankrupt. The act also provides for cross border insolvency state code incorporate with foreign courts to solve cross border insolvency cases. United States of America’s bankruptcy code is one of the oldest coats and is still prevalent without any new law being drafted in present time.

As we can see that the UAE bankruptcy laws for very old and had regressive laws with penal provisions which decided the companies from investing in UAE or any running companies in the UAE. Still, with the new law, they have provided a well-defined process to form restructure plans while running the business remove regressive penal punishments which is a welcome step and encourages the companies to continue their business while also returning the amount in debt instead of just punishing the people running the company and suffering Loss which is the ultimate goal of insolvency and bankruptcy laws.

“On the other hand, the United Kingdom has also introduced a new law for the information c and governance by giving major reforms like a free-standing moratorium that gives the company the freehand to determine the course of action which helps to rescue the company instead of just following the formal procedures and not getting any result. The UK has also given major power to the court to bypass the creditor’s Ascent for the restructure plan in case a court feels that this is the best records available for the company and is being blocked by the creditors for their greed of larger returns which will further worsen the situation.” [3] Meta reforms have also been provided by the act to ensure that the business does not close down and keep ongoing.

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The bankruptcy code of The United States of America probably the oldest but the most reliable piece of legislation for dealing with insolvency but no significant amendments in the laws has made it behind the other laws. While the other laws understand the concept that that can only be paid when the company keeps on running the US law focuses on shutting down the company the day the petition of bankruptcy is filed which is a very regressive step because are not only the chances of getting the debt go down but also the economy suffers when the company closes down and incoming times the US government has to bring amendments to resolve this issue.

[1] corporate information insolvency and governance act 2020 by Andrew Mills and Paul Durban

[2] Pricewaterhouse coopers guide on UK Insolvency and Bankruptcy reforms

[3] Bankruptcy Reform Act of 1978

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Competition Law Issues in the Fashion Industry

By: Cheshta Tater 

When one thinks of the fashion industry, the first words which come into one’s head are “designer wear” and “exclusivity”. A small consumer share but a considerable revenue and profit share of the fashion industry comprises luxury fashion.[1] Luxury fashion thrives on exclusivity and brand value and is always a status symbol, never a need. Given its exclusive and expensive nature, one cannot help but wonder how it rarely ever comes under the lens of the Competition Commission of India (“CCI”) or any other anti-trust regulatory body.

The objective of competition law is to create a healthy market environment by protecting and balancing the interests of businesses, consumers, and the economy. Lower but competitive prices allow consumers to make informed decisions about the substitutive products they wish to purchase while ensuring that no business abuses its dominant position. However, in the luxury sector of the fashion industry, the prices of products are always sky-rocketing. The much affordable products can not substitute them since the cost of a product, and its brand carries high social standing value, and are often one of a kind.

In the past few years, there have been several mergers and acquisitions in the luxury fashion sector worldwide, leading to a few dominant players. However, none of them has come under the beat for violating provisions of competition law. Through this article, the author would elaborate upon regulatory authorities’ findings regarding the monopolies present in the luxury sector. After that, the intersection of Intellectual Property Rights (“IPR”) and Competition Laws concerning the fashion industry. Lastly, the author would present their views on the necessity to check on the dominant players in the luxury and high fashion sectors.

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  1. Escaping the Watchdogs

The 1990s saw the boom of luxury fashion houses as well as fast fashion houses across the globe. With India’s globalisation in 1991, these brands became household names for the affluent and aspirational products for the middle class. One such brand was “Louis Vuitton”, the first label of the world’s largest luxury fashion group, LVMH.[2]

Since 1987, LVMH has acquired many luxury labels, both within and outside the fashion sector. Today, the group owns 75 luxury houses[3] in the industry of, inter alia, clothing, cosmetics, bags, watches, wines and spirits, and perfumes. In 2000, the joint acquisition of the fashion house Prada by LVMH and Fendi was approved.[4] The European Commission allowed for such a merger since these companies’ market share did not exceed the 25% limit.[5] Even though the 25% mark was crossed in the luxury handbags sector and leather accessories, the Commission chose to look at the luxury sector as a whole rather than dividing it into segments such as luxury clothing, luxury handbags, and luxury wines, and the likes.[6] The Commission believed that despite the merger, the parties would not be a dominant player in the market,[7] and the same was reasoned by stating:

  • Luxury items have low to no substitutability with other similar but non-luxurious products[8]; and
  • The purchase of a luxury good is linked to prestige rather than consumption of a specific item,[9] indicating that one luxury label’s product can not be substituted by a similar effect of another luxury label.

The goodwill, brand name, and the trademark value of a luxury fashion group is the most significant factor in deciding the cost of its goods and its worth as a status symbol. The intersection of IPR and Competition law is discussed in the following segment. This will help understand the exorbitant prices and the Commission’s reasons behind allowing the joint acquisition.

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  1. The intersection of IPR and Competition Law

IPR refers to a bundle of rights which give the owner the right to exclude others from accessing the product, subject to a limited period, i.e., it aims towards providing a sort of monopoly to the owner of the said invention by giving them the sole right to use or distribute it. On the other hand, Competition Law strives for the exact opposite and actively works towards a non-monopolistic market. Hence, a tussle arises between the two–which while talking of similar subjects, are complementary to one another in nature in certain areas and balancing them is essential for having a near-perfect market.

The denotation of ‘competition’ in the IPR and Competition Law are contextually different. The primary objectives of granting IPR encourage fierce competition among the intending innovators and simultaneously restrict the competition in many ways. At the end of the specified duration, the rights go to the public domain ending the completion. The objective of Competition Law is to prevent abusive practices in the market, promote and sustain competition in markets and ensure that the consumers get the right products at a reasonable price and better quality.[10]

While competition in IPR is reward-based, it aims to regulate and eliminate the unfair advantages wielded by monopoly holders in Competition Law. Competition Law also does not recognise the concept of right, while IPR on the other hand, by way of competition, allows for exploitation of rights, albeit in a restricted manner. However, in both, the basic concept of competition is the main driving force of respective legislation. While it may seem that the objectives of both are poles apart, somewhere down the line, their ultimate goals are the same, i.e., to achieve consumer welfare.

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When it comes to luxury fashion, a dire need is seen to strike a balance between the two laws. While IPR is essential to luxury brands as more than anything, it is the brand’s uniqueness, which makes it a luxurious one. For example, it is the red sole of Christian Louboutin’s, which attribute them their high value. The principles of IPR must remain intact to promote innovation and cater to the public who may value uniqueness as an important factor while purchasing. For the same, evils such as Counterfeiting must be avoided and actively punished not to bring down the value of said luxury brands and in the background, the importance of innovation.

However, it is also crucial that these exclusive rights do not turn into Monopolies which in turn do not just turn exploitative to other producers, but are also unfair to the consumer as because of this exclusivity, not only can be charged exorbitant prices for said ‘unique products’, but also result in lesser variety for the consumer to choose from. And hence, the balance between Competition Law and IPR needs to be struck perfectly to neither take away from the Innovators and Owners, but also not hamper the consumer.

  • Bring them under the lens.

As discussed earlier, luxury brands are known for their exclusive goods and sometimes, even their exclusive customers. A luxury handbag label, Birkin, is so exclusive that bags aren’t available in retail stores and only a very few loyal customers are even offered to purchase a Birkin handbag.[11] This exclusivity of the brand and its reflection lies in the originality and sophistication of the product’s creation, the qualitative level of the materials used, and the products’ marketing.

Considering such exclusivity of the brand and its goods, presupposing luxury products’ interchangeability does not set a good precedent. For instance, no other label’s handbag is at par with a Birkin bag when it comes to exclusivity and status. As established earlier, luxury products are not purchased for their utility but their reputation. Even a product of the same fashion house cannot replace the more exclusive product at such a point. Taking the example of Birkin, a Birkin bag cannot be substituted by a bag of Hermès, which is the parent company of Birkin. Their cost indicates the same. While the cheapest Hermès bag sells for $540, the cheapest Birkin doesn’t trade for anything less than $12000.[12]

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Suppose the interchangeability of luxury products cannot be presumed. In that case, the entire luxury market cannot be created as a single competitive space, i.e., a more transparent and distinct division of products is necessary to correctly evaluate competitiveness and dominance in the luxury market. Wines and bags cannot be created in the same market. Once distinct relevant market needs are defined, it will be apparent that LVMH is a dominant player in two sectors: luxury handbags and luxury leather accessories.[13] The pertinent question in competition law now arises: Is this dominant position being abused?

In LVMH’s case, it is crucial to understand that the group owns 75 brands, many of which are “must-have” goods for retailers, i.e., an essential product that retailers have to stock and display to meet their customer’s requirements.[14] This leads to lower bargaining power in the hands of the retailer so that they have to stock more from the house, apart from the most-have. In turn, this leads to the absence or reduced presence of other dwellings in such a boutique because the retailer only has so much capital to invest.

Companies are free to enter the market in a competitive market to compete with existing players, without immediately devoured by more powerful rivals. It is becoming difficult for existing players to compete with LVMH; one can only imagine how new players will be slaughtered in the market. LVMH’s turnover of 53.7 billion euros in 2019 marked its dominance as the strongest player in the luxury market. Gucci, the second-largest luxury fashion house, has still not reached the 10 billion euro turnover landmark.[15]

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The numbers speak for themselves, indicating that the abuse of a dominant market position is not always active but is passive. If too much emphasis is placed on active abuse, there may be a risk that the market’s actual situation and concerns are overlooked.

[1] McKinsey and Company, The State of Fashion 2020 (2020) <https://www.mckinsey.com/~/media/mckinsey/industries/retail/our%20insights/the%20state%20of%20fashion%202020%20navigating%20uncertainty/the-state-of-fashion-2020-final.ashx> 90-91

[2] Deloitte, Global Powers of Luxury Goods 2019: Bridging the Gap between the Old and the New (2019) <https://www2.deloitte.com/content/dam/Deloitte/ar/Documents/Consumer_and_Industrial_Products/Global-Powers-of-Luxury-Goods-abril-2019.pdf> 15, 42

[3] LVMH, Houses, <https://www.lvmh.com/houses/#:~:text=LVMH%20is%20home%20to%2075,exquisite%20caliber%20of%20its%20products.&text=Our%20group%20of%20wines%20and,no%20other%20in%20the%20world> last accessed 22 December 2020

[4] Commission approves joint acquisition of Fendi by LVMH and PRADA (European Commission, 26 May 2000) <https://ec.europa.eu/commission/presscorner/detail/en/IP_00_535> last accessed 22 December 2000

[5] Commission of the European Communities, LVMH / PRADA / Fendi (2000) COMP/M.1780 [16]

[6] ibid

[7] ibid [22]

[8] ibid [11]

[9] ibid [10]

[10] Shubhodip Chakraborty, Interplay Between Competition Law And IPR In Its Regulation Of Market (Lawctopus, 15 November 2015) <https://www.lawctopus.com/academike/interplay-competition-law-ipr-regulation-market/#:~:text=Intellectual%20Property%20Rights%20(IPR)%20consists,adverse%20effect%20on%20the%20market> last accessed on 23 December 2020

[11] Sarah Lindig, This Iconic Bag is Still the Most Exclusive in the World (Harper’s Bazaar, 14 June 2015) <https://www.harpersbazaar.com/fashion/trends/a11201/hermes-birkin-bag-most-exclusive-in-the-world/> last accessed 22 December 2020

[12] Hermès <https://www.hermes.com> last accessed 23 December 2020

[13] LVMH / PRADA / Fendi (n 6)

[14] Commission of the European Communities, Coca-Cola/Amalgamated Beverages GB (1997) IV/M.794 [136-138]

[15] George Arnet, Gucci on Track to Hit €10 Billion in 2020 (Vogue Business, 26 April 2019) <https://www.voguebusiness.com/companies/gucci-sales-reach-euro-10-billion> last accessed 24 December 2020

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Impact Of Covid-19 On Foreign Direct Investment and Related Laws

By Deepakshi Aeran

ABSTRACT

Covid-19 has locked up the world over. For such a deadly virus, not a single nation is safe. This condition is not the first time in the world. Earlier world encountered this form of deadly virus known as “influenza / Spanish flu” in 1918. After battling and coming out of that situation after 100 years, here stands a new challenge in front of the world. The question is that how this crisis has turned out for various nations. Covid-19 has hit the nations hard irrespective of it being a developed or developing ones; in every aspect possible. Stock markets have plummeted and many companies have to struggle with the economic damage. There is a great deal of uncertainty in global chains.

This article aims to bring light on how the pandemic has affected the Foreign Direct Investments and how governments are handling the havoc to come out of it with minimal damage, and may be taking some advantages for future.

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INTRODUCTION

Over the years, every nation government is altering their policies with respect to Foreign Direct investment[1] to improve their economy and to enforce condition on their achievement. The Emerging trend of increasing Foreign Direct Investment is too focused on the national safety concerns, for example last year UK government involvement was in the future contract between Advent International and Cobham plc.

In recent years, countries such as the United States have interfered in proposed foreign direct investment (FDI) transactions to resolve national security issues, with a particular focus on China. The Covid-19 pandemic not only impacted on healthcare and critical infrastructure from an FDI viewpoint, but also undermined companies in other sectors and made them easy targets for creditors and opportunistic buyers[2].

Furthermore, due to Covid -19 many countries have amended their foreign direct investment polices to control or to protect their economy. Companies those who are interested in multinational business they have to be aware of these new polices

Similarly, the article further deals with how various countries are working out with their policies and guidelines, like EC, UK, AUSTRALIA, INDIA etc.

EUROPEAN UNION

Just at beginning of April 2020, Germany adopted legislation that would allow regulatory authorities to examine whether the acquisition would lead to a likely disorder of public order or security (instead of a real threat to public order or security). While this amendment was recommended prior to the spread of Covid-19, Germany also proposes to raise the number of sectors in which FDI will require a primary focus, a move that appears to be driven by the pandemic.

Spain[3] has also formally introduced a provision for prior governmental approval for:

  • Non-EU investors purchasing 10% or more of or gaining management rights in or controlling Spanish companies engaged in sectors such as telecommunications, data processing or storage, electoral or financial infrastructure and sensitive facilities, vital technologies and dual-use products (such as robots and semiconductors, as well as biotechnology) supply of key contributors (such as raw materials and food safety) and sectors with access to or ability to monitor sensitive information;
  • Foreign direct investment where the investor is owned explicitly or implicitly by the government of another country.

Italy – one of the worst impacted by Covid-19 – has also extended the scope of sectors in which FDI would require a prior government inspection.

Prior to the pandemic, there was a growing propensity for the Italian Government to use its powers to review the FDI. However, on 7 April 2020, the Italian Government dramatically expanded its authority, both to new sectors and to sectors already subject to the FDI rule.

Specially, prior approval is now needed for acquisitions of 10% or more by non-EU-controlled investors in new sectors – banking, insurance, food and health. The inclusion of health (and likely insurance) as a strategic field seems to be a necessary reaction to the pandemic. It is interesting that these tougher guidelines have also been applied to EU-controlled investors by the end of the year.

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The French FDI regime has already been greatly improved by introducing the pre-planned changes that followed the pandemic. These wholesale amendments took effect on 1 April 2020 and, in short, expanded the spectrum of investment protected by the scheme, increased the list of strategic sectors to which the scheme applied, required substantive details to be given for approval, and increased penalties for non-compliance.

However, it was announced on 28 April 2020 that France would reduce the control limit for acquisition of non-European investors’ share capital of strategic French listed companies to 10% by the end of the year (against 25% at present).

This represents a major step-change from the pre-1st April 2020 regime by further restricting the control threshold, which was reduced to 25% just a few days earlier by the pre-planned reforms previously mentioned.

The whole reform comes in the sense of the French Government’s declaration of its intention to shield national companies from the danger of overseas takeovers during the COVID-19 crisis. Moreover, the French government has recently highlighted its comprehensive use of FDI powers in barring the acquisition by the US Teledyne of the French company Photonis (which develops applications for military use) – although the decision was not linked to COVID-19, it nevertheless represents a significant milestone.

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UNITED KINGDOM

The National Security and Investment Bill was released in the Queen’s Speech on 19 December 2019. The latest legislation follows the introduction of an EU system that would replace the current powers of the UK Government to deal with mergers and acquisitions under the Enterprise Act 2002.

The UK government will have power to “scrutinise investments and consider the risks that can arise from hostile parties acquiring ownership of, or control over, businesses or other entities and assets that have national security implications.”[4]

New powers apply to transactions in any industry, irrespective of the profitability or market share of the parties. The United Kingdom Government’s proposals are currently lacking in detail, but appear to build on those set out in its 2018 White Paper, which was included in the Advent / Cobham Agreement Warning. The three main components of the proposed law are as follows:

  • A notification system allowing businesses to flag deals with potential security concerns to the government for quick, efficient screening.
  • Powers to mitigate risks to national security – by adding conditions to a transaction or blocking as a last resort, plus sanctions for non-compliance with the regime.
  • A safeguarding mechanism for parties to appeal where necessary.[5]

AUSTRALIA

Given that Europe was declared to be the epicentre of the Covid-19 pandemic in March, the above-mentioned steps may have been anticipated. However, countries in other continents have also taken serious measures – for example, Australia has temporarily amended its FDI legislation with effect from 29 March 2020 in the national interest to deal with the economic implications of the spread of Covid-19, Following which all potential foreign investments subject to the Foreign Acquisitions and Takeover Act 1975[6], where the other requirements for notification are met, would now require prior regulatory approval, irrespective of size or existence of the foreign investor.

A number of temporary but substantial changes to the Australian FDI system were announced on 29 March 2020. The Australian Government described these steps as “important to safeguard national interest as the outbreak of coronavirus exerts intense pressure on the Australian economy and businesses” and thus indirectly recognised the possibility of taking over the troubled Australian economy. These adjustments effectively make all FDI subject to review for the duration of the pandemic by reducing the financial criterion for review in terms of target valuation to AUS$0.

This represents a significant constriction of the system, especially when combined with the already relatively low cut-off for review (20 per cent or lower in some cases). Moreover, this is a particularly significant change for investors from countries that have free trade agreements with Australia (such as the USA) – those investors may initially benefit from a criterion of approx. AUS$1.2 billion for investments in some (non-sensitive) industries.

The Australian reforms are thus broadly extended to all international investors (to the possible advantage of domestic investors) and are in contrast to the more focused approach adopted in Spain, France and India.

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THE UNITED STATES OF AMERICA

In response to COVID-19, the United States Government has not proposed any new restrictions on foreign investment in U.S. companies or any amendments to the authority of the Committee on Foreign Investment in the United States (CFIUS), an interagency government committee approved to investigate such transactions involving foreign persons.

However, as a consequence of defaults on loans, debt restructuring and investment opportunities, the pandemic may put those forms of lending transactions into the public eye of the CFIUS review that would otherwise normally escape scrutiny.

In addition, international investors seeking opportunities in this environment should be conscious that investments made under the aegis of lending or funding transactions that still be subject to transactions or investments protected by the CFIUS assessment[7].

INDIA

The trajectory of history is always influenced by unpredictable shocks, and the outbreak of COVID-19 is one such epoch-defining occurrence that restores international trade order and global supply chains. In the framework of multinational firms, in particular Multi-National Corporations (MNCs), trying to hedge potential output shocks, India has emerged as a promising and significant alternative link in the current global supply chains. The larger geopolitical scenario, India ‘s liberal FDI policy, the government’s sectoral and institutional reforms, both at central and state level, and India ‘s wide and greater than the mean consumer market are among the many factors that underscore India ‘s attractiveness as an FDI destination.

In India, the development of the manufacturing sector has been largely hampered by the legacy of property, labour and logistics, the most critical factors of development. The Government is building a land pool of about 461,589 hectares for new projects, dramatically reducing transaction costs for investors. India is also pursuing wide-ranging reforms on labor issues. Reforms in these crucial factors of production have opened up several opportunities for foreign investors to invest in India by sending out positive signals.

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Creating a strong base is a sine qua non for the growth and stability of the manufacturing sector, and investment in the sector needs to expand significantly to the maximum. A good reward system is known to be effective in channelling new investments. Recently announced production-linked incentive schemes for cell phone manufacturing, pharmaceuticals and medical devices have created a high level of interest among investors attempting to steal opportunities in these sectors. These schemes were developed with the intention of creating scale and size, with vertically integrated units, in the Indian manufacturing sector. Similar, initiatives for other sectors of strength are underway, and once unveiled, these schemes would further improve India ‘s position as a feasible alternative to China[8].

India is among the most liberal FDI policies in the world, where foreign investment of up to 100 per cent is allowed on an automatic basis in most sectors of the economy.

Foreign investment in only a few economic sectors is subject to limits on approval conditions or foreign investment ceilings. The number of sectors that are not open to FDI is small, and there are only a few industries, such as agriculture, where foreign investment is only approved for a restricted set of activities.

In addition, in the recently launched ‘Atma Nirbhar’ scheme[9], the honourable Finance minister launched a range of FDI related reforms. A declaration of an rise of up to 74% in FDI investment in the defence manufacturing sector is reflective of the government’s positive intention in the sense of FDI.

Over the period, the liberal FDI policy framework has helped India reap benefits of a greater inflow of foreign investment, which has risen faster than the country’s GDP growth rate. India’s GDP was $479 billion in 2001, and it is now $2.72 trillion. Around the same time, FDI inflows in India increased from $4.03 billion to $73 billion[10].

It is said that opportunities lie in adversity India is trying to leverage its plan to drive economic growth with a powerful manufacturing engine fuelled by rewards to attract FDI, and a wide domestic market. Moreover, with a renewed drive for changes, India is signalling pathways to the world that we welcome businesses.

CONCLUSION

The changes and developments made by various countries highlight the need for investors to carefully consider foreign investment. There may be many more changes and additions to the FDI policies to come and what restrictions we see is might be just the tip of an iceberg. Countries are posing restrictions and along with it trying to protect their economic and national interests as the virus is continuously spreading.

FDI is a major part of every economy and Covid-19 has really shackled the economies to the core. It is important for the nations to protect the domestic markets before focusing on foreign investments. And therefore, it is possible that other countries also impose barriers to its FDI, may be stricter, in long term in order to navigate through the storm.

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[1] OECD (2008), Benchmark Definition of Foreign Direct Investment, 4th edition, www.oecd.org/investment/fdibenchmarkdefinition.htm

 

[2] https://taxguru.in/finance/corona-impact-indian-economy.html

[3]Royal Decree-Law 8/2020, 17 March 2020: https://www.lexology.com/library/detail.aspx?g=177aae39-e8f4-4916-912c-5d5f758f1367

[4] Available at, https://www.lexology.com/library/detail.aspx?g=b6dbafd1-2b1b-4610-9260-ebf535b834a6

[5] Available at, https://www.mayerbrown.com/en/perspectives-events/publications/2019/11/uk-government-remains-committed-to-adopting-new-national-security-review-legislation

[6] Available at ministers.treasury.gov.au.

[7] Available at, https://www.reedsmith.com/en/topics/coronavirus-covid-19-resource-center-need-to-know-business-legal-issues

[8] Available at, https://www.mondaq.com/india/financing/923078/covid-19-impact-government-of-indiaamends-foreign-direct-investment-policy-to-regulate-chinese-investments-into-india

[9] Available at, https://www.prsindia.org/report-summaries/summary-announcements-aatma-nirbhar-bharat-abhiyaan

[10] Available at, https://www.news18.com/news/opinion/india-to-emerge-as-favourable-fdi-destination-post-coronavirus-2732193.html

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Corporate Social Responsibility and the related provisions in India and USA (Impact of COVID-19)

By: Anmol Sharma

In these times of crisis, a strong commitment to the well-being of stakeholders is of utmost importance. Companies around the world are currently facing sharp drops in demands that puts job at risks, threatens the income of suppliers and local communities in which we erode the confidence of providers finance to firms. Therefore welcome that companies around the world are stepping up their social responsibilities activities examples are Unilever a British dutch conglomerate that donated soaps, sanitizer, bleach, and food. German chemical company BASF gave away over 100 million masks and supplied health care facilities with hand sanitizers for free of charge. Microsoft grants its worked 12 weeks of paid parental leave because of school disruption. Another example could be of Danone, they announced to guarantee all employment contracts and wages onto the summer to extend childcare and health care programs and to put in place a 300 million euro find to support fragile suppliers.

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Likewise in India Ratan Tata had donated INR 1500 Crores to the government, being the biggest industrialist he donated such big amount of money in this pandemics and he even stated that if the country needs more help I might sell my company or everything I had earned till yet for the country, some of the bug donations had been done by Actor Akshay Kumar who donated an amount of Rs. 35 Crores to the government of India. Reliance industries donated INR 500 Crores to the PM cares meant for Covid crisis. SCR money can be helpful in ongoing pandemic situation of Covid-19, to run community kitchens, provide shelters to homeless and stranded migrants labourer example: to support to civil society responding to food relief. It can prevent deterioration in gains made in Area of child rights, girl rights for example: lots of children may be pushed into child labour, malnutrition may rise, under age marriage of girls given more poverty.

CSR is not philanthropy, Rather responsibility towards society. A way to achieve balance of Economic, Social and Environmental imperatives. As per Companies act 2013, 2% of profit should go for certain CSR related activities such as Environmental protection, Girl education, Nahi Kali(Mahindra).

CSR (Corporate social responsibility) comes in 2007 in India & in USA it truly began in 1971. In India company act it is mandatory provision under section 135 of company act 2013, which came into effect from 01.04.2014 on the other hand in USA CSR (Corporate social responsibility) is type of soft law which do not requires a statue or regulation that means hard law but is nonetheless seen as obligatory by most corporations because of consumer expectations and internal norms. Principles of building the legal shell specifically in interpreted rights, duties, and causation, are mainly worldwide embraced. Thus, corporates must have CSR schemes that are “litigation ready” when it requires human rights because the UNGPs would be informed about the content of sensible corporate practices, which had censorious implications for multinational civil and commercial disputes. That is to say, UNGPs (The United Nations Guiding Principles) make multinational tort liability of corporations to 3rd parties.

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CSR (Corporate social responsibility) is basically bringing consciousness about society, surroundings, environment and that is where the CSR brings in the stake holder perspective to think about society & have those consideration in the mind of businessmen basically when they are discussing strategy. [1]The capitalists should act as a trustees (not owners) of their property and conduct themselves in a social responsible way. This concept actually measures financial, social & environmental performance of the corporation. [2]The Business Responsibility Reporting (BRR) are mandated for requirement of top 100 (from 500 to now top 1000) lasted entities in their annual report. In todays world 90% of CEOs claims that Sustainability is key to success. Research shows that if you have good CSR programme it will increase employee commitment, customer satisfaction, reduce risk and even get better access to finance. The good example of irresponsibility is Volkswagen case, Volkswagen is known to be the most responsible companies top-rated on different screens and still it turned out that they had tampered with their emission technology and that of course led to major drop in their brand value but its also read to a drop in their share prices of the companies.

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Top management of corporate sector is not going to do the Job but they have to endorse the activities on the CSR so the first thing then is to put together a group of company across the company 5 to 10 people from different department and they together are going to find out and discuss what this companies main social impact or the main footprints of the company, a good check list for that is the sustainable development with 5 goals the SDGs of course those 5 goals are relevant for individual companies depends upon which secretary they’re in so first will be MAP lets say companies and the industry of producing clothing in developing countries well probably decent work and economic growth is most relevant or if company is in oil industry then climate action issues is relevant and if the company is in fish farming well then it would be life below water is more important. When the goals are identified a concrete plan with concrete target and how to reach the target must be set up when that is ready we move on to the second step that is TEST take the draft plan presented to key stakeholders ask for their input revise accordingly who are stakeholders like customers, suppliers other employees, non governmental organisation, environmental organisation these are ones to to come with feedback and then revise  the plan according to that then we’re ready for the third step which is LAUNCH the launch is about making the rest of the company aware of the plan and let them buy into tithe day-to-day work how do you do that, put it on a company website or newsletter or monitors be creative. The fourth step is the IMPLEMENTATION have you had to follow up the plan, are we reaching the targets are we not why there will be unexpected happenings these are great learning point. Now the last and fifth step that is REPORTING the reporting is like accounting coming forward with what worked or what didn’t work and why, and, be open and be honest and transparent not only focused on what went went well but also the problems the challenges one might think that companies with big CSR report are doing a lot of things are being good companies but actually its not true its the opposite way around companies with the big report writing a lot those are the ones who have been criticised and have to explain that they have changed and convinced the reader the CSR reports are good source of finding out to which extent the CSR work is actually integrated into the company.

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Working practices of the corporate company have been totally changed since this pandemic of Covid-19 and turn corporate company to work on different platforms, for example, to work from home is mandatory these days as offices are still closed for time being for the safety of their own. This measure had been taken worldwide whether it’s India or the USA or any other country as this the social responsibility of corporate sectors to make sure that people are safe during these pandemics and they won’t suffer any monetary problems.

The legal department of the corporate sectors is still analyzing and evaluating the effects of this pandemic on contractual relationships of all sorts, as well as the consequences of Covid-19 on contractual relationships of all sorts, also as possible mitigating strategies which will have to be compelled to be implemented. In particular, the performance of contracts that one can reasonably expect to be impacted by the spread of coronavirus (a sizable amount of contracts of all kinds, indeed) would require deep analysis to verify whether or not they include the act of God clauses that would potentially and ultimately excuse performance from any (or both) parties within the event an unforeseen scenario. In this scenario, the legal departments will play a crucial role in this pandemic situation where they had to make a strategy for the corporate sectors so that it favors the corporate sector rather than affecting them. Even the Boards of the company had to come forward with strong leadership as they had several commitments towards their company. We are now seeing great samples of true leadership that goes beyond direct responsibilities within companies to a way larger scale: Leading initiatives that, because of the large power of globalization and therefore the scale of social and professional networks, have a really powerful reach. According to section 135 of the companies act, CSR spend is mandatory for every company beyond a financial threshold, Net worth of INR 500 Crores or Turnover of INR 1000 Crores or Net Profit of INR 5 Crores, required to spend 2 % of average net profit of last 3 years on CSR projects, reports made under clause (0) of sub-section (3) of section 134 specify the reasons for spending the amount. On the other hand in the USA, there are corporate foundations in the companies where spending money on CSR is also mandatory, recently [3]500 firms spend around $20 billion a year on CSR activities.

Section 135 of the companies act, the compliance of constitution of the CSR committee of the board 3 or more directors, at least 1 independent director, CSR committee shall formulate and recommend CSR policy (preference to be given to local), recommend CSR activities and expenditure on the same, monitor CSR policy from time to time, with this the responsibility of The Board as follows –

  1. Disclose composition of CSR committee.
  2. Approve CSR policy and report.
  3. Ensure SCR activities and undertaken by company
  4. Ensure spending on CSR activities and reporting of non-compliance.

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Now, on the other hand, the same business laws are there in the USA where it is mandatory for every company to spend on CSR and The Boards of the companies had to take measurable steps to ensure their responsibilities.

 Like we talk about today’s time then one of the most crucial steps taken under CSR in all the companies is that they had to make sure that all the departments including there buildings must be sanitized properly not only in India or USA but this is world-wide like in India it is set up by the central government for the promotion of sanitation, likewise in the whole world including the USA and other countries it is mandatory that to sanitized every building and keep sanitizer bottles or packs for employees so that they can be safe during this pandemic.

On other hand in India work from home is a new format which is not as successful as where employees work as in the office premises but yes during this pandemic this rule has to be followed by every corporate sector same as in the USA this step of work from home has been taken up and been followed up there also for the care of employees.

In India promoting education, including special education and employment vocation skills especially among children, women, elderly, and, the differently ables and livelihood enhancement projects.

On 23.02.2020 in India funds may be spent for various activities related to COVID 19 under item no. (i) and (xii) of Schedule VII relating to the promotion of health care, including preventive health care and sanitation, and, disaster management (including state Disaster Management Fund).

28.03.2020: contribution to PM cares fund shall qualify as CSR expenditure under item (vii) of Schedule VII.

[4]The SALARY of the employees during the lock-down and payment to casual/contractual workers – not CSR, any ex-gratia payment is made to temporary/ casual workers/ daily wage workers over and above the disbursement of wages. Specifically to fight COVID-19, the same shall be admissible towards CSR expenditure as a one-time exception provided there is an explicit declaration to that effect by the Board of the company, which is duly certified by the statutory auditor.

On the other hand in the USA, there are cuts of salaries during lockdown even the former president didn’t do much about it but Newly appointed president Biden said that corporate sectors must pay the salary to there employees in this pandemic situation as it is difficult not only for corporate sectors but people of the country who are working in the corporate sectors are also suffering a lot in this Pandemic situation even the Government is also facing monetary problems in the whole world.

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CSR can be good for a company, first it can builds good image, responsible behaviour which gives competitive advantage, can act as a marketing strategy. CSR can be for government by helps government in achieving its social objectives welfarism concept.

BENEFITS TO CSR, Lack of awareness will be resolved, lack of interest of local community in participation of CSR activities will be tackled, an opportunity to build trust and synergy between CSR, NGO and Local bodies. All these will be a precursor in institution of CSR in India as well as in USA.

[1] Gandhis Concept of “Trusteeship”

[2] SEBI has, vide circular dated August 13, 2012

[3] Fortune Global, https://hbr.org/2018/01/stop-talking-about-how-csr-helps-your-bottom-line#:~:text=Today%2C%20Fortune%20Global%20500%20firms,for%20attracting%20and%20motivating%20employees

[4] Schedule VII Companies act COVID NOTIFICATION

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Analysis of the Legal aspects of Mining in Nigeria

By: Sree Kuttan

Introduction

Nigeria is regarded as a country endowed with abundant natural mineral resources such as iron, lead-zinc, tin, tungsten, tantalum, gold, manganese, and nickel. In Nigeria, there are a number of laws applicable to the mining sector such as the Constitution of the Federal Republic of Nigeria 1999 (as amended), Land Use Act, Laws of the Federation 2004 (the Land Use Act), Nigerian Minerals and Mining Act, 2007 (the Mining Act), Nigerian Minerals and Mining Regulations 2011 (the Mining Regulations). The Act and the regulations have since introduced a better regulated sector and provided an attractive investment climate for foreign investors seeking to invest in the mining sector.

The Mining Act

The Mining Act is Nigeria’s major legislation governing the mining sector. It regulates all aspects of the exploration and exploitation of solid minerals in Nigeria. The Mining Act also provides that all lands in which minerals have been found in commercial quantities shall be acquired by the Federal Government in accordance with the Land Use Act.

The Mining Regulations

The Mining Regulations are the subsidiary legislation issued under the Mining Act. The Mining Act and the Mining Regulations are administered by the Ministry of Mines and Steel and the Mining Cadastre Office.

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The Land Use Act

The Land Use Act is Nigeria’s legislation governing land acquisition and ownership. However, the use of land for mining purposes is considered as constituting an overriding public interest. , the Mining Act also provides for contractual arrangements applicable to the lawful use of any land for mining purposes.

Licences and Permits Applicable to the Mining Sector

Under the Mining Act, a person is authorized to search for and exploit mineral resources when he or she has obtained a mineral title to do so. The different mineral titles available under the Act are: Reconnaissance Permit, Exploration Licence, Small-Scale Mining Lease, Mining Lease, Quarry Lease and Water Use Permit.  It is an offence under the Act to undertake or be involved in the search or exploitation of mineral resources without having the requisite mineral title.

  • Reconnaissance Permit:

This permit allows, on a non-exclusive basis, reconnaissance activities on all land within Nigeria that is available for mining operations. In Nigeria, a reconnaissance permit allows the holder of the permit to only obtain access into, enter or fly over any land within Nigeria to search for mineral resources on a non-exclusive basis and to remove surface samples in small quantities. A reconnaissance permit is not transferrable or assignable to a third party under any circumstance whatsoever16 and where the holder of the permit becomes mentally incapacitated or diseased, the permit shall be revoked.

  • Exploration Licence:

An exploration licence gives its holder the exclusive right to conduct exploration activities within the area permitted. In order to be qualified to apply for an exploration licence, an applicant has to be either a company that has been duly incorporated under Nigerian law or a mining co-operative or the holder of a reconnaissance permit already granted in respect of the area which is the subject of the exploration permit application. In Nigeria, an exploration licence is granted for an initial period of three (3) years and may be renewed for two further periods of two years.

  • Small-Scale Mining Lease:

Small-scale mining is defined under the Mining Act as artisanal, alluvial and other forms of mining operations involving the use of low-level technology or application of methods not requiring substantial expenditure for the conduct of mining operations within a small-scale. A small-scale mining lease shall not be granted in an area which is the subject of an exploration licence, small-scale mining lease, mining lease, quarry lease, or water use permit or any area close to mining operations.

  • Mining Lease:

A mining lease grants the holder of the mineral title the right to obtain access and enter the mining lease area to carry out exclusive exploration and exploitation of mineral resources activities. In Nigeria, only a corporate body duly incorporated under the Companies and Allied Matters Act or any other legal entity which has demonstrated that a commercial quantity of mineral resources exists in an area is qualified to apply for a mining lease. Mining leases are required to be granted or denied by the Minister within 45 days of application. A mining lease is valid for a period of twenty-five years and renewable every twenty-five years and shall not be granted in respect of any area within an exploration licence area or a small-scale mining area except to the holder of the exploration licence or small-scale mining lease covering such area.

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  • Quarry Lease:

Quarry leases in Nigeria are granted in respect of all naturally occurring quarriable minerals. A person shall be ineligible to apply for a quarry lease if it is shown that any of the members or directors of the applicant or a shareholding holding a controlling share of the applicant has been convicted of a felony or an offence under the Mining Act or the Mining Regulations.

  • Water Use Permit:

Only the holder of or an applicant for an exploration licence, small scale mining lease, mining lease, or quarry lease is qualified to apply for a water use permit under the Mining Act and the Mining Regulations. The validity of a water use permit is for as long as the small-scale mining lease, mining lease, quarry lease or exploration licence for which use it was granted and shall expire upon revocation or expiry of the small-scale mining lease, mining lease, quarry lease or exploration licence for which use it was granted.

Fiscal Incentives of the Nigerian Mining Sector

Of paramount importance to any mining investor are the fiscal regime and tax incentives of the host country. Under Nigerian mining laws, a mining project is entitled to enjoy various tax advantages, incentives and benefits as follows:

  • In determining total profits, a licence holder is entitled to deduct from his assessable profits Capital allowance of 95% of qualifying expenditure incurred in the year in which the investment was made on all certified exploration, development and processing expenditure including feasibility studies, sample assaying costs, and infrastructure costs.
  • The amount of any loss incurred by a licence holder shall be deducted as far as is possible from the assessable profits of the first year of assessment and thereafter in the year which the loss was incurred and in so far as it cannot be so made, then from such amounts of such assessable profits of the next year of assessment and so on up to a limit of four years after which the period any unregistered loss shall lapse.
  • Exemption from customs and import duties on approved plants and machinery, equipment and accessories imported specifically and exclusively for mining operations.
  • Tax holiday for the first 3 years of operation which period may be extended for another 2 years. The Tax relief begins to accrue on the commencement of operations. This is at odds with CITA which only grants tax holiday of 3 years without any option of extension.
  • Expatriate Quota and resident permit in respect of expatriate quota
  • Personal remittance quota to expatriate personnel for the transfer of foreign currency out of Nigeria.
  • Free transferability of dividends or profits;, payments in respect of servicing a certified foreign loan; and foreign capital in the event of sale or liquidation of mining operations in any convertible currency.
  • The Central Bank of Nigeria(CBN) may permit a title holder who earns foreign exchange from the sale of its minerals to retain in a foreign exchange domiciliary account a portion of his earnings for use in acquiring spare parts and other inputs required for mining operations which would otherwise not be readily available without use of such earnings.
  • Grant of investment allowance of 10% on qualifying plant and machinery.
  • Tax deductible for environmental cost.
  • Tax deductible for pension funds for employees of mining companies.
  • Annual Capital Cost Indexation-unclaimed balance of capital cost shall be increased yearly by 5% for mines that start production within 5 years from the date of enactment of the Act.
  • Deferment of royalty payments on any minerals for a specific period on the approval of the Federal Executive Council.
  • The investor may also be entitled to claim an additional rural investment allowance on its infrastructure cost. This is however dependent on the location of the company and the type of infrastructure provided.

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Considerations for Mining Operations

Before the commencement of mining operations by a mineral titleholder, there are certain legal considerations that a person interested in mining business in Nigeria must take into cognizance such as lands excluded from mining operations, surface rent and compensation, outright ownership of mining land, annual service fees and royalties.

  • Lands Excluded from Mining Operations
  • Surface Rent and Compensation
  • Ownership of mining land
  • Annual Service Fees and Royalties

Incentives Applicable to Mineral title Holders

A mineral title holder under the Mining Act engaged in mining operations under the Act and the Regulations is entitled to certain benefits;

 

  • Extension Services for small-scale and artisanal mining
  • Capital Allowances
  • Exemption from Customs duty and Other Benefits
  • Permission to Retain and Use Foreign Exchange and Free Transferability of Foreign Exchange
  • Pioneer Status and Tax-Deductible Costs

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Factors Impeding Development of the Mining Sector

Given that the Nigerian legal and regulatory framework meets all the major considerations of a mining investor, it is difficult to understand why the survey conducted by the Fraser Institute ranks Nigeria so low and the World Bank’s forecast for mining investment in Nigeria between the years 2000 and 2020 is nil. This may not be unconnected with the following:

  1. Security: Majority of the naturally occurring minerals are located in the schist belt which covers an extensive part of Northern Nigeria where the present insurgency is being experienced. Security is one of the main risks to any mining investment as it has a bearing on the overall cost of the project. As the government improves the security situation in these parts of the country, mining juniors and TMC’s may begin to refocus their attention to Nigeria.
  2. Funding: There is a challenge of funding mining projects. Mining projects have long lead times and as such require long term capital which simply is lacking in Nigeria presently. Perhaps with the introduction of the single treasury account and limitation of focus on short term funds, banks may be forced to start providing longer term funding to sectors such as the mining sector.
  3. Infrastructure: The lack of adequate infrastructure is also a challenge to any mining investor. The mineral deposits in Nigeria are too distant to the ports for the export market and there is presently very little domestic use for the minerals presently being produced. The railway system is archaic and in need of a complete overhaul to be able to serve the sector. In the absence of a functional railway system, Nigeria won’t see any major mining investment in the immediate future. It is crucial to begin to look at various models of how the needed transportation infrastructure for mining activities can be provided. One model could be the use of Public Private Partnership to deliver multi-client/multiuser mining related rail infrastructure in Nigeria. The pension funds are also a veritable way of funding the infrastructure investment for the sector.
  4. Illegal Mining: Illegal mining contributes to about 60% of the mining activities in Nigeria. This is perhaps the biggest challenge to the mining sector. However, the loss of revenue is not the only by product of illegal mining as same also results in the degradation of the environment and loss of human life mainly from lead poisoning.
  5. Political and Economic Risk: Nigeria has witnessed 16 years of uninterrupted democratic rule and more recently the transition of power from a ruling party to an opposition party. This clearly signifies political stability to any foreign investor seeking to invest in the solid mineral sector. The ongoing devaluation of the Naira posses its own hindrance to investment but there are ways of addressing currency risks in mining projects and this includes currency hedging.

Recommendations for the Sector

There are a number of recommendations and these include:

  1. The urgent need to improve on the funding of the public mining institutions so as to ensure effective monitoring and regulation of mining activities.
  2. The spate of illegal mining must vastly reduce so as to ensure order and prevent environmental degradation and loss of life.
  3. The Federal Government must as a matter of urgency address the security situation in the northern region of Nigeria which is ore rich.
  4. Enforcement of the “use it or lose it principle” with respect to licences which are not utilised within a specific timeframe.
  5. Improved mining related transport infrastructure through Public Private Partnerships.
  6. Identify a specific set of minerals to promote through roadshows showcasing the potential of mining these minerals in Nigeria.
  7. Privatisation through competitive bidding of existing Federal Government mining properties as a means of kick stating the sector.

Conclusion

As Nigeria plans to take advantage of the inherent growth opportunities available in the morning sector and open the sector to private and foreign investment and investors, it is important for all players, new and existing players to be aware of the regulatory and commercial considerations for the mining sector in Nigeria. As being the largest economy in Africa, with a population of 170 million inhabitants to provide skilled and unskilled labour and a transparent legal and regulatory framework offering some of the best fiscal incentives in the global mining industry, offers attractive mining investment opportunities to the discerning investor.

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Pre-Packaged Insolvency

By: Prashant Pathak 

Pre-packaged insolvency (a “pre-pack”) is a sort of liquidation strategy, where a rebuild plan is concurred ahead of time of an organization announcing its bankruptcy. In the United States pre-packs are frequently utilized in a Chapter 11 recording. In the United Kingdom, pre-packs have gotten well known since the Enterprise Act 2002, which has made organization the prevailing bankruptcy method. Such game plans are additionally accessible in Canada under the Companies’ Creditors Arrangements Act.

 What is Pre-Packaged Insolvency?

A “Pre-Packaged Insolvency” is a course of action, where the offer of all or part of an organization’s business or resources is haggled with a buyer before the arrangement of an indebtedness proficient as the manager. The real deal is then executed on the arrangement and endorsement of the bankruptcy proficient (hereinafter alluded to as “IP”). The pre-pack instrument basically encourages the definition of a goal plan before any proper procedures. This plan lessens the time and cash spent on court procedures and straightforwardly moves to getting a reasonable goal for the organization. The fundamental target of pre-packs is to find some kind of harmony between the interests of the leaser and shield the business from liquidation.

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This may be a novel component in India, yet nations like the United States of America (USA) and the United Kingdom (UK) have effectively executed it in their particular indebtedness rehearses. Since India has no administrative involvement in pre-pack, another structure or alterations to the current arrangements of the IBC would be needed to execute the plan in the current bankruptcy system.

PRE-PACKAGED INSOLVENCY IN UNITED KINKDOM:

The expression “pre-pack deal” has been characterized by the Association of Business Recovery Professionals as “a game plan under which the offer of all or part of an organization’s business or resources is haggled with a buyer before the arrangement of an overseer, and the head impacts the deal quickly on, or soon after, his appointment”. The contrast between a pre-pack deal and an ordinary deal is that in a typical deal the executive business sectors the business and arranges the details of the deal after his arrangement.

The reasons a head sells on a pre-pack premise, instead of after post-arrangement advertising, differ from case to case, yet they regularly include the accompanying contemplations. A pre-pack deal dodges the expenses of exchanging (which implies loan bosses get more back), and undoubtedly, the organization and the executive might not have the assets to exchange. It likewise stays away from the chairman facing the challenges related with exchanging. The estimation of the business may disintegrate during organization exchanging.

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PRE-PACKAGED INSOLVENCY IN UNITED STATES OF AMERICA:

In the United States, regularly the term pre-packaged bankruptcy is utilized rather than pre-packaged insolvency. An ordinary liquidation case is one in which the account holder records for Chapter 11 help without having concurred ahead of time to the provisions of an arrangement of redesign with its loan bosses. Throughout the Chapter 11 case, the borrower or, if the indebted person doesn’t hold the selective option to propose an arrangement, a lender or loan boss gathering may figure and propose an arrangement of reorganization. An organization going through Chapter 11 redesign is adequately working under the security of the court until it arises. A model is the carrier business; in 2006, over a large portion of the business’ seating limit was on aircrafts that were in Chapter 11.

In a pre-bundled case, the arrangement advocates will have tied down adequate help from loan bosses to affirm their arrangement of redesign preceding petitioning for Chapter 11 rearrangement. Pre-bundled plans of revamping practically consistently disable (for example cover short of what) at least one classes of lenders, thus to guarantee that the arrangement can be affirmed by the liquidation court, the arrangement advocates should make sure about the help of in any event 66% in sum and more than one-half in number of at any rate one such hindered class, notwithstanding guaranteeing the arrangement agrees to any remaining necessities for affirmation. Two procedurally troublesome parts of the cycle are the declaration (which should be organized so as not to trigger authoritative end arrangements) and getting the imperative loan boss approval.

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In 2009, another element finished the acquisition of proceeding with activities, resources and brand names of General Motors as a piece of the ‘pre-bundled’ Chapter 11 reorganization. As positioned by absolute resources, GM’s liquidation marks one of the biggest corporate Chapter 11 insolvencies in US history. The Chapter 11 documenting was the fourth-biggest in US history, following Lehman Brothers Holdings Inc., Washington Mutual and WorldCom Inc.another substance with the support of the United States Treasury was shaped to secure productive resources, under area 363 of the Bankruptcy Code, with the new organization intending to give a first sale of stock (IPO) of stock in 2010. The excess pre-request leasers claims are paid from the previous partnership’s assets.

EXECUTION OF PRE-PACKAGED IN INDIA:

The Bankruptcy Law Reform Committee, entrusted with contextualizing the IBC, has suggested pre-packs as a suitable option to the customary CIRP in India. As per the report put together by the Committee, the pre-pack plan can be permitted under the NCLT administered plan of course of action. Under this course of action, the pre-pack plan would be exposed to earlier endorsement of the leasers and the important partner prior to being introduced to the NCLT. Further, the NCLT would endorse the arrangement simply subsequent to investigating and guaranteeing that the arrangement fulfills the fundamental necessity as might be recommended under the IBC. Along these lines, the pre-pack plan would basically follow the methodology under IBC, while as yet protecting the matter of the Corporate Debtor.

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PREFERENCES OF PRE-PACKAGE SCHEME :

Aside from saving the matter of the organization and shielding it from likely liquidation, pre-packs have numerous advantages that are exceptionally difficult to disregard. Initially, they would give a superior re-visitation of the leaser. In the current indebtedness component, frequently during the CIRP, the estimation of the resources gets devalued which in the long run brings about lesser compensation to the banks from the returns of the goal plan. Be that as it may, in the pre-packs component, the estimation of the resources will be haggled ahead of time, subsequently, giving better re-visitations of the lenders.

Furthermore, it’s fundamentally less tedious and modest in contrast with the conventional bankruptcy procedures, since all the basics of the pre-packs, similar to exchange and documentation of the proposed plan, are done heretofore. This decreases the all out cost associated with the cycle and jam the estimation of the business which can be vital for the endurance of independent companies.

Ultimately, pre-packs would work inside the overlap of the legal plan. Rather than a private rebuilding measure, pre-packs would work as a legal upheld goal measure under the IBC. This suggests that pre-pack would be exposed to the endorsement of the NCLT and resulting to the endorsement, all the partners would be limited by the goal plan. This would alleviate the danger of ensuing test and rebelliousness by the loan bosses.

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Difficulties to and Suggestions for Implementation of the Pre-Pack Scheme:

  1. MORATORIUM:

In the ordinary bankruptcy procedures under Sections 7 or 9 of the IBC, a programmed stay for example ban happen, as far as Section 14. The ban restricts the lenders from authorizing cures against the corporate borrower and its resources. Be that as it may, a borrower looking for pre-packs might not have the assurance of a ban. This would offer ascent to a circumstance where the leasers can move toward the Courts or Tribunals and implement their cures, while the indebted person is arranging a pre-pack goal. Such extra case would undermine the resources of the indebted person, yet in addition power the organization into CIRP or liquidation. To relieve such a danger, the Government should present an arrangement or stretch out the assurance of ban to the pre-pack instrument. This would permit the borrower to zero in on facilitated rebuilding and control the leasers from implementing cures against the account holder’s resources.

On the other hand, without ban, the account holder could consistently speak with the lenders and have a go at keeping up its validity to evade any such circumstance that could overcome the pre-pack goal. This would require the borrower to oblige the interests of leasers and offer all the fundamental data with the lenders. Notwithstanding, accomplishing such collaboration among lenders and indebted person is actually quite difficult. Without a ban, the loan bosses can sever the exchange whenever and authorize their privileges, in this manner overcoming the whole pre-pack goal. In this way, the assurance of the ban will be instrumental in arriving at an effective goal under the pre-pack system.

  1. Absence of Transparency:

The classified nature or absence of straightforwardness is another test to the execution of the pre-pack plot. Since the way toward going into the pre-pack plan is hazy and gets just the consent of the made sure about leasers, there are insufficient motivations to think about the stakes of unstable banks. In such cases, the resources of the indebted person organization might be moved without understanding the worth payable to the unstable lenders. Besides, the classified idea of the plan would deny such leasers the occasion to protest the exchange. Subsequently, sufficient cures and plan of action should be presented in the pre-pack plan to ensure the interest of unstable banks. A sensible time period should be accommodated the unstable lenders to record claims and mention criticisms regarding the arrangement. Also, the command to get endorsement from the NCLT would forestall such treacherous exchanges by partners and address the worries of unstable lenders. This would be critical to assist banks with creating trust in the new strategy.

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  1. Section 29A of the IBC:

Segment 29A would likewise goes about as a significant obstacle in the presentation of pre-pack plans in India. This arrangement was presented by the Insolvency and Bankruptcy Code (Amendment) Act, 2018, and it forbids the current administration or advertisers of the indebted person organization from recovering command over the resources of the organization. It basically stops the indirect access passages of the defaulting advertisers back to the administration. Since the pre-pack plot is an indebted person started measure, it would be the advertisers who are responsible for the cycle and not the IP. The advertisers haggle with the leasers to hold control of the business and keep it as a going concern. This would conflict with the essential substance of Section 29A and, along these lines, deny corporate borrowers from detailing a goal plan with the lenders.

It tends to be contended that quite a sly way of recapturing control under the pre-pack plan would bring about circumvention of indebtedness laws. In any case, if the powerlessness to reimburse the obligations is brought about by factors like languid financial development (brought about by pandemic like COVID-19), at that point permitting the current advertisers to hold control would be prudent. This would guarantee progression of the business action and limit the interference.

The Government should in this manner, weaken segment 29A to actualize the plan of pre-packs in India. The motivation to weaken segment 29A is to empower proactive indebted individuals (in trouble) to arrange the terms of indebtedness with their leasers. In the event that an arrangement like Section 29A is made pertinent to the elements ready to go for pre-bundled bankruptcy, it might will in general thrashing the goal of such a plan. Along these lines, pre-packs should be liberated from segment 29A.

CONCLUSION:

The COVID-19 pandemic and the resulting lockdown has presented difficulties for Governments around the globe. With each monetary action stopping, organizations are confronting extreme monetary emergency and are driven into indebtedness. The pre-packs conspire, whenever presented, will go about as an impetus in assisting those organizations with enduring.

Since India doesn’t have any earlier administrative involvement in pre-packs, the presentation of this plan would require some genuine thought and due steadiness. The Government should lead a far reaching consider and guarantee that all the issues are killed and a superior instrument is set up.

The COVID-19 episode and the resulting lockdown have influenced the Indian economy antagonistically, making monetary difficulties a few organizations the nation over. In the wake of the common circumstance and to forestall mass indebtedness procedures, the President has proclaimed a law and suspended the recording of new cases under the Insolvency and Bankruptcy Code, 2016 (hereinafter alluded to as “IBC”). The said Ordinance prohibits recording new applications under Sections 7, 9, or 10 of the IBC, for a half year, for any default set off by the COVID-19 emergency happening on or after 25 March, 2020. The choice to suspend IBC will give some breathing space to the organizations. Be that as it may, when the suspension is lifted, the council for example Public Company Law Tribunal (hereinafter alluded to as “NCLT”) will be overwhelmed with bankruptcy applications. Along these lines, it is an advantageous opportunity to return to the forthcoming changes and investigate elective answers for the ordinary corporate indebtedness goal measure (hereinafter alluded to as “CIRP”).

 

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Analysis of Sexual Harassment Laws at Workplace In USA, UK And UAE

By: Aritra Sarkar 

Sexual harassment at workplace has been considered a crime by the United States labour law since the 1970s. In the USA the sexual harassment at workplace is prevented by Title VII of the Civil Rights Act, 1964.[1] This law protects individuals from discrimination based on sex. It makes it illegal for employers to hire, fire, alter any service conditions, etc. solely based on sex. As per U.S. law, the harasser can be of any sex and the harassment can also happen to any sex. Any general hostility towards sex is considered harassment. There are two types of sexual harassment in U.S. law.[2]

The first type is called the “quid pro quo” sexual harassment. The term “quid pro quo” literally translates to “this for that”. Therefore, this type of sexual harassment occurs when an employee is offered something in return for the satisfaction of the sexual demand of the harasser.[3] In this type of sexual harassment, an employee has to satisfy the sexual demands of the employer to affect employment decisions like hire, fire, promotions, avoid punishments, etc.[4] For being able to claim sexual harassment of the “quid pro quo” nature the employee has to be able to prove that[5]: –

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  1. The plaintiff was an employee or has applied for employment in the company or organisation in question.
  2. The plaintiff has to prove that the defendant or the alleged harasser made unwelcome sexual advances to the plaintiff or has engaged in some kind of unwelcome verbal or physical actions of sexual nature.
  3. Certain decisions are influenced, explicitly or impliedly, by the plaintiff’s acceptance or denial of the sexual advances made by the defendant.
  4. During the time of the harassment or the conduct in question, the defendant was a supervisor or an agent of the company or organisation.
  5. The plaintiff was harmed in some form by the conduct of the alleged harasser.

The second type of sexual harassment is “hostile work environment” cases, first established by Meritor Savings Bank v. Vinson[6]. In these cases, sexual harassment makes the workplace uncomfortable, offensive and intimidating. Cases where sexual favours are asked, unwelcome sexual advances are made or any other conduct of sexual nature which makes it difficult for the employee to work comfortably[7].

Courts take into considerations a variety of factors in considering whether a workplace is hostile or not, like[8]–

  1. if the offensive sexual behaviour was through verbal communication or any physical conduct or both;
  2. whether the offensive sexual conduct was repeated multiple times;
  3. if the offensive sexual conduct was hostile or patently offensive;
  4. if the defendant (alleged harasser) was a co-worker or a supervisor;
  5. if other co-workers or supervisors or any staff joined in perpetrating the harassment; and
  6. if the harassment was towards a single individual or a group of persons.

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Pre-Civil rights act of 1991

Barnes v. Train[9]– This case was decided in as early as 1974. This case is considered to be the first reported case of sexual harassment at workplace in USA. In this case Barnes, an African-American woman was reportedly fired from her job at Environment Protection Agency after she had refused to submit to the sexual advances made by her employee. Although the case was dismissed, it was appealed again in 1977.

Barnes v. Costle[10]– This was the appeal of the case Barnes v. Train. Although Paulette Barnes, the plaintiff, lost in Barnes v. Train, she won the case on appeal. During this case, the district of Colombia court of appeals rules that if a person suffers tangible employment losses for not submitting to the unwelcomed sexual advances by his/her employer or supervisor then it will be considered as sexual harassment. The decision was partly influenced by the case of Williams v. Saxbe[11] which was decided a year before in 1976. The court also ruled that the company will be liable in case it is not knowingly taking proper action against sexual harassments done by supervisors.

Post-Civil rights act of 1991

Burlington Northern and Santa Fe Railway Co. v. White[12]– In this case, the court broadened the view of sexual harassment conducts to include any altercation in-service conditions or any other decisions that will dissuade an employee to file a suit for discrimination.

Reeves v. C.H. Robinson Worldwide, Inc.[13]– This case was decided as recently as 2010. In this case, it was held that a hostile work environment is created if sexually explicit language or pornography is present. Hostile workplace environment does not have to be targeted towards an individual employee; it might as well be targeted to a group of employees.

UK

In UK, all employees are protected from sexual harassment at workplace by the Equality Act, 2010. The legal definition sexual harassment according to the equality act is- “The Equality Act says it’s harassment where the behaviour is meant to or has the effect of either: violating your dignity or creating an intimidating, hostile, degrading, humiliating or offensive environment.”[14] Besides this general prohibition of sexual harassment section 26 of the Equality Act 2010 specifically provides for 3 different types of sexual harassment: –

  1. Relevant Protected Characteristics– Section 26(1) states that ‘A’ will harass ‘B’ if (a) “A engages in unwanted conduct related to a relevant protected characteristic” (b) for the purpose or effect of (i) “violating B’s dignity”, or (ii) “creating an intimidating, hostile, degrading, humiliating or offensive environment for B.”[15]
  2. Unwanted Conduct of a Sexual Nature- Section 26(2) states that ‘A’ will harass ‘B’ if (a) “A engages in unwanted conduct of a sexual nature” and (b) “the conduct has the purpose or effect referred to in subsection (1)(b).”[16]
  3. Differential treatment- Section 26(3) states that ‘A’ will harass ‘B’ if (a) “A or another person engages in unwanted conduct of a sexual nature or that is related to gender reassignment or sex”, (b) “the conduct has the purpose or effect referred to in subsection (1)(b)” and (c) “because of B’s rejection of or submission to the conduct, A treats B less favourably than A would treat B if B had not rejected or submitted to the conduct.”[17]

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Section 26(5) of the Act states lists the relevant protected characteristics, namely, age, disability, gender reassignment, race, religion or belief, sex and sexual orientation.[18]

In 2019 there was a consultation on the context of sexual harassment at workplace and it was decided that the policies regarding workplace harassment should be tightened up. Consequently, the UK equality body and the Equality and Human Rights Commission together published “technical guidance” in January 2020, in consideration that it would become a statutory code of practice once the response to the 2019 consultation is published by the government.[19]

However, there is no specific set of rules which regulates the responsibility on the employers to take pro-active actions in private sector industries, the employers are still expected to take adequate measures to prevent sexual harassment at workplace to avoid being liable for any such misconduct through the principle of vicarious liability. The situation is stricter in public sectors because the Public Sector Equality Duty (PSED) explicitly says that the employers should give due regard to prevent any incidents of sexual harassment at workplace.[20]

UAE

UAE law like most other countries strictly prohibits any kind of sexual harassment at workplace. Sexual harassment in the form of repeated offensive jokes, offensive or sexual comments, unwelcomed touch etc. is prohibited. Any offensive or unwelcoming sexual behaviour if experienced by any woman can be reported to the police or to a lawyer for taking proper actions against it.[21]

Chapter 5 of the federal law no. 3 of 1987 of UAE penal code deals with the crimes that are perpetrated against women. Section 1 deals with Rape and debasement, section 2 deals with Flagrant Indecent Acts and section 3 deals with the enticement to lewdness and prostitution. Sexual harassment in the workplace is covered under section 2 of Chapter 5 of the federal law no. 3 of 1987 of UAE penal code. This section has two articles article 358 and 359.[22]

Article 358 states that “Any person who publicly commits a disgraceful act shall be punished by a jail sentence for no less than six months. The same penalty shall apply to any person who says or commits any act against public morals. Any person, who commits an indecent act with a woman or a boy under the age of fifteen years even if not in public, shall be punished by a jail sentence for no less than one year.”[23]

Here we can see that article 358 of the UAE penal code explicitly protects both women and men below the age of 15 years. The rest of the section does not talk about whether it will be protecting both women and men rather it says to protect against “disgraceful acts” and “against public morals”. However, in my opinion, courts should take a broad view of the above article.

Article 359 states that “Shall be subject to a jail sentence for a term not exceeding one year and/or to a fine not in excess of ten thousand Dirhams, whoever molests a female in an indecent way by words or acts or through electronic means or any other method. Shall be sentenced as well to the same penalty, any male disguised in a female apparel and enters in this disguise a place reserved for women or where entry is forbidden for other than women. Should he perpetrate a crime in this condition, this shall be considered an aggravating circumstance.”[24]

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A new article was added under no. 359 bis by virtue of Article 2 of the Federal Decree-Law no. 4/2019 dated 14/08/2019. Article 359 bis states that the perpetrator “Shall be subject to a jail sentence for a term not less than one year and/or to a fine not less than ten thousand Dirhams, whoever commits a sexual harassment crime. Sexual harassment shall mean excessive annoyance of others by repeating acts, words or signals that would molest them, for the purpose of pushing them to respond to their own sexual desires or the desires of others. The penalty shall be a jail sentence for a term not less than two years and/or a fine not less than fifty thousand Dirhams, in case of several perpetrators, in case the perpetrator carries a weapon, or the perpetrator has a functional, family or educational authority over the victim.”[25]

As we can see section 359 bis clearly defines harassment in general and states the punishment for such an act. Furthermore, articles 360 to 370 punishes sexual offences in public but none of the articles however mentions “workplace” explicitly. Nonetheless, because of their general nature, these articles combined can be very helpful in preventing sexual harassment at the workplace.

In conclusion, I would like to say that even though all the three countries discussed in this write-up are having a different set of laws, sexual harassment at workplace is mostly developed in the legal system of USA and UK mainly because of the sheer number of cases there. In UAE most of the articles are general in nature, although they will prevent sexual harassment in the workplace but a separate law explicitly regarding harassment at workplace is essential to take care of matters related to the hostility of the employer towards the employee after he/she reports a sexual harassment case etc.

[1]Staff, “Facts About Sexual Harassment” (U.S. Equal Employment Opportunity Commission, 15 January 1997) <https://www.eeoc.gov/publications/facts-about-sexual-harassment> accessed 17 December 2020

[2]Staff, “Workplace Fairness” (Sexual Harassment – Legal Standards, 2020) <https://www.workplacefairness.org/sexual-harassment-legal-rights> accessed 17 December 2020

[3] Findlaw’s Team, “What Is Quid Pro Quo Harassment?” (Findlaw, 4 December 2018) <https://employment.findlaw.com/employment-discrimination/what-is-quid-pro-quo-harassment.html> accessed 17 December 2020

[4]Staff, “Workplace Fairness” (Sexual Harassment – Legal Standards, 2020) <https://www.workplacefairness.org/sexual-harassment-legal-rights> accessed 17 December 2020

[5] Staff, “What Is Quid Pro Quo Harassment: Discrimination Attorneys” (Swartz, 2 July 2019) <https://swartz-legal.com/employment-law-resources/quid-pro-quo-harassment/> accessed 17 December 2020

 

[6] Mcelroy W, “The Sad Evolution of Sexual Harassment” <http://www.wendymcelroy.com/ifeminists/2004/1027.html> accessed 17 December 2020

[7] Staff, “Workplace Fairness” (Sexual Harassment – Legal Standards, 2020)   <https://www.workplacefairness.org/sexual-harassment-legal-rights> accessed 17 December 2020

[8] Ibid

[9] Barnes v. Train, 13 FEP Cases 123 (D.D.C. 1974)

[10] Barnes v. Costle, 561 F.2d 983 (D.C. Cir. 1977)

[11] Williams v. Saxbe, 413 F. Supp. 654 (1976)

[12] Burlington N. & Santa Fe Ry. Co. v. White, 548 U.S. 53, 126 S. Ct. 2405 (2006)

[13] Reeves v. C.H. Robinson Worldwide, Inc., 594 F.3d 798 (11th Cir. 2010)

[14] Staff, “Harassment” (Citizens Advice, 2020) <https://www.citizensadvice.org.uk/law-and-courts/discrimination/what-are-the-different-types-of-discrimination/harassment/> accessed 17 December 2020

[15] Equality Act 2010, s 26(1) (UK)

[16] Equality Act 2010, s 26(2) (UK)

[17] Equality Act 2010, s 26(3) (UK)

[18] Equality Act 2010, s 26(5) (UK)

[19] Staff, “Sexual Harassment in the Workplace in the United Kingdom” (CMS Law/Tax 27 October 2020) <https://cms.law/en/int/expert-guides/cms-expert-guide-on-sexual-harassment-in-the-workplace/united-kingdom> accessed 17 December 2020

[20] Ibid

[21] Elhais H, “What Are Your Legal Rights Under Sexual Harassment? – Criminal Law – United Arab Emirates” (Mondaq, 6 September 2019) <https://www.mondaq.com/crime/843168/what-are-your-legal-rights-under-sexual-harassment> accessed 17 December 2020

[22] Federal Law No. 3 1987

[23] Federal Law No. 3 1987, art 358

[24] Federal Law No. 3 1987, art 359

[25] Ibid

 

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