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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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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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Tortious Liability of Companies in India and USA

By: Prashant Pathak

 

“A tort is a common wrong for which the cure is an activity for unliquidated harms and which isn’t solely the penetrate of an agreement, or the break of a trust, or the penetrate of other only impartial commitment”- Salmond

The term ‘tort’ was brought into the phrasing of English Law by the French talking legal counselors and Judges of the Courts of Normandy and Angevin Kings of England. As a specialized term of English law, misdeed has gained an exceptional importance as a types of common injury or wrong. Till about the center of the seventeenth Century misdeed was a dark term, when method was viewed as more significant than the privilege of a person. This accentuation on procedural perspective for deciding the accomplishment for a case proceeded for exactly 500 years, till 1852, when the Common Law Procedure Act was passed and supremacy of substance over the technique progressively picked up firmer ground. Today the adage as it stands seems to be ‘ubi jus ubi remedium’, for example where there is not too far off is cure.

Tort is what might be compared to the English word ‘wrong’ and of the Roman law term ‘delict’. The word misdeed is gotten from the Latin word ‘tortum’ which means contorted or abnormal or wrong and is as opposed to the word rectum which implies straight. It is required out of everybody to act in a clear way and when one goes astray from this straight way into screwy ways he is said to have submitted a misdeed. Thus misdeed is a lead which is wound or slanted and not straight. In spite of the fact that numerous conspicuous essayists have attempted to characterize Tort, it is hard to do as such for shifted reasons. The vital explanation among this being, that the law of Torts depends on chose cases. Judges while choosing a case, feel their essential obligation is to decree the situation close by as opposed to set down more extensive guidelines and consequently they only from time to time set out any meaning of a lawful term. Besides the law of misdeed is as yet developing. On the off chance that a thing is developing no acceptable definition can be given.

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TORTIOUS LIABILITY:

It is relevant to comprehend what is implied by tortious obligation or rather the idea of misdeed law to comprehend its utility. To toss all the more light, the word misdeed developed, from at one time very nearly passing into abstract use as an equivalent for wrong yet after the center of the seventeenth century, a training started in the courts of the customary law, of recognizing activities in ‘contract’ for breaks of agreement and activities for different wrongs, and of utilizing the word ‘misdeed’ as a succinct title for the last class of activities. From that point forward it was regular to discuss ‘activities in agreement’ and ‘activity in tort'[1]. So a misdeed came, in law to allude to that specific class of wrongs for which an activity in misdeed was perceived by the courts of customary law as a cure and to lose the nonexclusive feeling of wrong which it might have helped in well known use.

Another fascinating consequence of this relationship of the word with a type of activity was that it came to allude likewise to the obligation of an individual who didn’t submit any misdeed or wrong, for example an expert who is sued for the harms by the individual harmed by a misdeed submitted by his servant[2]. This was on the grounds that an ‘activity in misdeed’ was the cure against the expert and in course of time and because of new requirements and conditions, the expert was held subject to pay harms despite the fact that he had not submitted any misdeed. So the law of misdeeds is that assortment of law which manages the risk of people against whom an ‘activity in misdeed’ would lie.

tort as we probably am aware today has developed throughout the long term and has filled immensely in nations, for example, the England, United States of America, and other reformist nations and partly in India. The primary investigation in this article anyway would spin around two parts of this part of law, initially, regardless of whether the law of misdeed in India is pointless and besides, whether the law of misdeeds has been basically disregarded. Prior to proceeding onward to the center subject it is basic to completely comprehend the significance of the term misdeed in the Indian setting.

TORT LAW IN INDIA:

In India the term tort has been in presence since pre-freedom time. The Sanskrit word Jimha, which means warped was utilized in antiquated Hindu law text in the feeling of ‘tortious of fake conduct’.[3] However, under the Hindu law and the Muslim law, misdeed had a much smaller origination than the misdeed of the English law. The discipline of violations in these frameworks involved a more noticeable spot than pay for wrongs. The law of misdeeds in India as of now, is mostly the English law of misdeeds which itself depends on the standards of the custom-based law of England. Anyway the Indian courts prior to applying any standard of English law can see whether it is fit to the Indian culture and conditions. The utilization of the English law in India has consequently been a particular application.

“We need to develop new standards and set down new standards which will enough arrangement with new issues which emerge in a profoundly industrialized economy. We can’t permit our legal deduction to be built by reference to the law as it wins in England or for the matter of that in any far off nation. We are absolutely set up to get light from whatever source it comes yet we need to construct our own law.”

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During British standard, courts in India were charged by Acts of Parliament in the UK and by Indian institutions to act as per equity, value and great still, small voice if there was no particular principle of authorized law relevant to the contest in a suit. As to suits for harms for misdeeds, courts adhered to the English customary law to the extent that it was consonant with equity, value and great still, small voice. They left from it when any of its standards seemed nonsensical and unsatisfactory to Indian conditions. An English resolution managing misdeed law isn’t by its own power pertinent to India however might be followed here except if it isn’t acknowledged for the explanation just referenced.

TORTIOUS LIABILITY OF COMAPANIES IN INDIA:

The law of torts in India depends on the standards of the English Common Law. Be that as it may, it has been adjusted to meet the nearby necessities. A portion of the significant standards of misdeeds incorporate carelessness, disturbance, trespass, vicarious obligation, severe and supreme risk. In setting of the current article, we will center upon the ideas of exacting and total obligation versus the two outstanding modern fiascos in India.

  1. a) Doctrine of Strict Liability

The regulation of “severe risk” advanced in Fletcher v. Rylands. For this situation, Rylands employed temporary workers to assemble a supply on his territory. While building it, the contractual workers found a few imperfections and left them unfixed. After some time, Rylands’ repository burst and overflowed Fletcher’s bordering mine causing £937 worth of harm. Blackburn, J. believed that any individual who for his own motivations welcomes on his property and gathers and keeps there anything liable to do underhandedness, in the event that it gets away from should keep it at his hazard and in the event that he doesn’t do as such, is at first sight responsible for all the harm which is the regular outcome of its escape.

  1. b) Doctrine of Absolute Liability

The guideline of “outright risk” was first historically speaking applied by the Supreme Court of India in M.C. Mehta v. Association of India (popularly known as Oleum gas spill case). For this situation, oleum gas spilled from a manure plant of Shriram Foods and Fertilizers, Delhi and made harm a few people. A forthcoming public interest suit (PIL) by M.C. Mehta gave the occasion to the Court to pass a progression of requests managing the eventual outcomes of gas spill. For this situation, the Court objected the utilization of the standard of severe risk

  1. Bhopal Gas Tragedy

Association Carbide India Limited’s (UCIL) plant at Bhopal was planned by its holding organization Union Carbide Corporation (UCC), USA and was inherent 1969 for making pesticides, created by responding Methyl Isocyanate and Alpha Naphthol. An occurrence of gas spill occurred in the Bhopal pesticide plant of UCIL the evening of 2-3 December, 1984 making extreme misfortune the lives of individuals in the region. Individuals were presented to this gas all around the city and the quick impacts were hacking, retching, serious eye disturbance and a sensation of suffocation. A huge number of individuals passed on quickly, and lakhs of individuals continued perpetual wounds.

Then, the Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985was passed by Parliament to give certain forces on the Central Government to make sure about that cases emerging out of, or associated with, the Bhopal gas spill fiasco, are managed expediently, successfully, impartially and to the best bit of leeway of the petitioners and for issues coincidental thereto. This Act made the Union Government illustrative of the casualties of the misfortune and permitted them to record suits for their sake. Alongside this, an out of court settlement between the Government of India and Union Carbide was shown up at, which fixed the risk of the organization to pay $470 million according without limit and last settlement, everything being equal, rights and liabilities emerging out of that fiasco. With everything taken into account, it was a terrible move, as the settlement restricted the liabilities for the cases which were recorded later. It is a hard certainty, however it is as clear as open air that $470 million dollars were not adequate to remunerate all the harmed. Truth be told, it is not really 15% of the first case of $3.3 billion.

The pay granted was around Rs. 1 lakh for the groups of the individuals who lost their lives, Rs. 50,000 for forever harmed and Rs. 25,000 for briefly harmed.

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TORTIOUS LIABILITY OF COMPANIES IN USA:

ENTITY LIABILITY:

The idea of element obligation permits an enterprise to be held at risk for the criminal wrongdoings of its representatives if (1) the specialist is acting inside the real or evident extent of their business or authority and (2) if the specialists mean, in any event to some degree, to some way profit the organization through their activities. The organization can at present be held at risk for their representatives’ criminal offenses or activities regardless of whether the specialists’ activities are in opposition to corporate strategy or straightforwardly dismiss express requests of the enterprise. This standard was set up in New York Central and Hudson River Railroad v. US, 212 U.S. 481 (1909), where the court chose to expand the misdeed precept of respondeat better than criminal cases, setting up a type of corporate criminal obligation for activities of company’s representatives.

ARE AMERICAN COMPANIES LIABLE FOR TORT COMMTITED ABROAD?

In Ogoniland, Nigeria, ecologically concerned protestors were beaten, assaulted, and murdered for shows contradicting forceful oil advancement in the Ogoni Niger River Delta. Nigerian nationals brought suit under the Alien Tort Statute (ATS) in the Southern District of New York, asserting that unfamiliar enterprises that work together in the United States helped and abetted these atrocities. In Kiobel v. Illustrious Dutch Petroleum Co., the Supreme Court held that unfamiliar organizations are not dependent upon obligation in the United States for tortious acts outside of the United States. Be that as it may, on the grounds that Kiobel managed an unfamiliar enterprise, the assessment left open whether or not a United States organization could be at risk for tortious acts outside of the nation, and the open inquiry brought about a circuit split. The Fourth Circuit has held that American partnerships can be sued for acts submitted outside of the United States, while the Eleventh Circuit has extended Kiobel and expressed that American courts need ward over these cases, hence excepting them in that circuit. The Fourth Circuit’s thinking is a superior examination of cases brought under the Alien Tort Statute (ATS) on the grounds that the resolution was proposed to give a solution for outsiders harmed by Americans. Thusly, the United States has a commitment to give a gathering to noncitizens to get pay for misdeeds submitted by Americans in different nations. Moreover, the ATS was made to manage an American resident’s lead outside of the United States. Without a court authorizing this commitment, companies have minimal solid motivation to screen workers’ potential tortious exercises abroad.

Kiobel v. Illustrious Dutch Petroleum Co.

 In Kiobel, Nigerian residents claimed that the Royal Dutch Petroleum Company and Shell Transport and Trading Company helped and abetted the Nigerian government in viciously stifling fights against forceful oil advancement in Nigeria. The offended parties looked to recuperate in United States court under the ATS for the savage, tortious acts submitted in Nigeria. The ATS gives that “the region courts will have unique purview of any considerate activity by an outsider for a misdeed just, dedicated disregarding the law of countries or a deal of the United States.” The offended parties asserted that the organizations abused Nigerian law. On allure, the Supreme Court confronted the issue of whether an ATS case could gives harms to activities by non-American enterprises a working in an unfamiliar area. The Court depended on a legal standard known as the “assumption against extraterritorial application” to discover that the ATS doesn’t cover these claims. The Court held that the assumption against extraterritorial application applies to claims under ATS, yet that nothing in the resolution counters that assumption, so the ATS didn’t matter to the cases in Kiobel. Further, all pertinent lead in Kiobel occurred outside of the U.S.However, the Court expressed that if claims “concern the domain of the United States,”they can refute the assumption against extraterritorial application, yet should have adequate power to do so. Thus, this holding left open whether or not government courts have position to hear claims with respect to tortious acts submitted outside the United States yet that “contact and concern” the United States by prudence of their American tortfeasors.

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Analysis of Cyber Laws in UAE, Australia And China

By: Apoorva B N

ABSTRACT

In the modern swift- moving world, computers and internet are no more a privilege. Internet facilities have become a necessity as it is the par on course for any individual’s life today. Today, we have achieved so many advancements in the technological arena that it is next to impossible to even imagine our lives without computers or the internet. Now that internet has made its way to almost every aspect of human life, along with its blessings are its share of dangers and threats that haunt individuals today. In order to regulate the use of internet and everything that comes with it, ‘Cyber law’ emerged as a necessary facet of law. Cyber law deals with disputes arising in the internet domain, including matters like data protection, privacy concerns, identity left, electronic signatures, information technology and security. As information technology is looking at advancements taking place at a rapid rate, law regarding its regulation also needs to be updated at the same rate. In India, the main legislation that seeks to regulate information technology and related aspects is the Information Technology Act, 2000. Various amendments are being made to this legislation from time to time to be on par with the technological advancements that are taking place in the IT field. Similarly, this article aims to get an understanding and a brief analysis of the cyber laws of other jurisdictions like UAE, Australia and China.

INTRODUCTION TO INFORMATION TECHNOLOGY (IT)

Technological advancement is one of the most important factors contributing to a country’s economy. It also brings about modern rapid changes to the social lives of the individuals. Advancement in technology and science brings about rapid growth in employment opportunities thereby increasing the GDP of the country that enriches the economy as a whole. Information Technology is the study and use of computer systems to store, retrieve and send information.[1] In order to regulate information technology, especially facets of it including internet law, information and digital security, IT law or cyber law has emerged as a necessary aspect of law.

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CYBER LAWS IN UAE

UAE is said to be the most digitally advanced Arab country. It had also made its place in the top 20 digital economies in 2018[2]. In 2017, two breakthrough digital initiatives, the Dubai Internet of Things (IoT) Strategy and the Digital Wealth Initiative, were launched[3]. Securing an important position in the word for being digitally advanced, UAE has its own set of cyber security laws for the regulation of the cyber threats and like offences that form a part of any technological advancement. Therefore, the UAE has a comprehensive legislation on cyber laws called the ‘Cyber Crimes Law 2012’ (UAE-Law No. 5 of 2012)[4]. Few of the important offences and penalties that are covered under this legislation are—

  • Promoting or publishing pornographic material or indecent act and gambling activities.
  • Publishing of others information and photos on internet
  • Violating others privacy by eavesdropping and publishing the information using the social media
  • Human Trafficking
  • Data Forgery of prohibitive data
  • Unauthorized use and interception of computer services

Penalties for imprisonment for a term which may extend to ten years and a fine up to 200,000 AED.

The National Electronic Security Authority (‘NESA’) implements the Cyber Law and regulates the protection of communications networks and information systems in the UAE.[5] The Telecommunications Regulatory Authority (‘TRA’) was established by the Telecommunications Law to supervise the telecommunications division in the UAE. The TRA set up the Computer Emergency Response Team (CERT) to advance the standards of information security and protect the IT set-up.

Information Security Regulation (ISR) standards from Dubai Smart Government mandates government entities in Dubai to implement requirements and controls stated in the standard to ensure appropriate level of confidentiality, integrity, and availability of information assets.[6]

These were the key features of the Cyber law infrastructure in the UAE.

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CYBER LAWS IN AUSTRALIA

The legislations that deal with cyber and Information technology laws in Australia are as follows[7]—

  1. Australian Privacy Principles (APP): It is an amendment made to the Privacy Act, 1983 including various other amendments like—
  • The Privacy and data protection Acts, 2014-Victoria ;
  • Privacy and data protection Act, 1998– New south Wales;
  • Privacy and information Act, 2009– Queensland;
  • Personal information Privacy Act, 2004– Tasmania;
  • Information privacy Act, 2014– Australian capital territory;
  • Information Act, 2002– Northern territory.
  1. The Cybercrime Act, 1995: In August 2012, the Government passed the Cybercrime Legislation Amendment Act 2012(Cth) (CLAA). The purpose of the CLAA was to empower Australia to assent to the Council of Europe Convention on Cybercrime (Cybercrime Convention), the only international treaty on cybercrime. The Cyber Crime Act, 1995 was very much based on the international convention on cybercrime and it contains various offences relating to the unauthorised access, modification, or impairment of data and restricted data (sections 477.1, 477.2 and 478.1 of the Criminal Code).
  2. TELECOMMUNICATION ACT, 1997—The main objective of this legislation is to protect the privacy of individuals who use Australian telecommunication systems related to real time communications.[8]

These were the key Cyber law legislations of Australia and their objectives.

When it comes to high tech crime or cybercrimes of national importance, the accountability of investigation and response is conferred to Australian Federal Police (AFP). They possess jurisdiction over cases of cybercrime concerning online frauds affecting any governmental institution. Their jurisdiction further ranges to the investigation of cases related to virtual child sex harassment and exploitation, child protection and tourist child sex offenders.[9]

The Director of Public Prosecutions prosecutes on violations relating to unauthorised admission to data, damage caused to electronic communication and use of carriage services to harass or cause a wrongdoing, within sections 478.1(1), 477.3(1) and 474.17 of the Criminal Code (Cth).[10]

The New South Wales Police are conferred with powers to investigate and prosecute online fraudsters in offences in areas like internet banking, mobile banking, phishing, mule recruitment, shopping and auction site fraud, scams, spam and identity theft, child sexual exploitation and cyber bullying offences.[11]

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CYBER LAWS IN CHINA

The Chinese Government has always laid emphasis on the advancement in science and technology. Their innovation model includes huge projects in areas like Nano Technology, biotechnology, aircrafts, high-end generic microchips etc. Cybersecurity law of the People’s Republic of China was enacted by the e Standing Committee of the National People’s Congress on November 7, 2016 and was enforced on June 1, 2017. The key features of the cyber law of China are as under[12]—

  1. Security obligations of ISPs
  2. Rules for the transnational transmission of data at critical information infrastructure
  3. Rules for personal information protection
  4. Principle of cyberspace sovereignty

It also provides intricate rules and definitions on legal liability for various unlawful conducts, and sets a range of punishments like fines, suspension for modification, withdrawal of licenses and commercial licenses among others. The law therefore enforces cybersecurity and administrative authorities with powers and duties to implement the law against illegal activities.

Relevant cases in China[13]—

Sina Weibo v. Maimai (2016) was the first unfair competition case concerning big data analytics in China. The central issue for the court to decide was whether the alleged “unauthorized collection and use of data” and its related activities constitute unfair competition under the Anti- Unfair Competition Law. The case is a landmark decision to address one of the important questions on competition for data resources in the internet industry: to what extent data scraping (both personal data and other data) targeting a competitor could be potentially caught by the rules of unfair competition.

Tencent v. Douyin (2019) – case concerning the ownership of users’ ID, nicknames and profile pictures.

Facts: Douyin had entered into a Developer Agreement with WeChat and QQ platforms, and had access to users’ WeChat and QQ IDs, nicknames and profile pictures. Douyin had shared those data with Duoshan, a social networking product run by its affiliate. WeChat and QQ platforms claimed that the unauthorized use of IDs, nicknames and profile pictures of their users constitute unfair competition. The court granted a temporary injunction restraining Douyin from using those user data until the date of final judgment. It remains to be seen whether the court would consider the case following the same logic of the Maimai case.

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CONCLUSION

We can therefore conclude on being able to have understood the meaning and importance of information technology and how it has become an inevitable and a significant aspect of human life today. We also understood the IT laws or cyber laws that are codified in various jurisdiction across the world, like UAE, Australia and China. By the above stated information, it is safe for us to conclude that among the countries whose cyber laws have been discussed in this article, China appears to be the most technologically advanced country thereby making it better equipped in IT or cyber laws to regulate the threats that will be posed with technological advancements. Secondly, UAE is also seen to have been making efforts and taking efficient steps to get their IT or Cyber law infrastructure well- equipped. Australia appears to be relatively backward in terms of technological advancements in comparison with China and UAE. But Australia’s latest technological advancements have given rise to good legal backing by way of the cyber law legislation of the country.

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[1] ‘WHAT EXACTLY IS INFORMATION TECHNOLOGY (IT)’, workforce.com, https://www.workforce.com/news/what-exactly-is-information-technology-it

[2] CLEOFE MACEDA, ‘UAE MOST DIGITALLY ADVANCED IN ARAB WORLD’, GULFNEWS, https://gulfnews.com/technology/uae-most-digitally-advanced-in-arab-world-1.2239034

[3] Ibid.

[4] BASSAM ZA’ZA’, ‘UNDERSTANDING UAE’S CYBERCRIME LAW AND PENALTIES’, GOING OUT, SEPTEMBER 12, 2015 07:00, https://gulfnews.com/going-out/society/understanding-uaes-cybercrime-law-and-penalties-1.1564565#:~:text=the%20uae%20cybercrime%20law%20no,and%20seriousness%20of%20the%20cybercrime.

[5] IBID.

[6] COMPLIANCE AND DATA PROTECTION SERVICE, RNS TECHNOLOGY SERVICES, https://www.rnstechnology.com/compliance-data-protection/#:~:text=information%20security%20regulation%20(isr)%20standards,compliance%20with%20local%20regulations

[7] KING & WOOD MALLESONS, ‘AUSTRALIA’S CYBERCRIME LEGISLATION’, LEXOLOGY, https://www.lexology.com/library/detail.aspx?g=4ab62fdd-f177-47eb-b02d-e327cf9833a9

[8] “Cybercrime Laws in Australia.” lawteacher.net. 11 2018. All Answers Ltd. 12 2020 https://www.lawteacher.net/free-law-essays/australian-law/cybercrime-laws-in-australia-8255.php?vref=1

[9] PAVUL LEGAL, ‘CYBERCRIME LAW IN AUSTRALIA’, PAVUK, 2 June 2018, https://www.pavuklegal.com/cybercrime-law-in-australia/

[10] PAVUL LEGAL, ‘CYBERCRIME LAW IN AUSTRALIA’, PAVUK, 2 June 2018, https://www.pavuklegal.com/cybercrime-law-in-australia/

[11] Ibid.

[12] LAUREN MARANTO, ‘WHO BENEFITS FROM CHINA’S CYBERSECURITY LAWS?’, CSIS, https://www.csis.org/blogs/new-perspectives-asia/who-benefits-chinas-cybersecurity-laws#:~:text=In%20June%202017%2C%20the%20China,for%20China’s%20present%20day%20guidelines.&text=The%20law%20requires%20that%20data,to%20government%2Dconducted%20security%20checks.

[13] Recent privacy case law update in China, Dentons, file:///C:/Users/Apoorva%20Narendranath/Downloads/8b0990bc-f987-428d-b3c1-4eea30fbce82.pdf

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Copyright Licensing Agreement and the Clauses Covered Under It- An Analysis

By: Darshi Sanghvi

What is copyright licensing?

In India, copyright is known by and large as an ownership right offered by law to creators, for instance, of artistic work, cinematography, literature and sound recordings. In other words, it is a protection provided to creators of work in the form of an acknowledgement for their intellectual contribution. The primary objective of any copyright is to protect the interest of the creator, besides the dissemination of knowledge that is carried out. An often undiscovered fact is amidst other benefits; economic rights also enable a creator to reap economic benefits from his intellectual creations. As per the Copyright Act of 1957, there are different rights in place, pertaining to the nature of the work undertaken. It is further pertinent to note that it is the exclusive right of the owner to do or authorise doing any of the acts covered thereon.[1]

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The copyright framework permits not only the communication of work, but also its reproduction, translation and adaption. Thus, the owner of the copyright work is given the opportunity of generating wealth not just by exploiting it himself, but also by sharing it with the public at large for mutual benefits. This is where copyright assignment and licensing come into play.  A distinction may be drawn between licensing and assignment, in terms of the fact that through licensing, the licensee is granted rights on the basis of certain conditions, however their ownership is not vested in the licensee. On the other hand, in an assignment, the assignee is regarded as the owner of the interest assigned to him.

Through copyright licensing, the licensor grants a license to the licensee, thereby authorising the use of the said copyright by such a licensee. The licensee is thus provided with the adequate protection and spared from the claim of infringement unauthorised use that may be made by the licensor otherwise.

Furthermore, the term ‘Exclusive License’ is elaborated in the Copyright Act to comprise of licenses that confer, on the licensee or any other person duly authorised by him, any right pertaining to the copyright of the work, excluding all the other persons.[2]

In exchange of a consideration, a copyright owner may choose to transfer some or all of his rights to others for the purpose of seeking monetary benefits. A license may either be said to be exclusive, or non-exclusive.[3]

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What is a copyright licensing agreement?

In order to initiate licensing, a copyright owner enters into a contract, widely known as the Copyright Licensing Agreement. Through such a contract, the copyright owners permit another individual or organization to use their work in several ways, for instance:

  • For reprinting
  • For distribution
  • For using it over a specified period of time[4]

In a nutshell, it is an agreement that throws light on how, why, when and where a copyrighted work can be capable of being used.

Types of copyright licensing agreements

  • Voluntary License – The author, also known as the Copyright owner, is said to have exclusive rights with regard to his creative work and has the sole right to grant license in that respect. The Copyright Act 1957[5] provides that the owner of the copyright may grant the interest in his copyright through a license in writing, which must be signed by him or an agent duly authorised by him to do so. Such a license can be granted with respect to existing as well as future work. A voluntary license may be exclusive, non-exclusive, sole or implied.
  • Compulsory License[6]– As a part of the Berne Convention[7], India has taken a step towards the incorporation of a compulsory license under the Copyright Act 1957. The term “compulsory license” is used to mean a statutory license that provides an exclusive right to do an act without the prior permission of the copyright owner/ author. Section 31 covers the compulsory licensing of copyrighted work that is withheld from the public.

Important clauses to be included in Copyright Licensing Agreements

An agreement begins by stating the date and place of its execution and further proceeds towards identifying the contracting parties. This lays the foundation for the following clauses that are particular to the property or rights that are granted.

  • Recitals: This clause is considered essential for any form of agreement as it is used to provide a gist about the contracting parties. This clause sets forth the relationship of the parties up to the stage before which the agreement came into being. A well-drafted recital plays its part in clearly expounding the context of the agreement to any reader, thus enabling a person unknown to the agreement to comprehend it better. Nevertheless, it also clarifies the fact that the binding clauses of the agreement are to be included in the coming clauses and not the recital itself.
  • Definition: This clause is equivalent to a dictionary for the purpose of the agreement. It elucidates all the terms of immense importance to the agreement, which play an important role in determining the rights and obligations of the parties. Definitions can additionally be used for the purpose of restricting the scope of the agreement. A precise description of the terms like “licensed patents”, “use”, “royalty”, “revenue” etc. can be found within this clause.
  • Rights Grant/ Grant of license: This clause plays a significant role in enabling the parties to understand the extent to which the license extends. The Rights Grant clause irons out the significance of the rights granted by the Licensor to the Licensee. The said clause states several points like the “Exclusivity of the license”, “right to use”, “restrictions on use” and “limitations- geographical and political”. Most importantly, it acts as a guide by specifying “who gets what”. The clause clarifies that the Artist retains his right to reproduce his work and that the license remains with the artist and does not affect the ownership of the copyrighted work.
  • Indemnification: In the event of any litigation risk or loss arising on one party as a result of the act of another or due to the existence of any defect in the license granted or the ownership of the copyright, it is essential to discuss the specifics of who will be indemnified and who will be the indemnifier if such a risk comes true. In other words, this clause provides the right to the party suffering due to the act of another party to call upon him to indemnify the suffering party for any loss that may have incurred.
  • Consideration: Consideration forms an essential part of any contract, unless it is expressly mentioned otherwise. The consideration clause of a license agreement cites the amount of consideration that a licensee is required to pay to the licensor, in the form of royalties. The clause further sets out the method by which such royalties are to be calculated. According to most of the agreements, the royalties paid are based on the profit made by the licensee by exploiting the license. Besides such a royalty, the licensor is also entitled to demand a fixed license fee to be paid, which can be taken separately from the royalty. Both, the fee and the royalty depend on a number of factors, for instance, the use of work, the Artist’s reputation, the scope of the license, so on and so forth. The licensor also possesses the right to formulate a condition obligating the licensee to keep track of the sales made by him and to show the licensor such audit reports that shall be prepared by him.
  • Obligations of the Parties: Every party contracting under a license agreement has certain obligations towards each other which differ and are over and above the aforementioned clauses. These obligations involve making disclosures with respect to the information which is required to be known by both the licensor and licensee; in case the grant is of an exclusive license then the licensor agrees not to exploit the exclusivity granted to him thereunder; and may also contain a clause that obligates the licensee to exploit the copyrighted property in a manner that enables him to make the most of the license granted to him, much more so in case of exclusive license which exclusively grants him the license to exploit particular copyrighted work.

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  • Alterations and modifications: Alterations or modifications of any sort that may be made by the licensee must first be granted under the rights grant clause. If, upon granting any such right, modifications are made in the work, then the licensor might demand to be the owner of such property post the requisite improvement and shall then assign such improved property under another license with identical conditions as the previous agreement. Under certain circumstances, the licensee might seek to retain the ownership of the improved property, and then the licensor might obtain a license from the licensee for the purpose of including the modified part in his original work.
  • Term and termination: This clause lays down the period for which a license is granted to the licensee, the focus being on the date when it comes into force and the date on which it ceases to exist. Such a license possesses the scope of being renewed from time to time, subject to the conditions as specified under the agreement or at the will of parties. Term of the license is finalised by the concerned parties bearing in mind their respective benefits. Termination of an agreement is by and large based on two factors: at convenience and for cause. More often than not, parties don’t prefer granting the opposite party a right to terminate the contract at convenience as it may lead to a loss to the other party who might have invested a huge amount of money with a view of exploiting the licensee or the granted rights. One party is entitled to immediately terminate the agreement, if the other party does an act that is considered as a breach of any term of the agreement. This clause also puts out the consequences of termination of the license for any reason whatsoever. Nevertheless, in case of termination of the agreement at convenience, the party bringing about the termination of the agreement can, under obligation, be compelled to give a prior notice of certain period before such termination is implemented.
  • Dispute Resolution: In case of any dispute arising between the parties with regard to any breach of the agreement or any other reason pertaining to the license. Majority of the agreements elucidate the process to be followed in case of a conflict. The form of dispute resolution that must be opted for, can be decided at the discretion of the parties, which can be chosen from normal litigation, arbitration, mediation, and conciliation. The parties are at their will to decide the manner of dispute resolution and the law governing them.[8]

This is a non-exhaustive list of clauses essential to the agreement entered into between a copyright owner and the person seeking rights to reproduce or perform that copyrighted work. Copyright license agreement should be drafted, bearing in mind the protection of the rights of the Licensor as well as the Licensee. Furthermore, each clause must stipulate the rights, obligations, and limitations expressly, such that any future misunderstandings and misconceptions can be avoided on the part of the parties.

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[1] Section 14 of Copyright Act 1957

[2] Section 2(j) of Copyright Act 1957

[3] https://ssrana.in/ip-laws/copyright-law-india/copyright-licensing-in-india/

[4] https://vakilsearch.com/advice/copyrights-in-india-how-to-assign-and-license-a-copyright/

[5] Section 30 of Copyright Act 1957

[6] Section 31 of Copyright Act 1957

[7] Article 9(2) of Berne Convention

[8] https://www.gspkendra.com/2018/12/27/most-important-clauses-in-a-copyright-licensing-agreement

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Analysis of Banking and Investment Laws in USA, UK and UAE

By: Manas Maheshwari 

Introduction

Banks are the most important element of the Financial System of any country. The Economic Development Indicator depends on the efficacy and efficiency of the banking system prevailing in that particular country. The core function of Bank is to accept deposits and lend money thereby acting as an intermediary between depositors and borrowers. The income of  Bank is difference between rate of interest charged to the borrowers and the rate of interest paid to the depositors. This is the traditional function of Banks. In modern times like now, Banks including Non-Banking Financial Companies (NBFCs) perform various other value added services to its customers like foreign exchange transactions, providing distinct types of loans other than business loans such as car loans, home loans, education loans etc. , advisory and consultancy services, hire purchase financing, insurance services and many more. The Banking is not limited to the Commercial Banking operations alone. It has widened its limits and has reached the stage where the Investment Bank’s role in the economic development has come into play. The Investment Bank performs dual functions like acting as an underwriter, book manager to the issue, merchant banker, registrar in primary securities market from side of the corporate issuer. The Investment Bank also advises the clients mainly, Institutional Investors about the Buy and Sell side functions. The role of Foreign Direct Investment (FDI) also comes into play when the commercial operations has been globalized and particularly when the capital is not at abundance.

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Analysis of Banking and Investment Laws in UAE

As per the Doing Business Report 2020[1] published by the World Bank, the United Arab Emirates is ranked 16th out of 190 countries. This shows that UAE is gradually becoming  business and financial centric attracting a host of global banks corporate to set up their operations.

Currently, there are three types of Banks operating within UAE. These are:

  1. Commercial Banks;
  2. Islamic Banks and
  3. Foreign Banks.

The Islamic Banks are regulated by the Shariah principles as opposed to the commercial banks leading to many operational differences between the two. The popular banks currently operating in UAE are Emirates NBD, National Bank of Abu Dhabi, Abu Dhabi Commercial Bank, First Gulf Bank and Dubai Islamic Bank.

The UAE Central Bank is the primary regulator for Banking and Financial Services in UAE. Apart from Central Bank, there are various other regulatory bodies namely:

  1. The Insurance Authority (“IA”);
  2. The Securities and Commodities Authority (“SCA”);
  3. Dubai Financial Services Authority (“DFSA”) and
  4. Abu Dhabi Global Market (“ADGM”).

The Regulatory authorities functioning within the federal level are the Central Bank, IA and SCA and those functioning within the emirate level are DFSA (operates within the Dubai International Financial Centre) and ADGM (operating within Abu Dhabi).

The Federal Law No. 10 of 1980[2] governs the Central Bank, the Monetary System and Organization of Banking. The Islamic Banks, Financial Institutions and Investment Companies are governed by Federal Law No. 6 of 1985[3]. The Decretal Federal Law No. 14 of 2018[4] covers the subject of Central Banks and Organization of Financial Institution and their activities. The SCA is governed by Federal Law No. 4 of 2000[5] and issues regulations from time to time which the companies operating in the securities market has to comply with. The IA regulates the Insurance sector in UAE in accordance with Federal Law No. 6 of 2007[6].

The DIFC, being an international Financial hub offers very vibrant environment w.r.t Commercial Banking and Investment Banking services. The laws related to this area of business are:

  1. Companies Law[7];
  2. Electronic Transactions Law[8];
  3. Insolvency Law[9] and
  4. Law of Security[10].

The Financial Collateral Regulations[11], Insolvency Insurers Regulations[12], Security Regulations[13] and Investment Companies Regulations[14] has been amended from time to time by DIFC.

The Central Bank of UAE issues licenses to foreign banks for operating in UAE as per the law that governs the domestic bank licensing. The Investment Banks cannot accept deposits whose maturity period is less than two years with some exceptions and these banks are licensed as per the relevant law[15]. The Islamic Banks can carry all types of Banking, Financial and Investment services and operations as per the relevant federal law.

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Only authorized Institutions and Companies incorporated as per the Commercial Companies Law are licensed to act as moneychangers[16]. In respect of Financial Intermediaries involved in sale and purchase of stocks and bonds and in money market transactions, only UAE citizen in respect of natural person can act as an intermediary[17]. The responsibility for licensing brokers and intermediaries fall upon SCA in respect of shares and Central Bank in case of currency and commodities.

The Investment Companies as per the resolution[18] adopted by Board of Directors of Central Bank is involved in following businesses:

  1. Managing Portfolios;
  2. Preparing Allotment;
  3. Managing Investment Trust funds and
  4. Acting as a Trustee for managing funds on behalf of Beneficiary.

The Finance Companies undertake the following activities according to the resolution[19] adopted:

  1. Loans and Advances;
  2. Issuing credit guarantee and
  3. Issue of securities such as stocks, bonds, debt etc.

The Laws and Regulations governing Foreign Exchange are:

  1. Anti-Money laundering legislation[20] by Central Bank (To Register Hawala Providers);
  2. Anti-Money Laundering/Anti-Terrorist Financing Regulations[21] by DIFC and
  3. Anti-Money Laundering and Combating the Financing of Terrorism[22] by DMCC.

In the midst of Covid-19 pandemic, the Central Bank of UAE have taken various measures relating to rescheduling loan payments, reducing charges for customers, deferring loan installments, encouraging customers to adopt digital banking services, to boost lending capacity of banks and to provide temporary relief to private sector and retail customers affected by Covid-19 pandemic and directed all banks to carry out sanitization of ATMs on regular basis[23].

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Analysis of Banking and Investment Laws of UK

As per the Doing Business Report 2020[24] published by World Bank, United Kingdom is ranked 8th out of 190 countries. This establishes the fact that UK Laws and Regulations are business friendly.

Most of the UK laws partakes its character from European laws and regulations. The Primary framework for regulating Banking, Financial Services and Insurance sector in UK is Financial Services and Markets Act 2000[25] (“FSMA”). Apart from this, there are various domestic rules and regulations derived from secondary sources.

The principal regulators for Banks are:

  1. Bank of England (“BOE”);
  2. Prudential Regulation Authority (“PRA”), a division of BOE and
  3. Financial Conduct Authority (“FCA”).

The BOE performs a statutory duty exercising its powers in the matter of resolution of Banks if a Bank is declared insolvent. The Financial Policy Committee (“FPC”) of BOE performs macro-supervision over Banking and Financial Sector. The Payments System is regulated by a Payment Systems Regulator and the issuance of Electronic Money is regulated by FCA.

The Primary function of PRA is to supervise the Banking and Insurance Companies[26]. The PRA also ensures proper mechanism of infrastructure in place for performing Banking related functions. It develops strategies in cooperation with the Companies to counter the crisis like situations. The PRA helps in ensuring a sound financial system is in place.

Till 2013, the Financial Services Authority (“FSA”) was the principal regulator for Banking and Financial Services industry. After 2013, the responsibility was divided between PRA and FCA.

The PRA and FCA are different entities working together and having a common aim. The FCA is responsible for ensuring fairness in the Financial Markets. It helps in ensuring a fair outcome for the consumers. The primary objectives[27] of FCA are:

  1. To protect the consumers;
  2. To protect the Financial Markets;
  3. To promote competition and
  4. To work in coordination with consumer groups, trade associations, professional bodies and other stakeholders.

The FCA is an independent public body and the main source of its income is the fees which it charges from its customers. The FCA is accountable to the Parliament and Treasury.

The activities that are regulated under the Banking and Financial sector are incorporated in the Financial and Markets Act (Regulated Activities) Order 2001[28] (“RAO”). Regulated Activities covers the following aspects:

  1. Accepting Deposits;
  2. Securities and Derivatives Business;
  3. Transactions in Investments;
  4. Insurance Activities;
  5. Mortgage Contracts and
  6. Consumer Credit.

In the wake of the global financial crisis in 2008, the UK economy went into a sharp recession. This was the time when the concept of Bank Ring-Fencing was developed. Under this concept, the retail banking services of the Bank were separated from the other services that the Bank offered and were prioritized. The Bank Ring Fencing helps in protecting the consumer banking services from the unexpected events which leads to global financial crisis like situations.

The Financial Services Compensation Scheme (“FSCS”) is a deposit insurance scheme which protects the consumers of the firms in financial sector that have failed.

The Consumer credit in UK is mainly regulated by Consumer Credit Act, 1974[29]. The Act regulates the following aspects:

  1. Credit card purchases;
  2. Credit agreements and
  3. Credit advertising.

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The Banking Resolution aspect is incorporated in the Banking Act 2009[30]. The Bank of England is the UK’s Banking Resolution Authority. The Resolution regime is governed by the Bank of England’s approach to Resolution. This Resolution regime does not apply to the credit unions. The depositors of credit unions are paid out by FSCS up to a maximum limit of 85,000 pounds per credit union[31].

Due to Covid-19 pandemic, the FCA has also reviewed the disaster recovery plans in order to ensure that all the regulations have been complied with[32]. The UK’s exit from the European Union will also have a substantial impact on the Banking and Financial Sector.

Analysis of Banking and Investment Laws in USA

USA has a dual banking system put in place. Both the Federal Banks and State-Chartered Banks are operating in USA. The following categories of Banks are operating in USA:

  1. National Banks;
  2. State-Member Banks;
  3. State non-member Banks;
  4. Foreign Banks;
  5. Private banks;
  6. Industrial Banks and
  7. Trust Companies.

The Banks are required to obtain a charter before accepting deposits and continuing business[33].

The Primary Regulatory Authority for keeping a regulatory oversight over the Banking operation in US is the Federal Reserve System (“Fed”). The Federal Reserve System, being the Central Bank of USA is the primary supervisory authority over Bank Holding Companies, Financial Holding Companies, State Chartered Banks, Savings and Loan Holding Companies. The Federal Reserve is equipped with the following powers:

  1. Remove officers of Banking Companies;
  2. Imposing penalty and fines;
  3. Revoking Bank membership and
  4. Terminating activities of Banks.

The main functions[34] performed by Fed are:

  1. Formulate monetary policy;
  2. Stabilizing the financial system;
  3. Administering the payment and settlement system and
  4. Promoting the consumer awareness and community development.

Besides the Federal Reserve, other regulatory bodies operating in USA are:

The Office of the Comptroller of the Currency (“OCC”): The OCC[35] is the primary supervisory authority having oversight over National Banks, Saving Banks and Foreign Banks having branches at federal level. The OCC is an independent unit of the Department of Treasury. It helps in ensuring that the Banks are accountable to customers and comply with the relevant laws and regulations.

The Federal Deposit Insurance Corporation[36] (“FDIC”): It is an independent agency created to instill the confidence among the general public in the financial system. It insures deposits and supervises the state-chartered Banks. The responsibility of FDIC also lies in administering the deposit insurance fund and managing receiverships.

State Banking Agencies: The State Banking Agencies are responsible for supervising the banks operating at state level. The functions of this agency varies from state to state. Some common functions performed by these agencies are:

  1. Issuing Bank charters;
  2. Conducting examinations at Bank and
  3. Enforcing regulations and levying fines.

Some other important regulators[37] for Banking and Financial oversight are:

  1. Financial Crimes Enforcement Network;
  2. Federal Trade Commission and
  3. Consumer Financial Protection Bureau.

The Securities and Exchange Commission (“SEC”) is the primary regulator of Securities Market in USA. The primary objective of SEC is to protect the investors, develop efficiency in the securities market and to address investor grievances.

The derivative market in USA is regulated by Commodity Futures Trading Corporation (“CFTC”). The National Association of Insurance Commissioners (“NAIC”) is a regulatory organization governed by chief insurance regulators of the respective states. The Insurance Laws are enacted by the respective state legislature under which insurance regulators operate. The legislations related to Banking in USA are:

National Bank Act of 1864[38]: This act performs the functions relating to establishing national banks, creating uniform national currency and establishing OCC.

Federal Reserve Act of 1913[39]: This act established the Federal Reserve System as the Central Bank of USA. The act sets out the framework for the operation of Fed and ensuring stable monetary and financial system.

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Federal Credit Union Act[40]: This act establishes the National Credit Union Administration for governing the credit unions.

Federal Deposit Insurance Act[41]: This act establishes the Federal Deposit Insurance Corporation which will insure the deposits of all banks and saving associations. The FDIC is the primary regulator for state non-member banks.

Bank Holding Company Act of 1956[42]: This act gives enhanced powers to Federal Reserve by regulating the Bank Holding Companies.

International Banking Act of 1978[43]: This act brings foreign banks at par with the domestic Banks w.r.t regulations, capital requirements etc.

The Gramm-Leach-Bliley Act[44] was adopted in 1999 for providing affiliation of Banks, securities firms and for safeguarding the personal sensitive data of the customers.

The Dodd-Frank act[45] of 2010 is a comprehensive set of regulations governing financial services borne out of great recession of 2008. The Act performs following functions[46]:

  1. Protecting consumers against any abusive lending and mortgages by Banks;
  2. Overseeing non-banking hedge funds;
  3. Establishing financial stability oversight council;
  4. Orderly shutdown of Banks if it becomes insolvent and
  5. Creating Volcker’s Rule which prohibits banks from owning hedge funds for their own purpose.

Besides these important acts some other important acts such as Bank Secrecy Act[47], Patriot Act[48] etc.

According to Doing Business Report 2020[49] published by World Bank Group, the United States of America is ranked 6th out of 190 countries. The Banking and Investment related laws in USA are quite business friendly and amended from time to time in response to the latest developments.

 

[1] The World Bank, Ease of Doing Business Rankings, Link.

[2] Union Law No. (10) of 1980.

[3] Federal Law No. (6) of 1985.

[4] Decretal Federal Law No. (14) of 2018.

[5] Federal Law No. (4) of 2000.

[6] Federal Law No. (6) of 2007.

[7] DIFC Law No. 5 of 2018.

[8] DIFC Law No. 2 of 2017.

[9] DIFC Law No. 1 of 2019.

[10] DIFC Law No. 8 of 2005.

[11] DIFC Financial Collateral Regulations, November 01, 2019.

[12] DIFC Insolvency (Insurers) Regulations, September 29, 2008.

[13] DIFC Securities Regulations, November 01, 2019.

[14] DIFC Investment Companies Regulations, November 12, 2018.

[15] UAE Central Bank, Banking, Link.

[16] UAE Central Bank, Banking, Link.

[17] UAE Central Bank, Banking, Link.

[18] Resolution No. 164/8/94 dated 18 April 1995.

[19] Resolution No. 58/3/96 dated 14 April 1996 and Resolution No. 165/06/2004 dated 6 December 2004.

[20] Central Bank of UAE, Anti-Money laundering legislation,  Link.

[21] DIFC Non-Financial Anti Money Laundering/Anti-Terrorist Financing (AML/CFT) Regulations, Link.

[22] DMCC Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) Policy and Process, Link.

[23] Mazen Boustany and Samar Safar Aly, Guidance for Financial Services Industry in the UAE, April 01, 2020, Link.

[24] The World Bank, Ease of Doing Business Rankings, Link.

[25] 2000 c 8.

[26] Bank of England, What is the Prudential Regulation Authority?, Link.

[27] Financial Conduct Authority, About the FCA, Link.

[28] 2001 No. 544.

[29] 1974 c 39.

[30] 2009 c 1.

[31] Financial Services Compensation Scheme, About us, Link.

[32] Mazen Boustany and Samar Safar Aly, Guidance for Financial Services Industry in the UAE, April 01, 2020, Link.

[33] Baker McKenzie, Global Financial Services Regulatory Guide, Link.

[34] Federal Reserve System, About the Fed, Link.

[35] Office of Comptroller of Currency, Who We Are, Link.

[36] Federal Deposit Insurance Scheme, About Us, Link.

[37] Baker McKenzie, Global Financial Services Regulatory Guide, Link

[38] 12 U.S. Code § 38.

[39] Pub. L. 63-43.

[40] 12 USC § 1751 et al.

[41] Pub. L. 81-797.

[42] 70 Stat. 133.

[43] 92 Stat. 607.

[44] 113 Stat. 1338.

[45] 124 Stat. 1376-2223.

[46] Mark Koba, Dodd-Frank Act: CNBC Explains, Link.

[47] 84 Stat. 1114-2.

[48] 115 Stat. 272.

[49] The World Bank, Ease of Doing Business Rankings, Link.

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Digital Forensics and Law Enforcement

By: Prabha Devi Ganesan

INTRODUCTION

Digital Forensics is also defined as the science of identifying, preserving, analyzing and reporting of any evidence stored in the digital media like computer, network, server and mobile device. The documents of the evidence which are collected from the storage media computer system or any digital device can be used as evidence in the court. Before performing a forensic investigation a digital forensic examiner must understand various concepts in forensic.

People who can involve at the time of investigation are

  1. First responder
  2. Forensic investigators
  3. Court expert witness
  4. Law enforcement personnel

Process of Digital Forensics

  1. Identification -The first process of digital forensic is that what kind of evidence is present and also identifying the format and finding out where it is stored in the computer or mobile device.
  2. Preservation – It means that all the data is isolated, preserved and secured from using the digital device.
  3. Analysis – Based on the evidence found the fragments of data are reconstructed and the conclusion is being drawn as a conclusion. It also tells that how was it taken place.
  4. Reporting – It is like reconstructing all the crime scene and reviewing it with proper photograph, sketching and mapping the crime scene
  5. Presentation – This is the last process and all the above process are being summarized in this process and explained and put to a conclusion. The terms should be written in a abstracted terminologies

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Principles of digital evidence can be gathered digitally from the messages that are sent via phone, email internal history, computer files, images and instant messages. It can also be from the sources like desktop computers, laptops, mobile devices and cloud.

Main objectives

It helps to find the identity of the suspect or the culprit. Reconstructing the procedures at the crime scene may help to ensure that digital evidence which is obtained is not being altered or corrupted. It also helps to identify the evidence at short period of time and also gives overview of any malicious activity involved. It also helps to find the motive behind the crime scene. Process of computer forensic report gives a complete documentation on the investigation process. All the evidence is preserved by following chain of custody.

In case of confiscating a computer, expert forensic examiner must be called. The expert is called to ensure that any criminal actions doesn’t get lost or damaged if the computer is switched off. Pictures of the data that is currently being displayed on the screen and when the computer system is taken into custody when the server system is off because when the server system is off, the data saved can be damaged or disrupted from the services provided to the customers. As soon as the mobile is being confiscated it must be switched off and battery must be removed it is to make sure that the recent call information and cell tower remains unchanged. Once if it is off we shouldn’t turn it on because it may change the information on the device. A remote command can be sent without the knowledge of the investigator if the attacker gets to know about the mobile device is on. The mobile must be kept off because there are many other chances where it can be switch on easily. All the evidence which is collected is kept in FARADAY BAGS or other materials used when isolating a mobile device.  We should turn on flight mode. Turn off WIFI. Turn off Bluetooth. NFC or other communications system must be off. To prevent static electricity it can be kept in a material where there is no passage of electric current like paper bag, paper made out if cardboard and any envelope made up of paper.

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LAW ENFORCEMENT

Computer based evidence have common in court proceedings and also it consists of many important information for computer for intelligence than the law enforcement. There is much enforcement of techniques that law enforcement is not being known. Digital forensics is involved in the commercial organizations   in case of any disputes regarding the employment, wrong or fraud investigation and intellectual property theft bankruptcy etc.

CASE LAW 1:  (CREDIT CARD FRAUD)

STATE OF TAMILNADU VS THE MANAGER OF BPO ORGANIZATIONS (BUSINESS PROCESS OUTSOURCING)

FACTS OF CASE: The manager with the fraud control unit of BPO filed a complaint stating that two of his employees has conspired with the credit card holder and manipulated the credit card limit and as a result they cheated the company of INR 0.72 million. After the investigation they have seized six mobile phones, imported wrist watches, jewelers, credit cards and leather accessories all worth of INR0.3 million and cash INR 25000. They also informed the company of the security lapses in their software so that cases like this could not be repeated in the future. This case has won the second runner-up position for India Cyber Cop Award for its investigating. It was also stated that the case was remarkable by the investigating team of the business process and its use in collecting digital evidence.

CASE LAW 2: (BLACKMAILING)

STATE OF MAHARASTRA VS THE NRI (NON-RESIDENT INDIAN)

FACTS OF THE CASE: the accused was a NRI was working in Dubai she posed to a young girl living in Kolkata to enter into Han email correspondence. The accused started corresponding with the complainant using different email IDs with different female names which made the complainant believe that he was corresponding with different girls. Later on the accused asked for money and gifts and also sexual favors from the girls whom he was corresponding with. The accused started blackmailing the complainant referring to the email exchanges and she was made to believe that one of the girl committed suicide and sent fake copies of high court of Calcutta he also paid the bribe for the officials who supposedly investigating and compensate the family. This case won the first runner-up position India Cyber Cop Award for its investigating

Coming to the network forensics it involves HEX CODES AND ASCII CODES

ASCII CODES – AMERICAN STANDARD CODE FOR INFORMATION INETRCHANGE

When we take forensics it is also important to know about the number system fundamental. It is for the understanding the machine. There are 4 types they are binary, octal, decimal and hexadecimal

Binary number

Base -2

Symbols- (1-0)

Octal number

Base – 8

Digits – (0-7)

Decimal number

Base -10

Standard number is always 10

Hexadecimal number

Base – 16

Digits – (0-9)

Characters – A to f

OFFSET – It indicates the distance between the starting or beginning of the object and a given element or point with the same object.

FILE SYSTEM FORENSICS

The Identification, collection and analysis of digital evidence from different types of storage media is known as FILE SYSTEM FORENSICS. There are many concepts that relates to the file system

 

Firstly,

Hard disk – data can be hidden on the maintenance track or it can be protected or preserved in a protected area on the hard disk which is also known as evidence collection tool

File allocation table (FAT) and Master File table (MFT) in New Technology File System (NTFS) are to keep a track of files present in the storage media

Deleted files are removed from the file system table even though it looks like it has been deleted from the hard disk and looks like it doesn’t appear in the hard disk anymore and the clusters which are being deleted allows the other files to save or store data. There are different ways to recover the data using certain techniques we can use hex format   when we are using hex format we should start from the starting or beginning and end of the file. We should copy it in a text file. After saving it in a text file it has to be saved in an appropriate file extension.

PARTITION TABLE

It is the Master boot record. It enables a computer system to know how the hard drive is being organized particular partition are being erased but still it is being stored in the hard drive.

 

SLACK SPACE

The data is hidden in a random data is called ram slack found left over at the end of the volume. If the data are being deleted and if the clusters are not being stored it can be used in to store the data, and also the data which is deleted can be restored. It is mainly to hide the data in the storage media in a computer.

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FREE SPACE

The space which is being created are being obtained after the deletion of the file which is been deleted from the original partition is called free space

FAKED BAD CLUSTERS

The data can also be stored in cluster that are named as bad and master file table which is names as badclus contains the information about the bad clusters present in NTFS file system. Size of file system is equivalent to the size of the volume. It is used to hide the size of the data stored on volume by a suspect

FAT 32 – 1996

It is mainly used in DOS and windows operating system before windows XP. 32 in the FAT32 represent the 32 bit number to depict cluster value. It accommodates 2^32. Newer hard drive don’t use FAT32

It gives a idea about where a particular file is stored it is also considered to be very simple when compared to NTFS file system.

NTFS

It’s a newer file system than FAT32

It is being used in Window NT & 2006

It has 512 byte record called boot record

It is used to read the information regarding the partition present on the file system and other relevant information that is used by the operating system to load properly

CONCLUSION

Digital forensic examination of electronic system has end up in a great success in the analysis of cyber and computer assisted crime and also it has equivalent importance on the appropriate incident management capabilities to handle misuse of systems.

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Laws relating to Private Equity in the Construction Industry

By: Ananyaa Jha

Introduction

The capital investment in a business plays a major role in determining its long-term sustainability and success and there are various sources available, one of which is private equity, which has gained momentum since the past two decades in India, especially owning to the boom of the IT sector. At present the private equity (PE) firms are showing tremendous growth, the funds are distributed evenly across different sectors to mitigate the risk-factor. PE is a capital form of investment in a company that is not listed or traded publicly.

The paper discusses the law governing private equity in India along with how does a PE investment work. It also throws light upon the increasing demand for last-mile funding in construction industry and how private equity can come to the rescue.

Private Equity & its’ Importance?

The term private equity refers to capital investment in an entity that isn’t publicly traded. It’s an interest or ownership in a company that isn’t publicly listed. Private Equity investment can be made in a public company with the objective of making them private and delisting them from the stock exchange platform. Private Equity investors gain equity in return for the capital they invest in the company. Private Equity investors are generally institutional investors (such as banks, hedge funds, pension funds etc.) or individuals having a high net worth, or private equity firms comprising of accredited investors.[1]

Private Equity is different than venture capital as the latter is a funding provided to start-ups or entities which are in the nascent stages which showcase a lucrative growth in the long run, whereas private equity is more commonly invested in mature businesses that have already been established but are unable to generate profits due to poor performance & lack of efficiency, and are in-turn failing.  Private Equities play an active role in the functioning of an entity in order to improve the performance and help steer the company in the direction of increased revenues so that upon selling the investment and exiting from the entity, a generous amount of profit can be earned.[2]

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PE is a crucial form of investment as along with providing the required liquidity in a project, it stimulates entrepreneurship & increases shareholders value, in turn promoting job creation and fuelling economic growth. PE leans towards the riskier side of an investment scale as there is high likelihood of a company failing to perform. It involves a high level of long-term risk in order to yield high returns. Various strategies of PE investment include but is not limited to- growth equity funds, leveraged buyouts, venture capital investments, certain real estate investment amongst others.

Construction Industry & Private Equity

Construction industry and private equity have joined hands for the past many years, coming together to fund significant development projects worldwide. In the absence of PE firms, a lot of real estate development projects wouldn’t see the light of day or wouldn’t have reached the finish line. In this industry, the PE firms make available the required funds to help a project start and finish. These firms have a major role to play in the development of real estate.

Development of the real estate in any country is a costly affair, sometimes requiring the support of foreign investors too. The entire project can cost upwards of 10 to 100 crores. In majority, the development firms fall short of the necessary amount to fund the project in its entirety. This is where PE firms come into the picture. Usually, a banking institution will cover a hefty amount of the costs yet it leaves approximately 20-35% to be funded by the developers, which could still be a large amount, unable to be funded by the developers on their own, they may require additional help funding their project, bringing in private equity.[3]

If a PE firm chooses to invest in a real estate development project, they will have a major role to play in the process of decision-making. Basically, the PE firm/investor are regarded as either a majority or a part-owner of the property in which they are investing, owing to the large scale of investment in the project, they get entitled to a considerable scale of ownership of said project, which entitles them to have substantial influence in all the decisions to be made. They will provide their input throughout the construction process. The construction firm, in all becomes indebted to the PE firm.

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The year 2020 has witnessed a drop in PE investments because of the novel coronavirus disease’s outbreak (COVID-19 pandemic). The chance of specific sectors like healthcare, technology, e-commerce among a few others currently bringing about investment opportunities exists[4].

The real estate industry has taken a major hit due to the ongoing COVID-19 pandemic and the end of first quarter (March) has shown the sector to reach an all-time low. Commercial as well as residential sectors have been hit severely.[5] The already ailing residential sector in terms of poor demand is witnessing a hard time to launch any new projects or to even finish the ongoing projects due to shortage of labour and continuous construction stoppage.[6]

The slowdown in the sector will remain even post COVID-19 crisis and as lockdowns relaxation continues nationwide, since the construction sector is faced with a critical working capital crisis which holds utmost importance to restart the business & sustain it successfully. Many have their hopes pinned on intervention by the government to help recover the loss created by the pandemic. However, private equity can prove to be of aid in this current scenario.

The regulatory framework revolving around PE funds in India

In India, commonly the PE funds are established as trusts & in accordance with SEBI (Alternative Investment Funds) Regulations, 2012, are registered as an alternative investment fund (AIF). Although, only a company, trust and limited liability partnership are available to be used as the legal vehicle for the PE funds. Companies Act, 2013 provides for PE funds to be established as companies but this method is not used much due to the lax compliance required in comparison to trust structures and in addition, the unclear precedents for fund-raising. According to the Limited Liability Partnership (LLP) Act, 2008, the alternative investment funds can be instituted as LLPs, however, the LLPs use for PE funds is quite rare.[7] The regulatory framework:

  1. SEBI (AIF) Regulations, 2012

SEBI via notification dated May 21, 2012, repealed & replaced 1996 Venture Capital Funds Regulations of SEBI with the Alternative Investment Funds Regulations of 2012, The AIF Regulations were intended to provide for unregulated funds & extends its principles in this regard along with increasing stability and accountability of the market. There are 3 categories along which these AIFs are spread. Category II categorizes such AIFs which don’t come under the ambit of Category I & III. According to regulations, PE funds get registered as Category II. The purpose of preparing these regulations was to create a standard structure in order to govern private set of funds & investment vehicles to improve the channelizing of the funds.

SEBI has recently issued a circular that introduces various notable changes to the legal framework that currently exists. To strengthen the disclosures required, SEBI directed compulsory Performance Benchmarking along with standardizing PPM, that’s the prime document for disclosing all the relevant information to the potential investors, & Annual Audits for the alternative investment funds. On 1st March, 2020, all these changes have been enforced.

  1. The Companies Act, 2013

The Companies Act, 2013 brought with it a required overhaul for companies’ governance in India. The Act of 2013 brought major changes by placing regulatory responsibility, accountability & heavy compliance policies on private companies. Private companies take the ‘private placement’ route to raise capital as they aren’t permitted to offer securities to the general public & raise capital, so they have to take a different approach, wherein the securities are issued to only a selected no. of private individuals. Section 42 of the Act governs the ‘private placement’ process and all such private companies have to comply with the provisions contained in the section. The Section plainly states an invitation or an offer can’t be made to over 200[8] individuals, excluding the securities that are offered under ESOP[9] & the Qualified Institutional Buyers, but such immense rules in respect of PE funds are inapt because regulating the investments that are done through PE funds do not necessitate large compliances because the securities aren’t offered to the public. [10]

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The working of PE Investment

Elucidated below is a guideline which the investors/firms need to follow when they invest in private equity of an entity:

  • Raising Capital & Share-Purchase: The Private Equity investment process starts with chalking out an acquisition plan, & ways in which capital for it could be raised, that encompasses decisions based on different kinds of financing used for raising capital, etc, along with conducting due diligence. As soon as the acquisition deal closes, the management duties of the firm that’s been acquired becomes the responsibility of PE investors.
  • The Acquired Company’s Restructuring: The subsequent move is restructuring of the firm required to increase its productivity by managing the company through improving operations & reducing costs. It covers a wide range of crucial decisions about the operations, the expansion, the profitability, the strategy to be adopted, along with the company’s growth model. The involvement level will be directly proportional to the size of their investment.[11]
  • Selling/Exiting the Company: Generally, the end mission of PE firms is putting the company on sale/exiting at a sizeable profit, which usually takes place after around 3 to 7 successful years after initial investment, although the number of years may vary depending on specific strategic circumstances. After the acquired company begins profiting, & continues to show consistent growth, it is the right time to sell it as there exists high probability of the promoters gaining enormous profits from the sale of the entity. The PE investors get their share of the profits and enjoy a good return.

The demand for last-mile funding in Construction Industry

PE firms have been on the look out to take advantage out of the increasing need of last-mile funding by the construction/real-estate developers because of the on-going stagnation in the residential sector which has worsened due to the liquidity crisis that is existent in the country. Many of the PE investors are keeping an eye for offering capital out of existing funds for construction projects which are in the final or late stage & also establishing platforms in order to finance such real estate projects. [12]

After Real Estate (Regulations & Development) Act (RERA) was implemented in 2017, the developers since then have focused on completing the construction projects & so the demand for funding capital in the late-stages has soared. The banks unwillingness to refinance loan in addition to the liquidity crisis in the financial market has elevated the demand for PE funds because a substantial number of late-stage projects are unable to finish due to lack of capital.

Given the scenario, influx of last-mile capital funding coming in to complete projects is very positively transformative for all the concerned stakeholders. The benefit of last-mile funding is that comparatively it’s a less risky approach as these projects have the necessary approvals, the construction has begun & to some extent have started bringing about sales, so all of this helps to mitigate the risk involved, which provides better chances of reward & hence, investors interests piques.

The PE firms’ interest in the real estate sector is growing at the same time when the government is taking initiative to revive the sector. The government in 2019 announced the establishment of a Rs 25,000 crore AIF in respect of last-mile funding to get the stalled residential projects back on track, because sales have been on the declining scale since 2014, except a marginal rise in the year 2016, but the demonetisation decision by the government & goods and services tax (GST) implementation worsened the situation in 2017 & since the recovery in the sector is moving very slowly.

Conclusion

Private Equity and the construction sector haven’t always connected as the PE investors have by & large steered clear of the construction industry owing to a great deal of inherent risks, like the business having a cyclic nature, professional management, succession planning along with the unrealised expectations in respect of financial requirements of the construction business, i.e., bonding, & the owners of construction companies have been apprehensive of outside investors. However, that perception is changing as PE investors will bring not just financial aid but act as a strategic partner, unlike the other sources of capital & work with the business & make a sustainable model by keeping a long-term vision, thereby maximizing value. The PE firms will bring in deep understanding of the construction industry & help the companies grow by investing not just capital but an array of other valuable requirements for the company to grow.[13]

[1] https://www.investopedia.com/articles/financial-careers/09/private-equity.asp, (Last Visited at 9:00 AM on 6th November, 2020).

[2] https://www.investopedia.com/ask/answers/020415/what-difference-between-private-equity-and-venture-capital.asp#:~:text=Private%20equity%20is%20capital%20invested,potential%20for%20long%2Dterm%20growth., (Last Visited at 10:00 AM on 6th November, 2020).

[3] https://workwithfocus.com/news/private-equitys-role-in-real-estate-development-construction/, Last Visited at 5 PM on 6th November, 2020.

[4] Rukmini Rao, “Coronavirus: E-commerce, SaaS and healthcare to attract more PE funding, says report”, Business Today, May 14, 2020, available at https://www.businesstoday.in/current/corporate/coronavirus-e-commerce-saas-and-healthcare-to-attract-more-pe-funding-says-report/story/403823.html (last visited at 2 PM on 6th November, 2002).

[5] Knight Frank India Survey.

[6] Kailash Babar, “Covid-19 impact: Real estate sentiments hit lowest level”, The Economic Times, April 16, 2020, available at https://economictimes.indiatimes.com/wealth/real-estate/covid-19-impact-real-estate-sentiments-hit-lowest-level/articleshow/75175857.cms?from=mdr (last visited at 7 PM on 6th November, 2020).

[7] Pratish Kumar, Sumitava Basu and Divya Dhage, “Private Equity in India: market and regulatory overview”, available at https://uk.practicallaw.thomsonreuters.com/8-504-2425?transitionType=Default&contextData=(sc.Default)&firstPage=true, (last visited at 11:00 AM on 6th November, 2020).

[8]  Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014.

[9] Employee Stock Option Plan

[10] B&B Associates, “Private Equity in India: Evolution and Legal Overview”, July 31, 2020, available at: https://bnblegal.com/article/private-equity-in-india-evolution-and-legal-overview/, (last visited at 9:00 PM on 8th November, 2020).

[11] https://corporatefinanceinstitute.com/resources/careers/companies/equity-firm/, last visited at 11:00 AM on 8th November, 2020.

[12] Bidya Sapam, “Private equity firms sense big opportunity in last-mile real estate funding”, December 3, 2019, available at: https://www.livemint.com/industry/infrastructure/private-equity-firms-sense-big-opportunity-in-last-mile-real-estate-funding-11575311313757.html, (Last Visited at 10 AM on 9th November, 2020).

[13] https://www.cohnreznick.com/insights/private-equity-builds-bridges-construction-industry#:~:text=Private%20equity%20brings%20a%20lot,a%20company%20needs%20to%20grow., last visited at 11:30 AM on 10th November, 2020.

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