Archive for October, 2012

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real world expert witness perspective in international arbitration

Tuesday 30 October, 2012

I had breakfast with John Levitske of Duff & Phelps who talked about REAL WORLD EXPERIENCES IN INTERNATIONAL ARBITRATION: THE EXPERT WITNESS’ PERSPECTIVE, which was sponsored by the Chicago International Dispute Resolution Association.  John provided expert witness testimony in international arbitration hearings in Vienna, Stockholm, & New York city.  He served as an expert consultant for international arbitration in Amsterdam, Sault St. Marie, Paris, Montreal, & Dayton, where he would contribute to behind-the-scenes white papers.  It’s common for central & eastern European cases to be heard in Vienna, & for former Soviet countries in Stockholm.

International arbitration typically deals with substantive issues, such as economic damages, (“quantum disputes”), lost profits & diminution in value.  Post-merger & acquisition transaction disputes in valuations, accounting, & general agreements are also addressed.  Proceedings are either in “American/English” style, with direct testimony, cross examination, & rebuttal testimony, or tandem style with expert witness conferencing/”hot-tubbing,” or occasionally combination of American & tandem styles.  Experience in both venues helps.  For example, discovery is an issue.  Some Europeans are not familiar with American methods.

There are a number of real-world considerations dealing with the medium & the presentation:

Medium;

Forum

  • Confidentiality?  There is no public record for some arbitration hearings & because arbitration is different than a court hearing, there is less incentive for clear opinions.
  • Expediency?
  • Specialized expertise?
  • Enforceability?
  • Procedural flexibility?
  • Facilities?  There is a hotel in Stockholm which has a business center specifically for arbitrators & expert witnesses.

Language

  • English + local language?
  •   arbitrators
  •   experts
  •   parties
  •   attorneys
  • Interpreters?
  • Court reporters?
  • Technical terms?

Logistics

  • Use of demonstratives?
  • Hearing room layout
  •   visual aids?
  •   microphones?
  •   distance from
  •     arbitration panel?
  •     counsel?
  •      other experts?
  • Will experts be put in the “bubble,” when they can’t speak with attorneys or clients?

Presentation;

Expert reports

  • Can they be supplemented?
  • Will a condensed summary overview be presented @ the hearing?
  • Are the expert reports a substitute for direct testimony?

Opinion basis

  • Was discovery available?
  • Should the expert attend testimony of other witnesses?

Scope of expert testimony

  • Will a direct expert-to-expert meeting occur pre-hearing without clients or attorneys to attempt to narrow the issues for the hearing, called “hot-tubbing”?
  • Will the arbitrators ask questions?

Attorneys must still manage client relations.  I found it interesting that arbitration panels will pose general open-ended questions to expert witnesses, such as “What are industry trends & best practices?”  There are some cultural differences between arbitration panels:

  • Austrians & Germans are strict constructionists, for whom words are everything.
  • The presence of female lead attorneys varies across countries.
  • Most participants think the world was built in their own image, & approach the exercise in this way.
  • Piercing corporate veils is common in America, but not elsewhere.
  • Some foreign parties are oblivious to American Generally Accepted Accounting Practices (GAAP).
  • The interpretation of contracts can vary across countries.  For example, headers have different weights in the UK.
  • Government authority in regulation differs across countries.

 

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invest in ireland?

Wednesday 24 October, 2012

I attended this event Expand your Business Internationally through Ireland sponsored by the Industrial Development Agency (IDA) Ireland.  Presentations kicked off with Mary McEvoy, who heads up their emerging businesses unit based in Atlanta.  IDA Ireland is a government agency, & therefore doesn’t charge for it’s services.  There are main reasons companies set up operations in Ireland:

  1. track record
  2. talent
  3. taxes

Allen Peterson, CEO of Aasonn, next talked about why they opened operations in Cork, Ireland in 2010.  Part of the reason was speed.  They started on 26 March, & were incorporated by 6 May-the total process was completed remotely.  As a cloud-based firm, they started with a global approach.  Their solution was bundled with Successfactors.com, which was acquired by SAP, requiring a global approach.  They have also opened a branch in London & 1 in the Philippines.  Partners like Marketo & Dell Boomi support world-wide focus too.  1 reason they located in Cork was that the requirement for local resident directors can be avoided with a bond of 1800 €.  In their experience, it was easier to find well-qualified workers than in other places they tried.  Being based in the EU means they have access to a large & wealthy prospect base with 1/4 of the world’s GDP & responsible for 30% of the world’s consumption.

Aasonn’s decision-making criteria were

  • quick access to a highly-skilled labor pool
  • workers with a strong work ethic & who were well-educated
  • low tax rate
  • English & foreign language skills
  • technology infrastructure

Ireland’s unemployment rate is 14-15%, so workers are available there.  The depth of the labor pool has been an issue for Peterson in the past-a shortage of workers drove up wages 25% in 1 year in Argentina, but doesn’t appear to be in Ireland.  The future availability of labor seems assured with Ireland’s young population.

Ireland is rated #1 in skill levels by IMD’s world competitiveness yearbook, which validated Aasonn’s decision.  In terms of ease of doing business, Ireland is #8, the highest in the EU.  The Manpower Group ranked Ireland #1 in skills availability & as being the country where it’s least difficult to fill jobs. Ireland is #2 behind Norway in productivity ratings.  Additionally, Aasonn got a good line of credit from the Bank of Ireland.  To avoid double taxation, Aasonn leaves it’s profits in Ireland.

To close the evening, Daryl Hanberry, an Irishman based in the New York offices of Deloitte Touche, told us about taxes in Ireland.  The government is committed to attracting foreign direct investment (fdi).  There are non-tax as well as tax reasons to open up in Ireland, such as the labor pool, track record of previous companies, & cost competitive levels comparable to 2003. Ireland features a 12.5% corporate tax rate, withholding tax exemptions, 25% on passive income, & o% tax on capital gains.  Early planning is key for nonresident Irish companies to take advantage of intellectual property.  R&D tax credits with no success requirement of 25% create an effective credit of 37.5%, which can be carried back 1 year & forward 3 years.  Although Ireland is technically not a tax haven, basing holding companies there makes sense.  The TMT sector is highlighted in IBM’s Global Location Index.  In sum, Ireland charges 0 taxes on foreign dividends & has doubled it’s number of treaty networks.

Finally, in fine Irish tradition, lots of Irish whiskey was served as well.  Hope you can’t tell…hiccup…

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the future of capitalism?

Friday 19 October, 2012

Apparently the Chicago Council on Global Affairs is questioning the future of capitalism. They invited Italian & University of Chicago Professor Dr. Luigi Zingales to present his vision of the future, while @ the same time promoting his latest book A Capitalism for the People.

When he came to America, he saw the world in a different way, that marrying/sleeping well is not the only way to the top.  America takes its merit system for granted.  He wanted to learn how we can make a system where inequality can function in a democracy.  3 elements are critical for survival:

  1. a more efficient system
  2. can’t have too much inequality, i.e. too many with nothing to lose
  3. there has to be a level of ideological consensus-Luigi’s mom was shocked to hear that all professors in America are not paid the same, as they apparently are in Italy.

The 1st 30 years after World War II saw a fair amount of social unrest from which the US learned by doing.  There was little risk of expropriation during that span, & illiteracy was drastically reduced like never before.  Italians take a test after the 2nd grade, after which you don’t pass, many drop out of school, which made high school literates scarce, which drove their “price” (wages) up.

In the last 30 years, the US succeeded on nation-building.  High school education became more widespread & the rule of law improved world-wide.  But now high school graduates are facing competition from comparably-educated workers throughout the rest of the world, while the highly educated are still earning well.  To bipartisanship, he found his son selectively enforcing rules when playing Monopoly.  The Tea Party & Occupy Wall Street Movements are not only complaining about similar things, while at the same time differing about what to do about them.

So what should we do now?  Is there a similar historical opportunity? @ the end of the 19th century, middle class farmers were being squeezed, which resulted in an explosion of populists.  The government took on the role of rebalancing, not as radical Marxists, rather by implementing some regulations.  How to do it?  Then, the answer was more regulation.  Today that doesn’t work.  Now regulations are designed, implemented, & applied for the regulators & not for those being regulated.

Turning to ideologies, he then differentiated between pro-business & pro-market policies.  The former favors incumbents who distort competition by using their influence over government, which leads to a decline the in the ability to compete over the long haul.  Historically, Catholics had monopoly power deigned by the state while protestants had to compete with 1 another.  He likens big companies to birds:  “Please don’t feed the firms!”  Lobbying is a way to get the government off your back & in your pocket, which creates a race to the bottom.  We need to break this logic.  There is a common thread between the Tea Party& the Occupy Wall Street Movement, a populist agenda.  The best way to scare the rich is for them not to know where “redistribution” will end.

The US attracts talent, but it can’t be taxed too much.  The Swedes tax the best football/soccer players even when they play in Spain-this is not the way.  Public schools don’t help.  We need to introduce quality control in education, pay better teachers more & fire the worst of them.  Vouchers have been criticized, but they create different values depending on your starting point.  Increases in social mobility are required.  Interestingly, leftists came here & became market economists.

We need to change the way we do regulation by simplifying it so that even congressmen can understand it, while they are attending their 400 fundraisers/year.  There are some good taxes, for example the soda tax in New York City, which is better than a new regulation.

In Italy, the level of ‘civicness”  is low, which makes it difficult to teach without value judgements. Not choosing a judgement results in choosing a judgement.  Without any moral philosophy, some decisions are detrimental.  Incumbents make sure the entrenched system survives.  The risk comes in addressing legal norms while @ the same time not addressing social norms.

What does all this have to do with the future of capitalism?  Got me.  Read the book-maybe you’re find the prediction there.

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Korean partnership conference in Chicago

Thursday 18 October, 2012

After moving back to Chicago for @ least a short while, I made it to the lunch @ the Korean Trade-Investment Agency’s Global Partnership Forum 2012 @ the Rosemont convention center. You can see the program here .  Here are some highlights from the presentations earlier in the day:

Jay Eizenstat of McDermott, Will, & Emory provided an overview of the Korean-US Free Trade Agreement which has been recently implemented.  Exports from the US to Korea will increase 41% from 2006 to 2012 from $18B to $26B.  Imports from Korea to the US will increase 31% from $27B to $35B.  The general benefits of KORUS are;

  • duty elimination/reduction on originating products encourages greater access for US autos in Korea & 2/3 of US agricultural products enjoy immediate duty-free access to Korea
  • easy to administer rules of origin-based on criteria for originating goods, are clearly spelled out, & easily adminstered
  • easy to make claim for preferential treatment-certification optional
  • services market access-finance, telecommunications, audiovisual, legal, express delivery, & investor protections
  • intellectual property rights-cutting edge, comprehensive IP protection for tradmarks, copyrights, & patents, & enforcement against piracy & counterfeiting grounded in WIPO & TRIPS
  • sanitary/phytosanitary (SPS) & technical barriers to trade (TBT) disciplines
  • pharmaceuticals-fair, reasonable, non-discriminatory, values patented products, establishes committee review for reimbursement rates
  • customs trade facilitation-simplified procedures & publication of laws, regulations, & procedures

case studies

  • heavy equipment-component duty elimination reduces costs
  • agricultural equipment-tariffs on mechanical agricultural sprayers reduced from 8% to 0 over the next 3 years when entering Korea from the US
  • vehicle components-8% Korean tariff on gear boxes, & drive axles drops to 0 immediately
  • cars & suv’s-Korean tariff will decrease from 8% to 0 over next 5 years

Rita Athas of World Business Chicago brought out a few details about the Korea-Chicago relationship

  • Chicago was the recipient of $226M in Korean automotive imports last year
  • Chicago is host to 20+ Korean companies, including Samsung & LG;  14 Korean Small Business Corporation Business Development Center firms;  & 7547 Korean-American-owned businesses
  • Chicago is the 3rd largest Korean community in the US & Korean students are the 3rd largest group (4450) of students in Illinois
  • Chicago Customs District imports $7.2B & exports $1.7B from/to Korea

Jaesun Uh of Kotra summarized Kotra’s Global Partnership program process of business promotion, a number of case studies, & offered some tidbits of information about Korea’s economy:

  • Korea is #5 for R&D expenditure for 2010 @ 3% of GDP
  • Korea ranks #4 for number of international patent applications with 1,514,183 during 2003-2009, & 50.1 researchers/10,000 people
  • Korea has FTA’s with 2/3 of world markets, worth 61% of world GDP, 46.2% of world trade volume, & 39.7% of world population

Here are the Korea companies seeking partners in the US

  1. A-Ryung Machinery
  2. CM Partner Inc.
  3. Dae Chang Forging Co. Ltd
  4. Daedong Gear Co Ltd
  5. Daekeum Geowell Co Ltd
  6. Daelim Motor
  7. Dae Ryang Ind. Co Ltd
  8. Daeshin Metal Mfg Co Ltd
  9. Daesun Hi-Tech Co Ltd
  10. Daou Precision Ind Co
  11. Dong Jin Electric & Machinery
  12. Dongwon
  13. Doowon Fluid Connectors, Inc
  14. Felix Technology Co Ltd
  15. Glosco Ltd
  16. GMB
  17. GS Gear
  18. Hanarotech Co ltd
  19. Hanil Forging Industries
  20. Hanjoo Metal Ltd
  21. Heungkuk Metaltech
  22. Hwashin Tech Co Ltd
  23. Hyolim Industrial Co Ltd
  24. Iljin USA
  25. Iljin Steel Corp
  26. INZI Controls Co Ltd
  27. J&L Tech Co Ltd
  28. Jinhap Co Ltd
  29. Jinhung Ind Co Ltd
  30. Jung-A hydraulic Co Ltd
  31. Kodima Co Ltd
  32. Korea Flange Co Ltd
  33. Kunhwa
  34. LSIS
  35. MB Shiroyama
  36. Mirae VC Co Ltd
  37. Nedec Co Ltd
  38. Nokwon Co Ltd
  39. Onegene Co
  40. S&S Metal Co Ltd
  41. Samsung Climate Control Co Ltd
  42. Samu Dies Corp
  43. Samwon Tech USA Inc
  44. Sangshin Ind Co Ltd
  45. Sangsin Brake
  46. SAS Co Ltd
  47. SBBTech
  48. SeA Mechanics Co Ltd
  49. Semyung Industrial
  50. Seojincam Co Ltd
  51. SI Automotive
  52. Simmons IK Co Ltd
  53. Sinteron Co Ltd
  54. S&T Motiv
  55. Sungjin Fo-Ma Inc
  56. Sungwoo Automotive
  57. Taeyang America Corp
  58. Ryang Industry Co Ltd
  59. Woojin Eng Co Ltd
  60. Woorim Machinery  Co Ltd
  61. Woosung Precision Industrial Co Ltd
  62. Yoolim Industrial Co Ltd
  63. Yushin Precision Ind Co Ltd

Let me know if you would like to contact any of these firms & I’ll put you in touch with the personal contact information that I have.