Your Snapshot of Key Legal Developments in Asia
Issue 2 - Aug/Sep 2013
- Sub-Decrees No. 286, 287 and 288 on Cambodian Nationality
- Sub-Decree No. 289 on Private Security Management
- Sub-Decree No. 476 on Financial Trusts
- Bank of Lao Issues Notice Emphasizing Measures Against Money Laundering
- Electronic Tax Collection System Trials from October 2013
- Personal Data Protection Act 2012 - Issuance of Advisory Guidelines
- Hiring Practices - Fair Consideration Framework
- Singapore High Court Upholds China Ruling
Sub-Decrees No. 286, 287 and 288 on Cambodian NationalityCambodia has seen an increased interest in its laws on nationality, both from the standpoint of immigration as well as in relation to property ownership. In keeping with this, there have been a number of Sub-Decrees issued recently dealing with Cambodian nationality issues.
- Sub-Decree No. 286 ensures that foreigners who wish to marry or have married a Cambodian national have the right to apply for Cambodian citizenship.
- Sub-Decree No. 287 deals with the Application and Procedure for Nationalization, stating that a foreigner has to submit an application and pass an exam of Khmer Literature, determined by the Prakas of the Minister of Interior.
- Sub-Decree No. 288 sets out the processes and requirements for abandoning one's Cambodian nationality, such as the requirements that the applicant must be at least 18 years of age, the abandonment must be voluntary, and the production of a confirmation letter of alternative nationality and/or residence.
Sub-Decree No. 289 on Private Security ManagementThe Royal Government of Cambodia has issued Sub-Decree No. 289, which sets out rules and regulations for the setting up of private security companies. This is part of an effort to encourage the establishment of private security companies to safeguard private property, and ensure the security of the people and the public order of the country. The Ministry of Interior, with the assistance of the General Commissariat of National Police, was appointed to control and manage such private security companies.
Permission from the Ministry of Interior should be sought only after the company is duly registered at the Ministry of Commerce. In addition, a letter of permit from the local administration will be required for the appointment of guards or security staff.
Sub-Decree No. 476 on Financial TrustsSub-Decree No. 476, issued by the Royal Government of Cambodia ("RGC"), sets out rules and procedures to establish, register, and manage financial trusts in which the trustor is a development partner that has entered into an agreement with the RGC to invest funds in financial trusts for the purposes of developing the banking and microfinance sectors ("Financial Trusts"). Under this law, the Ministry of Economy and Finance ("MEF") is the authority in charge of supervising these Financial Trusts.
The Sub-Decree determines the rights, obligations and liabilities of the trustor, trustee and beneficiary. It requires the Financial Trust to be established by a written form, which must be filed and registered at the MEF for validation and enforcement. Moreover, any beneficiary of an existing Financial Trust has to register the trust for validation and enforcement within 6 months after the effective date of this Sub-Decree.
Shanghai Free Trade Zone - A New Era For China?On 29 September 2013, China officially launched the China (Shanghai) Pilot Free Trade Zone ("Shanghai Free Trade Zone"), which is thought to be one of the largest regulatory reforms since the era of Deng Xiaoping. This update will give you a glimpse of what the Shanghai Free Trade Zone entails.
The Shanghai Free Trade Zone covers an area of 28.78 square kilometres along the eastern coast of Pudong. It includes the four existing customs-supervised areas: (i) Waigaoqiao Free Trade Zone, (ii) Waigaoqiao Bonded Logistics Park, (iii) Yangshan Free Trade Port Area, and (iv) Pudong Airport Comprehensive Free Trade Zone. Its Master Development Plan, covering 6 industries with 18 sub-sectors that are open for investment in the Shanghai Free Trade Zone, outlines a specific guide for how the Shanghai Free Trade Zone will operate.
Foreign investment will be allowed in all sectors in the Shanghai Free Trade Zone, unless prohibited or restricted by a "Negative List". Compared to the previous Catalogue of Industries for Guiding Foreign Investment, the Negative List appears to be more investor-friendly. It covers 8 fields divided into 1,069 sectors. According to the Negative List, foreign investment in media organizations, internet cafes, casinos, as well as the construction of golf courses and theme parks will be still restricted or prohibited in the Shanghai Free Trade Zone.
With a view to accelerating the formation of a market-oriented and investor-friendly environment, starting from 1 October 2013, the relevant administrative examination and approval items stipulated in China's three foreign-invested enterprise laws will be adjusted in the Shanghai Free Trade Zone on a three-year trial basis.
Picture source: http://www.zetland.biz/newsletter/1309newsletter/Shanghai.htm
In the Shanghai Free Trade Zone, the foreign investment approval process will be eased for companies which businesses are outside of the Negative List. Foreign-invested enterprises will only need to make filings with the relevant governmental authorities instead of seeking approvals for the establishment, merger or change in other major matters of foreign-invested enterprises. It will save those companies substantial time and effort.
To expedite the import process of goods entering into the Shanghai Free Trade Zone, unlike the policy of "entering after customs declaration" formerly applied in Waigaoqiao Free Trade Zone, according to the Administrative Measures for the Shanghai Free Trade Zone ("Administrative Measures"), the imported goods will be allowed to enter into the Shanghai Free Trade Zone prior to getting customs declared.
According to the Administrative Measures, on the condition that risks can be controlled, companies can undertake convertibility of Renminbi under the capital account within the Shanghai Free Trade Zone. In addition, the Administrative Measures provide that the government will also promote liberalization of interest rate within the Shanghai Free Trade Zone, although detailed guidance, timeline of Renminbi convertibility and interest rate liberalization have yet to be formulated.
The launch of the Shanghai Free Trade Zone will likely trigger a new wave of reforms and liberalization in the coming years. This is comparable to the Special Economic Zone in the early 1980s and the Pudong Development Area in the early 1990s in China. Although the detailed implementation rules have yet to be issued, it is anticipated that China will sharpen its competitiveness through de-regulation and opening up more sectors to foreign investors. It certainly seems that a new era for China is on the way.
New Royalty Rules in Mining SectorThe Ministry of Energy and Mineral Resources' Directorate General of Minerals and Coal ("Directorate General") issued Circular No 04 E/DJB/2013 on July 4 for the purpose of "optimizing non-tax state revenues." In contrast to the previous rules, when royalties had to be paid within one month subsequent to shipment, the new Circular requires miners to pay royalties upfront before shipping their output. Thus, it is now incumbent upon mining companies to make sure they have sufficient funds in hand to pay their royalties upfront -- prior to shipment and possibly prior to payment from their buyers. On the upside, however, advance payment of the royalties will ensure that good title to the minerals is vested in the mining companies, which can then be transferred to the buyers.
The Circular makes no changes to the rules governing the calculation of dead rents.
Tighter Requirements for Merger NotificationsIndonesian competition law applies a mandatory post-merger notification system to M&A transactions. On 5 April 2013, the Indonesia Competition Commission ("KPPU") introduced Directive No. 2/2013, which amends the requirements for such notifications as set out in KPPU Directive No. 13/2010. Previously, only limited information had to be provided in the notification, such as information on the legal aspects, assets and turnover, and affiliated companies. Directive No. 2/2013 introduces two additional requirements, namely, the submission of (1) a business plan for the next three years, including information on the industry outlook; and (2) information on the market structure of the industry, including the market share of the merging entities and their competitors. These changes present new challenges to prospective mergers and acquisitions as it will have to be ensured that the due diligence process takes into account the new requirements.
Bank of Lao Issues Notice Emphasizing Measures Against Money LaunderingOn 29 July 2013, an instructive notice was issued by Bank of Lao PDR ("BOL") to commercial banks nationwide to strictly provide their banking services in line with the Governmental Decree on Anti-Money Laundering and Terrorist Financing.
As part of its effort against money laundering and terrorist financing transactions, BOL issued its Notice, number 498/CBM, to emphasize service restriction towards individuals and organizations whose names are recorded under the Specially Designated Nationals and Blocked Persons List of the US government and the List established and maintained by the 1267 Committee with respect to individuals, groups, undertakings and other entities associated with Al-Qaida.
Electronic Tax Collection System Trials from October 2013On 18 September 2013, the Ministry of Finance announced that the Lao government is planning to start using an electronic system for tax collection early next year, with a test of the system on motor vehicle tax to begin next month.
Revenue collection has not reached government-forecasted levels because of various violations of the regulations and loopholes in procedures. These, in turn, have resulted in an increase of the government debt. Despite the large number of motor vehicles imported into the country each year, the government only receives a small amount of tax revenue from the trade. Importers and dealers have either reported lower buying prices than the actual price paid or used various means to avoid the payment of any duty.
Finance Minister, Mr. Phouphet Khamphounvong, said the new method of taxation will calculate tax based on a vehicle's engine capacity (both the size and number of cylinders), its brand and model, but not its sale or purchase price.
The ministry had first announced the plan for electronic tax collection several years ago but had not been able to implement it until now, as a lot of preparation was needed to select the best technology. The organisation and training of operating personnel also took time. The new system will be able to report whether tax has been paid, thereby making the collection of tax more efficient. It is anticipated that the government would be able to collect more revenue through the use of this system. A full trial will begin next year and will gradually be applied to other sectors of business.
Changes Pursuant to Strata Titles (Amendment) Act 2013The Strata Titles (Amendment) Act 2013 ("STAA 2013") is anticipated to come into force soon and will bring about a significant change to the legal landscape relating to strata developments and common property management.
Briefly, the amendments of significant note under the STAA 2013 include:
- the extension of the Strata Titles Act 1985 to Labuan;
- the introduction of the Electronic Land Administration System of Strata Titles;
- a compulsory requirement for the original proprietor to apply for sub-division of a building or land at the super structure stage, thereby requiring the application for sub-division to be made in two stages;
- in the case of phased developments, the issuance of a provisional strata title for a provisional block comprising of land parcels will now be allowed;
- the designation of limited common property and the creation of one or more subsidiary management corporations to represent the different interests of parcel proprietors; and
- the execution of transfer documents of ownership of strata titles by the purchaser within thirty (30) days from the date of issue by the Land Administrator or any extended period by the Director.
Malaysia's Personal Data Protection Act 2010The Personal Data Protection Act 2010 ("PDPA") seeks to regulate the processing of personal data by data users in commercial transactions, and to safeguard the interests of data subjects. The PDPA was slated to come into effect on 16 August 2013. The Personal Data Protection Department of Malaysia ("PDPD") has since indicated that the effective date is likely to be sometime before the end of 2013.
The PDPD has also indicated that the Act will be implemented in 3 stages: (i) 1st phase – registration of data users and information dissemination; (ii) 2nd phase – inspections for compliance to be carried out by the PDPD; and (iii) 3rd phase – audits and commencement of prosecution for non-compliance.
Data users will be given a 3-month sunrise period from when the PDPA comes in to effect to comply with the Act. As one of the requirements for compliance, data users who operate in the 11 sectors identified by the PDPD must register with the PDPD.
The PDPA has commercially far-reaching implications and severe penalties in the event of non-compliance. Data users should therefore thoroughly understand the new data protection regime and its impact on business operations. If companies do not have any data protection policies, they should begin to put in place sound internal policies to ensure compliance with the law.
The above excerpt is adapted from a Rajah & Tann LLP update published in August 2013. Please click here to read the update.
New Employment and Skill Development Law (Pyidaungsu Hluttaw Law No. 29/2013)Myanmar has taken significant steps to promote landmark labour rights and policies in recent years. In 2007, a Supplementary Understanding was reached between the Myanmar Government and the International Labour Organization which established a complaint process that would not prejudice the complainant or subject the complainant to retaliatory action. This understanding was followed by another agreement in 2012 to establish a plan of action to eliminate forced labour completely by 2015.
On 30 August 2013, in the latest bid to create job opportunities, enhance workers' labour skills and reduce unemployment in Myanmar, President Thein Sein signed the new Employment and Skill Development Law ("ESDL"), thereby repealing the Employment and Training Act of 1950.
Under the ESDL, a 'Central Body' will be formed and be responsible for formulating policies on job creation, the reduction of unemployment and the promotion of skill development among workers. In order to implement such policies, the Central Body will employ two teams: 1) the employment development team; and 2) the skill development team.
With respect to the development of skills, the skills development team will prescribe requirements for employers to either conduct on-job training or afford employees other forms of training. This move aims to ensure that workers' skills are updated and kept relevant. Employers that employ workers in factories, workshops or similar establishments, will further be required to contribute to a skill development fund. The rate of contribution by the employer shall not be less that 0.5% of the salaries and wages of their employees.
Under the ESDL, the Ministry of Labour, Employment and Social Security (the "Ministry") will be responsible for matching employment seekers with suitable employers on the operations front. This will not only apply to job opportunities in the private sector, but also to jobs in government, as well as those posted by employment agencies that provide a free service to job seekers. To ensure a complete employment contract, the ESDL has stipulated what must be covered by the employment agreement, such as the wage, probation period, working hours, overtime, medical treatment, termination and accommodation. Furthermore, all employment agreements will be subject to approval by the relevant employment and labour exchange office set up by the Ministry.
Of particular interest are the provisions that allow foreigners to set up training schools or skills assessment entities under the ESDL. Foreigners seeking to establish a training school will be required to submit an application to the skill development team for a registration certificate. Upon approval, the foreigner will then be allowed to appoint foreign experts (with current work permits) and to import teaching or assessment tools.
Personal Data Protection Act 2012 - Issuance of Advisory GuidelinesOn 24 September 2013, the Personal Data Protection Commission issued the Advisory Guidelines on Key Concepts in the Personal Data Protection Act and the Advisory Guidelines on the Personal Data Protection Act for Selected Topics.
The issued guidelines make no changes to the substance of the Personal Data Protection Act 2012 ("PDPA") but are intended to provide guidance on the PDPC's interpretation of the PDPA. The issued guidelines expound on specific requirements, obligations and best practices under the PDPA, thereby providing the public with greater clarity on the implementation of the PDPA.
These guidelines have been finalized from the proposed advisory guidelines that were under public consultation earlier in February 2013. Certain amendments have been made to those proposed guidelines relating to key personal data protection concepts.
Our Firm had published a client update on this subject. Please click here to read the full update.
Hiring Practices - Fair Consideration Framework
The Ministry of Manpower ("MOM") recently announced new rules under the Fair Consideration Framework ("FCF") that require employers to consider Singaporeans fairly before hiring Employment Pass ("EP") holders.
From 1 August 2014, businesses which make any new EP applications must first advertise the job vacancy on a new jobs bank. The advertisement must be open to Singaporeans and must also meet other stipulated requirements. In addition, firms with discriminatory hiring practices may be subject to additional scrutiny from MOM and may even have their work pass privileges curtailed.
Please click here to read the full update on this subject.
Singapore High Court Upholds China Ruling
The Singapore High Court recently made a landmark ruling in what is believed to be the first instance of a Singapore Court enforcing a judgment from the People's Republic of China.
The Plaintiff, Giant Light Metal Technology (Kunshan) Co. Ltd ("GLMT"), sought to enforce an award from the PRC in a Singapore Court against a Singapore-based company, Aksa Far East Pte Ltd. Upon considering the circumstances, the Court decided to allow GLMT's application.
Please click here to refer to our Update which provides a summary of the case, as well as a discussion of its implications on companies doing business overseas.
Thailand Reacts to the Implementation of the Maritime Labour Convention, 2006The Maritime Labour Convention 2006 ("MLC") was adopted by the International Labour Organisation ("ILO") in February 2006, but it was only this year, on 20 August 2013, that it has come into force.
The MLC aims to protect the rights of all seafarers to fair terms of employment, a safe and secure workplace, medical care and other welfare protection measures. In addition, the MLC also propounds creating conditions of fair competition for shipowners by prohibiting all forms of forced labour and discrimination in employment and occupation. Consequently, with effect from 20 August 2013, ports of countries that have ratified the MLC can inspect the labour compliance of ships from other countries docking at their ports through state control procedures. This is in spite of those ships flying the flag of a non-party country.
The upshot for Thailand, which has yet to ratify the MLC, but whose ships dock at member countries, is that it now has to enact laws or regulations to comply with the MLC. In this regard, the Marine Department has urged the Cabinet to consider and approve its Guidelines for Implementation of Maritime Labour Convention 2006, until such time the Maritime Labour Convention Act officially enters into force.
Separately, the Ministry of Labour has issued two Ministerial Regulations regarding Standards for Maritime Labours, No. 1 and No.2, in June and August 2013, respectively. These two regulations were issued under existing maritime-related laws which include the Navigation in Thai Water Act, the Thai Vessels Act and the Marine Department’s regulations. They are are mainly to standardize Thailand’s maritime labour-related requirements and conditions under, for example, the Seafarers' Agreement, and to ensure that those requirements and conditions are in line with the MLC's framework of documents, e.g. the Statement of Compliance for Maritime Labour Convention 2006 (SoC) and the Declaration of Maritime Labour Certificate (DMLC) which set out all 14 minimal standards for the issuance of a maritime labour certificate as per the MLC.
Labour OutsourcingLabour outsourcing, which means the provision of labour force by a labour outsourcing service provider ("Labour Outsourcing Provider") to enterprises, is permitted under the new Labour Code No. 10/2012/QH13 ("Labour Code 2012"). In implementing labour outsourcing, the licenced Labour Outsourcing Provider will recruit employees and assign such employees to work for another employer in accordance with a labour outsourcing service contract.
A newly issued Decree 55 imposes certain restrictions on labour outsourcing. Under Decree 55, there are only 17 jobs in which labour outsourcing is allowed. Further, a Labour Outsourcing Provider is only allowed to allocate an employee to a client for a period of twelve months in aggregate; this period is not renewable. In order to be licenced, the Labour Outsourcing Provider shall satisfy certain conditions in terms of capital (i.e. VND 2 billion), facilities (i.e. 2-year leased office), and capable human resources (i.e. legal representative having at least 3 years of experience).
Although the Labour Code 2012 and Decree 55 serve to open doors for labour outsourcing, the provision and receipt of such labour outsourcing services is still under substantial limitation. Moreover, due to unclear regulations relating to labour outsourcing, more guidelines are still needed from the competent labour authorities for an efficient implementation of labour outsourcing.
Rights of Foreigners to Purchase and Own Residential Houses in VietnamThe Ministry of Construction of Vietnam has recently issued the 4th draft amendment to the current Law on Residential Housing (the "Draft") for discussion before it is sent to the National Assembly for passing. In an effort to make the Vietnamese real estate market more attractive to foreigners, the Draft proposes to provide more opportunity for foreign organisations and individuals to purchase and own residential houses in Vietnam.
Under the Draft, the "foreigners" who are allowed to purchase and own residential houses in Vietnam will comprise both foreign organisations and foreign individuals. In addition, such foreign organisations and foreign individuals are also allowed to give, receive and inherit residential houses to/from other entities/individuals in accordance with the laws of Vietnam. Foreign organisations must be legally licensed to operate in Vietnam. As for foreign individuals, they must be permitted to enter into Vietnam by the competent authorities of Vietnam and are not entitled to the privileges and immunity of diplomatic representations and consulates.
Certain limitations on the purchase and ownership of real property under the current Law on Residential Housing are lifted by the Draft. Foreign organisations and foreign individuals will be allowed to purchase and own commercial residential houses for a leasehold period of up to 70 years, with the likely option to renew upon expiry of such period. In addition, there will also be no limitation on the number of commercial residential houses that can be purchased and owned by foreign organisations and foreign individuals. Lastly, foreign organisations and foreign individuals will be allowed to lease out commercial residential houses lawfully owned by themselves in accordance with the laws of Vietnam.
Signing of Joint Statement on Strategic Partnership between Singapore and VietnamIn September 2013, Singapore and Vietnam signed a Joint Statement on Strategic Partnership, further promoting cooperation in the legal and judicial spheres between the two nations, and improving the understanding of their respective laws, legal systems, and institutions. The Joint Statement also grants greater mutual access to both countries’ legal services industry, allowing both parties the opportunity to provide and engage in legal services in the other jurisdiction. This will in turn strengthen both legal and economic cooperation between Singapore and Vietnam.
Moreover, the Joint Statement also aids in the mutual enforcement of judgments. Traditionally, foreign judgments are mostly recognised on a reciprocal basis, which rarely occurs, leaving a vast majority of foreign judgments unenforceable in Vietnam courts. However, the signing of this Joint Statement could be seen as a first step in correcting this position. The Singapore-Vietnam Memorandum of Understanding on Legal and Judicial Cooperation (2008) provides mutual legal assistance between both countries. Coupled with the Joint Statement, the Memorandum could establish a concrete basis for further recognition and enforcement of Singapore judgments in Vietnam.
The Joint Statement is thus another progressive step for the mutual recognition and enforcement of Singapore and Vietnam's judgments in each other's national courts. However, it remains to be seen when and how this will be implemented in practice, and further legal guidance and provisions will be needed.
Establishment of Vietnam Asset Management CompanyIn May 2013, the Vietnam Asset Management Company ("VAMC") was launched following Decree No. 53/2013/ND-CP in order to tackle non-performing loans ("NPLs") - a burden on Vietnamese commercial banks and other credit institutions ("Vietnamese Credit Institutions"). It is a 100 percent state-owned one-member limited liability company established by the State Bank of Vietnam ("SBV") with the business purpose of purchasing NPLs from the Vietnamese Credit Institutions.
VAMC is given broad authority to deal with the NPLs in a number of aspects, such as the ability to restructure NPLs, the right to enforce security, and the power to sell the collateral through an auction. It is a mandatory requirement that the Vietnamese Credit Institutions with NPL ratios of 3 percent or more are required to sell them to VAMC in exchange for special bonds. Failure to do so will result in a reassessment of that Vietnamese Credit Institution, which may then result in an order for sale of the NPLs, or a restructuring plan approved by the SBV. Holders of special bonds may use them as collateral for re-financing from the SBV.
Although the establishment of VAMC is seen as a positive change in the banking sector, foreign-invested credit institutions (established and operating in Vietnam) fall outside the scope of this Decree. According to some estimates, the ratio of NPLs is so high that VAMC may not have sufficient funds to purchase all NPLs. This could require further government reforms which permit VAMC to partner with foreign investors as a funding source. Consequently, this might enable foreigners to purchase real property assets in Vietnam by way of participating in the security enforcement (together with VAMC).