ChinaLat Law : China and Latin America Litigation Lawyer & Attorney : Diaz, Reus, Rolff & Targ Law Firm : Trade, Business, Dispute Resolution

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GENEVA — The United States has defeated China in a wide-ranging ruling at the World Trade
Organization that could provide massive market opportunities for American makers of everything
from CDs and DVDs to music downloads and books.

The verdict Wednesday finds definitively against China for forcing American media producers to
route their business in China through Chinese state-owned companies. It could also set a larger
precedent for others such as U.S. automakers claiming to be hampered by cumbersome
distribution rules in the communist country.

The WTO victory comes as President Barack Obama is being pressed to be tough on trade rules
with China, which many Democrats in the U.S. Congress blame for America's soaring trade
deficits and lost manufacturing jobs.

The Associated Press reported the main findings of the then-confidential ruling last month, but
the public release of the 464-page document on Wednesday revealed dozens of smaller
decisions that support the complaints of trade associations representing record labels such as
EMI and Sony BMG; publishers including McGraw Hill and Simon & Schuster; and, to a lesser
extent, the major Hollywood studios of Warner Bros., Disney, Paramount, Universal and 20th
Century Fox.

It also offers hopes of greater business for Apple Inc.'s iTunes store, finding that China was
breaking trade rules by preventing companies offering music downloads to computers and mobile
phones from offering their services directly to Chinese customers.

The ruling stopped short of a complete U.S. victory as the three-member panel delivered mixed
findings on Chinese censorship rules that apply to American-made goods, but not to Chinese
products. It also permitted China to make U.S. films go through one of two designated distributors
to be shown in Chinese cinemas, a requirement not required of Chinese movies.

The Chinese Commerce Ministry could not immediately be reached, but U.S. Trade
Representative Ron Kirk called the ruling a "significant victory to America's creative industries."
"These findings are an important step toward ensuring market access for legitimate U.S. products
in the Chinese market, as well as ensuring market access for U.S. exporters and distributors of
those products," Kirk said in a statement. "We will work tirelessly so that American companies
and workers can fully realize the market opening benefits that this decision signals."
The panel found that "China has acted inconsistently with provisions" of the agreement it made
with all WTO members when it joined the global trade body in 2001, as well as the General
Agreement on Trade in Services and General Agreement on Tariffs and Trade that governs trade
between all WTO members.

It instructed Beijing to "bring the relevant measures into conformity with its obligations under
those agreements."

Despite the looming WTO decision, there has been no indications in China of an internal debate
on the issue of relaxing restrictions on imports. This is an extremely sensitive issued for the ruling
Communist Party, which seeks to keep out content deemed politically or socially objectionable,
as well as to protect Chinese filmmakers and other content producers from foreign competition.
However, China has committed itself to the WTO process, so there's little chance that a verdict
can be completely ignored. One possible outcome is that the government will come up with a
compromise, perhaps setting up new regulations and procedures for vetting and approving
cultural imports that would allow a marginally wider opening of the market.

That may not be enough for American record labels, film studios and publishers, who could ask
the Office of the U.S. Trade Representative to pressure China into full compliance by threatening
retaliatory trade sanctions. The WTO can authorize higher tariffs and other measures against
countries failing to adhere to the rules, but generally only after years of litigation.

China can appeal the ruling, but officials at the country's WTO mission in Geneva declined to
comment.

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Auguest 7, 2009

If Shanghai city officials have any say in the matter, that whole talk of Shanghai and Hong Kong becoming the new financial centers of the world might actually come true. Shanghai officials petitioned to the State Administration of Foreign Exchange (SAFE) in hopes of loosening restrictions for foreign private equity firms to be incorporated and operate in China. The city, which is currently preparing for the 2010 World Expo is making a significant push to become more international.

Over the past six months, a number of officials and journalists have suggested that with the collapse of Wall Street, and China's relatively quick rebound, finance might soon have a new home in the Eastern hemisphere. China's current policies towards foreign finance firms, however, have made it difficult for a true global presence to take root. According to a published report, a number of private equity firms have approached the Shanghai city government about Renminbi denominated funds, only to be told that the existing laws as dictated by SAFE make it difficult for a foreign firm to successful start one. Shanghai's officials are petitioning the central government to allow concessions to be made on the city's behalf.

If Shanghai had its way, the central government would allow foreign private equity companies to establish RMB denominated funds as long as they followed certain requirements. Firms interested in establishing a fund would need to be incorporated in Shanghai's Pudong Special Economic Zone and 80% of any capital raised for a fund would need to be done in country. If these conditions are met, Shanghai officials hope that the central government would permit qualified P/E groups to incorporate as "local entities," despite their foreign interests and parties.

The central government's own announcement this spring that it intended to help turn Shanghai into a global financial center suggests that the city government may, in fact get its wish. China's financial system is still relatively underdeveloped compared to its Western counterparts, but the country is benefiting now, as government checks and balances over the markets played a role in protecting the country from the global downturn. The country is still fine tuning its IPO process and is also relatively inexperienced in the alternative investments arena. The China Investment Corporation (CIC) is one of the youngest, though biggest, sovereign investment funds in the world, hedge funds are largely restricted in the country, and the first domestic Chinese incorporated PE firm was not established until 2006. With more and more foreign firms interested in coming to Mainland China, and both the central and Shanghai governments indicating interest in establishing the city as a global financial powerhouse, major changes in a relatively short time to China’s regulatory process can be expected.

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By Carlos Gonzalez & Arti Sangar

In recent years, the Middle East has emerged as a centre for monumental buildings. Dubai is currently building the world’s tallest—Burj Dubai—while Saudi Arabia, Kuwait, Bahrain and Qatar all are considering building rival towers over the course of the next decade.

Although attention-grabbing, these developments also cause enormous environmental impact. It is estimated that buildings worldwide use 42% of the world’s energy and are responsible for 40% of greenhouse gas emissions.

Despite the current economic downturn, regions around the world—including the Middle East—continue to explore and embrace green building design to help address environmental concerns.

Green developments in the Middle East

Many Gulf countries are introducing green building regulations and guidelines that govern the design and operation of all new buildings. Dubai World, the investment arm of the Dubai Government, has recently adopted the US LEED Green Building Certification scheme as a requirement for all its developments.

Additionally, in the UAE, the Emirates Green Building Council will soon be developing a specific UAE LEED version to guide future developments. Moreover, Bahrain, Qatar and Oman are all moving towards green building standards too.

These green initiatives have been triggered by numerous international organisations with Middle East operations bringing their environmental policies and standards into the region. In the UAE, for example, international businesses that have adopted green initiatives include Grand Hyatt and HSBC. UAE companies following their example include TECOM Investments and Zabeel Properties with other local and international organisations likely to follow in the near future.

Given the harsh desert climate of the Arabian Peninsula, some experts question whether buildings in the Middle East can really go green. Nevertheless, green investing continues to grow in the region. Currently under construction, Masdar City in Abu Dhabi plans to be the world’s first zero-waste, carbon-neutral city and plans to utilise green and alternative energy in its buildings and throughout the city’s entire infrastructure.

New green buildings, but what about the old ones?

While green buildings are becoming the norm in Middle Eastern construction, converting older buildings to green technology presents daunting challenges. And, while many architectural icons, including New York’s Empire State Building, are going green, it is yet to be seen whether the Middle East will accept the challenges associated with converting its old buildings into newer, cleaner, greener versions.

However, while installing energy efficient and renewable technologies in old buildings creates technical challenges and presents developers with increased expenditure, the long-term advantages often outweigh the initial expense.

In the current economic environment, owners and developers are realising that green buildings offer a good investment. It’s often said that green buildings have higher market values because they are cheaper and often more efficient to maintain. Also, by going green owners can expect an increase in occupancy.

The point is this: Given the growing demand for green building space in both the public and private sectors in the Middle East, owners and landlords are coming under increasing pressure to think green when selling or leasing their properties.

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QWith numerous multinational banks and financial services corporations badly tarnished by

their role in the global economic meltdown, are Latin American countries' attitudes toward foreign banks changing? If so, in what way? How might the current environment affect foreign financial services companies operating in Latin America? Should countries make regulatory changes in their banking systems? Have foreign banks been a good or bad thing for Latin American countries?
 

ABoard Comment: Thomas Morante and Yani R. Contreras: "Foreign banks play an important

role in the Latin American financial system given their substantial market presence. Although many global banks and financial services companies have sustained losses and struggled during the economic meltdown, this has not necessarily impacted the extension of credit by multinational bank subsidiaries operating in numerous Latin American markets. The subsidiaries of foreign banks in Latin America,much like locally owned banks in the region, have funded operations from deposits obtained from the local market rather than securing financing from crossborder transactions or international markets. This has provided a certain stability to their loan activities.While it is true that some international banks have adopted new internal policies restricting their lendlending activities to accommodate the lack of liquidity in the market by imposing stricter criteria for borrowers to obtain loans, it does not appear that foreign bank subsidiaries in select Latin American countries such as Brazil, Mexico and Peru have reduced their lending activity when compared to locally owned banks in the region. Further, Latin American countries do not appear to be imposing higher barriers to entry for foreign financial institutions, in part due to commitments under DR-CAFTA, and NAFTA and other bilateral FTAs. Banking system problems in Latin America appear to arise not from the competition between foreign and local banks, but rather, because the market is dominated by few participants, making it an oligopoly. This  has increased the risk of instability (systemic risk) and introduced the possibility of contagion risk to other banks in a specific country. Furthermore, the decrease in money remittances has affected the availability of credit for both local and foreign banks in Latin America given that reduced remittances has meant reduced savings. In the context and spirit of the G-20 recommendations, it would appear that Latin American regulators will seek to ensure the continuation of credit and the strength of each local financial system. "

AGuest Comment: Carlos F. Gonzalez: "Although hard to believe now, there was a time in the

not too distant past when foreign banks greedily eyed Latin America's largely untapped markets. In
those heady days, foreign banks were tempted by opportunities in retail and small and middle market business banking. These institutions also promoted mortgage and consumer lending, as well as various credit card products. Because of the pronounced lack of penetration of consumer-based financial services (as compared to the US and Europe), Latin America offered the promise of solid and consistent growth. By 2008, the same banks that once capitalized on burgeoning credit markets began to reduce, if notcancel, available credit lines. Although banks may be cutting back their services, a demand still exists. Who fills that demand needs to be carefully considered.
Absent a change in course, the gap created by retreating banks may be filled by other financial institutions looking for new market opportunities. This poses a real danger. The economic downturn in the US exposed serious structural defects in many banks and other financial institutions. Although better oversight may have lessened the blow, the fact remains that certain institutions pursued lending and other business strategies with catastrophic consequences.
It is not acceptable to simply allow these institutions to apply those same failed strategies in another market. Regulators throughout Latin America must carefully scrutinize foreign banks, particularly those looking to establish a first presence in the current economic climate. While there is a dire need for credit and other financial services, the lessons of the US and Europe make clear that strict regulation is essential if another collapse is to be avoided."
 

Thomas Morante is a member of the Financial Services Advisor board and partner at Holland & Knight where Yani R. Contreras is foreign legal counsel. Both are members of the firm's Financial
Services Practice Group.

Carlos F. Gonzalez is a partner at Diaz, Reus & Targ in Miami.

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