Events, Events, and More Events

The end of October and beginning of November are beautiful times of the year, and they can also become the “silly season” for conferences and events.  We have too many to rotate through the little News item on the top of the page, so we are including them here for easy reference:

• October 26: ICDR conference in Sao Paulo. This event brings practitioners from the U.S. and Brazil together to discuss international arbitration, and this year it features a mock arbitration under the ICDR Rules.  Mauricio Gomm is the chair and both he and Quinn Smith will be participants in the mock arbitration.
• October 28: OAB event in Curitiba. This event targets the local legal community with speakers drawn from Curitiba and local bar associations to discuss arbitration in Brazil.  Mauricio Gomm will moderate the debate.
• November 5-6: Investment arbitration seminar at FIU. This seminar is both challenging and informative as it brings practitioners from the world of investment arbitration to Miami to discuss hot topics, substantive issues key to investment arbitration, and debate some of the things challenging investment arbitration today.  Quinn Smith will speak in the debate portion on Friday night.
• November 7: Future of Arbitration: Miami meeting in Miami.  This event focuses on young practitioners and features noted arbitrators Jan Paulsson and Albert Jan van den Bergh taking questions from the audience. Quinn Smith is one of the organizers.

Important Investment News from Latin America

Latin America continues to attract investment, and journals in the U.S. are continuing to take notice.  A recent overview of news items reveals a lot of interest and some of the burgeoning hot spots on the continent.

Peru Stays in the News for more Reasons than Vargas Llosa

For those who follow literature, the Peruvian writer Mario Vargas Llosa won the Nobel Prize this year, but the Miami Herald’s Andres Oppenheimer notes the general success of Peru on many fronts, calling Peru the region’s next success story:

“Investments are booming, attracted by the country’s political and economic stability, and exports rose by 35 percent during the first eight months this year, the IMF figures show. While part of Peru’s economic growth is due to high world commodity prices, the country’s free trade deals with the United States, the European Union and China are accelerating the economic expansion.”

I’m scheduled to lecture next year in Lima on international arbitration, and I could not be more excited to visit the country and see what is happening first hand.  From an arbitration standpoint, the country has invested heavily in the process with advanced legislation and dedicated legal community.  The investment side looks equally bright, and our clients are increasingly dedicating their resources to the country.

Colombia Grows as a Hotel Destination

Recent tourism campaigns, cheap airfares, decreasing crime and violence, and the country’s natural beauty are continuing to attract hotel chains to the country.  USA Today notes how Colombia is becoming a hotel destination:

“Colombia’s seeing the big chains move in as Colombia’s tourism industry expand, low-cost carrier airlines reduce airfare costs, people’s security fears begin to fade and the government entices new real-estate development with tax breaks, the story says. Some 360 lodging projects are taking advantage of the tax breaks.

‘For many years, there was no hotel construction in Colombia, just local brands,’ hotel executive Juan Carlos Galindo tells HotelInteractive.com. ‘Our country is changing a lot in terms of security and economy. National investors and international investors are starting to see Colombia differently.’”

After two trips to Colombia this year (after visits to Cartagena and Bogota), the investment in hotels in obvious and nearly astounding. In addition, we’re heading to Cali for an annual service trip to help local groups connect to service opportunities.  We expect to see more of the same growth there.

Growth in Brazil Continues Apace

Despite an attempt to slow bond purchases with an increased tax on foreign buyers, money continues to flood into Brazil:

“Brazil’s move to double a tax on foreign investments in domestic bonds is unlikely to hampertrading of stocks and derivatives products, BM&FBovespa ChiefExecutive Edemir Pinto said Tuesday.”

Looks like little is slowing the markets.  In other news, Petrobras continues to invest in sugar-based ethanol with another major joint venture:

“The agreement marks another step into Brazil’s ethanol market for Petrobras. The oil giant in May made its biggest splash in the sector by agreeing to pay 1.6 billion Brazilian reals ($962 million) over five years for a stake in sugar group Guarani in Brazil, the world’s No.1 producer of sugarcane-based ethanol.”

The move will likely continue to solidify Brazil’s place in the ethanol market.

Latin American Venture Capital Financing Keeps Growing

In a Spanish-language article explaining venture capital financing and its growth in Latin America, Latino Business Review makes the case venture capital funding is on the rise:

“Al respecto de la encuesta realizada, Cate Ambrose, presidente y director ejecutivo de LAVCA, comentó ‘El descenso en el número global de inversión no fue una sorpresa dado el estado de la economía mundial en 2009. El hallazgo más significativo de nuestra encuesta es que la recaudación de fondos para el private equity en América Latina es relativamente robusta en comparación con otros mercados mundiales, y esa tendencia se está acelerando en el 2010, mientras que los inversionistas internacionales buscan la exposición a las economías en crecimiento como Brasil, Colombia y Perú.’”

This should come as no surprise given the high rates of growth, and it dovetails perfectly with a conference we’re helping organize (behind the scenes), Florida International University’s Conference on VC in the Americas.  Make sure to check out Professor Manuel Gomez’s panel on “Legal Strategies and Venture Capital.”

Brazil Falls in World Bank Index, Judiciary Examines its Role

Many developing countries closely watch the World Banks’s Ease of Doing Business Rankings, issued annually.  In the most recent report, Brazil checked in at a dismal 129th, just above Lesotho and behind such lesser lights as Bhutan, Nicaragua, and Uganda.  Brazil also finished below other South American competitors Peru, Mexico, Chile, and Colombia (Colombia led the region at 37th).  The rankings consider a number of factors, including the country’s legislation and its judiciary.  Apparently, the ranking has sparked a bit of soul searching. The National Law Journal highlights the response of the Brazilian judiciary and legal community:

“The World Bank ranking, which is taken seriously by investors, prompted the government to launch a new research effort into the role of law in the country’s development and the prevailing perception that the law is hindering development, Trubek said. An estimated 70% of the country’s litigation involves the government either as a plaintiff or defendant. “This government imitative has generated a lot of academic interest,” he said. 

Fundaçäo Getúlio Vargas law school in Sao Pãulo has already begun taking an empirical look at the country’s legal system, said law professor Luciana Gross Cunha. In 2007, the school launched a periodic ‘judiciary confidence index,’ which seeks to capture the public’s attitude toward the judiciary. 

‘The results, as we forecast, were not so bright,’ said Dean Ary Oswaldo Mattos Filho. ‘People didn’t trust too much in the judiciary’s power.’”

This criticism of the judiciary is a bit hard to parse for foreign investors.  The article references a survey on consumer opinion, which may not be the best way to gauge investor opinion.  The judiciary is often a frequent target of attacks even though it increasingly handles more complex cases in an efficient manner.  Of course, international investment in Brazil frequently chooses arbitration over litigation, but this is common of cross-border transactions all over the world.  When it comes to arbitration, the majority of the results are fair and positive.  For the international investor, this may be the most important aspect.

Our experience is similar.  Even though our firm is based in Miami, we regularly maintain contact with the Brazilian judiciary through lectures, seminars, and other events in Brazil and the U.S.  We’ve noted an increasing interest by the judiciary in international topics, as evidenced by the appearance of judges from the highest commercial court (the Superior Tribunal of Justice) in Miami for lectures.  In addition, although Brazil did not perform too well in the World Bank’s rankings, investment continues apace.  Maybe international investors are just not that concerned.

By the Book vs. Meia Nota

Whenever we discuss starting up or running a business in Brazil, there are invariably two types of discussions: “by the book” or “meia nota.”  Differentiating between the two is important for companies doing business in Brazil.  ”By the book” is a phrase that can appear in English in the middle of an otherwise completely Portuguese conversation (it also has a slight “y” sound at the end of the word).  By the book is pretty simple: it means the company does everything according to the law.  ”Meia nota” is a little different.

Meia nota tends to appear towards the end of the conversation and always in Portuguese. It means the company shipped one quantity and declared another.  For example, there is a purchase order for 5,000 units and an invoice for 5,000 units, but 10,000 units appear at the warehouse.  This is the simple version of meia nota.  It can appear in other contexts that are a bit more difficult.  Sometimes we see payroll stubs to employees for one number but actual payment in another.  Or there is a shipment by truck with one list of items and the arrival at the destination with another.  You get the point.

Invariably, meia nota does not end very well.  Normally, we get a phone call and a description of how one party suffered damages but can’t show it on the books.  The aggrieved party is irritated (to say the least), but we are often at a bit of a loss; the courts are not good places to go to resolve meia nota disputes.  And while there might be a way out, it is often more expensive than by the book.  Bottom line, we recommend all of our clients and potential clients follow the by the book method.  There is no “Brazilian way,” despite what you may hear, that sanctions meia nota.

Defenses in Securities Litigation Tighten

As securities litigation becomes increasingly international, the plaintiffs and defendants often come from outside the United States. A recent Supreme Court decision strengthens the defenses available to defendants outside the U.S.  Here’s the article from the Wall Street Journal:

“The Supreme Court decided Australian shareholders who had purchased stock overseas in an Australian bank couldn’t bring securities-fraud claims in a U.S. court. In order to avoid ‘incompatibility with the applicable laws of other countries,’ U.S. securities laws should govern only domestic stock purchases, the court concluded . . .

‘The court decisions to date seem to have applied a bright line test: If you buy on a foreign exchange, you are out luck,’ said plaintiffs’ attorney David Scott, who represents shareholders whose fraud claims against Credit Suisse Group AG were dismissed in July. A representative for Credit Suisse declined to comment.”

From the article, it appears plaintiffs’ attorneys are not too thrilled with the decision, and they have reason for concern. In the past, doctrines like forum non conveniens have sent some cases to other jurisdictions, but these decisions implicitly accepted jurisdiction was proper in the United States. The Morrison decision goes a step further, reading the statutory language to exclude some claims from U.S. courts.

For now, it appears securities plaintiffs will have a tougher time making it to trial into U.S. courts.

(h/t Lisa Bench Nieuwveld)