Month: June 2013

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FIPB says Jet-Etihad deal won’t fly

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June 15, 2013: The announcement allowing foreign airlines to invest in the Indian aviation sector was expected to boost domestic airlines, which — barring one — have shown losses every year because of skyrocketing oil prices and the global economic downturn. The Consolidated FDI Policy dated April 5, 2013, permitted foreign airlines to invest up to 49 per cent in the equity share capital of domestic carriers, provided certain conditions are met. One of these conditions was that substantial ownership and effective control of the Indian airline should vest in Indian nationals even after the investment.

Soon after this announcement, the Abu Dhabi-based Etihad Airways announced that it would pick up a 24 per cent equity stake in Jet Airways, a domestic carrier. The deal however, has constantly faced opposition from the Government of India, the Competition Commission of India, and the Department of Industrial Policy and Promotion (“DIPP”). The latest hurdle is whether “effective control” of Jet Airways will remain with Indian nationals after the investment. This was discussed at the meeting of the Foreign Investment Promotion Board (“FIPB”) held on Friday.

While the Consolidated FDI Policy states that effective control of a domestic carrier must remain with Indian nationals, there is no definition of the term “effective control” in the policy and the DIPP has not issued any clarification. The Government fears that Etihad may try to seek indirect control of Jet Airways with a mere 24 per cent stake, thereby undermining the policy.

On Friday, the FIPB deferred the deal saying that it required further information about the ownership and control of the domestic carrier after the investment. It appears that the FIPB is not satisfied with the structure of the deal and the information provided so far. Company officials have however stated that the deal is in line with Government regulations, as the share purchase agreement does not contain any provisions that transfer effective control to Etihad.

Under the Jet-Etihad deal, after the regulatory authorities clear the transactions, Naresh Goyal will directly own 51 per cent while Etihad will own 24 per cent. Etihad would not have veto rights or special representation on the Board of Directors and would only have received seats on the Board proportional to its stake. Additionally, Naresh Goyal, the majority shareholder holding 75 per cent stake in the airlines, is an Indian citizen and after the acquisition, it would have been the Indian owners who would have had the rights to nominate persons to the Board. At this stage however, it appears that the FIPB is not convinced with the argument and that a clear definition of “effective control” is awaited from the DIPP. Note that even if the FIPB clears the deal, the Cabinet Committee on Economic Affairs must then approve the proposal as the size of the deal is over Rupees 1,200 crore. Two other regulators, the Competition Commission of India and the Securities and Exchange Board of India, have raised the same issue.

Given the current regulatory environment, there seems to be some way to go before the deal is approved and the domestic carrier receives the much need cash infusion!

(Deepa Mookerjee is part of the faculty on myLaw.net.)

 

To learn more about cross-border M&A, check out myLaw.net’s online learning programme on Mergers and Acquisitions Law.

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SCOTUS says NO to patenting human genes

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June 14, 2013: Yesterday, the Supreme Court of the United States unanimously decided that human genes could not be patented. In Association for Molecular Pathology et al. v.  Myriad Genetics, Inc., et. al., 569 U. S. (2013), accessed at http://www.supremecourt.gov/opinions/12pdf/12-398_8njq.pdf, the Court stated that “naturally occurring” human genes cannot be patented because they were a “product of nature” and not a human invention.

Myriad Genetics, Inc. (“Myriad”) had obtained several patents after discovering the gene location and sequence of the BRCA1 and BRCA2 genes (“the Genes”). The mutation of the Genes had the potential of increasing the risk of breast and ovarian cancer. The knowledge of the mutation of the Genes allowed Myriad to develop tests to assess a patient’s cancer risk. If the Court had allowed the patenting of human genes, Myriad would have held a monopoly in the market for genetic testing for the early detection of cancer. Myriad was charging USD 3340 for its genetic tests. The immediate impact of this judgment on public health is that it will significantly reduce the cost of genetic testing by allowing other companies and laboratories to enter the market.

(Samar Jha is part of the faculty on myLaw.net.)

 

To learn more about Patent Law, check out myLaw.net’s online learning programme on Intellectual Property Law.

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The Story of Miranda Rights

MirandaRights_FacebookOn June 13, 1966, the Supreme Court of the United States, in a landmark 5:4 ruling, upheld the fundamental right of a human being to be reminded of the right to silence and effective legal counsel when charged with an offence. The case of Ernersto Miranda v. Arizona altered the criminal justice system in the U.S. forever.

Ernesto Miranda was arrested on March 13, 1963, by the Phoenix Police Department on charges of the kidnap and rape of a 17-year-old girl. The charges were based on circumstantial evidence and after two hours of interrogation, Mr. Miranda signed a statement confessing to the charge of rape and stating further that he had signed the confession voluntarily, without coercion, and after a full understanding of his legal rights.

During trial however, the defence attorney argued that at no point of time had Mr. Miranda been made aware of his right to remain silent or to have an attorney present during interrogation, both of which are part of the Fifth Amendment to the American Constitution. Mr. Miranda was convicted on the basis of the signed confession. He then appealed the trial court’s decision to include the confession as evidence, before the Supreme Court of Arizona. The Court dismissed the appeal, emphasising that Mr. Miranda never specifically asked for legal representation.

By this time, the publicity generated in this case had reached the far corners of the country. When the Supreme Court of the United States of America heard the case, it was obvious that the matter was more important than the charge of kidnapping and rape. The future of civil liberties, as espoused by the American Bill of Rights, was to be secured through the judgment that followed.

The Supreme Court held that “the prosecution may not use statements, whether exculpatory or inculpatory, stemming from questioning initiated by law enforcement officers after a person has been taken into custody or otherwise deprived of his freedom of action in any significant way, unless it demonstrates the use of procedural safeguards effective to secure the Fifth Amendment’s privilege against self-incrimination.”

Miranda’s conviction was overturned and ever since that day, to be “Mirandi-zed”, is a fundamental right of every person charged of an offence on American soil.

(Suhasini Rao Kashyap is part of the faculty on myLaw.net.)

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WTO may grant extension to Least Developed Countries to comply with TRIPS

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June 12, 2013: According to reports, even though most developed countries have opposed it, the WTO has informally decided to extend the deadline for the least developed countries (“LDCs”) to comply with the terms of the Agreement on the Trade Related Aspects of Intellectual Property Rights. The LDCs had sought more time from the World Trade Organisation (“WTO”) to comply with the terms of the TRIPS. Haiti had made the request on behalf of the LDCs in November 2012.

The WTO had originally granted the LDCs time till July 1, 2013 to amend their intellectual property laws, incorporating the minimum standards stated in TRIPS. Further, in relation to pharmaceutical patents, the LDCs had been given time till 2016.

The WTO Council on TRIPS met yesterday to formally decide on this issue and the meeting will continue today. If the extension is granted, the LDCs will have time till July 1, 2021 to comply with the requirements of TRIPS. This extension will not prejudice the right of the LDCs to ask for another extension in relation to pharmaceutical patents.

This is also seen as a victory for many non-governmental organisations such as the joint United Nations Programme on HIV/AIDS (“UNAIDS”) and United Nations Development Programme (“UNDP”) , which had argued for such an extension.

(Samar Jha is part of the faculty on myLaw.net.)

 

 

To learn more about TRIPS and other major international agreements and conventions on Intellectual Property, check out myLaw.net’s online learning programme on Intellectual Property Law.

 

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Why we need pre-legislative scrutiny

Last month, a Working Group of the National Advisory Council (“NAC”) recommended a pre-legislative process for all Central government draft legislation. The recommendation announced that it would try to “move in the direction of creating institutionalised space for people’s participation in the formulation of legislations in a systematic manner”. Mandira Kala of New Delhi-based PRS Legislative Research spoke with us about these recommendations.

The edited transcript of Ms. Kala’s talk is below.

Pre-legislative scrutiny involves the examination of bills and legislation before they arrive in Parliament. Mandira Kala said that the questions discussed by the NAC included what kind of information should be made public when a ministry is drafting a Bill, the kind of consultative process that should accompany a draft law, and who should be involved in such a process. The note discussed the importance of pre-legislative scrutiny, especially by citizens and highlighted the fact that citizens of India were rarely able to access information on the legislative proposals from different ministries.

“Typically, this happens within the ministry and the bureaucracy and is not a very consultative process in terms of engaging with different stakeholders and different constituents. As a result, if the government is thinking about bringing in law on land acquisition, we would only know about what kind of law the government is thinking of, when it made it to Parliament.” Another peg in the NAC report is Section 8 of the Right to Information Act, 2005, which talks about pro-active disclosure by the government. Laws and rules made under different legislations is one aspect of it. Some of these issues were also addressed by the Financial Sector Legislative Reforms Commission, which looked at the overhaul of financial sector regulation.

Referring to the current debate on disruptions in Parliament, she said that legislation tends to pass quickly and without effective examination. In the U.K. Parliament, Ms. Kala noted, the government brings out a calendar of the important legislative matters that they propose to enact. “We only get to know this when a Parliament session is starting up. In this session for instance, land acquisition and food security were big bills. If there was a Parliamentary calendar, or a calendar of pre-legislative ideas, then it would be useful for citizens to start thinking about the legislative priorities of the government and how they can engage with it.” That kind of an exercise goes into strengthening the ultimate bill, she said.

There was a consultative process before the current food security bill was brought into Parliament. “The ministry had circulated a draft of the bill for comment and several people had given their comments but when the bill was produced in Parliament, there was no clarity on what kind of comments the government considered, what was the substance of the responses, and what issues were being addressed.” Ms. Kala said that the government could state the problem they were seeking to address with a particular law, their opinion about the most effective way to solve the problem, and the issues up for debate in an explanatory memorandum for bills brought in after pre-legislative scrutiny.

Had there been such an explanatory memorandum to the National Food Security Bill, 2013, Ms. Kala argued, it would have mentioned the existence of the Public Distribution System, discussed whether it had worked, and discussed the best way to allocate food resources to those who need it. Such cost-benefit analysis is an important part of strengthening the pre-legislative process. Currently, none of that happens.

Pre-legislative scrutiny could also reduce the likelihood of subsequent amendments to legislation. The government would have thought through the draft law with more care and more consultation with stakeholders and political parties. “It would be more of a consensus building process from the very beginning rather than a controversial and at times hostile process that happens when Parliament considers passing the law.” Ms. Kala added that this would not be entirely new for the government. Some laws require that draft rules under those laws should be placed before the Parliament before they are enacted. The important part of the pre-legislative process is the documentation of the costs and benefits of the proposed legislation and how the proposed intervention in a policy problem is expected to work out. If these guidelines are published ahead of the legislation coming in to Parliament, citizens and stakeholders will be able to engage more fruitfully in the law-making process.

 

(Aju John is part of the faculty at myLaw.net)