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Forcing long-term thinking in the banking industry

 

KidandthebankerLast week, The Hindu published this article on the report of the United Kingdom’s Parliamentary Commission on Banking Standards and what the RBI stands to learn from that report. The article highlights the key findings of the report in relation to raising the standard of accountability within the management of banks.

As the article concludes, the Indian banking sector is changing from largely public to inclusively private. In this context, the RBI should be mindful of the regulatory landmines waiting when the banks it is regulating change from risk-averse public banks to market-hungry private banks.

One of the points that caught my eye deals with incentives for performance within the banking system. One of the key takeaways from the financial crisis is the risk stemming from the issue of executive pay. Managers become prone to taking short-term risks easily, while ignoring the long-term consequences. Immediate positive consequences are heavily rewarded while the negative long-term consequences take their toll on the banks, and eventually the system, as a whole. In this context, the Commission made the following recommendations:

  • Creation of a separate set of accounting statements dealing exclusively with remuneration, both at the company level and at the level of business units.
  • Avoiding the use of narrow measures such as return on equity for determining remuneration.
  • Bank remuneration committees must disclose the measures used to determine remuneration.
  • A significant part of variable remuneration must be deferred, for up to ten years.

Banking-and-Finance-LawTo my mind, these steps could play a significant role in tempering the zeal of executives and making them mindful of the long-term consequences of their actions.

(Deeksha Singh is part of the faculty on myLaw.net.)

 

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The problem with legalese

PlainEnglishwithTD“As stated heretofore, the landlord’s conduct created, caused, and resulted in serious bodily harm and massive injuries, to wit: a broken and mangled left leg, lacerations to the aforementioned leg, and several broken digits on the foot attached to said leg, in witness whereof was the spouse of the injured party.

Source: IIT-Chicago Kent College of Law, Legalese.

We all know legalese when we read it or hear it. It is full of long and complex sentences, the use of two or three words when one would do, and technical, foreign, or complex words.

You might think that the one above is a fairly typical legal sentence — and note that it is a single, long sentence. Many of you might even think that this is a good sentence. Some of you might even be pleased to have drafted such a sentence because it sounds lawyer-like and appropriately serious. But let’s ask ourselves a few questions. What is actually being said? Can it be understood the first time it is read? Can it be properly understood by someone who is not a lawyer? Is it pleasant or easy to read? And finally, putting all of these ideas together – is this the best way of writing what the writer is trying to communicate?

This sentence very clearly demonstrates the problems that the use of legalese creates. The use of overly formal and unnecessarily legalistic language creates a barrier between the writer and the reader. It conceals what the writer is trying to communicate behind a screen of useless words and too many clauses. Yes, it may sound lawyer-like or serious, but that is only because the expectation persists that lawyers work and write in a world that no one else can understand or have admission to. That, I would suggest, is an out-dated and unhelpful view.

Legal-Writing-and-Professional-CommunicationsAs lawyers, our job is to help our clients. It is as simple and as complex as that. We are hired for our knowledge and expertise in the law, and for our ability to apply an analytical mind to all kinds of problems. Primarily, however, our most important skill is that of communication. It is no good having an encyclopaedic knowledge of the law or an incisive legal mind if we cannot effectively persuade a judge, negotiate with an opposing lawyer, or explain the likely outcome of a case to a client.

In all of the things a lawyer does—whether drafting contracts, advising clients, or appearing as an advocate—communication is key. This is something that no one can really argue with. Whether in written or oral form, good communication is characterised by succinct and clear expression. This is because when we communicate, we want the person we are communicating with to understand us first of all. As lawyers, we often want that person to be persuaded by what we are saying as well, but that can hardly happen if that person doesn’t really understand us. Right now, too many lawyers are simply beating their clients into submission with a heavy vocabulary, or engaging in some kind of chest-puffing verbal one-upmanship in the courtroom. As lawyers, it is time to put our egos away, along with the ye olde English and Latin dictionaries, and make sure that we are being understood. The rest will follow.

Have you heard of ‘plain English’?

It’s not really something that is spoken about much in relation to the law in India, nor taught in most Indian law schools. But if you’re doing one of the programmes on myLaw.net that involves writing or drafting skills, then you have heard of it. You might have experience in the use of plain English if you’re a lawyer who has worked overseas in a jurisdiction such as the U.K. or the U.S.A. But for the majority of Indian law students and lawyers who think that legalese – the use of terms like “heretofore” and inter alia – is an essential element of legal writing, I’m here to convince you otherwise.

Over the coming weeks, I’ll be tackling some of the most common questions about plain English or plain language, and objections to its use, that I have come across in my time working both here and in Australia. I invite you all to consider my arguments, contribute to the discussion, ask any questions, and in the end, tell me if I’ve convinced you to change the way you write!

(Tennille Duffy is part of the faculty on myLaw.net.)

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Solutions in the draft Indian Financial Code to fight ponzi schemes

Ponzi_scheme_Sumathi_ChandrashekaranClick here to listen to Sumathi Chandrashekaran speak about the solutions present in the draft Indian Financial Code to discourage ponzi schemes.

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The ethical Attorney General and three Cs

Shyam Divan’s article in The Hindu today refers to the change in how the Attorney General’s office has prioritised its duties towards the three Cs – Client, Court, and Constitution.

G. E. Vahanvati

Mr. Divan had this to say about the recent conduct of Goolam E. Vahanvati, the current Attorney General of India:

“On Coalgate, the Attorney General represents the Union government since November 19, 2012. The Central Bureau of Investigation (CBI) represented by a separate set of lawyers told the Supreme Court earlier this year it was investigating the suspected criminal conduct and corruption on the part of officials in the Union government with regard to the allocation of coal blocks. Simply put, the CBI had been investigating officials who were working for the Attorney General’s client. Nevertheless, in February and March this year according to the affidavit filed by the CBI Director, the AG was present at meetings with CBI officers, even advising them. The CBI Director states that the advice of the Attorney General was incorporated into the CBI’s confidential status reports, subsequently filed in court. The Attorney General continued to appear for the Union government even after the CBI Director had made such a declaration.”

As an advocate, the Attorney General owes a duty to both client and court. The following extract from Section II (“Duty to the client”), Chapter II (“Standards of professional conduct and etiquette”), of Part VI (“Rules governing advocates”) of the Bar Council of India Rules is relevant to Mr. Vahanvati’s conduct.

33. An advocate who has, at any time, advised in connection with the institution of a suit, appeal or other matter or has drawn pleadings, or acted for a party, shall not act, appear or plead for the
opposite party.”

It is also important to understand that appointments to the office are made by the President of India under Article 76 of the Constitution of India. The Attorney General therefore, also has a duty to uphold the Constitution. Very often, this duty would require him at act independent of the Government of India.

M.C. Setalvad understood the need to balance the Attorney General’s duties towards the Client (Government of India), the Court, and the Constitution.

M.C. Setalvad

“The first AG, M.C. Setalvad, led by example in this regard when he appeared before the Chief Justice M.C. Chagla Commission inquiring into the Mundhra scandal in 1958. His severe comments on the conduct of then Finance Minister, T.T. Krishnamachari, and Chagla’s report itself led to the latter’s resignation. In the wake of the Commission’s report, one Member of Parliament criticised Mr. Setalvad’s independence: “The Attorney-General whom we sent to defend our case, became the prosecutor of the Finance Minister and, incidentally, of the Government.””

Mr. Divan’s belief is that Mr. Vahanvati’s recent conduct is part of a trend where the Attorney General’s duty to the Client has been prioritised over the duty to the Court and the Constitution.

 

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

 

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Four lawyers went to the Ashes…

Douglas_Jardine

 

Andrew_Hilditch

David_Gower

Stuart_Clark