Tuesday, February 16, 2010

The Copenhagen Accord and the Philippines

The Copenhagen Accord and the Philippines :
Collecting on a Promissory Note on the Climate Debt of Developed Countries
By Atty. Elpidio Peria
The Philippines, in the aftermath of its endorsement of the Copenhagen Accord which was merely noted, not adopted, in the contentious closing plenary of the 15th Conference of the Parties of the United Nations Framework Convention on Climate Change (UNFCCC) in Copenhagen, Denmark last 19 December 2009 now faces the challenge of what it must do next, either to further qualify such endorsement in a manner that protects its national interest and ensures that the existing multilateral processes on climate change are strengthened or to withdraw such endorsement if it can foresee that it results in the sidelining of the UNFCCC process or the Kyoto Protocol.
One way the Philippines may approach this task of qualifying its endorsement of the Accord is by looking at it as if it were a promissory note which recognizes in no uncertain terms the climate debt of developed countries and these countries should pay up at a certain time in the future. The concept of climate debt was proposed by Bolivia supported by several developing countries in recognition of the historical responsibility of developed countries – the US, the European Union including Japan – for generating most, if not all, of the greenhouse gas emissions in our atmosphere that is causing the warming of the earth leading to climate change, but there appears to be no operational mechanism on which to carry out the concept, until this Accord.
At the outset, there are a lot of things going against the implementation of the Accord given its non-legally binding nature. As there are very few countries that have signed on to it, the game is on to get as many countries to endorse it though most likely there will be very few developing countries that will sign up and have enough political clout to exact compliance with the obligations or commitments in the Accord. With this possible scenario, it is important that the Philippines link the enforcement of the commitments of developed country endorsers of this Accord to what is currently going on in the UNFCCC process, including that of the Kyoto Protocol, which are legally-binding instruments. Putting the implementation of the Accord within the framework and process of the UNFCCC and Kyoto Protocol is the Philippines’ assurance that it will always have the moral high-ground to insist that the creditors, in this case, the developed countries, should always make good on their obligations first, especially on emissions targets, financing commitments and technology transfer, before the developing countries which signed on to the Accord can be made to comply with its obligations under the Accord.
Those who are saying that the UNFCCC or the Kyoto Protocol process is dead and that the group of countries under the Accord represents the formation of country-groupings that herald a new global order are trying to pull a fast one on the people and the decision-makers - how can a voluntary agreement between a smaller group of like-minded countries make real the long-unfulfilled commitments of developed countries on emissions cuts, finance and technology transfer and sustain them for quite some time in order to make a difference ? Shouldn’t our efforts focus more on finding remedies to what ails the multilateral process of climate change negotiations and narrowing the issues on the table such that agreements can be secured within given realistic timeframes?
Like the acknowledgment of debt in a promissory note, the Philippines should spell out in its interpretative statement to the Accord that the climate debt is the historical responsibility of the Annex 1 countries to the Kyoto Protocol. Furthermore, the Philippines should state that the “pledge and review” process envisioned in paragraph 4 of the Accord be subjected to review by the Subsidiary Body on Implementation (SBI) of the UNFCCC. If countries signing on to the Accord will have to reinvent the wheel and come up with their own procedures, just wrangling on what the rules will be on compliance will take up their time, and this will render the Accord a useless platform to exact real action on the problem of climate change. Paying up a debt should not be up to the whim of the debtor, but is done in such a way there is a clear process and schedule of payment that may be reviewed anytime by another body, like a court, and in this case, the SBI can act like such a court that will find ways to ensure that the debtor will pay up on the debt.
When we come to the issue of the amount that must be paid in a promissory note, there should be a clear indication of the amount of the money to be paid, in clear periods of time. The Accord fails spectacularly in this aspect – it does not specify where the money will be coming from, its paragraph 8 only speaks of “international institutions” including “wide variety of sources, public and private, bilateral and multilateral, including alternative sources of finance”, and the time frame for paying up is also not specific, which in the language of promissory note, should be a day certain, with a specification of when the debt or its installments will be paid. The Philippines can propose a specific date on which all those commitments for financing and technology will fall due.
The Accord may have added further obligations for developing countries like the conduct of national inventories of greenhouse gas emissions every two years and the acquiescence to international consultations and analysis of its mitigation actions which does not appear anywhere in the UNFCCC. These add-on obligations however should not impair the duty of the creditors, in this case the developed countries, to pay up their debt, or to make good their mitigation commitments under the Accord
In sum, if we liken the Accord to a promissory note, we should ensure that the promissory note contain provisions that will ensure that the debtor will pay up on the climate debt in a manner that is clear and enforceable, without further efforts on our part. If the Philippines cannot get its way on these qualifications and interpretations of the Accord, then it should be ready to disassociate itself with the Accord and return to the existing process under the UNFCCC where there are already near-complete proposals for long-term cooperative action and the renewal of commitments under the Kyotol Protocol that only need to be further elaborated on until the next meeting of the Conference of the Parties to the UNFCCC in Mexico in December 2010.
The proponents of the Accord suggest that our interest in the Accord lies in the Philippines getting money for its climate change adaptation efforts which is a national priority given that the Climate Change Act has been approved. However, the Climate Change Commission under the said Act has only P50 million for its initial appropriations and the rest is up to the annual appropriations of all relevant government agencies and local government units. The Accord will also affect the identification of the national priorities which are part of the components of the National Framework Strategy and Program on Climate Change. If the money from the Accord is not clear, and worse, if they contain conditions and are even in the form of loans, then it will not really contribute to an honest-to-goodness implementation of the Act.
Finally, given that countries signing on to the Accord have to indicate what their economy-wide emissions targets will be for 2020 (for a developed country) or their nationally-appropriate mitigation actions (if a developing country, like the Philippines), this will have a significant impact on the way our economy is organized and run. In this sense, identifying these targets would mean wide-ranging discussions with all affected sectors, including the identification of the peaking year for national emissions and the adoption of a low-emission development strategy. It is here where science-based discussions of policy will get real and politicians will provide figures not based on guesses and predilections but on hard data and clear estimates of possible impacts on all sectors and the consideration of the best, next-best and the worst scenarios for the country.
Are we even ready to provide that figure by January 31, 2010 or should our initial response to this obligation consist of requesting an extension to such a deadline?
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Saturday, February 6, 2010

Corporate Recovery Act of the Philippines

Day 152/365 Corporations LawImage by jerine via Flickr
Corporate Recovery Act of the Philippines

For almost a century, the Philippines did not have a clear legislative base for insolvency, suspension of payments and corporate rehabilitation.
Our insolvency law last was passed way back last 1909(!) when the Philippines was still under American tutelage, while our suspension of payments and corporate rehabilitation are still of martial law vintage under Presidential Decree No. 902-A.
With the passage this week of the Corporate Recovery Act, our insolvency, suspension of payments and corporate rehabilitation laws are now updated, and hopefully to be at par with the realities of the global market and business conditions.
As explained by the authors --
"While SEC has recently adopted rules for governing petitions for suspension of payment and rehabilitation, it nevertheless has remained hampered by this inadequate legislative base.
"Further, and perhaps of most immediate concern, the recently passed Securities Regulation Code (Act 8799) will transfer SEC's quasi-judicial jurisdiction over suspension of payments cases to the Regional Trial Courts. These courts, lacking a set of procedural rules to govern these cases, may have no choice but to apply the antiquated procedures of the Insolvency Law. This would radically change the rules of the game for companies that need the relief offered by rehabilitation and suspension of payments.
"In short, the Philippine has long needed to modernize and clarify its rules for rehabilitation and insolvency. This need has now become urgent with transfer of SEC's quasi-judicial jurisdiction over suspension payments and rehabilitation cases to the Regional Trial Courts.
According to the authors of the law, the Corporate Recovery Act, or the CRA, represents a comprehensive approach to the complex problems faced by enterprises when they, for whatever reason, can no longer pay their debts as they come due. It combines the creation substantive rights with relatively detailed procedural guidelines that move cases through court-supervised proceeding quickly. It emphasizes the survival of the enterprise while at the same time keeping paramount the rights of creditors with duly registered liens against the enterprise's assets.
The CRA clarifies the rights of debtors and creditors to initiate formal debt relief proceedings. A financially distressed enterprise may petition the court if it cannot pay its debts as they are coming due, regardless if it is insolvent. By contrast, P.D. 902-A allows SEC to take jurisdiction only when the distressed enterprise's assets exceed its liabilities. This has often led to time consuming litigation over whether the debtor is solvent or not at the onset of the proceedings. In the meantime, the debtor languishes. The CRA avoids this problem by allowing enterprises in the door regardless of their solvency or insolvency.
The authors of legislative measure said that once a case begins, the CRA offers four different means of relief: Pre-Negotiated Rehabilitation, Fast Track Rehabilitation, Court-Supervised Rehabilitation, and Dissolution-Liquidation.
Pre-Negotiated Rehabilitation
In the wake of the Asian crisis, banks have been diligently working with debtors to restructure loans whose payment terms are no longer practical. Numerous such agreements have been reached over the past several years. Two obstacles, however, stand in the way of a successful "work out". The first could be called the "maverick creditor problem" (where one creditor seeks to lay claim in the debtor's assets while others negotiate). The other is the "free-riding creditor problem" (where a creditor refuses to compromise knowing that the other creditors will). Both problems arise often. They undermine the trust patience needed to collectively restructure an enterprise's debts.
Pre-Negotiated Rehabilitation under CRA solves these problems. It allows a debtor that has worked out a rehabilitation plan with its creditors to go to court for official approval. While the plan awaits approval (expected time would be several weeks to hear technical objections, etc.), the claims and lawsuits of creditors, such as that of the maverick creditor mentioned above, are suspended. When the court approves that plan, all the creditors are bound by it, even the minority creditors who were trying to free ride on the good faith negotiations of the other creditors.
This remedy would be open to my enterprise that can develop a rehabilitation plan that is supported by a majority of its creditors. The experience of other countries, as well as some limited experience in the Philippines indicates that it is the most efficient and likely-to-succeed route to rehabilitation. It is thus one of the mainstays of the proposed legislation.
Fast-Track Rehabilitation
But what happens if the debtor cannot develop a pre-negotiated rehabilitation plan? The usual result has been for the debtor to petition SEC to initiate suspension of payments or rehabilitation proceedings. While various SEC cases involving large industrial companies are moving forward, few would deny that it has been a grueling experience and that success is not necessarily assured.
The challenge of the traditional rehabilitation approach is that it tries to do two things at the same time: (1) to figure out how to fix the debtor's business, and (2) to determine who gets what out of the proceedings. This one-two combination is the reason why many rehabilitations fail. The parties to the proceeding, seeking to minimize their losses, have move than the long-term interest of the enterprise in mind. The result is strategic bargaining, strategic lawsuits, and endless proceedings. And time, unfortunately, is the number one enemy of a successful outcome.
Fast-Track Rehabilitation under the proposed legislation stems from the assumption that the persons with the best incentives to fix an enterprise are owners with long-term outlook. These individuals will gain or lose depending on the ultimate outcome of the rehabilitation. To get to this point, Fast-Track Rehabilitation:
* creates a new, debt-free enterprise based on the assets of the debtor;
* transfers the shares of the new enterprise to the debtor in exchange for the debtor's assets;
* allows for the auctioning of the shares of the new enterprise with an eye toward maximizing revenues from the sale;
* gives shareholders and creditors of the debtor various preferred rights in bidding for the shares of the new enterprise if they so choose;
* allocates the proceeds from the shares sales to creditors and shareholders of the debtor according to pre-established priorities.
Fast-Track Rehabilitation keeps the enterprise together (albeit under a new corporate entity) while significantly reducing its debt in a very short period of time. While there are no guarantees of success, the enterprise, under new corporate trappings and management, has a far better chance of rehabilitating itself under these circumstances rather than trying to do it through endless rehabilitation proceedings. Workers benefit from this. So do the high priority creditors.
The legislation essentially makes Fast-Track Rehabilitation mandatory if the enterprise has not already petitioned for Pre-Negotiated Rehabilitation.
Court-Supervised Rehabilitation
As experienced in the Philippines and elsewhere teaches, traditional rehabilitation, even under the most progressive legislation, is drawn out process with few guarantees of success. Nonetheless, the CRA does provide it as a form of relief. It is only available, however, to non-stock corporations, or in instances where the secured creditors submit a motion to the court to convert the proceedings from Fast-Track Rehabilitation.
The CRA allows for the drafting of a rehabilitation plan while claims of creditors are suspended. The creditors then decide to support the plan or not. If the majority of a particular class of creditors opposes the plan, the case is converted to liquidation.
Court-Supervised Rehabilitation under CRA differs from current practice in several respects. The CRA puts the onus on the shareholders (through the debtor's board of directors) in drafting and selling a rehabilitation plan. The shareholders have the most to win or lose depending on whether a plan is approved. They should be the ones to take the first crack at the plan. Further, while the shareholders can hire experts to help in formulating the plan, the cost of hiring such experts are borne by the shareholders rather than the creditors.
This is contrast with current practice where the interim rehabilitation negotiates and balances the competing demands of the creditors and the shareholders. While some individuals have been able to rise to this challenge, even they concede it is very difficult to wear several hats at once. It is better to split the job into two roles: the court-appointed administrator (called the "conservator") conserves the assets (for the general benefit of all creditors) while the shareholders and their rehabilitation planner make their pitch for adjusting creditor's claims, minimizing shareholder dilution, and saving the enterprise.
The proposed legislation makes Dissolution-Liquidation the relief of last resort. It will most often be used when other forms of relief fail or when a debtor seeks to liquidate itself when it has insufficient assets to cover its debts.
The liquidation proceedings under the CRA are rather straightforward. They closely resemble the approach currently adopted by SEC. The major change is the modification of the ranking and prioritization of creditors currently found in the Civil Code. Several practitioners and commentators have argued that the Civil Code rankings massively complicate both liquidations and rehabilitations.
The CRA presents several options to a distressed enterprise. First, it gives it the chance to negotiate a rehabilitation plan agreed to by the majority of its creditors. Upon court approval, the plan would bind all creditors, even the dissenting ones.
If this effort fails, and an enterprise goes into formal rehabilitation proceedings, the CRA focuses on restructuring the claims against the enterprise while getting it out of debt quickly. The task of improving the enterprise's operations falls upon the new owners.
Traditional Court-Supervised Rehabilitation is available under the CRA, but only under limited circumstances, due to its inherent delay, cost, and risk. Finally, traditional dissolution and liquidation available, but only when a debtor voluntarily consents to it or when other rehabilitation approaches fail.
The CRA thus is both an evolution and an innovation in terms of current practice. It emphasizes workable solutions and de-emphasizes court-led approaches. Above all, it emphasizes the preservation of an enterprise while allowing its ownership to be restructured and its creditors to be treated fairly. In this sense, the CRA is pro-worker, pro-market, and pro-creditor at the same time.
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Tuesday, February 2, 2010

Qualities of Good Lawyers

WASHINGTON - NOVEMBER 03: National Football Le...Image by Getty Images via Daylife
Qualities of Good Lawyers: Who says lawyers are liars?
By Beverly Caboteja
It’s 5:30 pm.
It was another ordinary day for me in law school. Well, I thought it was.
My professor talked about a different topic; a topic I don’t usually hear from my other instructors. He’s talking about his life being a lawyer, and what it is to be not just a lawyer but a good lawyer.
When I was still in my first year in law studies, I used to look at my lawyer-professors who stood in front of me, wondering, how can I get from where I am right now to where he is? I’d listen to my them tell about all their joys, fears, and even brunt of becoming one. Admittedly, I couldn’t help myself but think, will I, too make myself a good lawyer someday? A plain question yet it entails no certain answer.
I had already learned in the course of my education that I didn’t have to live the same low-level I had learned while growing up during my early years in law school. But I still had to figure out what it was going to take to change me so I could be, God willing, what I am supposed to be in the future. I knew that change was absolutely essential if I was ever going to heed and fulfil the call of being just like the lawyers whom I pay so much respect.
I just then want to share the discovery I made that took me beyond all my yesterdays into my more serious walk towards excellence for indeed, being in law school is never like a walk in the park. Nonetheless, along the way you come to appreciate everything that envelopes therein. And it is all worth it.
Now, I began contemplating, what makes a good lawyer? What distinguishes good lawyers from the bad ones? A number of differences leaked out from the discussion, and in this article, let me share with you some of which my professor had emphasized.
When people look for lawyers, they have to meet certain criteria. They, unsurprisingly, want the best lawyers in town. Although it is seemingly difficult for people to know exactly who they want, there are certain general requirements that all candidates should be able to meet. These criteria are those that make a good lawyer:
One of the most important criteria that separate good lawyers from bad ones is writing skills. Lawyers have to write a lot but not only a lot but also write well. As what IP Today columnist Joseph N. Hosteny says, “first-rate writing is another hallmark of good lawyers. They have to lay out their argument and how their points of support and evidence fit into the overall picture of what they are saying.” In short, they should learn to elucidate things clearly and comprehensively.
I remember few months ago, my teacher used to remind us the three (3) L’s:
LAW,LOGIC, LANGUAGE. Among the three, he emphasizes the third. Writing in law school is far different from writing in high school or even in college. Hence, he stresses that we are to learn the language of class.
On a personal note, every case requires a brief, and lawyers often take on many cases at once. Consequently, they need to be able to convey their ideas quickly and in a short amount of space so that anyone reading the brief can quickly understand the attorney's argument.
Another important criterion that good lawyers meet is a thorough reading and understanding of the law. Laziness in reading the law is another trademark of a bad lawyer, or at least the slothful one. Some people have said that a good lawyer reads the law, but the truth is that good lawyers do more: they comprehend the laws and know the law inside and out. They don’t only read laws for the sake of completing a pleading but make it sure that everything is done well. This is also inevitable to being a successful and most-sought after lawyer because lawyers have to use laws in their client’s favor.
But many lawyers these days are not readers. We are taught in law school to read the case, and perceive the facts that controlled the court’s decision about the law. This enables us to grasp the fuller understanding of the case. Besides, the less you read, the less you know, as my teacher quotes it.
It is important that attorneys can maintain their objectivity and independence from their clients. The good ones don’t allow themselves to be dictated upon. Neither do they become “underdogs”. More so, many times, lawyers defend their clients for publicity purposes, but in the process their judgment gets weakened. When attorneys believe one thing over another and start to espouse their beliefs, they lose the ability to think clearly because they have become involved in the case; they want to prove themselves right. By maintaining their neutrality, lawyers can more level-headedly decide what is in the best interest of their clients.
Furthermore, good lawyers can and do look at things from the opposing parties' viewpoint. For example, prosecution attorneys should not try to wrongly convict people because of the negative effects it can have on the convicted individual; to understand this they should look at the situation from the defendant's eyes. Moreover, looking at the case from the opposing party's eyes also allows attorneys to understand what arguments the opposing party might use.
Finally, good lawyers engender honesty. They do not resort to anything fraudulent or corrupt all for the sake of generating income or of increasing revenues. Pitiful it seems but there are lawyers who treat lawyering just like any other businesses. This indeed palpably is unethical as dictated by the legal ethics. They even dupe clients and impose fees unreasonably.
These are only some of the characteristics that make up a good lawyer. I, personally have high regard and respect to lawyers which lead me to dreaming of becoming one. Not all lawyers are liars. They are not even bad. There are just some few who seem to deviate from the realm of the righteous.
Good lawyers bring about safety and assurance. They speak for those who cannot speak for themselves, for the rights of all who are destitute and ensure justice for those being crushed.
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