For in-house counsel focused on protecting their organizations’ compliance  — a growing concern for GCs around the world — a global compliance program is often the answer. A recent survey of 150 general counsel and chief compliance officers in Europe listed regulatory compliance and training as one of their top on-the-job priorities for 2013. The survey, conducted by Legal Exchange Network (LEN), includes participants from the UK, Switzerland, Italy, Denmark, The Netherlands, Finland, France, Norway, Sweden, Germany and Belgium. In-house counsel’s focus on compliance may extend beyond their legal department to dealings with outside counsel as well. For Law Firm and Client Partnering Best Practices, Lex Mundi suggests ,“clients share their compliance communication plans with outside lawyers.”

When developing a compliance program, there are several factors to take into consideration, from organization needs to protocols for conducting a compliance investigation. As a starting point, the January/February issue of ACC Docket suggests referring to the US Federal Sentencing Guidelines’ (USFG) seven elements for a successful and effective compliance program.

The seven elements are:

1. Implement compliance standards, codes of conduct, and policies and procedures;
2. Specify an executive-level individual with the responsibility to oversee compliance;
3. Put in place certain measures to ensure that no substantial discretionary authority is given to individuals who may have a tendency to engage in misconduct;
4. Put in place compliance training programs, awareness and communications;
5. Be consistent when it comes to taking action against misconduct;
6. Be ready to review your compliance program and initiatives to respond appropriately to misconduct and prevent similar offenses; and
7. Respond promptly to allegations and take steps to prevent further similar offenses.

Maria Hernandez, leader of the European Compliance department at Pentair, recommends, “going back to the basics to create a successful compliance program.”  During the initial stages of development, Hernandez also recommends that counsel “try to think about the heart of the matter before jumping ahead with sophisticated processes or policies.” For those who are equipped with a legal department led compliance program already in place, training and implementation may be the key to success. As organizations continue to expand and do business internationally, global buy-in reigns supreme.

Tiffani Alexander is managing editor of the ACC Docket, the award-winning journal of the Association of Corporate Counsel (ACC). She earned her BA in Journalism from the University of Maryland, College Park, and has a MA in Arts, Entertainment & Media Management from Columbia College Chicago. Tiffani can be contacted at Alexander@acc.com.

As the sixth largest economy in the world, Brazil has become an attractive country to many businesses. At this year’s Annual Meeting in Orlando, Fla., an esteemed panel of experts on the country –– including Marco Antonio de Gregorio, legal director for Latin America, Reckitt Benckiser; Alexandre D’Ambrosio, general counsel and executive director, Votorantim Group; Eduardo Loyo, chief economist, BTG Pactual; Jose Diaz, partner, Demarest e Almeida; and Celso Xavier, partner, Demarest e Almeida ––presented on doing business in Brazil. The panel discussed Brazil’s legal landscape, delving into its legal structure, tax and anti-trust scenarios. They spoke about societal norms and how things have changed in the region over the years, including the nature of litigation, arbitration and restructuring, stronger laws focused on compliance, business entry and why it’s become important for companies to enter and invest in the country.

Loyo gave an economist’s overview of Brazil, discussing everything from trends in retail and industrial production, to income, inflation, public debt, and interest and unemployment rates. This led to a discussion of Brazil’s high growth rate — a contributing factor to the country’s attractiveness. In the early 1980s to 2000s, the rate of growth was less than 2 percent, but it more than doubled between 2003 and 2010, coming in at 4 percent. According to the panel, this growth acceleration caused consumers to spend too fast, “over-heating” the economy, which caused interest rates to stay higher than those in other places in the world. Further, Xavier pointed out that currency strengthening (another byproduct of the growth) could actually cause issues like heavy taxation and limited physical space for public spending on investment.

In the past year, the economy in Brazil has slowed down, returning to an approximate 2 percent growth rate. Further, according to the panel, interest rates have decreased from as high as 10 percent to a much more desirable approximant of 2 percent. They predicted that growth in the future will not be as fast or as slow as in the past, and said they expect “permanently lower interest rates with sufficient growth” moving forward.

Naturally, in-house counsel are most interested in the legal landscape of a country their company is contemplating entering into. According to de Gregorio, Brazil is “a country full of lawyers,” with statistics indicating that one in every 265 people in Brazil practice law. But it doesn’t stop there: “Every year, more lawyers enter the market, and there are 1,240 law schools,” said de Gregorio. He went on to discuss the 24.3 million new lawsuits filed in 2010, the approximately 84 million ongoing lawsuits in the country during any given year, as well as the four million laws implemented in the country since the 1988 Federal Constitution. Apparently, it is very cheap to file a lawsuit in Brazil, a civil law country, which accounts for the large number of suits filed.

Xavier discussed litigation in the country, stating that “the US way of drafting agreements does not work in Brazil –– we are a civil law country.” He went on to explain a few reasons why: There are no juries in Brazil, except in the case of murders; there is no discovery during trial; no punitive damages; and as Brazil is a large country, litigation will vary from place to place.

In addition to large number of “new” laws being implemented in the country, Brazil has also seen great tax reform, with 85 different taxes (73 federal, 6 state, and 5 municipal), 28.591 federal tax acts, 83.516 state tax acts, and 137.017 municipal tax acts. Again, understanding, or at least being aware of these taxes, is critical for foreign companies contemplating doing business in Brazil.

“The Brazilian Way” was sometimes used as a derogatory term in the past, according to D’Ambrosio, often describing a “way” to get around the laws. However, this is “quickly becoming a thing of the past” as companies strive to be compliant. Take, for example, Brazil’s tough anti-trust laws, focused on the investigation of illegal practices. “Brazil has the most aggressive anti-trust laws in the world and decided to pose the most aggressive fines in world,” said D’Ambrosio, adding that, “It’s a wonderful time for lawyers to make money.”

The Brazilian Way also encompasses a culture that values the diversity of its people and places a high value on personal relationships. This is important to remember as the in-house counsel assisting your company in gaining entrance into the country. According to Diaz, companies tend to enter Brazil through M&A, and that activity remains “strong” throughout industries. Areas of opportunity identified by Diaz included infrastructure (airports, roads, energy), oil and gas (biofuels, civil construction), and rural land. “Brazil requires infrastructure growth investment,” said Diaz.

Panelists offered the audience a few things to remember when forming a new company in Brazil: 1) The corporate structure options are Limitada (in pyramid form: partners up top, officers directly under) and S.A. (shareholders up top, with a board of directors directly under and the officers at the bottom), and there is no minimum capital requirement; 2) The rules for acquisition are different than in the United States; and 3) Liquidating a company there can prove difficult (if the company wants to divest it is better to do a merger).

The panel agreed that doing business or starting a business in the country can prove difficult due to its legal environment being in transformation, the complex tax system, its not-so-easy entry, and the new laws that must be complied with and understood. However, they also echoed the popular quote, “Brazil is the country of the future and always will be.” They called attention to the upcoming World Cup, saying that the country will see a “boom” over the next few years in every industry, and added that the substantial growth of the middle class makes it a good time to “get into the country.”

It came as no surprise when, on Aug. 20, 2012, Gu Kailai, the wife of ousted Communist Party official Bo Xilai was found guilty of murdering British businessman Neil Heywood and given a suspended death sentence. It also came as no surprise that the trial was over with before it even got started.

Most likely, authoritarian justice was employed to prevent the revelation of toxic facts embarrassing to the Party. Simply put, the trial and sentencing was rehearsed and stage-managed, and the verdict was a foregone conclusion. Anyone that thinks justice was served is wholly mistaken.

We only have part of the story; the rest of it has been buried and may be dealt with in the parallel universe known as the Party disciplinary process. The involvement of many other people in the crime and resulting cover-up, including Bo Xilai himself and Chongqing’s former police chief Wang Lijun, who tried in vain to declare political asylum at the United States Consulate in Chengdu, is still unclear.

While the Party can man-handle its own people using managed justice, the results of this trial provide little solace to the family and friends of Neil Heywood, who appears to share some fault in his own murder. Indeed, the official media in China has been feeding the argument to the public that Ms. Gu would likely receive a suspended death sentence for a number of mitigating factors, including that Heywood purportedly threatened Ms. Gu’s son.

If this is indeed a valid defense, where are the facts indicating that Heywood brought on his own demise? Without substantiation, this allegation is a figment of someone’s imagination, an insult to Heywood and something that the Party apparently has latched onto for political expediency. But the same defense certainly doesn’t apply to Zhang Xiaojun, the Bo family aide who was also found guilty but given a lighter sentence of nine years in prison for his role in the murder. What’s his excuse for leniency?

While, in general, the results may be fair, given that Ms. Gu and Mr. Zhang are guilty of premeditated murder and will spend much time in prison, the results will never to be fully understood without transparency and a degree of judicial independence from the political process.

Foreign business, with much at stake in China, should not view this case as an acceptable outcome but as a case that brings more uncertainty to a tenuous legal system.  In run-of-the-mill business disputes, foreigners don’t stand a chance in a Chinese court if Party-politics takes a priority, as it did in Ms. Gu’s case.

This case is a reminder that the judicial system in China is not independent, that politics trumps the law and that Party politics trumps the pursuit of justice. And everybody in and out of the system in China knows it.

Guest Author: James Zimmerman is an American lawyer living and working in China since 1998 and the author of the

Since the end of the Cultural Revolution in 1976, when the legal system all but ceased to exist, China has taken significant steps to reform its laws and regulations, judiciary and court infrastructure. China has promoted international legal exchanges, including sending tens of thousands of law students, lawyers and judges to the West for legal training. Much progress has been made, but the system is still a work in progress.

Notwithstanding 30 years of progress and reform, the Chinese government continues to politicize its legal system by requiring all lawyers to submit to a loyalty oath to the Chinese Communist Party and its leadership.

China’s Ministry of Justice issued the requirement on March 23, 2012, which provides that Chinese lawyers must not only uphold the law and the PRC Constitution, but also swear “to uphold the leadership of the Communist Party of China and the socialist system.”

This oath is mandatory for all Chinese lawyers working for Chinese law firms. A Chinese lawyer that refuses this oath will be declined a practitioner’s license. This rule does not apply to foreign lawyers. Nor does it apply to Chinese qualified lawyers working for foreign law firms, since they are effectively required to suspend their practitioner’s license in order to join a foreign firm.

While much of the oath’s language is a reasonable reflection of the duties of the members of the legal profession, the Party loyalty requirement is a reminder that the Chinese judicial system and Chinese lawyers and law firms are not independent from the political process. Their expressed loyalty — notwithstanding any individual attorney’s personal views — is first and foremost to the political party in control of the State.

It’s one thing that the ethical standards for Chinese lawyers and law firms are vastly different from US law firms. For example, in China, there is an absence of attorney-client privilege and the law firm, not the client, owns the file materials. Still, the requirement of a loyalty oath to the Communist Party is interference, at best, and clearly a violation of China’s own Constitution (Article 35, freedom of association) and 30 years of commitment to rule of law.

Most Chinese lawyers don’t give this a second thought and are too busy trying to make a living. Those that disagree with the loyalty oath roll their eyes and view it as a joke or as non-binding. Those that tend to agree with the oath tow the Party line and emphasize the current need for political stability and the importance of social harmony. All would agree that further legal and political reform lies far in the future.

Some law firms in China have used their Party ties and loyalty to grow their business, especially with Chinese companies and government-related legal work. Most law firms with foreign clients tend to hide their Party activities from foreigners. A comparison between the Chinese and English language versions of some Chinese law firms’ websites, for example, brings this practice to light. Such websites tend to erase the Party activities from their English version, while prominently describing them in the Chinese version. Such practices raise serious concerns that these firms are misleading their foreign clients.

Having worked with Chinese lawyers and law firms for over 20 years, I find the MOJ’s oath requirement to be an obstacle to Chinese lawyers, law firms, judges and academics, who seek to improve the quality of the legal system in China. Chinese lawyers deserve better. Their clients deserve better.

Until China moves in the direction of a truly independent judiciary and legal system, Chinese lawyers and law firms will never get the international respect for which they yearn. As the practice of law continues to globalize — as witnessed by the recent expansion of Chinese law firms to international destinations such as New York, London and Hong Kong — Chinese lawyers and law firms must realize that their own politicized rules of practice will limit their opportunities, if not block their international expansion.

And the MOJ is misinformed if they believe that Chinese lawyers and law firms will be effective in carrying the Party’s message to the global stage. Regardless of the messenger, that message is unlikely to be welcome anywhere in the global practice of law. Indeed, in most established legal systems worldwide, justice is (or should be) meted out objectively, without fear or favor, regardless of identity, money, power, privilege or political affiliation.

Chinese courts and the Chinese bar are not independent from the Communist Party machine. In short, politics trumps the law in China. Anyone in contact with the Chinese legal system would be wise to remember this..