Novartis’ Indian patent application No 1602/MAS/1998 at the Chennai Patent Office on 17 July 1998 relating to a beta crystalline form of imatinib mesylate had initially been rejected by the Controller of Patents under section 3(d) of the Indian Patents Act, 1970 (Act). According to section 3(d), a new form of a known substance is not patentable in India unless the new form showed “enhancement of the known efficacy” of that substance.

Novartis filed writ petitions before the Madras High Court in May 2006, claiming that the Controller erred in rejecting its patent application, and further claiming that section 3(d) was, inter alia, vague, ambiguous, and contrary to the requirements of the Trade Related Aspects of Intellectual Property Rights (TRIPS) of the WTO Agreements. In the challenge to section 3(d), Novartis had argued that this provision is not in compliance with TRIPS and was in violation of the Indian government’s constitutional duty to harmonise its domestic laws with its international obligations under TRIPS. The Madras High Court held that it was not the proper forum to decide whether the Indian patent law was TRIPS compliant or not. Dismissing the petition, the Madras High Court held that section 3(d) was not vague or arbitrary and therefore did not violate the Indian Constitution. Novartis’ challenge to the Controller’s decision rejecting the patent, which was filed before the Madras High Court, was subsequently transferred to the Intellectual Property Appellate Board (IPAB).

Before the IPAB, Novartis had argued that the beta crystalline form of imatinib mesylate had, inter alia, improved bioavailability, lower hygroscopicity, improved thermodynamic stability and improved flow properties. The IPAB, in 2009, upholding the Controller’s decision, interpreted the term “enhancement of the known efficacy” to mean improved therapeutic efficacy of the new form and not merely improved bioavailability or improved physical properties. Novartis then appealed against the IPAB’s order before the Supreme Court.

The apex court of India upheld the IPAB’s order refusing grant of a patent to Novartis’ product. According to the judgement, in case of chemicals and especially pharmaceuticals if the product for which patent protection is claimed is a new form of a known substance with known efficacy, then the subject product must pass, in addition to section 2(1)(j) and 2(1)(ja), the test of enhanced efficacy as provided in section 3(d) read with its explanation. With regard to the interpretation of the term “enhancement of the known efficacy”, the Supreme Court reasoned that “not all advantageous or beneficial properties are relevant, but only such properties that directly relate to efficacy, which in case of medicine, as seen above, is its therapeutic efficacy.” The Supreme Court decided that Novartis’ product fails to qualify as an invention under section 2(1)(j) and 2(1)(ja) and also fails the test of patentability under section 3(d).

The Supreme Court decision this morning makes it very clear that in order to obtain a patent for a new form of a known substance in India, the applicants must show in their patent specification, sufficient proof that the new form of a base compound of known substance is therapeutically more efficacious than the base compound or known substance. Experimental data to establish that the new form has a therapeutic advantage will be essential in determining whether the new form will qualify for a patent in India vis-à-vis section 3(d) of the Act.

In order to obtain sufficient information, referring to assets and rights of Spanish residents located abroad, the form 720 also clarifies the instruments of improving mutual support with other countries. The exchange of information among states necessary for tax payments, so as for collaboration in general, is essential for bringing into life this declaration.

Who is obliged to submit this tax form? (Order 72/2013, art. 2)

The taxpayers who must report their assets and rights held abroad, in accordance with the new regulation are:

• Individuals and legal entities residents in Spain;
• Individuals or legal entity, non-residents in Spain, with permanent establishment in the Spanish territory if they belong one of the following groups: holder, representative, authorized, beneficiary, individual or entity with powers of disposal or real beneficial owner.

What must be declared? (Order 72/2013, art. 3)

As for data that need to be reported to the Spanish Tax Office new obligation includes specific information on assets and rights situated abroad comprising:

• Bank accounts of banks located abroad;
• Stocks, rights, incomes and insurance deposited, managed or gained abroad;
• Real estate and rights on real estate located abroad.

Each of previous points implies an autonomous obligation of declaration, so, for instance, a taxpayer will have to declare bank accounts albeit she/he would not have stocks or real estate abroad.

However, there will be no obligation of submitting tax form for accounts of banks located abroad if neither the final balance (on 31^st December), nor the average balance reaches a total of 50.000,00 EUR. The submission of the disclosure in successive years will only be obligatory when this limit has been increased by more than 20,000 EUR in a year. In respect to the obligation to declare stocks, rights, insurance and incomes deposited, managed or gained abroad and also for properties or rights on real estate located abroad similar limits are applied.

Deadline to file the tax form (Order 72/2013, art. 7)

In order to comply with these obligations, the tax form has to be filed during the first quarter of each year, starting from 2014. Exceptionally, the period of presentation of the model, in respect of 2012, is from February 1^st to April 30^th 2013.

How it must be declared? (Order 72/2013, art. 4 to 6)

The tax declaration form must be registered electronically, via Internet. Namely, each set of information (bank accounts/stocks/real states) that must be reported, constitutes a separate obligation of presentation. However, all the blocks of information will be filed through a single information model (only one tax model 720 and not three models).

What are the penalties? (eighteenth additional provision of General Tax Law 58/2003 of December 17)

Notably, a strict penalty regime has been adopted. If a taxpayer disobeys the regulation a heavy fines will be imposed.

Firstly, in the case of failure to comply with the obligations to provide tax authorities with the information on all three categories (bank accounts of banks located abroad; stocks, rights, revenue and insurance deposited, managed or gained abroad; real estate and rights on real estate located abroad), the minimum penalty will be 30.000,00 EUR.

Secondly, in the case of existence of the obligation to provide the tax authorities with the information referring to just one of the mentioned categories, if the declaration is not presented will be the minimum penalty 10.000,00 EUR.

Thirdly, if a taxpayer has omitted to:

-          report a piece of information,

-          has submitted incomplete information,

-          has submitted inaccurate information or

the penalty for breaching any of the obligation abovementioned will be 5.000,00 EUR, with a minimum of 10.000,00 EUR.

The Order HAP/72/2013 represents one step towards more restrictive tax regulation. Misunderstandings of the Tax Declaration 720 may result in a heavy fine, and therefore errors are strongly undesirable. Moreover, the submission of incomplete or imprecise data entails same penalties.

For the enforcement of this Order the key will be developed and efficient cooperation with foreign states. Information flow between different countries is increased once time more.

In conclusion, this informative declaration that refers mainly to tax residents in Spain, designed to fight a tax fraud, represents a very complex and severe regime, which can result highly compromising for a taxpayer.

Mauricio Tico
Marija Cvetkovic

The underlying conflict was between two Dutch companies MAIN FREIGHT CARRIERS and MAINFREIGHT. The latter, defendant, pleaded in short that it had older trade name rights than applicant, stating that it took over commercial activities by an older New-Zealand company named Mainfreight Limited which name also enjoyed protection in the Netherlands.

In its ruling, the Court follows the Dutch doctrine and jurisprudence on the protection of foreign trade names in the Netherlands. In this respect, the Court of Appeals has ruled:

“The protection of a foreign trade name in the Netherlands does not require that the company is vested in the Netherlands and that the trade name is used in the Netherlands. It is sufficient that the name enjoys a reputation in the Netherlands with the relevant public worthy of protection (such reputation that likelihood of confusion is to be feared).”(office translation)

Since the defendant did not show that it actually acquired older trade name rights from Mainfreight Limited and since there was no reputation in the Netherlands of an older trade name it could invoke, before applicant started using its trade name in the Netherlands, the defendant lost the case.

The Court ruled that the name MAINFREIGHT is only slightly different from applicants name (it only differs with regard to the descriptive element ‘CARRIERS’) and that actual confusion took place between the trade names of parties. Therefore the request by applicant to change defendants name in such a way that it is no longer a combination of the words main and freight is awarded.

Defendant is also ordered to pay applicant € 10.691,16 and € 19.990,71 lawyers and costs for the procedure in first instance and for the appeals proceedings.

J. Becker

The very short exemptions section in the CISG governs the extent to which a party is exempted from its liability. It contains two provisions: failure due to an uncontrollable impediment (article 79) and failure due to one of the parties act or omission (article 80).

Article 79 of the Convention is the principal provision governing exemptions from liability. It corresponds to domestic concepts of e.g. force majeure. But it is not a force majeure clause. The article originates from ULIS article 74[1] that however, did not classify the cause of failure as an impediment, but instead used the more lenient word, circumstances.

Under the article 79, a party to a contract is not liable for a failure to perform any of his obligations if he can prove that the failure was due to an impediment outside his sphere of control. This is not easy to prove and it entails the party in breach to satisfying a long list of restrictive requirements. This list of requirements makes it the longest article in the CISG, and probably the longest article of any internationally recognized Convention. With the word of scholar Harry Fletchner “Whereas proving exemption under Article 79 requires satisfying a long list of requirements that can be difficult to understand, challenging to distinguish, and daunting to apply”[2].

Article 79(5) restricts the exemption from liability to apply only to damages. Nothing prevents the counterparty from exercising any other right under the CISG. This means that the creditor to a contract retains the right to reqiure specific performance, along with other rights, other than the right to damages. Question that this raises, is whether or not the compliance obligation contains a limit of sacrifice? Or whether subsequent impediments that occur after formation of a contract triggers the contract to be amended or renegotiated, the so called hardship? These issues must be left open.

There are similar provisions in the Danish Sale of Goods Act. However, Danish law distinguishes between specific and generic goods, opposite of the Convention. Further, the Danish Sale of Goods Act seperates contractual obligations depending on those involved, e.g. whether or not they are consumers. On this basis, they are not comparable.

Mr Kim Christian Hove Thomse

An International Investment Treaty (IIT) is an agreement signed by two or more nations to build better relations by mutual cooperation with the objective of achieving sustained economic development for both nations. If one considers the fundamental basis of these IITs and exchange control regulations in India, the contradictions are hard to miss. One of the fundamental concepts of these IITs is that of ‘National Treatment’, which means that the host will not discriminate against foreign investors irrespective of whether this discrimination is a result of legal, administrative or other decision making. When countries enter into such IITs they agree that each of them will provide treatment that is ‘no less favourable’ than the way its domestic investors are treated. For example, the Comprehensive Economic Cooperation Agreement between India and Singapore provides that “each party will accord to investors of the other party and investments of the other party, in relation to the management, conduct, operation, liquidation, sale and transfer (or other disposition) of investments, treatment no less favourable than it accords in like circumstances to its own investors and investments.” This principle has been upheld and recognised in several international commercial arbitrations as well. It is therefore exceedingly difficult to reconcile the principle of ‘National Treatment’, with the pricing guidelines set out in the Indian foreign direct policy (FDI Policy). The recently introduced discounted cash flow (DCF) method of valuation and (i) the ceiling price for sale by a foreign buyer; and (ii) floor price for purchase by a foreign buyer of shares of an Indian company certainly discriminate between domestic and foreign investors and is a perfect example of this contradiction.

The second fundamental concept of these IITs is that of ‘most favoured nation’, which requires that a foreign investor must be accorded the highest standard of treatment available to an investor from any other foreign country. Another issue that has been debated extensively in this regard is the meaning of the terms “fair and equitable treatment” and “full protection and security” and its applicability. The FDI Policy specifying shareholding limits for foreign investment in specific sectors like telecommunications, insurance, print media and defense and the requirement of approvals from the Foreign Investment Promotion Board (FIPB) ignores the mandate of the IITs and discriminates against foreign investors.

Most IITs such as the one between India and Singapore provide for a provision dealing with ‘repatriation’ where the parties to the treaty undertake to assure investors of the other country free transfer of their capital and returns on investments. The only exceptions to availing benefits under such IITs are usually conditions such as protection of public morals and maintaining of public order, protection of human life and natural resources, preservation of national treasures and circumstances crucial to protection of security of the countries. Repatriation of proceeds by foreign investors under the present regulatory regime is ridden with restrictions for foreign investors which do not apply to similar investments made by Indian investors. Investments made by foreign investors may also be subject to minimum capitalisation requirements and lock in periods in certain sectors like banking and real estate. The lack of flexibility with respect to returns on investments is certainly an obstacle in the path of foreign investors looking to capitalise on their investments and could be a discouraging proposition for such investors, not to mention, prohibited by the IITs.

The aftermath of the Supreme Court judgment in the 2G case has left behind several disgruntled investors who besides their money also want answers from the Indian government. The world at this time is looking to see what action the Indian government will take to resolve this issue. The government now needs to take a hard look to decide what its next steps should be. Does it want to send out the message that India only claims to be ready to welcome foreign investments into the country but at some level is still hesitant to completely embrace it?  Will India be able to comply with its international obligations? If we want to continue to pique the interests of foreign investors, our policies must ensure that foreign investors are not treated arbitrarily merely owing to their foreign nationality. It is important that we are in a position to guarantee other nations that India will uphold the fundamental principles of international law and honour the IITs that it has signed.

Murali Neelakantan
Kaushalya Shetty

The conditions for opting out the audit stipulate that the concern for two consecutive years does not transcend two of the following three conditions at the balance sheet date:

1. A balance sheet of DKK 4 million.
2. Net turnover of DKK 8 million.
3. An average number of fulltime employees during the financial year of 12.

In practice the change means that the holding company does not need to audit the financial statement. If the company chooses to have the financial statement audited a declaration standard set by the Danish Business Administration can be applied. The decision to opt out audit can only be made prospectively.

If a company is required to have the financial report audited according to special legislation, it cannot take the advantage of opting out the audit. Opting out does not cover corporate funds.

Lene Holst Hansen

As a result of the confidentiality rule, the Court held that the seizure, in the course of an investigation by the Belgian Competition Authority against Belgacom, of a large number of e-mails was illegal and that the evidence thus obtained could not be used.

The ruling relies on Article 8 of the European Convention on Human Rights, which  protects the right to privacy and private correspondence, and the Court specifically rejected a plea that in-house lawyers were covered by the professional secrecy rule contained in the Belgian Penal Code that applies , inter alia, to admitted lawyers.

The ruling applies only to investigations carried out by the Belgian National Competition Authority on the basis of the Belgian Competition Act and it will not apply to investigations carried out by the European Commission on the basis of the EU competition law provisions. For the latter, the rules established by the CJUE in the Akzo case will continue to apply in Belgium.

It seems probable that the Belgian Competition Authority will appeal the judgment to the Belgian Supreme Court.

Charles Price

It can be seen that the Draft Communiqué is based on the EU Regulation numbered 207/2012 of March 09, 2012 (“EU Regulation”).  The Communiqué will have its legal ground based on the Law on the Preparation and Implementation of the Technical Legislation on Products numbered 4703, the Decree-Law numbered 663, the Turkish Medical Device Regulation which is in line with 93/42/EEC and 2007/47/EEC Directives and the Regulation on Active Implantable Medical Devices in line with 90/385/EEC that was amended by 2007/47/EEC.

The Communiqué determines the principles and procedures regarding the application of the electronic IFU on websites. It further regulates the content of these electronic IFU and provides guidance on how to transform from paper to electronic form.

These rules and procedures are indeed parallel to the EU Regulation that the Communiqué is based on. Electronic IFU is permitted only for certain medical devices and accessories which are intended for exclusive use by professional users and not for the use of other persons. These medical devices and accessories are listed under Article 5 of the Communiqué which is in line with Article 3 of the EU Regulation. The articles regarding the risk assessment, the requirements for electronic IFU, the indications regarding the electronic IFU, the website application and the fulfilment of the obligations regulated under the EU Regulation have been translated word for word and incorporated into the document.

We have seen over the years that the MoH have been rigorously following the EU practice and harmonizing current Turkish legislation with all the EU Regulations applicable to medical devices. Therefore, it can be said that the introduction of the electronic IFU for medical devices was not unexpected. However, it can be seen that the MoH has chosen to follow Europe’s timeframe as well. The MoH expects comments and suggestions from the industry until February 16, 2013 upon which it will finalize and publish the Communiqué which will enter into effect upon publication. Since the EU Regulation shall become applicable from March 01, 2013, Turkey expects this new practice to enter into force almost at the same time as the EU.

Ceren Aral
Dicle Doğan

The case relates to the insurance company’s investment stake of 5% in Fortis, which, when originally made in 2007, was worth US$ 3.8 billion. The company suffered losses estimated at some US $ 2 billion, when Fortis collapsed in 2008-2009 and had to be bailed out by the Belgian government. In return, the government acquired shares in Fortis Bank, part of which, against the wish of Ping An, it subsequently sold to BNP Paribas.

The case is a first in two respects: it is the first time that a PRC investor has had recourse to arbitration under the ICSID rules and it is also the first international investment case in which Belgium is cited as a defendant.

The Arbitral Tribunal has recently been constituted and the case will now proceed. The Chairman of the Arbitral Tribunal is Lord Collins, a former Justice of the UK Supreme Court and the two co-arbitrators are Mr David Williams, QC , New Zealand national, and Mr Philippe Sands, QC, a dual French-British national.

The arbitration proceedings are not public.

Charles Price

The case involved the Trustee of various Ford Motor Company pension funds, waggishly named “Wheels”. Wheels was the trustee of a fund pooling for investment purposes the assets of  Ford’s occupational pension schemes.

Pursuant to article 13 B d) point 6 of the EU 6^th Directive (as amended from January 1, 2007), “the management of special investment funds, as defined by the Member States” is exempted from VAT.

Following the ECJ decision of June 28, 2007 (C-363/05, JP Morgan Fleming Claverhouse Investment Trust), Wheels had sought to obtain the reimbursement of the VAT which had been charged and paid on services rendered by an investment manager, Capital International Limited, on behalf of various Ford motors pension funds. The Claverhouse decision had extended the exemption to collective investment schemes organised in theUnited Kingdomas OEICs and AUTs as well as closed end investment schemes.

The UK Revenue commissioners refused and the U.K. Tax Court referred the matter to the ECJ for a preliminary ruling.

The issue was whether the Pension Fund  held by Wheels could be characterised as a “special investment fund” within the meaning of the exemption mentioned in article 13 B d) above.

The ECJ first pointed out that whereas a degree of uniformity was required in some circumstances, when the EU legislation has conferred upon each of the Member States the task of defining certain terms (as here) it is up to the Member States to define the meaning of “special investment funds”.

The ECJ qualified the liberty granted to each of the Member States by pointing out that this power cannot be used to undermine the very bases of the exemption, which were to facilitate and encourage investment in collective investment schemes and to maintain fiscal neutrality for comparative activities, and it cannot select from among its “special investment funds” (as determined by domestic law) those which are exempted and those which are not.

EachMemberState’s power is thus restricted to the initial classification of “special investment funds”. This power is in turn moderated by the requirement that such choices maintain fiscal neutrality and do not treat differently economic operators carrying out the same or similar transactions.

The issue was therefore whether a pooled pension scheme was in fact in competition with “special investment funds” within the meaning of article13B (d)(6) of the 6^th directive and article 135(1)g of Directive 2006/112 (point 15).

The ECJ stated that funds governed by the UCITS Directive were  such « special investment funds » able to rely on the VAT exemption, UCITS being collective investment undertakings having as their sole object the collective investment of capital raised from the public. Similarly, the exemption could apply to non UCITS funds which display characteristics identical to UCITS and carry out transactions comparable, or at least in competition with UCITS; such funds may also qualify as “special investment funds”.

The ECJ found several grounds to distinguish a pooled retirement pension scheme from “special investment funds”.

Firstly, the beneficiaries of the scheme, unlike private investors, do not bear the risk arising from the management of the fund; the benefits to which a scheme member is entitled depends not upon the value of the funds’ assets but on a pre-determined amount calculated as a function of length of service and salary (point 27).

The Court also held that such a retirement pension scheme differed from a collective investment scheme (qualifying as a “special investment fund”) insofar as the contributions made by the “employers” were simply a means whereby they comply with their legal obligations towards the employees (point 28).

In its preliminary ruling the Court thus found that an investment fund pooling the assets of a retirement pension scheme, where the members of the scheme do not bear the risk arising from the management of the fund and the contributions paid by the employer are a means whereby the employer complies with its legal obligations, is not a “special investment fund” which may be exempted from VAT (point 29).

The above decision was rendered on a question concerning VAT. InFrance, it may however have repercussions in other fields of taxation.

Following the Santander decision of May 10, 2012, French tax law was modified with the result that dividends declared by French companies since August 17, 2012 to foreign collective investment schemes in qualifying foreign jurisdictions are exempt from withholding tax, pursuant to article 6 I-A and II of the law 2012 n° 958 of August 16, 2012.

To qualify for such exemption, the foreign investment schemes must be in the EU or in a jurisdiction which has entered into a treaty withFranceincluding administrative assistance and anti-tax avoidance provisions.

The foreign collective investment scheme must also:

-raise funds from a certain number of investors with a view to investing them, in the interests of such investors, in compliance with a defined investment policy;

-have characteristics similar to those of the following French collective investment schemes: OPCVM (i.e. UCITS) governed by articles 1, 5, or 6 of  I  of  article L.214-1 of the Monetary and Financial Code, French real estate collective investment schemes (OPCI) and close ended investment companies (SICAF).

The law of August 17, 2012 does not give details of the meaning of « similar characteristics » and we will have to wait for administrative commentary to know the real scope of this new law which removes the withholding tax which was applicable to dividends distributed to foreign investment funds.

In view of the Wheels decision we can fear that the French tax authority will take the position that dividends paid to foreign pension funds, held by trustees and not by the beneficiaries of the pensions, are subject to a withholding tax in France, inasmuch as such funds are not comparable with investment funds governed by articles 1, 5, or 6 of  I  of  article L.214-1 of the Monetary and Financial Code.

One can nonetheless consider that such a restrictive interpretation would be contrary to the principle of European law upholding the free movement of capital.

Charles Campbell