The future of investment dispute settlement

The original article was published in Family Office Magazine and can be found here.

Entrepreneurs engaging in international investments face several issues when they are accused of a breach of contract. When the investment agreement does not provide solid provisions for dispute settlement, endless legal discussions and expensive court cases in unfamiliar jurisdictions can be the result. This article provides simple solutions for both investor and beneficiary to avoid such issues. 

The solution to avoid endless legal battles is to insert an arbitration clause in the investment agreement (out of court legislation). Arbitration has numerous advantages.

  1. Unlike in court, parties can select an arbitrator with an appropriate degree of practical experience. For example, a Court of Arbitration has a list of arbitrators who are experts in the field of digital commerce.
  2. Arbitration is faster than litigation in court, and a time limit can be placed on the length of the process.
  3. Arbitration is cheaper and more flexible, more commercial and less formal than court.
  4. Unlike court rulings, arbitration proceedings and arbitral awards are confidential.
  5. Unlike in court, there are very limited avenues for appeal of an arbitral award, which limits the duration of the dispute and any associated liability.
  6. Due to the provisions of the New York Convention 1958, arbitral awards are far easier to enforce in other nations than court judgments.

From an international perspective, there are several courts of arbitration that offer an effective way to solve investment disputes. Below are examples (in alphabetical order).

Astana International Financial Court (AIFC Court)

The AIFC Court in Kazakhstan provides a common law court system that operates to the highest international standards to resolve civil and commercial disputes in the Astana International Financial Centre.  It adjudicates exclusively all claims arising out of the AIFC and its operations and other claims in which all parties to the dispute agree in writing to the jurisdiction of the AIFC Court.  

The AIFC Court has its own court of final appeal, its own procedural rules, and a special fast track for small claims. Its Chief Justice and judges are among the most experienced and distinguished judges from the common law world with global reputations for independence, impartiality, integrity, unconditional application of the rule of law, and incorruptibility. The judges, procedures, practices and standards at the AIFC Court will be familiar to businesses currently operating in major financial centres around the world.


Dubai International Financial Courts (DIFC Courts)

The laws establishing the DIFC Courts were designed to ensure the highest international standards of legal procedure, thus ensuring that the DIFC Courts provide the certainty, flexibility and efficiency expected by the global institutions operating in, with and from Dubai and the UAE. The laws enacted provide for a court system capable of resolving all civil and commercial disputes, ranging from sophisticated, international financial transactions to debt collection and employment disputes.

The DIFC Courts deal exclusively with all cases and claims arising out of the DIFC and its operations and any other claims where all parties agree in writing to use the DIFC Courts. The DIFC Courts carry out their functions in an independent manner, in accordance with the provisions of the DIFC laws and regulations.


Court of Arbitration of the European Chamber of Digital Commerce (ECDC Court)

As an activity of its parent organization, the Swiss Chamber of Commerce in The Netherlands, founded in 1933, the Court of Arbitration of the European Chamber of Digital Commerce plays a crucial role in today’s digital world. Issues specific to digital technology include fintech, blockchain, cybersecurity, digital currencies, and intellectual property. Fairness has always been a business tradition observed in Europe, making the region so prominent as an arbitration location. The Court of Arbitration is conveniently located at Schiphol International Airport in The Netherlands.

The Court of Arbitration applies the UNCITRAL Arbitration Rules of the United Nations Commission on International Trade Law which meet international legal standards. The rules are concise and easy to understand, comply with current national and international legal developments, and are published in several languages.

Unless parties do not agree otherwise, the Court will apply the neutral UNIDROIT Principles of International Commercial Contracts to judge the dispute.


London Court of International Arbitration (LCIA)

The LCIA is one of the world’s leading international institutions for commercial dispute resolution. The LCIA provides efficient, flexible and impartial administration of arbitration and other ADR proceedings, regardless of location, and under any system of law. The international nature of the LCIA’s services is reflected in the fact that typically over 80% of parties in pending LCIA cases are not of English nationality. 

The LCIA has access to the most eminent and experienced arbitrators, mediators and experts from many jurisdictions with the widest range of expertise. The LCIA’s dispute resolution services are available to all contracting parties without any membership requirements.


Arbitration Institute of the Stockholm Chamber of Commerce (SCC)

The Arbitration Institute of the Stockholm Chamber of Commerce (SCC) has developed into one of the world’s leading forums for dispute resolution. The SCC was established in 1917 and is part of, but independent from, the Stockholm Chamber of Commerce. The SCC consists of a Board and a Secretariat and provides efficient dispute resolution services for both Swedish and international parties. The SCC was recognized in the 1970’s by the United States and the Soviet Union as a neutral centre for the resolution of East West trade disputes. Also China recognized the SCC as a forum for resolving international disputes around the same time. The SCC has since expanded its services in international commercial arbitration and emerged as one of the most important and frequently used arbitration institutions worldwide.



When you want to avoid legal dramas unfolding from an investment agreement, check the websites above and copy the relevant clause into the agreement before signing. Another option is to persuade the counterparty to allow an already arisen case be settled by one of these arbitration institutions.

About the author: Bob Juchter van Bergen Quast, LLM, FSS, is the President of the Court of Arbitration of the European Chamber of Digital Commerce. Juchter van Bergen Quast has the right of audience before the AIFC. He is Chief Executive Officer of the Swiss Chamber of Commerce in The Netherlands and the European Chamber of Digital Commerce.

DIFC Courts corporate video

The DIFC Courts are an independent English language common law judiciary, located in the United Arab Emirates (UAE) and based in the Dubai International Financial Centre (DIFC). This video briefly explains the work of the Courts, why leading international law firms in the region use their services and how their role encourages investment in Dubai. The DIFC Courts’ jurisdiction governs civil and commercial disputes nationally, regionally and worldwide. The DIFC Courts are part of the sovereign structure of the UAE Emirate of Dubai and more than 500 cases have been decided since the Courts began operations in 2006. Based on international best practice, the Courts are an important resource for international businessmen seeking to resolve commercial legal disputes, as well as the enforcement of national and cross-border judicial decisions. The DIFC Courts’ official Enforcement Guide was created in 2012 to provide details on the enforcement of DIFC Courts’ judgments in Dubai, the UAE, the Middle East and across the world. The document is available on our website

See the corporate video here.

Intermediary commission percentages to raise money from investors

Investment banks and other consultants can plan and execute a fundraising campaign for startups and for companies in the growth phase. A reputable fundraising intermediary will likely speed up the process, reduce the legal risks, and negotiate a better deals. Most brokers will take a monthly retainer plus 5 percent to 15 percent of the investment. That may sound like a lot, but taking into account the time and risks, hiring an experienced expert can be very budget friendly.

Commission guidelines

The Lehman formula is a compensation formula developed by Lehman Brothers to determine the commission on investment banking or other business brokering services. Lehman Brothers developed the Lehman Formula, also known as the Lehman Scale Formula, in the 1970’s while raising capital for corporate clients.

The original structure of the Lehman Formula is a 5-4-3-2-1 ladder, as follows (accumulated amounts):

  • 5% of the first million EURO involved in the transaction
  • 4% of the second million
  • 3% of the third million
  • 2% of the fourth million
  • 1% of everything thereafter (above EUR 4 million)
Today, financial experts often seek some multiple of the original Lehman Formula, such as the double Lehman Formula (or the triple Lehman) (accumulated amounts):
  • 10% of the first million EURO involved in the transaction
  • 8% of the second million
  • 6% of the third million
  • 4% of the fourth million
  • 2% of everything thereafter (above EUR 4 million)
A more common variant used by mid-market M&A specialists and business brokers is the Double Percentage Lehman (“Modern Lehman”). Under this variation both the percentages and the scale are adjusted, instead of the percentages only. In addition, the percentage is held constant at 3% above EUR 8 million (accumulated amounts):
  • 10% of the first  million EURO
  • 9% of the second  million
  • 8% of the third million
  • 7% of the fourth million
  • 6% of the fifth million
  • 5% of the sixth million
  • 4% of the seventh million
  • 3% of everything thereafter (above EUR 7 million)

Source: Investopedia

How Chambers of Commerce Help Family Offices and Wealth Management Firms

A Chamber of Commerce has traditionally furthered the interests of businesses in a particular geography or market sector by way of representation, business services, and networking opportunities. Multilateral Chambers of Commerce can link the business environments of two or more countries, such as the Swiss Chamber of Commerce in The Netherlands.

International Chambers of Commerce, such as the European Chamber of Digital Commerce, aim to boost companies’ reputation and growth in a particular business sector, such as Digital Technology. Some are governmental, nonprofit, or private organisations.

This article, written by Bob Juchter van Bergen Quast and published in Family Office Magazine, presents some unique benefits that Chambers of Commerce can offer businesses in an independent, impartial manner.

Read the full article here

Functions of the AIFC Court

The AIFC is underpinned by an ambitious objective to become the financial hub for Central Asia, the Caucasus, Eurasian Economic Union, the Middle East, and Europe. The new financial centre is positioning itself to attract US$ 40 billion of investments by 2025 and ensure about 1 per cent growth in the carbonless GDP of Kazakhstan. Kazakhstan is the largest and most oil rich country in Central Asia.

Legal framework

The governing law of the AIFC is based on the Constitution of Kazakhstan and has a special legal regime, consisting of the AIFC Constitutional Law “On the Astana International Financial Centre” (the Law), its own independent judicial system and jurisdiction based on English common law and standards of leading international financial centres. The official language of the AIFC is English.

Like its neighbouring financial free zone the Dubai International Financial Centre (DIFC) (whose Courts were selected to advise the Kazakhstan Central Bank on establishing the AIFC’s commercial court and arbitration centre), the AIFC has its own specific legislation to address issues arising in the context of companies, contract, implied terms, obligations, damages and remedies, employment and partnership law.

It is reported by the Prime Minister of Kazakhstan that a total of 30 general-purpose AIFC Acts and 17 financial services regulation acts were developed and subsequently adopted by the relevant bodies of the AIFC. About 50 acts constitute the legislative framework of the AIFC.

Source: Norton Rose Fullbright

Official opening of the Court of Astana International Financial Center (AIFC)

The official opening of the Court of Astana International Financial Center (AIFC) took place in Nur-Sultan.

Since January last year, civil and commercial disputes have been solved in accordance with the best international practices and based on English law. The first case went to AIFC court in February of this year. The case is now available in English and Russian on the court’s website.
At similar international financial courts in Dubai and Qatar the first case was considered much later. “We managed to get enforced through the enforcement agency in Kazakhstan almost immediately and that is a world first, that never happens in new international financial centers,” said Registrar of AIFC Court, Christopher Campbell-Holt.
The AIFC Court is an independent institution as part of the financial center. According to the registrar of the Court, Christopher Campbell-Holt, the presence of this court in Kazakhstan is an additional factor to investment attractiveness of not only the country, but also the Eurasian region. “No one can tell our judges what to do. That is written in the constitution in law, court and arbitration center. It is very important to protect international investors, to show them, to give them perception,” Campbell-Holt also said. He added that the AIFC court and the International Arbitration Center will enable investors from all over the world to invest safely in Kazakhstan.

The importance of the Dubai International Financial Centre Courts

In his important and interesting paper “The Story of the Dubai International Financial Centre Courts: A Retrospective“, Mr. Jayanth K. Krishnan addresses the role of the Dubai International Financial Centre Courts (DIFC) in an international legal environment. The DIFCs are part of the sovereign structure of the Emirate of Dubai, within the UAE. Specifically, Dubai Law No.12 of 2004 (Dubai Law No.12) is the governing statute which originally established the DIFC Judicial Authority (including the two DIFC Courts, the Court of First Instance and the Court of Appeal). The Dubai International Financial Courts are an independent English language common law judiciary, based in the Dubai International Financial Centre (DIFC) with jurisdiction governing civil and commercial disputes nationally, regionally and worldwide. The Courts began operations in 2006. Originally, the jurisdiction of the DIFC Courts was limited to the geographical area of the DIFC. On 31 October 2011, the signing of Dubai Law No 16 allowed the DIFC Courts to hear any local or international cases and to resolve commercial disputes with the consent of all parties.

Krishnan researches the question regarding the succes of the DIFC:

Can Western-based, English-speaking, common law commercial courts operate successfully in an environment that are not their own — such as in the Middle East?

As Krishnan states, this question is not a simple thought experiment but rather the reality that has occurred since the mid-2000s in the Emirate of Dubai. Krishnan’s monograph recounts the history of how the Dubai International Financial Centre Courts emerged and developed. Drawing on extensive interviews with key stakeholders involved in the process, along with original documents as well as all of the Courts’ judgments, his narrative offers important lessons for those seeking to understand more fully the complex interactions among law, legal institutions and legal and political actors of today’s globalisation.

In my opinion the answer to his question is simply: “yes”, as I will explain below.

Most of the specificities of international arbitration result from its principal feature: party autonomy. Arbitration is essentially the result of contract and can be fashioned by parties in their own ways. Parties are thus free to select the place of arbitration, the language of the arbitration, the procedure governing the arbitration, the number and identity of arbitrators constituting the tribunal, the type of evidence they wish to allow and so on.

Apart from these advantages, in my opinion, the most important advantage is the relative ease with which an international arbitral award rendered in one country can be enforced in another country. This advantage is crucial, as the prevailing party in an international dispute frequently has to enforce the judgment or award rendered in its favor in another country in which the unsuccessful party has assets.

European – Gulf trade

The United Arab Emirates is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the NYC), which was adopted into UAE law by Federal Decree No. 43 of 2006. The NYC has been ratified by over 140 countries and, subject only to a very limited list of exceptions, requires signatory states to recognize arbitral awards rendered in other countries (see Section IV(A) (4)(b)).

There is no equivalent multilateral treaty in which countries agree to recognize and enforce each other’s judgments. The recognition of a judgment obtained in a foreign court will thus usually be subject to the domestic rules on the recognition of foreign judgments of the country in which recognition is sought. Generally, such rules allow for much more extensive review of the judgment than the New York Convention does with respect to foreign awards, and recognition and enforcement are more likely to be denied.

The six member countries of the Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE) represent an important region from a trade point of view and were the European Union’s fourth largest export market in 2018. The GCC countries have formed their own customs union and are working towards the goal of completing an internal market. There is an ongoing cooperation between the EU and GCC on trade and investment issues, macro-economic matters, climate change, energy and environment as well as research. Considering these trade volumes and the legal uncertainty of the applicability of national legislation, I consider the work of the DIFCs crucial from a business perspective in the context of trade between the Gulf region and Europe.


It is recommended that, before entering into an DIFC-arbitration agreement, a party checks whether at least one of the countries in which the other party has its assets, is a signatory to the convention. The DIFC is a premier choice regarding effective dispute regulation in European – Gulf trading.

Krishnan, Jayanth K., The Story of the Dubai International Financial Centre Courts: A Retrospective (November 8, 2018). The Story of the Dubai International Financial Centre Courts: A Retrospective; Monograph – Motivate Publishing Company (2018); Indiana Legal Studies Research Paper No. 404. Available at SSRN:

International Dispute Resolution – the advantages the Court of Arbitration of the European Chamber of Digital Commerce

The Court of Arbitration of the European Chamber of Digital Commerce plays a crucial role in today’s digital world. The appeal and quality of this independent arbitration institution are as valued today as ever. Fairness, even when there is a dispute, has always been this business tradition which continues to be observed in Europe, making the region so prominent as an arbitration location.


  • Unlike in court, parties can select an arbitrator with an appropriate degree of practical experience. The Court of Arbitrage has a list of arbitrators who are experts in the field of digital commerce.
  • Arbitration is faster than litigation in court, and a time limit can be placed on the length of the process.
  • Arbitration is cheaper and more flexible, more commercial and less formal than court.
  • Unlike court rulings, arbitration proceedings and arbitral awards are confidential.
  • Unlike in court, there are very limited avenues for appeal of an arbitral award, which limits the duration of the dispute and any associated liability.
  • Due to the provisions of the New York Convention 1958, arbitral awards are easier to enforce in other nations than court judgments.
  • The Court of Arbitration is located at Schiphol Airport, which is easy to reach.
  • The Court of Arbitration applies UNCITRAL Arbitration Rules of the United Nations Commission on International Trade Law which meet international legal standards. The rules are concise and easy to understand, comply with current national and international legal developments, and have been published in several languages.
  • Unless parties do not agree upon otherwise, the Court will apply the neutral UNIDROIT Principles of International Commercial Contracts to judge the dispute.

More information can be found here.

UNIDROIT Principles of International Commercial Contracts (UPICC)

The International Institute for the Unification of Private Law (UNIDROIT) is an independent intergovernmental Organisation with its seat in the Villa Aldobrandini in Rome. Its purpose is to study needs and methods for modernising, harmonising and co-ordinating private and in particular commercial law as between States and groups of States and to formulate uniform law instruments, principles and rules to achieve those objectives.

UNIDROIT has worked extensively in the area of contract law and adopted a variety of instruments intended to offer harmonised and effective rules to respond to the evolving needs of modern transactions. The UNIDROIT Principles of International Commercial Contracts (UPICC) constitute a non-binding codification or “restatement” of the general part of international contract law, adapted to the special requirements of modern international commercial practice.

The UNIDROIT Principles of International Commercial Contracts (hereinafter “the UNIDROIT Principles”), first published in 1994, with a second edition in 2004 and now in their third (2010) edition (hereinafter “UNIDROIT Principles 2010”), represent a non-binding codification or “restatement” of the general part of international contract law. Welcomed from their first appearance as “a significant step towards the globalisation of legal thinking”, over the years they have been well received not only by academics but also in practice, as demonstrated by the numerous court decisions and arbitral awards rendered world-wide that refer in one way or another to the UNIDROIT Principles.

The Model Clauses to apply UNIDROIT in contracts are divided into four categories according to whether their purpose is:

  1. to choose the UNIDROIT Principles as the rules of law governing the contract;
  2. to incorporate the UNIDROIT Principles as terms of the contract;
  3. to refer to the UNIDROIT Principles to interpret and supplement the CISG when the latter is chosen by the parties, or 
  4. to refer to the UNIDROIT Principles to interpret and supplement the applicable domestic law, including any international uniform law instrument incorporated into that law.

Where appropriate, for each Model Clause two versions are proposed, one for inclusion in the contract (“pre-dispute use”) and one for use after a dispute has arisen (“post-dispute use”).

The full Model Clauses can be found here.

European Rules of Civil Procedure

UNIDROIT and the European Law Institute (ELI) are working together towards the development of European Rules of Civil Procedure. Leading academics, practicing lawyers, judges, and members of European institutions are represented in the various committees. The instrument is expected to be finalised and adopted by the UNIDROIT Governing Council at its 98th session in 2019.

Recent years have seen the emergence of a growing body of rules at European level in the field of procedural law, in the wake of the enlargement of the EU competences towards judicial co-operation. The ELI/UNIDROIT project could serve as a useful tool to avoid a fragmentary and haphazard growth of European civil procedural law.

The ELI/UNIDROIT project may be considered a first attempt towards the development of other regional projects adapting the ALI/UNIDROIT Principles of Transnational Civil Procedure to the specificities of regional legal cultures, paving the way to the drafting of other regional rules.

Full information regarding the current status of the project, including all documents related to the various committees and conferences, is provided here.

Exemptions from the interdiction to offer securities in The Netherlands to the public

Are there any exemptions or exceptions from the interdiction to offer any securities in The Netherlands to the public or to admit to trading on a regulated market that is either located or functioning in The Netherlands without making available to the public a prospectus approved by a competent authority (all as meant in article 5:2 Wft (Law on the financial supervision)?

In principle, no prospectus needs to be approved by a competent authority and made available to the public if one or more of the exceptions set forth in articles 5:3 and 5:4 of the Wft apply or if one or more of the exemptions sets forth in the ‘Vrijstellingsregeling Wft’ (exemption regulation Wft) apply. Pursuant to these articles and this regulation it is i.a. not necessary to obtain the approval of a prospectus from a competent authority and make it available to the public in case of:

  • An offer of securities addressed to fewer than 150 natural or legal persons (it is not relevant how many persons actually purchase the securities offered, relevant is the number of persons to whom the offer is made).
  • An offer of securities that can only be acquired for a total consideration of at least EUR 100.000 per investor, for each separate offer.
  • An offer of securities whose denomination per unit amounts to at least EUR 100.000.
  • An offer of securities with a total consideration of less than EUR 100.000.
  • Shares or certificates of shares representing, over a period of 12 months, less than 10 per cent of the number of shares or certificates of shares of the same class already admitted to trading on the same regulated market located or functioning in the Netherlands.
  • Securities offered in connection with a takeover by means of an exchange offer, provided that a document is available containing information which is regarded as being equivalent to that of the prospectus.
  • Securities offered by an association or institution (vereniging of instelling) without the intention of making a profit and with the intention of obtaining funds to realize its non-commercial aims.
  • The total value of the securities offered is less than EUR 5.000.000, calculated over a period of 12 months and provided the offer is in compliance with sub clause 3 and sub clause 4 of article 53 of the ‘Vrijstellingsregeling Wft’ (exemption regulation Wft).
  • More information about the Vrijstellingsvermelding (only in Dutch)

Vrijstellingsregeling prospectusplicht: meld- en informatieplicht

De vrijstellingsregeling van de prospectusplicht is per 1 oktober 2017 gewijzigd, zoals 6 september aangekondigd. De vrijstelling wordt verhoogd naar €5 miljoen. Aanbieders van effecten die gebruik maken van de vrijstelling moeten de aanbieding melden bij de AFM en de beleggers informeren over de aanbieding. Het format voor het informatiedocument voor beleggers is vanaf nu beschikbaar op de website van de AFM.


Ondernemingen moeten aan nieuwe voorwaarden voldoen als zij gebruik willen maken van deze vrijstelling. Zo moeten aanbiedingen die onder deze vrijstelling worden gedaan voortaan vooraf worden gemeld bij de AFM. Ook zijn aanbieders verplicht gegevens te verstrekken aan beleggers met gebruik van een informatiedocument. Dit helpt beleggers om de kosten, risico’s en het rendement van de belegging beter te begrijpen.

Het informatiedocument moet gelijktijdig met de melding aan de AFM worden verstrekt. Daarnaast zijn ondernemingen verplicht om ook aanbiedingsdocumenten en reclamemateriaal aan de AFM te verstrekken. Meer informatie over de vrijstellingsregeling, het format voor het informatiedocument en een werkinstructie vindt u op de website van de AFM.

The legal status of Security Tokens in Europe

This article describes the legal context in seven European countries regarding Security Token Offerings. Such offerings differ from Initial Coin Offerings (ICO’s). An Initial Coin Offering (ICO) is the cryptocurrency equivalent to an Initial Public Offering (offering shares of a private cooperation to the public for the first time, also known as IPO) in the traditional investment world.

ICO’s act as fundraisers. For example, a company looking to create a new coin or a new software application launches an ICO. Next, interested investors buy in to the offering, either with fiat currency or with preexisting digital tokens like Bitcoin. In exchange for their support, investors receive a new cryptocurrency token specific to the ICO. Investors hope that the cryptocurrency will perform very well into the future, providing them with a high return on investment. ICO’s are often used by startups to bypass the regulated capital-raising process required by venture capitalists or banks.

Unlike an ICO, a security token is essentially an investment contract into an underlying asset. It has all the attributes of a security in that it is a fungible, negotiable financial instrument that represents actual monetary value. STO’s are backed by real assets.

It is interesting to see to what extent Security Token Offerings are considered traditional security offerings from an international financial law perspective. In the table below, the most important legal characteristics are listed.

Country Are Security Token Offerings considered a security, from a legal perspective? Prospectus needed?
Austria Determined on a case-by-case basis. Yes, unless: > 100.000 EUR < 150 investors < 2 Mio. EUR total investment qualified investors
Belgium Yes, when they look and feel like securities. Yes, unless: > 100.000 EUR < 150 investors < 500.000 EUR total offer profesional investors
France Yes. Yes, unless: > 100.000 EUR < 150 investors < 8 Mio. EUR total investment qualified investors
Germany Yes, when they look and feel like securities. Yes, unless: > 100.000 < 150 investors < 8 Mio. EUR total investment qualified investors
Switzerland Yes, called “asset token”. No.
The Netherlands Yes, when they look and feel like securities. Yes, unless: > 100.000 EUR < 150 investors < 5 Mio. EUR total investment qualified investors
United Kingdom Yes, see Guidance on Cryptoassets Consultation Paper. Yes, unless: > 100.000 EUR < 150 investors < 8 Mio. GBP total investment qualified investors


Crypto law differs among jurisdictions and certain countries offer more possibilities than others. Running into legal issues is easy, considering the complexity of the new digital laws. Properly drafted and constructed documents are an important part of running a business or structuring any offering. It is crucial to have a specialised lawyer provide you with the documents you need for business operations and fundraising. This includes documents like a private placement memorandum, token sales documents, and miscellaneous offering documents. These documents help not only to ensure compliance with any cryptocurrency law and governmental regulations, but to instill credibility in your project and confidence that your investors are protected.

Important link

The danger of using the term ‘crypto currency’

It is not hard to see why the authorities are concerned about digital currencies. Any bearer instrument tradable for monetary value has the potential to be used for criminal purposes. Late 2013, after the North American Bitcoin conference earlier in the year, a task force involving the Miami Police Department and the US Secret Service began investigating bitcoin trading activity in the area. At random, investigators chose a young Bitcoin trader, called Michel Espinoza, to focus their investigations on.

Espinoza was contacted by Detective Ricardo Arias and Special Agent Gregory Ponzi via bitcoin marketplace LocalBitcoins. They arranged several meetings between January and February 2014. It was during those meetings that undercover agents indicated that they intended to purchase stolen credit card numbers with the digital currency. In February 2014, Espinoza was arrested in a Miami Beach motel for agreeing to sell USD 30,000 worth of Bitcoin and subsequently selling USD 1,500 of Bitcoin to an undercover police officer he had met on an exchange site called (source: interview with mr Michel Espinoza).

Prosecutors charged that Espinoza violated Florida law on money laundering and for operating an unlicensed money transmitting business. Espinoza defense lawyer however, argued that these laws do not apply to Espinoza’s case, because he was not selling currency, but so-called crypto currency.

The status of crypto currencies

United States federal regulators are divided about whether or not crypto currencies should be seen as money/currency or not. The Internal Revenue Service regards it as property, but the Treasury Department’s Financial Crimes Enforcement Network regulates it as a currency.

In 2016, a Miami court judge ruled that Bitcoin is not the same as what normally is seen as money. The extremely interesting ruling states that:

Bitcoin may have some attributes in common with what we commonly refer to as money but differ in many important aspects. White Bitcoin can be exchanged for items of value, they are not commonly used means of exchange. They are accepted by some but not by all merchants and service providers. The value of Bitcoin fluctuates widely and has been estimated to be eighteen times greater than the U.S. Dollar. Their high volatility is explained by scholars as due to their insufficient liquidity, the uncertainty of future value, and the lack of a stabilization mechanism. With such volatility they have a limited ability to act as a store of value, another important attribute of money.

Bitcoin is a decentralized system. It does not have any central authority, such as a central reserve, and Bitcoins are not backed by anything. They are certainly not tangible wealth and cannot be hidden under a mattress like cash and gold bars.


I fully agree with the Miami judgement. So-called crypto currencies and money are totally different, although the original idea was to replace money (Nakamoto, 2008):

A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending. We propose a solution to the double-spending problem using a peer-to-peer network.

I consider the term crypto currency misleading. The electronically coded information, commonly called ‘crypto currency’ is not a coin nor a currency. They can be exchanged for money, goods and services (because there is a demand for ‘crypto currency‘), and therefore should be called crypto medium of exchange (abbreviation: ‘CME’) or something similar.This does not mean that these “bits of data” play a less important role in the economy than money. In my opinion, the CME will revolutionize the economy in a positive way. However, it has extremely high bubble-potential if it is not characterized in a correct manner; meaning a manner that does not mislead the public.

The documents in the Espinoza-case can be downloaded here and here.

Further reading

Becoming an International Offshore Centre – Steps to be taken by African nations


A number of African countries have began the process of moving away from being a tax haven to being an international finance centre, offering financial products to take advantage of the increasing international mobility of capital and labour. Legislations are continually being written with this goal in mind. It is important to enact laws that are in line with internationally accepted standards of an international finance centre. This article describes the steps to be taken for an African nation to become a modern international financial centre. It describes the way Rwanda is developing towards becoming an international financial centre and describes the importance of blockchain technology in this respect.


The broad objectives of governments that are willing to play a role as a financial centre should include:

  • to encourage businesses to form companies and take advantage of all the benefits the corporate form provides;
  • to create a sound base for business law framework in Africa which engenders confidence;
  • to promote a system which ensures sound reporting mechanisms as well as accountability and transparency;
  • to provide a simple and sound system which will ensure access for all to the company law;
  • to create a well functioning Companies Registry to support the new legislation and provide users with a reliable, cost effective and time efficient service; and
  • to provide urban and rural communities with open and affordable access to the proposed company law.


African countries should havein place a comprehensive legislative framework covering local and international companies incorporated. These legislations are designed not only for ease of incorporation but to also provide sufficient and non onerous compliance and ease of maintenance. Since their independence, numerous pieces of legislation have been enacted to compliment and update existing African laws inherited from Britain and France. Such legislations were required to enhance regulation which were lacking in specific areas of the industry. In addition, there should beimplemented a Prevention of Fraud Act to prevent the use of a country for fraud and illegitimate commercial purpose, to promote African countries as a legitimate tax havens and to encourage foreign investments in Africa.


In most cases, the entire list of actions below needs to be executed. In some cases one or more steps already have been taken.

  • A new Companies Act should be drafted, with input from the industry’s stakeholders. Such an act should eliminate the complex and cumbersome approach to formation and operation of companies. A well functioning Companies Registry to compliment thesenew laws should eventually provide affordable accessibility to the company law. Ultimately, a significant reduction in the overall cost of doing business in Africa should be the direct result.
  • With technical aid from the International Monetary Fund, anew International Banking Act should bepassed to regulate and supervise all offshore licensed banks. This ensures protection of depositor’s assets and sound banking practice and qualified management are in place.
  • A Mutual Assistance in Criminal Matters Act is needed. The aim is to regulate the provision by African nationsof international assistance in criminal matters in the prevention of Money Laundering of proceeds from criminal activities and terrorist funding.
  • A new Insurance Act is neededto provide for the licensing, regulation and supervision of insurance business. This is to promote the maintenance of efficient, fair, safe and stable insurance markets for the benefit and protection of policyholders.
  • Providers of company and trust services must apply for a license to offer such services and to be regulated with a system that sets out their legal obligations as license holders. This ultimately protects users of financial products and further enhances the reputation as a finance centre.
  • A new Companies Act should provide the courts with as much direction as possible to allow them to continue to make decisions on company law. The underlying objective of this is to reduce gaps and grey areas in the legal system.
  • The promise this proposed law is holding out is to ultimately remove the expensive, time consuming and protracted process of incorporating a company. The approach to this is to replace the traditional Memorandum and Articles of Association with a straight forward Application Form. The Application Form will contain the essential information required by the Registrar of Companies to satisfy himself prior to accepting or declining the application to incorporate a company.
  • Part of this shift is to introduce a set of “Model Rules”. This replaces the traditional Memorandum and Articles of Association which only servesthe legally trained. The Model Rules is essentially the internal governance rules which apply to the company and by which the company operates on a daily basis. Logically therefore, the Model Rules cover such things as appointments of directors, removal and powers of officers, meeting procedures, shareholders rights and so forth. In line with the Act’s objective to reduce costs and achieve simplicity, Model Rules will be attached as schedules to the required Act. There will be no need to get the Model Rules prepared professionally. And the Model Rules will provide both directors and shareholders with guidance for the management of the company. All types of company: private, public, single shareholder and community will be covered by the Model Rules which can be amended to meet specific needs of the company.

Case study: Rwanda

Rwanda will soon be able to handle cash transactions for regional and international financial service providers following an endorsement to establish Kigali International Financial Center (KIFC).The center will basically serve as a home for nationally or internationally significant financial service providers, enabling Rwanda to handle finances for others. They will include banks, investment managers, hedge-funds or stock exchanges.

Currently, Rwanda is on the move to have its financial systems especially the local stock exchange integrated within the regional dynamics. So far the Rwanda stock exchange (RSE) has announced plans to get automated by June 2018 – a step towards standards money handling procedures.

As one of the most interesting features, besides boosting the GDP, the establishment of a financial center means that Rwanda will be able to handle offshore accounts and attract investors to bank their money in Rwanda even when their projects are in other countries (1).

Blockchain technology

An extra and in my opinion, very important step to taken, is the implementation of Blockchain technology in the new (to be developed) African offshore banking sector. There are offshore jurisdictions that are working to attract Crypto banks. As an example, Puerto Rico just issued a license for a Cryptocurrency International Financial Entity (Puerto Rico’s version of a banking license). Dominica is also active in the issuance of quality offshore banking licenses and makes allowances for cryptocurrency. 

In addition, a number of open-sourced groups have been formed to increase the availability of blockchain technology for offshore banks. For example, the Enterprise Ethereum Alliance became the world’s largest open-source blockchain initiative on July 18, 2017. With members like MasterCard, Cisco and Scotiabank, I have high hopes for this team.


The end result in the proposed change to the incorporation process will make company formation much easier and cheaper. An executing agency, e.g. a Financial Services Commission (FSC), will no longer undertake extensive reviews of documents at the assessment stage since simple user-friendly forms will be used. An old fashion discretion of the Minister in the incorporation process will bereplaced by a new set of rules, as described above. This effectively will expedite the process and reduce the time involved in forming a company.

The future of African countries as International Finance Centres is bright. With changes in the regulatory regime, Africais poised to take advantage of the increasing mobility of capital and labour with the goal of capturing a slice of this market. With common sense regulation designed to avoid suffocating bureaucracy and onerous compliance, Africais poised to be a major international financial centre.

(1) KT Press, 6 December 2017, Rwanda To Establish International Financial Centre

The importance of the Astana International Financial Centre


Yet to be discovered as an international financial hub is the Astana International Financial Centre (AIFC) in Kazakhstan. In my opinion the current financial bubble in Western Europe and the crypto currency developments, make it almost impossible to ignore this opportunity to develop business and to diversify portfolios.

The Centre is the upcoming financial hub for Central Asia, the Caucasus, EAEU, the Middle East, West China, Mongolia and Europe. It is a fresh, new initiative and officially launched on 5 July 2018. The AIFC plays the main roles in attracting financial resources for the mentioned region. Apart from that, it can be a very important hub for establishing strategic business partnerships between European and Eurasian companies as well. Britain already has taken the lead in this respect, considering their impact on the AIFC Court and AIFC International Arbitration Centre. Both are crucial in fulfilling the role as an international financial hub. The AIFC is backed by the Kazakhstan government to ensure a solid legal and political position.

The most important features of AIFC

Although the Centre offers a number of important features, for western businesses AIFC offers two major benefits to take into account, when deciding to use the Centre as a gateway to further business development.

  • The applicable law of the AIFC is guided by principles, norms and precedents of England and Wales`s law and standards of the leading international financial centers.
  • Exemption from payment of corporate, individual income, land tax and property tax for a period of 50 years (until the end of 2065).

Some important bodies of AIFC

Although the AIFC has several important (internal) bodies, the most important bodies of AIFC in the business spectrum are the following.

The Astana Financial Services Authority was registered on 30 January 2017 as an AIFC body and regulates the financial services and related operations of the AIFC. The core functions of the AFSA include:

  • Registration. Registration of legal entities, subsidiaries and representative offices on AIFC territory.
  • Accreditation and Licensing. Issuance of permits to operate on AIFC territory requiring a license.
  • Regulation. Elaboration of acts in the form of regulatory provisions related to financial services regulation.
  • Control and Supervision. Supervision of audited entities compliance with approved acts of AIFC.
  • Law Enforcement. Conducting investigations in cases of violations of AIFC acts and ensuring enforcement of AIFC rules.

A regulatory regime consistent with recognized international standards (IOSCO, Basel, IAIS, FATF, etc.) has been introduced in the AIFC.

The AIFC Court will have its own legal system based on the principles and rules of English law. The AIFC Court is independent in its activity and separable from the judicial system of the Republic of Kazakhstan. It shall have no jurisdiction in respect of criminal and administrative proceedings and have an exclusive jurisdiction in relation to: 

  • hearing and adjudicating on any disputes between the AIFC participants, AIFC bodies and/or their foreign employees.
  • hearing and adjudicating on any disputes relating to operations carried out in the AIFC and regulated by the law of the AIFC.
  • hearing and adjudicating on any disputes transferred to the AIFC Court by agreement of the parties.

The AIFC International Arbitration Centre reviews disputes which the parties have agreed to be settled by arbitration.


If you consider business development in the Eurasia region, AIFC is a major player. It is advisable to use an expert to guide you to the regulations. When the normal regulatory hurdles have been taken, AIFC opens an enormous potential for international business development in a market that practically has no limits.

Website AIFC

The value of a Dutch foundation for international asset protection

According to the Rule of Law Index , the Dutch justice system ranks as one of the most reliable and effective in the world. In general terms, only the Scandinavian justice systems seem to do better. In terms of resistance to discrimination, corruption and undue political influence, The Netherlands is even ranked #1.

Companies that are active on an international level become increasingly aware of the risks involved when engaging business in certain national legal systems, but also of the opportunities differences in jurisdictions present. International asset protection is an important activity in the current business environment. International Asset Protection is the legal process of titling both personal and business assets to put them beyond the reach of future potential threats and creditors. In this respect, multinational companies look for a jurisdiction that best suits their needs in an individual case.

For such sophisticated parties, it can be interesting to set up a Dutch legal entity. An important option in this respect is the Dutch Foundation. In this article, I will detail most of the topics to know before starting a foundation in The Netherlands, in particular a Dutch Administration Office foundation.

What is a foundation?

A foundation is a private legal entity, not associated with the government, that has no members or shareholders and in which the revenues are used for non-profit purposes, such as a charity fund.

Facts and features

Dutch foundations have specific features within the Dutch tax regulations. Although they have legal personality, Dutch foundations differ from businesses because their profits are not used to accumulate personal wealth. Instead, Dutch foundations have a non-profit goal and pay no taxes as long as their activities do not focus on profit or they do not compete with other businesses. As long as this situation remains, Dutch foundations do not need to file tax documents or deposit documents at the Dutch Chamber of Commerce.

The Dutch foundation can only be incorporated by a Dutch notarial deed, and will subsequently be registered by the notary in the Dutch public company register, where the names of the board members are publicly disclosed. There can be one or more incorporators and/or board members. No government authority is involved in the creation of a Dutch foundation and it acquires full legal capacity immediately when it is created. The Dutch foundation has a board, composed of one or more individuals and/or legal entities. It needs an office address in or outside The Netherlands. The directors of a Dutch foundation are not liable for the debts of the foundation, except for instance in cases of fraud.

Stichting Administratiekantoor (STAK)

A so called ‘STAK’ (Dutch: Stichting Administratiekantoor or in English: Administration Office Foundation) is a normal Dutch foundation, but with specific statutes. In short, a STAK is formed to hold the shares of a private company. By using the STAK to hold ‘their’ shares, shareholders are able to separate the economic ownership from the voting rights.

Thus, a STAK can be a voting trust foundation, without shareholders or share capital. When the STAK is used to buy, hold or manage shares of other companies, it must issue exchangeable depository receipts to the original owner of the shares. The STAK thus enters into an agreement with the original owner of the shares, transferring their legal ownership to the STAK, while the original owners maintain economic ownership of the shares. The main regulatory document in this respect is the trust conditions document, drawn up by the notary when forming the STAK. This document stipulates the agreement between the STAK and the depository receipt holders. The original owner of the shares (now the depository receipt holder) may then receive any dividends from the stock, even though he or she is no longer the legal owner of the shares.

A STAK structure can also acquire and manage assets in its own name. It can then issue certificates to the directors attesting to the economic value of the foundation’s assets.

Example of the use of a STAK in respect to international asset protection

The STAK structure has become an effective legal form of asset protection, because the STAK structure separates legal and economic ownership of stock in other companies. This has been proven in e.g. the Yukos cases; several international court and arbitral cases seeking compensation from the government of Russia to the former shareholders of Yukos-based on the claim that Russian courts were not acting in good faith in launching tax evasion criminal proceedings against Yukos, which led to the bankruptcy of the company. The Yukos structure is as follows:

Yukos Capital S.a.r.l., a Luxembourg-based company under two Dutch STAKs – Stichting Administratiekantoor Yukos International and FPH for Stichting Administratiekantoor FPH – that are run by Yukos’s former management, represents all those who held Yukos shares when the company was liquidated in 2007, including about 55,000 minority shareholders, some of which were investment funds. As of 2015, the structures control up to $2 billion in assets.

Tax benefits

There are also tax benefits to forming a STAK. First, holding investments in a STAK is not considered a business activity, and a STAK is taken as transparent for tax purposes. Therefore, it is not a subject to the Dutch corporate income tax. If the depository receipt holders do not live or conduct business in The Netherlands, and their investment are not actually located in The Netherlands, they are not subject of the Dutch tax liability on profits or capital gains.

Other benefits

The STAK structure limits disclosure of ownership since the STAK itself is the legal owner of shares. It can also function as an inheritance planning vehicle.


All information has been prepared for general information purposes only to permit you to learn more about financial law. The information presented is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice. 

Do I need a private placement memorandum (PPM) when attracting investors?

Yes. If you are seeking to raise investment money for your startup, keep in mind that the best measure you can take to protect yourself against frivolous claims is by disclosing as much information about your company as possible. This way, if things go wrong and your private investors threaten to sue you for securities fraud or the government files a regulatory action against your company, you can use your disclosures in your defense.

One of the best ways to disclose information to investors is to have Private Placement Memorandum (PPM) made for you by a lawyer. What is a PPM?

Disclosure Document

A PPM is a detailed disclaimer that includes relevant disclosures about your business that allow investors to weigh the risks involved with providing your company the agreed funding. PPM’s share similarities, but are all different due to uniqueness of the type of the business and characteristics of each investment. PPM’s should contain warnings regarding the business, its history and background, risks involved, financial forecasts, legal structure and ownership changes, and legal and financial details about the offer. It is very important the the PPM contains a warning that governmental regulations regarding protection of the public (consumers) do not apply.

PPM’s are Worth the Investment

Your PPM is more than an insurance-type expense. The PPM can be used in your defence against frivolous claims from both investors and government regulators.The PPM makes it harder for a potential claim to be successful and it improves your legal position dramatically.

It is important to keep in mind that, if investors are not informed regarding the risks involved, you open the door to legal action and investigation by the Financial Authorities. Please also keep in mind, that investors will not be very understanding when they loose money and do not care about the personal relations you have built up in the course of time.

Like a prescription drugs is obliged to explain risks, your investment offer must follow the same requirements. You should be prepared for the worst in terms of lawsuits and most even lawyers, when you start the process of attracting investors.

Why Explain Risks?

The risks involved with investing in your company must be described in great detail in a PPM. Disclosing these risks clearly before investors start funding your business is the best way to protect you from lawsuits claiming you defrauded or misled them.

Risk Factors to Describe

General risk factors are common for most or all private placement offerings. A disclaimer is needed in your PPM. Furthermore, investors may not be able to sell the securities for a given holding period and must be made aware of this. Specific risk factors should focus on the challenges your business faces. These include a disclaimer regarding its industry, customers, strategy, and management.

The following is an example in a PPM of some of the risks involving an debt or equity investment:

  1. Lack of operating history. The Company is recently incorporated and has therefore limited operating history upon which Investors can evaluate likely performance. There can be no assurance that the Company will achieve its Investment objective or that the strategy applied to the Company will be successful.
  2. Key individuals. The Company is highly dependent on–among other factors- the attracted Investments, professionals employed by the Company and its advisors. There can be no assurance that the Company will have continued access to them.
  3. Development risks. The Company may be exposed to development risks and the returns on the Investments may therefore be subject to some extent to the risks associated with the development of certain projects.
  4. Business and market risks. Any future market recession could materially adversely affect the value of Investments and the assets of the Company. Returns from an Investment are generally affected by overall conditions in the economy, such as growth in gross domestic product, employment trends, inflation and changes of interest rates. Furthermore, the financial condition and results of operations of the Company will depend on the ability of the Company to manage future growth and effectively implement its business strategy.
  5. Currency exchange rates risk. Company will be exposed to foreign exchange risks if it has receivables and payables whose values are directly affected by currency exchange rates. Contracts between two different firms with different domestic currencies set contracts with specific rules. This contract provides exact prices for services and exact delivery dates. However, this contract faces the risk of exchange rates between the involved currencies changing before the services are delivered or before the transaction is settled. Company also faces foreign exchange risks due to economic exposure – also referred to as forecast risk – if its market value is impacted by unexpected currency rate volatility. Currency rate fluctuations may affect the company’s position compared to its competitors, its value and its future cash flow. When the Company bids for foreign projects, negotiates contracts directly with foreign firms, or has direct foreign investments, it faces contingent exposure. When Company negotiates with foreign firms, currency rates will continuously change before, during and after negotiations occur.
  6. Interest rate risk. Fluctuations and changes in interest rates may adversely affect the financial condition of the Company.
  7. Law, regulatory regime and permits. Laws and regulations governing the operations of the Company may adversely affect the business, Investments and results of operations. The failure to obtain or to continue to comply with all necessary approvals, licenses or permits, including renewals thereof or modifications thereto, may adversely affect the Company’s performance, as could delays caused in obtaining such consents due to objections from third parties. New laws may be introduced which may be retrospective and affect the business which the Company is involved with. The Company could be adversely affected by delays in, or a refusal to grant, any required governmental approval, as well as by the application to the Company of any legal or administrative restriction.
  8. Litigation risk. Investment in the Company involves certain risks normally associated with Investment in the business of the Company, which includes for example the risk that a party may successfully litigate against the Company, which may result in a reduction in the assets of the Company. The Management is not aware of any pending litigation against the Company.
  9. Tax and regulatory changes. The tax regimes applying to the Company and/or its Special Purpose Vehicles (“SPV”), the ability of the Company to repatriate its assets and other operations of the Company are based on regulations which are subject to change through legislative, judicial or administrative action in the jurisdictions in which the Company and/or its SPVs operate and/or invest, thereby affecting the tax treatment of the Company and/or its SPVs in these jurisdictions.
  10. Operations of the Company. The Company may be unable to pay interest. The Company may not achieve the Company’s business objective. The Company may experience fluctuations in its half-yearly and yearly operating results.
  11. Interest payments. Investors should note that interest payments on the participations is not guaranteed and will be at the discretion of the directors after taking into account various factors including the Company’s operating results, financial condition and current and anticipated cash needs.
  12. Collateral. The Company, either directly or indirectly through its SPV’s, may use property or other assets as collateral to secure a loan. If the Company stops making the promised loan payments, the lender can seize the collateral to recoup its losses.
  13. Insolvency. It is possible that the Company, due to many unpredictable and/or predictable factors, might become insolvent, whereby the potential Investors could lose all value of their Investment. However, currently there is no indication that such situation will occur in near future.

Choosing between debt and equity financing

Debt Financing

Borrowing money to finance the operations and growth of a business can be the right decision under the proper circumstances. The owner doesn’t have to give up any control of his business, but too much debt can inhibit the growth of the company.


  • Retain control. When you agree to debt financing from a lending institution, the lender has no say in how you manage your company. You make all the decisions. The business relationship ends once you have repaid the loan in full.
  • Tax advantage. The amount you pay in interest is tax deductible, effectively reducing your net obligation.
  • Easier planning. You know well in advance exactly how much principal and interest you will pay back each month. This makes it easier to budget and make financial plans.


Debt financing has its limitations and drawbacks.

  • Qualification requirements. You need to have a good enough credit rating to receive financing.
  • Discipline. You’ll need to have the financial discipline to make repayments on time. Exercise restraint and use good financial judgment when you use debt. A business that is overly dependent on debt could be seen as ‘high risk’ by potential investors, and that could limit access to equity financing at some point.
  • Collateral. By agreeing to provide collateral to the lender, you could put some business assets at potential risk. You might also be asked to personally guarantee the loan, potentially putting your own assets at risk.

Deciding factors

  • How important is it for you to retain full control of the business?
  • How important is it to know precisely what you’ll owe in monthly payments?
  • Are you comfortable with making regular monthly payments?
  • Are you able to qualify for debt financing? How is your credit history? Do you have a good credit rating?
  • Do you have collateral you can use? Are you comfortable with using it?

Equity Financing

With equity money from investors, the owner is relieved of the pressure to meet the deadlines of fixed loan payments. However, he does have to give up some control of his business and often has to consult with the investors when making major decisions. In the case of higher amounts, Rosemberg’s approach provides companies with fast and direct access to public capital without having to go through a complex and costly process to obtain a listing. This means that companies that are in an early investment phase will also have other funding options than only through venture capital or private equity.


  • Less burden. With equity financing, there is no loan to repay. This offers relief in several ways. First, the business doesn’t have to make a monthly loan payment. This can be particularly important if the business doesn’t initially generate a profit. This also frees you to channel more money into growing the business.
  • Credit issues gone. If you lack creditworthiness—through a poor credit history or lack of a financial track record—equity can be preferable or more suitable than debt financing.
  • Learn, gain from partners. With equity financing, you might form partnerships—informal, perhaps—with more knowledgeable or experienced individuals. Some might be well connected. If so, your business could benefit from their knowledge and their business network.


  • Share profit. Your investors will expect—and deserve—a piece of your profits. However, it could be a worthwhile trade-off if you are benefiting from the value they bring as financial backers and/or their business acumen and experience.
  • Loss of control. The price to pay for equity financing and all of its potential advantages is that you need to share control of the company.
  • Potential conflict. Sharing ownership and having to work with others could lead to some tension and even conflict if there are differences in vision, management style and ways of running the business. It can be an issue to consider carefully.

Deciding factors

  • If your creditworthiness is an issue, this could be a better option.
  • If you’re more of an independent solo operator, you might be better off with a loan and not have to share decision-making and control.
  • Would you rather share ownership/equity than have to repay a bank loan?
  • Are you comfortable sharing decision making with equity partners?
  • If you are confident that the business could generate a healthy profit, you might opt for a loan, rather than have to share profits.

Source: Jim Woodruff,

Important lecture: the AIFC Court and the Common Law Method of Resolving Commercial Disputes and Issues arising from Regulatory Decisions

The Rt. Hon. Sir Jack Beatson FBA, Justice of the AIFC Court 

Delivered at the Supreme Court of the Republic of Kazakhstan 

on Tuesday 24 April 2018

1. Introduction

(1) It is a huge honour and a great pleasure to be asked to speak here at the Republic of Kazakhstan’s Supreme Court in the presence of Chief Justice Assanov, other judges of the Supreme Court, with regional judges joining us by videolink, Lord Woolf, the Chief Justice of the AIFC Court, Barbara Dohmann QC, Chairman of the AIFC’s International Arbitration Centre, Kairat Kelimbetov, the Governor of the AIFC and other members of the team which has worked so hard to set up the Court, in particular the Court’s Registrar and Chief Executive, Christopher Campbell-Holt, who is based in Astana.

(2) My topic is the nature of the common law method and how it will work in the context of an international financial centre such as the AIFC. Consideration of the common law method has two distinct elements. The first concerns the law itself. The second concerns the judges who created so much of the common law over the centuries. I suggest that there will be at least seven features of the common law method which will make a substantial contribution to dispute resolution in the AIFC. I will say something brief about each of them. They are: 

· A proven track record and proven foundational principles relevant to commercial and regulatory law which have proved attractive to the international business community for over 100 years;

· An independent judiciary committed to the rule of law who are appointed as judges after significant practical experience as lawyers;

· The decisions of common law judges are sources of law which are binding precedents for decision-making in later cases on the same question so that parties and their advisers know where they stand and are able to predict the outcome of any disputes when they arise;

· Flexibility which enables a common law system to develop principle incrementally and keep up to date without producing uncertainty;

· Procedural rules which foster predictability and enable cases to be dealt with in a way that is proportionate to their complexity;

· Considerable experience of commercial arbitration and respect for the parties’ choice of arbitration shown by a “light touch” system of supervision guided by a general principle of non-intervention; and

· A developed body of principles and decisions on the supervision by judicial review of decisions of commercial regulatory bodies.

(3) Before turning to the seven features, I briefly set out the legal framework within which the AIFC Court will work. Article 13(2) of the AIFC’s Constitutional Statute (the “Constitutional Statute”) states that the court is an independent court and not part of the judicial system of Kazakhstan. The court is to serve the AIFC by dealing with all disputes which arise out the AIFC or its operation; that is disputes between AIFC participants, and between participants and AIFC bodies and the foreign employees of participants. But the court will also have jurisdiction in respect of other disputes concerning other markets which all parties agree to have dealt with by it.

(4) The AIFC Court Regulations (“the Regulations”) make provision for the complete independence of the AIFC Court’s judges when performing their judicial functions and require them to act impartially when doing so.

(5) Article 13(5) of the Constitutional Statute provides that the law to be applied is to be based on English law principles and legislation and the standards of leading global financial centres. Regulation 29(3) of the AIFC Court Regulations (“the Regulations”) provides that the Court will be guided by its own decisions on relevant matters and by final decisions in other common law jurisdictions. It thus has similar features to other institutions of what can be described as a transnational system of dispute resolution such as the DIFC, the Dubai International Financial Centre Courts and the SICC, the Singapore International Commercial Court. Such courts also form part of a complementary partnership between dispute resolution based on litigation and that based on arbitration.

2. The 7 features resulting from the AIFC being based on and guided by principles of English common law and legislation

(1) A proven track record and proven foundational principles relevant to commercial and regulatory law: My starting point is to say that the English common law, its method of making decisions and keeping the law up to date, and the judges who created so much of the common law over the centuries have a proven track record. A 2016 report stated that 27% of the world’s 320 legal jurisdictions use English common law. The confidence for over 100 years by the international business community in English common law and its judges is also demonstrated by the number of companies and individuals with no or little connection to England who choose to litigate or arbitrate in London. So, in 2015 seventy percent of the London Commercial Court’s work had no relation to England except for the choice of law and choice of jurisdiction clause in the contract. In the year ending in July 2017, 71% of claims in London’s Admiralty and Commercial Courts were international. Why is this?

(2) The first reason is that the principles of English common law balance the tension between the needs of certainty and flexibility in a way which has proved practical and attractive to its international users. I mention three principles that are relevant to the likely workload of the AIFC Court. First, the common law respects the parties’ freedom of contract and the bargain they have struck, and thus in general respects their autonomy to agree the terms of the contractual relationship as they choose. The second, which follows from this is that commercial contracts are construed so as to give effect to the intentions of the parties objectively determined. Provided you contract in reasonably clear and intelligible terms, what you agree is what you get. The objective standard protects those who rely in good faith on the apparent position and thus promotes certainty and finality of transactions. The third principle is that the courts will not imply terms into contracts or rectify their terms unless stringent conditions are met. Other than the relatively rarely applied rule against penalties, English law does not seek to strike down or amend the parties’ agreement. There is no overriding duty of good faith. 

(3) The United Kingdom has a strong independent judiciary committed to the rule of law: A strong and incorruptible judiciary ensures fair and predictable dispute resolution. International parties litigating in a jurisdiction with such a judiciary can be confident that their disputes will be decided only on their intrinsic merits, without regard to nationality, politics, religion or race. That is a vital factor in inspiring business confidence and underpinning international trade and investment. The judges of the AIFC Court are all the product of such a system, and will bring its values to their work. In the context of the AIFC itself, the commitment to judicial independence and to the rule of law is seen from the provisions in the AIFC’s Constitutional Statute and Regulations to which I have referred.

(4) One of the reasons for the confidence in English law that has been shown by the international business community is that common law judges are appointed after significant practical experience as lawyers. They have therefore had significant interactions over many years with the commercial entities and individuals who they represented or who were their adversaries. That background gives them experience and understanding of the pressures of commercial life, and the need for commercial and financial law to reflect the needs of the business community. It also helps them to understand the differences between acceptable and unacceptable practices. That background has also been an important factor in the adaptability of English common law to fast-changing practical and commercial realities.

(5) In common law systems, decisions of judges are sources of law: The hallmark of a common law system is the importance accorded to the decisions of judges and, in particular appellate judges, as sources of law. So, within a framework set by the legislature when it enacts statutes, the law is made by decisions of judges. The common law is thus that part of the law which it is within the province of the courts themselves to establish. It is unwritten in the sense that it is not in a statute, but it is made accessible and transparent in law reports and in textbooks which analyse the effect of the decisions with a view to identifying the principles which underlie them.

(6) Decisions are binding precedents:  The system is built on and depends on individual decisions being binding precedents for future courts at the same level to follow so that “like cases are treated alike” and the principles in a particular area are built up by a gradual development from case to case, in the way I will describe. Two features of the doctrine of precedent which gives binding effect to previous decisions of courts at the same level are crucial to the certainty that the common law produces. The first is its strength. The second is its maturity. Because English law has been determining cases involving international commercial disputes since the early 19th century it has built up a large and formidable body of precedent to assist parties and their advisers to know where they stand and to be able to predict the outcome of any disputes when they arise in many specialist areas such as shipping, commodities, insurance, construction and banking. By contrast, civilian systems are essentially codified legislative systems and owe their inspiration to the principles of the Napoleonic codes. In such systems judicial decisions are not primary sources of law but only a gloss on the law in the legislative code.

(7) This is not to downplay the importance of legislation. Of course, much English commercial law is contained in legislation, from statutes on topics such as Sale of Goods, Bills of Exchange, and Marine Insurance originating in the nineteenth century which reflected market practice and previous decisions on these topics, to modern statutes dealing with company law, banking and the financial markets. But much law is also contained in the decisions of the courts; either “pure” common law where there is no statute involved (a rarity in the modern world), or where the decision interprets the statute or is made against a statutory background which while not directly applicable is relevant to the determination of the underlying principles and the result in the case. While the core of pure common law doctrine continues to shrink, the common law technique will continue as the courts consider and apply the statutory provisions. In the case of the AIFC, its legal framework consists of regulations and rules made in accordance with its Constitutional Statute.

(8) The judges’ duty to apply statutory and common law, the fact that the principles governing the underlying contractual or other dispute are ascertainable, and the importance of the doctrine of precedent are strong factors in the certainty and predictability of English commercial law. Certainty is important in all contexts but particularly important where a transaction or course of dealing may affect third parties, for example involving documentary letters of credit, bills of lading, bearer bonds or long chains of contracts of sale or for services. In such cases there can be difficult choices between the claim of a person who has been wrongfully deprived of property, often fraudulently, and the claim of a third party who has acquired the property in good faith in the market place.

(9) A common law system has flexibility which enables it to develop principle and keep up to date without producing uncertainty: In a nutshell, the common law does this by applying old principles to new circumstances, and by very gradually moving from the particular to the more general in a way which is sensitive to the particular commercial context.

(10) Lord Goff, a distinguished English appeal judge and scholar, stated that the dominant element in the development of English law should be and is “professional reaction to individual fact situations rather than theoretical development of legal principles”. He described the process of legal development within a common law system as a movement from the identification of specific heads of recovery in particular cases to the identification and closer definition of the limits to a generalised right of recovery; a search for principle. This “bottom-up” approach of gradually generalising from the specific is part of the way that judges have exercised their responsibility over the centuries to keep the common law abreast of current social and market conditions and expectations, and the challenge of new technology. In keeping the law up to date, they have also had regard to what is done in other legal systems. Lord Goff saw the developing state of the law as a mosaic that is kaleidoscopic in the sense that it is in a constant state of change in minute particulars. Such development typically takes place in the decisions of appellate rather than first instance courts, and the reference to minute particulars indicates that it is very gradual and dependent on the particular context of the case which is being decided.

(11) Some of the most dramatic examples of such development of the law have happened in areas which are not of relevance to the work the AIFC Court will be doing. But there are also examples of development by our final court of appeal, formerly the House of Lords and now the UK Supreme Court, which is of great importance to commercial law. In 1932 the House of Lords took the specific cases in which a person had been held liable in damages for a civil wrong (a tort) and identified a generable principle of liability focussed on the blameworthiness of the defendant’s conduct which foreseeably caused the harm to those closely and directly affected by the conduct. In 1991 the English final court of appeal rationalised a large number of cases which had appeared to be based on narrow fact-based grounds and recognised the principle of unjust enrichment as the unifying principle underlying liabilities to make restitution of benefits gained by the defendant at the plaintiff’s expense.

(12) Because common law change is incremental and gradual, it is also possible to step back if a particular development turns out to be a step too far. It is the flexibility of the system which keeps it relevant and up to date and able to meet the challenges of an ever-changing commercial world. In recent years English law has been a leader in addressing the problems of globalised financial markets after the global financial crisis in 2008, as seen in the “Waterfall” and other litigation about Lehman Brothers and it has recently had to revisit and determine the duty of banks in identifying fraud in the internal corporate structure of their clients. Last month, Lady Justice Gloster, the Vice-President of the English Court of Appeal, stated that at present the common law is leading the way in Fintech, Digital Ledger Technology and Artificial Intelligence. 

(13) Predictability by the application of known and suitable procedures: The procedural rules in the English Civil Procedure Rules are designed to be practical and to deliver the speedy and efficient resolution of business and financial disputes in ways which are proportionate to the nature and complexity of the case. They are sensitive to the unique needs of commercial court users and are generally accepted as being the most effective set of rules to apply in trying complex commercial cases.

(14) I anticipate that the AIFC Court Rules, which are closely modelled on the English Civil Procedure Rules, will provide similar benefits. There is a special fast track procedure for small claims. The common law principle that the costs are generally to be borne by the loser of litigation applies, although there is power for the court to make a different order.

(15) A developed body of principles and decisions on the supervision by judicial review of decisions of regulatory bodies: I have stated that the AIFC court is to have exclusive jurisdiction over disputes between AIFC participants and AIFC bodies. The exact boundaries of that jurisdiction will need to be determined. In this context, however, the experience of the English common law in the exercise of the judicial review jurisdiction over the decisions of regulatory bodies, including those in the financial, banking and commodity markets will, in my view be very helpful. The role of the court has been to ensure by the exercise of a supervisory jurisdiction, that regulatory bodies operate within the area that has been allocated to them by the legislature or other body conferring power on them. The court is concerned with the legality of their decisions, including their rationality and procedural fairness rather than their substantive merits.

(16) While the courts have the final word on questions of law, in considering the other questions, they will take into account the expertise of the decision-maker, and whether the decision requires the evaluation of complex economic or scientific evidence. They will not interfere if the matter is one for the judgment of the administrator or regulator and not for the judgment of the court, and the threshold for a finding of “irrationality” is high. English Courts exercising the supervisory jurisdiction do not substitute their own judgment for that of the administrator or regulator who was tasked with making the decision.

(17) English law has considerable experience of commercial arbitration and respect for the parties’ choice of arbitration: Chief Justice James Allsop of the Federal Court of Australia has said that “co-operation and partnership between courts and arbitral structures is essential for a jurisdiction to serve international commerce, and for judicial and arbitral institutions to complement each other and to grow and succeed”. He also said that how well any particular jurisdiction deals with international commercial arbitration and so serves the international commercial community is dependent upon the quality and qualities of its commercial courts” which, “as supervising seat courts and as enforcing courts, are a critical integer in the successful operation of the international commercial arbitral legal order”.

(18) The legislative framework provided by the English Arbitration Act 1996 and the decisions of courts on it show respect for the parties’ choice of arbitration. English Courts provide support for the process during the arbitration if one party tries to frustrate the arbitration agreement and there is a general principle of non-intervention in arbitral proceedings. The volume of commercial litigation and arbitration in the Commercial Court in London means that English common law has considerable experience of supervising the awards made in commercial arbitrations. Last year, in an important speech in Beijing, Lord Thomas, then Lord Chief Justice of England and Wales, said that when considering a dispute about an arbitration agreement or the arbitration process, courts are required “to ensure that the choice of arbitration and party autonomy are fully respected and not nullified”.

(19) These then are the features of the English common law system which will, in my judgment, make the AIFC Court an effective and independent institution in which its users can have confidence. Confidence by the business community and the international investors in the AIFC in the AIFC Court and the fairness of its processes will play a significant role in ensuring the success of the AIFC.

(20) Thank you.

Source: AIFC

Tax structuring with Dutch private limited liability companies – shareholders’​ rights

Mainly due to its tax efficiency, the Dutch holding (BV) company regime is the most preferred holding regime in the world. The Dutch tax regime is beneficial regarding withholding tax, capital gains and income received from subsidiaries. Other advantages of a BV are the flexibility of Dutch corporate law and tax law, as well as the low costs of incorporation and maintenance. These factors make The Netherlands a good choice for group structuring and for international joint ventures. In this article I will discuss some important legal aspects related to shareholders’ rights of a BV.

Articles of association

In The Netherlands, a private limited liability company can only be formed with the aid of a notary, who will write the articles of association (AOA) of the company. These articles include the official domicile, the mission of the company, the share capital, corporate objects, types of shares, Shareholder obligations and requirements, corporate bodies and organs, the way in which to convene the general meeting of shareholders, representation of the company, issuance of shares, how and when decisions can be taken and which decisions require a supermajority of votes. The subjects that are not covered by the articles of association are regulated by the Civil Code of The Netherlands (BW). It provides general rules concerning the relationships among shareholders. The AOA stipulates the competence of the organs of the company.

In addition to these AOA the shareholders may want to specify the way these competences can be used. This is stipulated in a separate document, called shareholders agreement (SHA), that does not require the help of a notary.

Shareholders agreement

The shareholders agreement deals with the management and the the relation among shareholders in detail. They are only binding on the parties thereto. It may sound strange, but Dutch law does not prevent SHAs from regulating non-company matters as well. Examples of rules that can be found in the SHA are: funding of the company, division of tasks, transfer or sale of shares and minority shareholders’ rights. SHAs are not regulated in the BW. The general rules of Dutch contract law are applicable to SHAs.

Under Dutch case law, voting agreements must not be in violation of the Civil Code or any other rules relating to public morals. A shareholder should be able to pursue his own interest in exercising his voting rights, provided he takes into account his interest in the company alongside the company’s interests and the general principles of corporate law (see: M. Pannekoek, Shareholders’ rights in private and public companies in The Netherlands: overview).

Protecting minority shareholders

In Dutch company law a number of rights are given to all shareholders, irrespective of the number of shares they hold, such as the right to right to vote in the general meeting of shareholders. Book 2 of the BW provides important minority shareholders protection articles, of which the most fundamental one is section article 2:201:

  1. Except as is otherwise provided for in the articles, all shares shall rank pari passu (on equal footing) in proportion to their amount.
  2. A company limited by shares must treat shareholders and holders of depository receipts whose circumstances are equal in the same manner.

The relevant section of Dutch company law with regard to the principle of equality (2:201) subsection 2) is a direct result of the European Council’s second company law directive (section 42 of the directive of the European Council, 13 December 1976, Pb L 26/1, 31). This directive is limited to subjects related to capital protection and is also only applicable to public companies. However currently the principle of equality of shareholders applies not only to issues concerning capital protection but to all company law issues. Other important provisions for the protection of minority shareholders in Book 2 are sections 2:15 about the right to ask for nullification of a resolution if the shareholder who requests nullification has a reasonable interest in the due performance of the obligation which has not been performed; section 2:220 about the right for shareholders who together hold a certain percentage of the shares to convene a general meeting of shareholders; section 2:343 providing a shareholder an exit-opportunity in case the continuation of his shareholding can no longer be reasonably expected of him due to the conduct of other shareholders, and section 2:344-359 about the right to demand an official inquiry with the object being the policy and the conduct of business.

Book 3 of the Dutch Civil Code, containing property law in general, has two important provisions for minority shareholders. The first section, 3:13, forbids abusing rightfully obtained power. It is an elaboration the principle of reasonableness and fairness of section 2:8 of the BW. It means that shareholders of a company are obliged to respect the principles of reasonableness and fairness in their internal relations and actions. Laws, customs, AOA or resolutions will thus not be applicable when these rules are unacceptable according to the standards of reasonableness and fairness.

The second important section for minority shareholders is laid down in Book 3 of the BW; section 3:305a. This section allows minority shareholders (but the section is not limited to these shareholders) to organise themselves into an association or a foundation and to have the entity bring an action against the company for the benefit of the collective.

Conflict between the AOA and the SHA

It is important to know whether greater weight should be given to the AOA or to the SHA in case of a conflict between the two. In 1938 the Supreme Court of The Netherlands decided that the general meeting of shareholders can only deviate from the articles of association by amending these articles (Hoge Raad 8 April 1938, NJ 1938, 1076). Currently, article 2:8 BW stipulates that all those involved in a legal person must behave reasonably and fairly towards one another. In a recent court case (2014) it was ruled that articles in a SHA under article 2:8 of the BW are operative on the legal relationship within the company. Only when exceptional circumstances arise, shareholders are not required to observe a shareholders’ agreement in full.

Director’s liability towards the company

Directors have a large degree of entrepreneurial freedom in running the company. In general decisions that in retrospective cannot be seen as beneficial or even wrong, will not lead to a director’s liability.

Article 2:9 BW states that the director is obliged to fulfil his duties on behalf of the company in a proper way. If mismanagement (Dutch ‘wanbeleid’)is the case, the director is held personally liable for the damage towards the company. The Dutch Supreme Court has determined finds that mismanagement is the case when a director can be ‘seriously blamed’ for the actions involved and their consequences. Serious blame occurs when a reasonable and experienced director would not have made the contested decision. Some examples include: withdrawing funds from the company for personal purposes, fraud and others criminal acts, irresponsible and excessive financial risks. Only the legal entity itself may hold the director liable on the grounds of section 2:9 BW.

The yearly general meeting of shareholders normally grants discharge from liability for damages for directors. After having granted discharge from liability, the general meeting of shareholders may not hold directors liable for matters which it had knowledge of when granting discharge. In case of irregularities, for example, a 2014 court decision shows that payments to directors can reasonably be deduced from the accounts of the BV, and thus the discharge granted at the general meeting of shareholders covered the liability of the director.

Other issues

According to Dutch law, a legal transaction entered into by a company can be annulled in the event that the transaction is beyond the scope of the company’s objects and the other party to the transaction knew or reasonably should have known this without further investigation. It is generally accepted that acts of a company must be in its best interests, being in accordance with the objects of the company, stated in the AOA. Only the company itself is entitled to request the annulation of a transaction.


Doorman, A., & Timmerman, L. (2002). Rights of minority shareholders in the Netherlands. Default journal.

Getting Haiti back in the saddle

Goal of the article

In 2017, Professor Michael E. Porter of Harvard Business School gave an important presentation about a strategy for restoring Haiti’s prosperity. A crucial part of his advice is to “make attracting foreign investment a core strategy“. In this article I will provide a suggestion to implement such a strategy.

The causes of Haiti’s poverty

Poverty in Haiti affects its people in many aspects of everyday life, including housing, nutrition, education, healthcare, infant mortality rates, as well as environment. Haiti has constantly been plagued with low levels of living conditions, with many Haitians moving into the capital city of Port-au-Prince in a bid to escape poverty in the more rural areas of the country. Levels of poverty in Haiti are generally regarded as among the most severe in the western hemisphere. This short article describes the origin of Haiti’s poverty and provides a solution to get the country back in the saddle.

French extortion for re-enslaving

An important cause of this poverty is the debt they ‘owed’ to France after fighting for their independence; France demanded a payment of 150 million francs ($20 billion dollars) as ‘compensation’ for the profit they lost when Haitians freed themselves from slavery on plantations producing coffee and sugar. Most of this was still being paid until 1947.

The United States stealing Haiti’s gold

On July 28, 1915, United States Marines landed in Haiti on the orders of President Woodrow Wilson, who feared that European interests might reduce American commercial and political influence in Haiti, and in the region surrounding the Panama Canal. The precipitating event was the assassination of the Haitian President, Jean Vilbrun Guillaume Sam, but United States interests in Haiti went back as far as the previous century: president Andrew Johnson wanted to annex both Haiti and the Dominican Republic. Twenty years later, Secretary of State James Blaine unsuccessfully tried to obtain Môle-Saint-Nicolas, a northern Haitian settlement, for a naval base. By 1915, the Americans were also afraid that an ongoing debt Haiti was forced to pay to France tied the country too closely to its former colonizer; Germany’s growing commercial interests in Haiti were another major concern. So one of the first actions carried out by the United States at the start of the occupation was to move Haiti’s financial reserves to the United States and then rewrite its Constitution to give foreigners land-owning rights.

During the nineteen years of the United States occupation, fifteen thousand Haitians were killed. Any resistance to the centralized, United States-installed puppet governments was crushed, and a gendarmerie—a combination of army and police, modelled after an occupation force—was created to replace the Marines after they left. Although United States troops officially pulled out of Haiti in 1934, the United States exerted some control over Haiti’s finances until 1947.

Stealing by the Duvalier family

From 1957 to 1986 Haiti was ruled by the corrupt and oppressive Duvalier family. Loans incurred during this period alone were estimated to account for approximately 40% of Haiti’s debt in 2000, before debt relief was granted. These funds were used to strengthen the Duvaliers’ control over Haiti and for various fraudulent schemes. Large amounts were simply stolen by the Duvaliers.

New loans

With the devastating effects of the early 2010 earthquake in Haiti there came renewed calls for a further debt cancellation from civil society groups. In light of the tragedy and new borrowing that lifted Haiti’s debts back to $1.25 billion, groups such as the Jubilee Debt Campaign called for this debt to be dropped. Furthermore, during the aftermath emergency money was offered to the Haitian government from the IMF in the form of loans. Civil society groups protested the offer of loans and not grants for such an already heavily indebted country trying to cope with such destruction. 

On 28 May 2010, the World Bank announced it had waived Haiti’s remaining debts to the bank. The value of the waiver was only $36 million.

In 2015, France forgave only about US $77 million in a modern debt, unrelated to independence. In 2004, the Haitian government demanded that France repay Haiti for the millions of dollars paid between 1825 and 1947 as compensation for the slaves’ freedom. In 2015, the French government rejected this plan and said that it would consider investing in the country.


The Battle of Vertières on the island of Haiti on 18 November 1803 was the final event that stood between slavery liberty in Saint-Domingue. It involved forces made up of former enslaved people on the one hand, and Napoleon’s French expeditionary forces (who were openly committed to re-enslave the former enslaved people and regain control of the island) on the other hand. The result was that Napoleon’s troops pulled back from Vertières, knowing they were defeated and that Haiti was lost to France.

Because Napoleon had failed to re-enslave Haiti he was missing the plantation revenues. As war with England was inevitable and he could not raise enough assets, Napoleon abandoned his colonial policy. France’ immense territory of Louisiana was sold to the United States on 30 April 1803 by means of the Louisiana Purchase Treaty. It was the birth of what now is considered the most powerful nation in the world, as Livingston made clear in his famous statement: “We have lived long, but this is the noblest work of our whole lives…From this day the United States take their place among the powers of the first rank.”

The West still profits from the international political and economic role that the United States plays in the world. The country contributes to world peace and has liberated Europe twice from German dominance. However, until now, the West has only contributed to Haiti’s poverty. It is my opinion that not much can be expected from the West and that Haiti needs to take into account that it needs to get back on its feet without or with minimal foreign aid.


In order to restore Haiti to its former glory, I suggest the following.

  • As France has suggested it would invest in Haiti, a way of doing so would be to implement access to internet all over the country, so Haitians can have access to the open education platforms of e.g. Coursera. The French government could also fund a liaison office of the Institut européen d’administration des affaires (INSEAD) in Haiti that provides open education. INSEAD prides itself that it offers participants a global educational experience. With campuses in Europe (France), Asia (Singapore) and Middle East (Abu Dhabi), and alliances with top institutions, INSEAD’s business education and research spans around the globe. Our 150 renowned faculty members from 40 countries inspire more than 1,400 students in our degree and PhD programmes. In addition, more than 11,000 executives participate in INSEAD’s executive education programmes each year. I see INSEAD as an institution that can provide an ideal impuls to develop the level of education that Haiti needs to become an emerging market.
  • A very important step to taken, is the implementation of Blockchain technology in a new (to be developed) Haitian offshore banking sector. There are offshore jurisdictions that are working to attract Crypto banks. As an example, Puerto Rico just issued a license for a Cryptocurrency International Financial Entity (Puerto Rico’s version of a banking license). Dominica is also active in the issuance of quality offshore banking licenses and makes allowances for cryptocurrency. 
  • In addition, a number of open-sourced groups have been formed to increase the availability of blockchain technology for offshore banks. For example, the Enterprise Ethereum Alliance became the world’s largest open-source blockchain initiative on July 18, 2017. With members like MasterCard, Cisco and Scotiabank, I have high hopes for this team.
  • A new Companies Act should be drafted, with input from the industry’s stakeholders. Such an act should eliminate the complex and cumbersome approach to formation and operation of companies. A well-functioning Companies Registry to compliment these new laws should eventually provide affordable accessibility to the company law. Ultimately, a significant reduction in the overall cost of doing business in Haiti should be the direct result.
  • With technical aid from the International Monetary Fund, a new International Banking Act should be passed to regulate and supervise all offshore licensed banks. This ensures protection of depositor’s assets and sound banking practice and qualified management are in place.
  • A Mutual Assistance in Criminal Matters Act is needed. The aim is to regulate the provision by Haiti of international assistance in criminal matters in the prevention of Money Laundering of proceeds from criminal activities and terrorist funding.
  • A new Insurance Act is needed to provide for the licensing, regulation and supervision of insurance business. This is to promote the maintenance of efficient, fair, safe and stable insurance markets for the benefit and protection of policyholders.
  • Providers of company and trust services must apply for a license to offer such services and to be regulated with a system that sets out their legal obligations as license holders. This ultimately protects users of financial products and further enhances the reputation as a finance centre.
  • A new Companies Act should provide the courts with as much direction as possible to allow them to continue to make decisions on company law. The underlying objective of this is to reduce gaps and grey areas in the legal system.
  • The promise this proposed law is holding out is to ultimately remove the expensive, time consuming and protracted process of incorporating a company. The approach to this is to replace the traditional Memorandum and Articles of Association with a straight forward Application Form. The Application Form will contain the essential information required by the Registrar of Companies to satisfy himself prior to accepting or declining the application to incorporate a company.
  • Part of this shift is to introduce a set of “Model Rules”. This replaces the traditional Memorandum and Articles of Association which only serves the legally trained. The Model Rules is essentially the internal governance rules which apply to the company and by which the company operates on a daily basis. Logically therefore, the Model Rules cover such things as appointments of directors, removal and powers of officers, meeting procedures, shareholders rights and so forth. In line with the Act’s objective to reduce costs and achieve simplicity, Model Rules will be attached as schedules to the required Act. There will be no need to get the Model Rules prepared professionally. And the Model Rules will provide both directors and shareholders with guidance for the management of the company. All types of company: private, public, single shareholder and community will be covered by the Model Rules which can be amended to meet specific needs of the company.


  • Porter, Michael E. “A Strategy for Haitian Prosperity.” (pdf) In Keynote Presentation. Paper presented at the Forum on Competitiveness and Investment, Port-au-Prince, Haiti, September 22, 2017
  • “World Bank cancels Haiti’s debt”. AFP. 29 May 2010. 
  • Wroughton, Lesley (28 May 2010). “World Bank cancels remaining Haiti debt”. Reuters. 
  • “Hollande pledges Haiti investment”. BBC News. 2015-05-13. 
  • “France Confirms Will Not Repay Haiti ‘Independence Debt'”. TelesurTV. 12 May 2015. 
  • Wikipedia

Example of a tax minimization technique, called “double Irish with a Dutch sandwich”

The double Irish with a Dutch sandwich is a tax avoidance technique employed by large corporations, such as Google, Apple and Microsoft. This construction is called double Irish because two Irish companies are used in the arrangement. It involves the use of a combination of Irish and Dutch subsidiary companies to shift profits to low tax jurisdictions. One of the Irish companies is tax resident in a tax haven, such as the Cayman Islands or Bermuda. The double Irish with a Dutch sandwich’s essence is to send profits first through one Irish company, then to a Dutch company and finally to a second Irish company headquartered in a tax haven (the ultimate owner of the intellectual property). 


  1. An industrial company pays an IT-company for software to be used in Germany.
  2. The IT-company sends the money to its first subsidiary in Ireland, which holds the  IP.
  3. The tax payable in Ireland is 12.5 percent. As the Irish company pays a royalty to a Dutch subsidiary, it gets an Irish tax deduction. The activities of the Dutch licensing company primarily consist of receiving royalties from or on behalf of group companies. The Dutch company is typically not the owner of intellectual property rights, but it only obtains a license from a group company which it then sub-licenses to other parties.
  4. The Dutch company pays the money to the second Irish subsidiary that is tax resident in a tax haven. There is no withholding tax on inter-EU transactions and The Netherlands do not levy any transfer taxes with regard to the transfer of intellectual property.
  5. The owner of the IP is a group company. In order to avoid a high tax burden at the level of the owner of the IP, it is quite common that the company which owns the IP (and thus receives royalties from the Dutch company) is established in a jurisdiction which levies no or only few taxes over the IP income (tax haven). The Dutch tax system allows an easy transit of royalties to a tax haven company. The profits can thus land in an overseas zero-tax haven where they are stored for years.

Under the new Irish tax rules, companies not already operating in Ireland may not use the “Double Irish” technique as of January 2015. The companies that already use this technique have until 2020 to find another arrangement. They have to look for a replacement for Ireland, which is not so hard to find.

The myth of the financialization of the housing market


In February 2017, mrs Leilani Farha, the United Nations’ special rapporteur for housing, presented a paper on housing commoditisation to the UN human rights council in Geneva. The paper explains how an unregulated financial market has boosted housing prices to a level that excludes low-income households from certain attractive urban locations and created social inequality. Mrs Farha introduces the term ‘financialization of the housing market’. This article explains that execution of the ideas of mrs Farha will not lead to lesser social inequality. Other measures need to be taken rapidly.

What is meant by financialization of the housing market?

Global investment firms are looking for so called high-quality collateral investments, and housing is one of the asset classes that can be classified as such, together with US, German and Swiss government securities. This explains why housing is increasingly becoming financialized or subject to financial speculation. I would describe financialization in this respect as the increasing dominance of financial actors, markets, practices and measurements of the housing market. Thus, housing is disconnected from its social function and is part of an investment strategy.

Financial markets and housing prices

Stock markets and home building are leading economic indicators. The precise relationship is not known, but it can be observed that the housing sector influences the economy. When the stock market goes down, most portfolios loose money. The net worth of investors declines and so will their willingness to invest. Investors will also be influenced in their behaviour from a psychological perspective. In addition, contractors and their sub-contractors (plumbers, electricians, et cetera) are all dependent on housing. They will loose buying power, which influences other sectors as well.

Purposes of financial markets in general

Generally, the purpose of the financial (capital and money) markets is threefold: (1) raising money for new ventures (a small portion of the stock markets’ activity); (2) providing liquidity, so the investors and therefore contributors to the value of a company can cash in on their efforts and (3) allocating capital effectively, by setting the prices of the financial instruments. Stock markets all over the world list real estate companies.

Fundamental economic problems

One major economic “problem” is that the development of financial markets cannot be predicted. This is explained by the fact that it is too complex to specify all the original information and derivation rules that make up the price of financial instruments. Jeff Stibel (2009) explains this in the following manner:

The future, like any complex problem, has far too many variables to be predicted. Quantitative models, historical models, even psychic models have all been tried — and have all failed. Just imagine predicting something far simpler than the future of the stock market; say, chess. There are an overwhelming 10 to the 120th power possible moves. That’s a 1 followed by 120 zeros! As James Hogan explains it in his book Mind Matters, that sum far exceeds the number of atoms in the universe.

The same counts for housing prices. It is even hard to look back and compare housing prices in the past. Price alone is a misleading way to evaluate the performance of residential real estate. Those who fail to do additional analysis are likely to overestimate the attractiveness of housing as an investment. The only data available in this respect is Robert Shiller’s historical housing index (adjust for the significant increase in the size and quality of homes). To evaluate real estate as an investment, it is needed to consider the total impact that the purchase of the home has on the buyer’s finances. That is, incorporate all of the net additional expenditures (like interest, taxes, insurance and buying/selling costs) associated with the purchase.

The impact of time on the return of a real estate investment is often underestimated. In a 30-years time frame, in increase in price from EUR/USD 50.000 to 300.000 represents an annual growth rate of about 6.2%. The impact of time on the return on their housing investment is often under estimated. It should be stressed that this includes price increase with adjustment for inflation only. The average annual home price increase in the United States over a period of 100 years was about the same as the inflation rate.

Final thoughts

There is no such thing as a boost in housing prices over the years. Long-term housing prices are comparable to the inflation rate. They are not artificially kept high due to speculation. Houses are priced based on demand and availability. This does not mean that the government should not put an enormous effort into ensuring that everyone, irrespective of income or access to economic resources, has access to a safe, secure, habitable, and affordable home with protection from forced eviction.

The right to housing is a human right, protected by a number of fundamental declarations: Article 25 of the Universal Declaration of Human Rights; Article 11 of the International Covenant on Economic, Social and Cultural Rights; Article 27 of the Convention on the Rights of the Child; Article 5 of the Convention on the Elimination of All Forms of Racial Discrimination; Article 14 of the Convention on the Elimination of All Forms of Discrimination Against Women and Article XI (11) of the American Declaration on Rights and Duties of Man.

In my opinion, a governmental effort to reduce the so called financialization of the housing market is not an option to improve housing conditions for lower income households. It will lead to a housing bubble, since the market mechanism is artificially removed and prices do not reflect the real value of houses. In my opinion the only way to lower housing prices is to lower demand for housing. I cannot understand why it is not understood that reducing the human population is the most effective tool to combat poverty and inequality. As Paul Ehrlich, Bing professor of population studies at Stanford University in California and author of the best-selling book, the Population Bomb, in an interview with the Guardian (26 April 2012) says:

The optimum population of Earth – enough to guarantee the minimal physical ingredients of a decent life to everyone – was 1.5 to 2 billion people rather than the 7 billion who are alive today or the 9 billion expected in 2050.

We should not let mrs Leilani Farha’s ideas influence us, because they lead to a myopia. The focus should be on the factors that really can be influenced and make a substantial difference in fighting poverty.


Aalbers, M. (2016). The financialization of housing: a political economy approach. London: Routledge Taylor & Francis Group.

Ehrlich, P. R. (1975). The population bomb. Rivercity, MA: Rivercity Press.

Malthus, T. R. (2017). Essay on the principle of population. New York: W W Norton.

Shiller, R. J. (2016). Irrational exuberance. Princeton, NJ: Princeton University Press.

Stibel, J. (2009). Why We Can’t Predict Financial Markets. Boston, MA: Harvard Business Review.

Statistical sources

Eurostat, House Price Indices euro area and EU aggregates Index levels 2015 100 2017Q1

International Monetary Fund, Global Housing Watch

S&P CoreLogic Case-Shiller Home Price Indices

De factuur fiscaal bezien

Het komt voor dat de belastingdienst de aftrek van BTW in facturen weigert. Met name als het om grotere bedragen gaat. Het verwijt dat de ondernemer dan wordt gemaakt is dat de omvang en aard van de werkzaamheden niet is vast te stellen. Wat zegt het internationale recht over de inhoud van de factuur?

BTW-aftrek mag in beginsel niet worden geweigerd

In de zaak ECLI:EU:C:2016:690 en 101 bevestigt het Hof van Justitie EU dat het herhaaldelijk heeft geoordeeld dat het recht op btw-aftrek waarin de artikelen 167 en volgende van richtlijn 2006/112 voorzien, een integrerend deel van de btw-regeling is en, in beginsel, niet kan worden beperkt. Het wordt onmiddellijk uitgeoefend voor alle belasting die op in eerdere stadia verrichte handelingen heeft gedrukt (zie in die zin arrest van 13 februari 2014, Maks Pen, C 18/13, EU:C:2014:69, punt 24 en aldaar aangehaalde rechtspraak).

De aftrekregeling heeft tot doel de ondernemer geheel te ontlasten van de in het kader van al zijn economische activiteiten verschuldigde of betaalde btw. Het gemeenschappelijke btw-stelsel waarborgt bijgevolg een neutrale fiscale belasting van alle economische activiteiten, ongeacht de doelstellingen of resultaten van deze activiteiten, mits deze activiteiten in beginsel zelf aan de btw zijn onderworpen (arrest van 22 oktober 2015, PPUH Stehcemp, C 277/14, EU:C:2015:719, punt 27 en aldaar aangehaalde rechtspraak).

De materiële voorwaarden waaraan moet zijn voldaan opdat het recht op btw-aftrek ontstaat, volgen uit artikel 168, onder a), van richtlijn 2006/211 dat de goederen of diensten waarvoor op dat recht aanspraak wordt gemaakt, door de belastingplichtige in een later stadium moeten zijn gebruikt voor zijn eigen belaste handelingen en in een eerder stadium door een andere belastingplichtige moeten zijn geleverd of verricht (zie in die zin arrest van 22 oktober 2015, PPUH Stehcemp, C 277/14, EU:C:2015:719, punt 28 en aldaar aangehaalde rechtspraak).

Wat de formele voorwaarden voor de uitoefening van dit recht betreft, volgt uit artikel 178, onder a), van richtlijn 2006/112 dat de belastingplichtige in het bezit moet zijn van een overeenkomstig artikel 226 van deze richtlijn opgestelde factuur (zie in die zin arresten van 1 maart 2012, Kopalnia Odkrywkowa Polski Trawertyn P. Granatowicz, M. Wąsiewicz, C 280/10, EU:C:2012:107, punt 41, en 22 oktober 2015, PPUH Stehcemp, C 277/14, EU:C:2015:719, punt 29).

Het Hof heeft geoordeeld dat het basisbeginsel van neutraliteit van de btw verlangt dat aftrek van voorbelasting wordt toegestaan indien de materiële voorwaarden daartoe zijn vervuld, ook wanneer een belastingplichtige niet voldoet aan bepaalde formele voorwaarden. Wanneer de belastingdienst over de nodige gegevens beschikt om vast te stellen dat is voldaan aan de materiële voorwaarden, mag hij bijgevolg voor het recht van de belastingplichtige op aftrek van die belasting geen nadere voorwaarden stellen die tot gevolg kunnen hebben dat de uitoefening van dat recht wordt verhinderd (zie in die zin arresten van 21 oktober 2010, Nidera Handelscompagnie, C 385/09, EU:C:2010:627, punt 42; 1 maart 2012, Kopalnia Odkrywkowa Polski Trawertyn P. Granatowicz, M. Wąsiewicz, C 280/10, EU:C:2012:107, punt 43, en 9 juli 2015, Salomie en Oltean, C 183/14, EU:C:2015:454, punten 58 en 59 en aldaar aangehaalde rechtspraak).

Daarom mag de belastingdienst het recht op btw-aftrek niet weigeren enkel en alleen omdat een factuur niet voldoet aan de door artikel 226, punten 6 en 7, gestelde voorwaarden indien hij beschikt over alle gegevens die nodig zijn om na te gaan of is voldaan aan de materiële voorwaarden voor uitoefening van dat recht.

In dit verband mag de belastingdienst zich niet ertoe beperken de factuur zelf te onderzoeken. Hij moet bovendien rekening houden met aanvullende informatie die de belastingplichtige verstrekt. Deze stelling vindt steun in artikel 219 van richtlijn 2006/112, dat ieder document of bericht dat wijzigingen aanbrengt in en specifiek en ondubbelzinnig verwijst naar de oorspronkelijke factuur, met een factuur gelijkstelt.

De economische realiteit

Het HvJ EU overweegt in de zaak Paul Newey (HvJ EU 20 juni 2013, nr. C-653/11, BNB 2014/49) in de eerste plaats dat het begrip dienst een objectief begrip is dat onafhankelijk van het oogmerk of het resultaat van de rechtshandelingen wordt toegepast. Vervolgens overweegt het Hof in genoemde zaak dat contractuele bepalingen normaliter de economische realiteit weergeven en – mede omwille van de rechtszekerheid – een in aanmerking te nemen factor vormen. Een afwijking van de contractuele bepalingen is echter mogelijk als sprake is van een zuiver kunstmatige constructie die niet beantwoordt aan de economische realiteit en alleen is bedoeld om een belastingvoordeel te verkrijgen. De nationale rechter dient – op basis van een globale beoordeling van de omstandigheden – na te gaan wie de daadwerkelijke ontvanger van een dienst is. De contractuele bepalingen vormen daarbij een in aanmerking te nemen, maar niet de doorslaggevende factor.

Aard en omvang van de geleverde diensten

Een factuur die bij wijze van vermelding van de aard van een dienst slechts de omschrijving als bijvoorbeeld ‚juridische dienstverlening’ bevat, voldoet aan de eisen van artikel 226, punt 6, van richtlijn 2006/112/EG (2016:101, r.o 102 onder 1).

De factuur is onder meer bedoeld om te kunnen controleren of de opsteller van de factuur de juiste belasting heeft voldaan. Daartoe moet – naast voornoemde omschrijving – ook de datum bekend zijn waarop een dienst is verricht. Het is namelijk deze datum – en niet bijvoorbeeld de datum van uitreiking van de factuur – die volgens artikel 63 van de btw-richtlijn in beginsel bepaalt wanneer het belastbare feit in de zin van artikel 62, lid 1, van deze richtlijn heeft plaatsgevonden, en daarmee ook welke belastingvoorschriften ratione temporis op die handeling van toepassing zijn (2016:101, r.o 68).

Kortom, vermeld op een factuur duidelijk waar het om gaat en wanneer de prestaties zijn verricht.

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