Category: Private Offerings

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.

Website: http://aifc-court.kz

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.

Website: https://www.difccourts.ae

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.

Website: https://europeanchamberofdigitalcommerce.com

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.

Website: https://www.lcia.org

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.

Website: https://sccinstitute.com

Conclusions

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.

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

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.

Advantages

  • 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.

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.

Voorwaarden

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.

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.

Advantages

  • 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.

Disadvantages

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.

Advantages

  • 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.

Disadvantages

  • 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,chron.com

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.

Conclusions

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.

Solutions

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.

Sources

  • 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
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