Corporate Law & The Economy

ANUP RAJ UPRETI MANAGING PARTNER, PIONEER LAW ASSOCIATES Pioneer Law Associates, the first law firm in Nepal to specialise in corporate law, celebrates its 40th anniversary this year. Co-established by Bharat Raj Upreti, former Supreme Court Justice and Senior Advocate, Pioneer has over the years created a benchmark in corporate law services in the country. Anup Raj Upreti, Managing Partner of Pioneer, has been successfully carrying the baton and meeting the standards set by his predecessor. During a conversation with Business 360, Anup recalls that it was not until he went to Mussoorie, India for his higher secondary education that he was able to actually understand the essence of education. “The school I was studying in previously never focused on extracurricular activities, so it was pretty quiet and mundane,” he shares. Playing sports and participating in extracurricular activities besides academics contributes hugely to personal development, stresses Anup, adding that there is so much to learn about discipline and team work from these activities. Another life-changing decision, he mentions, was going to ILS Law College in Pune. “It was a five-year course but the last two years I studied in Edinburgh and these further changed my outlook in life,” he states. The emphasis on his education, he says, is because he got to meet people from various backgrounds and he probably wouldn’t have been the lawyer he is today if he had not had that opportunity. After graduating, Anup returned to Nepal and worked for three years before again going to the United Kingdom to complete his Master’s degree in banking and finance law. In this edition of Business 360, Anup talks about himself, his work, and the legal sector of the country.

How do you view the legal infrastructure in Nepal?

Law is always dynamic. We can take the example of company law for instance. While talking about company law, there has to be continuous evaluation whereby we have to ascertain whether the current law will work in the next five years. We also have to evaluate whether or not it worked in the past or did it create problems. Did the law help businesses to grow? These are the questions we should always be asking ourselves. The problem in Nepal is that reviews and reforms are not being done on periodic basis, which is the need of the hour. Commercial laws, generally need to be reviewed every five years to assess if the laws are meeting the challenges of the business community. For a healthy economy, it is important to address the challenges of the business community. That type of assessment is necessary but it has not been done at the required pace in our country. What all stakeholders need to understand is that ultimately the law was made for the growth of the private sector. Reform is a bit of a challenge in Nepal. I wouldn’t say that there have been no changes at all because the foreign investment law and the industrial enterprise law have gone through some changes but I think we need to focus a bit on the quality also. Why are we doing this? Is it working for us? How do we reduce the cost for businesses? These questions need to be asked for reforms because they sound like simple questions but are very critical for change and growth. Government policymakers need to be aware of such things.

"Why are we doing this? Is it working for us? How do we reduce the cost for businesses? These questions need to be asked for reforms because they sound like simple questions but are very critical for change and growth."

What about human resources in the legal field?

At present, five-year law schools have been established and they are producing good students with focus on corporate law too. Yet, one of my biggest complaints is that in those five years there is a lot more that could have been provided to the students regarding how the syllabus is being taught. Yes, the syllabus is there but it all depends on how the content is delivered or let’s say taught. The other part is ultimately our institutes need to start developing as research institutions which is not happening. Even when I am speaking to my junior colleagues in the office, I always tell them that during the five years of study they probably studied everything in theory but lacked good exposure, so the next five years in the job they need to start learning about the practical side of law that they missed. During the course itself students need to be taught to look at the quality of the lawyers of other countries too, more so if you are a corporate lawyer. Because in this age of globalisation with various foreign companies wanting to set up businesses in other countries, we have to interact with foreign lawyers and we have to learn how they think, how they perceive things. We need to be ready about their thought process and that is a challenge. So, what we have started in our office is every Monday and Friday we have a learning session for an hour in the morning. Law students have to realise that it is a dynamic field and we have to constantly update our knowledge. Knowledge building is very important. In the legal field, there are three contexts. The first being how do we get connected with clients. The second is how we deliver the work and for that team building and knowledge are very important. When we were working with my father, he made us write a lot and we also had to teach. We also had to be involved in the legal reform processes and had to conduct research. The third is revenue generation work. So, these are the three fundamentals that we need to be aware of and they are the core aspects of Pioneer.

Do you feel that legal practice in Nepal is anywhere at par with global standards?

As a corporate lawyer, I would say in our country, institutionalisation is an issue. Even today we have smaller legal firms but when you look at developed nations, they have larger firms and their strength is the team. That needs to happen here. But again, that depends on the market. In India too, previously there were many small firms or individuals but these days they have bigger law firms. It all depends on what the market seeks. Once the market grows and the economy grows, this will come about. At times, I feel it is a case of what came first: the chicken or the egg. Do we create a big team first or do we wait to get bigger transactions and then develop a team? The sector is developing gradually but not as per my expectations. One of the reasons why the corporate legal field has not grown as I would expect it to is because the economy as such has not grown. If we grow at 8% annually for many years then maybe we will be able to witness growth in the corporate legal field too.

How important are effective corporate laws for the economy?

For any sector to develop, there have to be effective laws governing it. We could take the example of private equity. Due to the Covid pandemic, the economy of our country has still not really picked up. Even SMEs are in a situation where getting loans from financial institutions is difficult. In this context, private equity is growing like a separate industry in the country. However, when it comes to private equity investment, contract law is very important and efficient enforcement of contracts is equally necessary. The way the regulator looks at it is also very important. What structure is permissible under company law and how do we value the shares? These are pertinent questions. When it comes to foreign investment, the speed at which we can bring it into the country is also important. After all commercial negotiations are over, how long do I have to wait to bring the investment: three months or six months? All these issues are important because private equity is very dependent on how good the laws are. Even just looking at private equity, there could be a lot of reforms done. That is but just one example of the need for good laws. However, the good thing is at least discussions have started because to reach any decision the first requirement is there has to be discussion. Fortunately, there are many organisations that are pushing for reforms and we should always be aware that reforms happen only when there is collective effort.

"As a Nepali lawyer, the biggest challenge for us is that the principle of the law is something but interpretation made by regulators is totally different."

Intellectual Property Rights are being discussed a lot these days with cases related to infringement of copyright and trademark in the news. Are the regulations governing IPR adequate?

The existing laws are not problematic as such but what we need to understand is that any law is just a piece of legislation. The most important aspect is in its implementation and again there are two factors dealing with this. For instance, the Department of Industry should be implementing concerned regulations according to the true spirit of the law, which has not happened. Why that might not have happened, I think, is because the people in the department do not have the judicial training or mindset. In Nepal’s context, corruption is another big issue. The other factor is that the pace at which the judiciary is understanding corporate law is very slow. But again, there is a silver lining. There are a few judges who are taking it seriously and some decisions have been noteworthy. It does take time for reforms to happen but that does not mean we should be taking years. At the end of the day, the business community suffers. At times, there are cases from our clients whose copyright or trademark has been misused by a third party. When it takes too long to resolve the issue, then their businesses may suffer by a few percentage points. I wouldn’t want to take names here but one of my clients did mention to me on how his business went down by a two-digit percentage point in a certain region. Now that should not be happening because ultimately to do business, we need to be able to protect our trademark from the very first moment when we start our venture. Any trademark is a certain party’s asset and somebody else cannot be using it for their benefit. Usually, we Nepalis do not seem to value time and we often say a slight delay will not affect anybody so much, but it does. Time is very important. We need to work with an urgency that every hour, every minute, every second counts. And, unfortunately, our dispute resolution mechanism has not worked with that urgency.

We lack consumer courts in Nepal which are very common elsewhere. Could you elaborate on their significance?

The consumer law in our country is still very traditional. Whenever we go to buy any product or service, we should be assured that our consumer law is such that we will not have to doubt the quality of the product or service being offered. The other thing is that if something does go wrong then there should a law whereby we can get refunded. And finally, disputes should be resolved in an expedited manner. I would say the information labels that we have on our products are not enough. Maybe our government thinks that this simple form of labelling is enough for our consumers but if you look at the labels in developed nations, especially food items, it is so stringent. I don’t think our food products have labels that disseminate all the information regarding the content of the food through which any one could make a decision according to their health requirements. When we talk about quality assurance the enforcement is so lax that nobody actually cares. We read news about bottled water being contaminated but there might be other food items too with the same problem. As a consumer, lack of enforcement has been hurting us. The other issue is where do I go and make a complaint and like I said earlier due to the lengthy process I would rather not pursue that case. Not to forget the cost involved due to the lengthy litigation process. If I have bought something that costs me Rs 2,000 my thought will be why take all the trouble for that paltry sum of money. So, this basically shows that even when there are laws, people will not seek redress if it takes a long time. We do have consumer rights and right to information but in Nepal everything gets stuck with enforcement and dispute resolution. The quality of law is not bad, maybe a few changes are needed. It is just the implementation aspect.

In developed countries, people file class action lawsuits. What is the scenario in Nepal?

We have some laws now for that like Torts, which was introduced about four years ago. I feel we often hear about such lawsuits in developed nations because the society there is a bit litigious. For anything and everything, big or small, they tend to file a case. In our society, culturally too we are not so litigious besides cases that deal with land and property, especially between siblings. Moreover, in developed countries, jurisprudence is developing a lot and there is a lot more clarity. In our country, everything at the moment is quite new. Let’s take data privacy for example. When foreign clients ask us, usually we have to say there are not many regulations here. Right now, we hear a lot about medical negligence and the Supreme Court has passed some decisions regarding such cases. But as a lawyer, my expectation is that jurisprudence should have been made a bit clearer. That was an opportunity. Hopefully, that will happen in the future. We missed that opportunity in a few judgements.

What are the major issues that companies approach you for?

What I have realised in all these years of practice is that issues the companies approach us with are related to the cycle of the economy. For example, at the moment we are just about out of the pandemic. During the pandemic, the economy was hit and we had many issues related to employment like how to reduce headcount and how to manage the revenue. Since revenues were low, the burning issue was on how to manage the employees. Contractual agreements were breached and there were defaults. There was financial distress and companies were closing down. We had the same situation but at a lesser magnitude after the earthquake too. In 2002, when the conflict was not yet over completely there was a question about whether paying ransom was legal in Nepal. Right now, there is more of digital economy and the issues are about digital taxes, privacy issues and compliance issues. In my 20 years, I have seen a lot of transition in the legal field and tax issues are quite regular. There was a time when we had so many trade union issues, these have dropped significantly at present. I think everything is sort of connected to the economy. Where there is more growth, there will be more cases. There is actually a joke that no matter what the economic situation, lawyers always benefit. In a sense it is true. You have a problem; you need a lawyer to resolve it. You have success, you again need a lawyer to make it even more successful.

How do you view the judicial system, especially in light of even the chief justice being implicated in corruption and an ongoing impeachment process?

I have been able to look at the judicial system in a professional perspective as and when I go to the courts. The other thing is that my father was in the judiciary for four years and at the moment, my sister is in the judiciary. I think it is way too big a topic to talk about but what I feel is, as a society in general and me being in the legal profession, for us a judicial system with integrity and competence is important. For lawyers, expertise is our strength and these days with news about corruption, it is a big challenge for us. Sometimes, we also feel that we are not the right type of lawyers for certain types of litigations. It is not because we lack competency but when we go to a court and the system is corrupt maybe we will not get the right outcome. That’s a feeling we get at times. So that’s a big challenge. Everybody has started to gradually realise how important the judiciary is for any country. But again, we must not only complain and look for ways in how we can change for the better. There are challenges for the judiciary too. The appointment process is very crucial. How do we appoint our judges? Not only competency, the judicial also needs to have passion because being a judge is not like a nine-to-five job. Judiciary is actually a place where you go to deliver service for the greater good of the citizens. It is challenging and the pay is also quite low so that passion has to be there. And there is a lot of stress and pressure from everybody. Our society is small, and we literally know each other and somebody is always there to put in a word or two on behalf of somebody else, so there have to be people in the judiciary who can resist that societal pressure. The other aspect is that the judiciary lacks the required resources. They have to listen to the cases and then also write the judgements. Support staff is an issue. That’s an academic exercise and there is a problem there, I think. If you take our office for example I have so many lawyers at my disposal. Whenever we have any transaction, I can form a team of ten lawyers and work accordingly, but a judge does not have that benefit. So, corruption is there and there is resource crunch too. However, to answer your question briefly I am not satisfied with how things are in the judiciary. It needs to change.

What are the everyday challenges you face as a lawyer?

The everyday challenges are that at times you have to give legal opinion when there is no guidance from anywhere. At times we are asked whether a client can do or not do certain things in Nepal but there is no judicial interpretation on several issues. Right now, the challenge is in the tax law. The problem is that there is one thing in the law; the courts interpret it in one way but the tax office is implementing the law in a different way. The real ethos of what is written in the law is not there in practice. I am just giving you an example of tax law but this can be seen in various other sectors too. Right now, we are seeing the same problem in the energy sector too. One thing is written in the law but they interpret it in a different way and implement it. As a Nepali lawyer, the biggest challenge for us is that the principle of the law is something but interpretation made by regulators is totally different.

Were you influenced by your father or was it a conscious decision to study law?

When we are recruiting people for our firm, we usually ask this question on why they wanted to become a lawyer. Oftentimes, the reply is they want to change the world and make a meaningful contribution to society and I am not saying that these answers are not good. With me, it was a totally different reason. I come from a very average middle-class family and when I was small, my father used to attend seminars and workshops in five-star hotels and if it was during my holidays I would tag along with him. I used to find these places very glamorous. I started developing a mindset that the corporate legal field was a glamorous one. As a kid, I was very fascinated with the settings of the hotels and the food that we got to eat. Due to this reason, I consciously decided to become a lawyer when I was just in grade 8. I thought being involved in law was a good life to have. Later, my father kept questioning me whether I really wanted to become a lawyer. He would talk about other professions, especially chartered accountancy but I didn’t like calculation and accounting. I had already made up my mind. For those wanting to join the legal field and do well, they should understand that this profession is a time-consuming one which means you will not be a good lawyer within five or ten years of starting practice. An average span for a lawyer is 40 years. In that context, what you need is total interest and passion. On the aptitude front too, you need to be willing to constantly read and write. Moreover, if one wants to join the corporate law field then you have to be aware that you will mostly be indoors, there is less action. It might not be like litigation where you visit the courts. In corporate law it is more office work like drafting papers and contacts. There will also be late nights where you will have to work odd hours because when you have foreign clients you will be working in different time zones. There are challenges but it is fun; the only thing is you need to have passion.

Your father was a well-recognised figure in corporate law and Pioneer Law Associates is a pioneer in this segment as its name suggests. How difficult has it been to carry on this legacy?

The firm was established by my father along with three other partners and we are the first legal firm in the country with special focus on corporate law. I have been practising corporate law for 20 years now and till date when I go to meet clients, especially the older generation, they still identify me as ‘my father’s son’. I feel it is a good legacy to carry forward and it keeps me on my toes. I face this challenge to maintain the reputation that was built by my father. He set a standard and I have to make sure that I maintain that legacy. That need to perform is always at the back of my mind. It is a challenge but I want to deliver on it. I feel, it has made me a better lawyer.

What has your journey in corporate law been like?

When we talk about the trend of legal practice in Nepal, we can see that generally, lawyers practice all types of cases. However, at Pioneer our founders wanted to focus on corporate law. At times when I reminisce about the opinions given by my seniors, their writings, I get amazed at the quality of their research. Some are better than those prepared by us with all the resources available at the moment. The legal profession has changed a lot due to the advancements which have been made in communication tools and technology. As a child, I remember visiting the post office to send or receive letters. Then it changed to telex and later to fax and now we have personal computers. In fact, back in those days, we used to hire typists as the typewriter was the only device available but now you will not find any such thing. In terms of the legal profession, technology has changed, resources have changed and along with that challenges have also changed, at least in the corporate field. The legal opinions and transactions I used to do in 2003 and what I do now in 2022 are totally different. We practice a lot of IT law, project finance law, private equity practice. During my initial years, we were just out of the conflict and the transaction volume and ticket size of the projects were very different. Initially, our firm had only five to six lawyers but now it is a 40-member team. Luckily for us, the growth has been very organic, slow and steady and it has been manageable.

With 20 years of experience in the field, how do you rate the awareness on corporate law in the country?

When we speak about awareness related to the corporate law sector there are two distinct categories. Previously, whether it was a family-owned business or an SME, the trend was that they would rather go for litigation if something went wrong instead of drafting proper contracts or papers prior to any agreement. At present, many business houses are being run by next-generation leaders and they are more aware and think differently. The litigation aspect is always there but the new generation likes to be prepared beforehand. They have this awareness that they need to have a good draft of the papers before they start a business or enter into a contract. Meanwhile, multinationals here always knew about such things because they are management-run institutions. They know they need legal support and they always take legal advice before making any big decision. They are also aware of the regulatory questions. So, gradually even our domestic businesses are laying emphasis on contracts and agreements. At present, there are many transactions taking place and some are complicated, and I think it is a good time for corporate lawyers right now. READ ALSO:

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