one of the country's most distinguished & sought after M&A and competition lawyers, in an exclusive interview with Legal Era Magazine...LE: Prior to joining P&A Law Offices, you practiced law in Brussels, Cleveland, and Palo Alto. What are the key differences between their legal systems and ours?Anand Pathak: The EU, the US, and India all have unique legal systems that have...
one of the country's most distinguished & sought after M&A and competition lawyers, in an exclusive interview with Legal Era Magazine...
LE: Prior to joining P&A Law Offices, you practiced law in Brussels, Cleveland, and Palo Alto. What are the key differences between their legal systems and ours?
Anand Pathak: The EU, the US, and India all have unique legal systems that have evolved over time. The EU's system is a legal regime at the EU-wide level, operating together with the laws of each of the Member States. There are EU laws and regulations that have direct applicability and create rights and obligations at an EU-wide level for the residents of all of the Member States. Then there are the laws of each of the Member States, a majority of which are influenced by the Napoleonic Code, and are applicable to the residents of that Member State, who in specific areas implement EU laws as a result of EU directives. The US and India have common law systems.
At a broad level, what is very distinctive between the Indian system and the US and EU systems is the speed with which cases get decided by the courts in the US and the EU, primarily because they have more courts per 1,000 persons. In the US and the EU, there is also greater pressure to settle a case, instead of the case going for trial, resulting from the high costs of litigation. I also find, particularly in the US, that judges often teach in law schools and are regular contributors to leading law journals. For instance, Judge Richard Posner, while a judge in the 7th Circuit Court of Appeals, taught antitrust law at the University of Chicago Law School and remains a prolific writer on antitrust and other legal issues. Likewise, Judge Ralph Winter of the 2nd Circuit Court of Appeals taught corporate law at Yale. And these factors contributed towards them being brilliant teachers, practitioners and judges. I am fortunate to have attended lectures by both.
As regards the practice of competition law, the US generally has a relatively non-interventionist approach towards competition, while the EU and India are more intrusive and aggressive in regulating the unilateral and coordinated conduct of companies. For instance, US authorities decided against pursuing Google for anti-competitive conduct, while the European Commission and the CCI have actively pursued Google in their respective jurisdictions. It is interesting to see this because the US is said to have introduced antitrust law into Europe, through Germany, after World War II, and yet, EU law has taken a slightly different direction as compared to US antitrust law, giving rise to an abundance of academic writing trying to reconcile the two systems and in an effort to show how they give rise to the same outcomes despite these differences between the two systems.
In terms of corporate law, the US Delaware Courts are way ahead of the rest of the world. In competition law also, generally speaking, the US and the EU Courts are ahead of the Courts in other jurisdictions in terms of their maturity in applying the law.
At a practical level, the three broadly transferable legal skills for a lawyer, across all of these jurisdictions, are M&A (corporate), competition law, and arbitration. There are of course some differences even in these practice areas in the provisions of law that apply as well as drafting styles — for example, acquisition agreements and financing documents drafted by US law firms are structured slightly differently from acquisition agreements and financing documents prepared by English law firms, but these differences are minor because the legal concepts on which these agreements are based are generally the same.
LE: You attended all of the EU Council negotiation meetings leading to the adoption of the EU Merger Control Regulation. What was the experience like?
I was in the EC Commission's Legal Service at a time when the EC was deliberating the adoption of comprehensive legislation for merger control. Attempts had been made in the past, but this was the first time that there was a realistic opportunity to push through the legislation. I was assisting Sir Leon Brittan's (then EC Competition Commissioner) negotiation team and sat immediately behind him in a large hall where he and Ministers of the various Member States and their delegations negotiated the legislation. The Chairperson of the Council at the time was Ms. Edith Cresson, later Prime Minister of France. Minister John Redwood represented the UK. Minister Helmut Haussmann of Germany led the German delegation. All of the political leaders in that hall were brilliant men and women of great conviction. I attended all of the sessions which frequently extended into late hours of the night. I witnessed the stands taken by the UK delegation and their frequent opposition to many provisions of the legislation transferring power to the EU - you may recall that Mrs. Thatcher was then the Prime Minister of the UK. I recall vividly how I would return to my apartment in Brussels late at night and excitedly tell my wife about the entire day's proceedings and about the commitment of the negotiators and their vision. I had difficulty sleeping at night because of the realization that I was witnessing something historical and unique! Then, the next morning, it would be reported in the press with photographs, and I would think back to the previous evening when I had been sipping wine during breaks in negotiations with these great men and women in an informal environment, all well-known political leaders of their respective countries.
After the adoption of the legislation, Regulation 4064 of 1989 (the precursor to the present regulation), in December 1989, I assisted in the drafting of the various notices and guidelines, especially on concentrative and cooperative joint ventures. It was an amazing experience and the most intellectually exciting time of my life. It was the first time that merger control became an important part of EC competition law enforcement under a separate framework of rules for the evaluation of transactions that affected the structure of the market. This legislation was considered necessary by the EC Commission because the traditional tools of enforcement of competition law contained in the EC Treaty were found to be insufficient to address the structural changes brought about by large transactions. The legislation was envisioned as a tool to empower the EC Commission to assert jurisdiction on large transactions that were not caught by the prohibitions on unilateral and concerted conduct.
As young lawyers with the EC Commission's Legal Service, we were required to analyse the gaps in the existing regime for the enforcement of competition law in respect of M&A transactions so that merger control could address those gaps as well as set out comprehensive rules for the assessment of large transactions.
Debates with fellow competition lawyers and economists on the aspects of joint and sole control, criteria for determining turnover, and discussions on the assessment of joint ventures were exhilarating and among the most intellectually satisfying aspects of my legal career. During that time, I had to read every decision of the EC Commission and the EC Court in competition law from 1962 to 1990. It helped me understand the evolution of EC antitrust and the reasons why certain Court and Commission decisions were decided and crafted in a particular manner. I also got a very close view of the EC Commission's decision making in competition law cases. I also worked on several of the EC Commission's cartel decisions and the two Tetra Pak abuse of dominance cases, one of which involved the then-novel notion of leveraging dominance from one relevant market into another relevant market by a dominant firm.
While I was a M&A lawyer by profession, when I came to work for the EC Commission, the study of and writing on competition law soon became a hobby for me as a result of this unique experience at the Commission, with the result that when I went back into private practice some months later, I practiced both as a M&A lawyer and a competition lawyer. While I continued to represent clients, primarily US clients, in cross-border M&A transactions, I would spend all my vacation and other free time writing articles on competition law for various journals.
During this time in Brussels, I was just two hours away by train from my parents who were living in The Hague in The Netherlands. My father was then a Judge of the International Court of Justice. Weekends were often spent with my parents with visits to the Peace Palace in The Hague. These visits also gave me the opportunity to meet some of the best legal minds in international law.
LE: Please provide a brief overview of the EU Merger Control Regulation, its pluses, and minuses.
Anand Pathak: The EU Merger Control Regulation is a comprehensive legislation that precisely sets out situation(s) in which a transaction may be characterized as having an EC dimension, and therefore, must be notified to the EC Commision to the exclusion of Member State jurisdiction. To aid in the understanding of the Merger Control Regulation, the EC Commision has published various notices that help practitioners evaluate various crucial aspects such as joint/sole control; calculation of turnover; and nature and scope of ancillary restraints. The adoption of this legislation helped to eliminate the legal uncertainty in the EU in respect of M&A and joint venture transactions that previously were subject to the potential risk of the application of the rules regulating conduct (then Articles 85 and 86 of the Treaty of Rome and now Articles 101 and 102 of the TFEU). The Merger Control Regulation was, therefore, instrumental in removing legal uncertainty in the application of competition law to mergers, acquisitions, and joint ventures that had a Community dimension.
One of the biggest challenges in the EU at the time was the assessment of joint ventures. In the 1970s and 1980s, a nonsensical distinction had developed in the EU between cooperative joint ventures and concentrative joint ventures and their assessment, which was eliminated as a result of the adoption of the Merger Control Regulation in December 1989. The competition law assessment of joint ventures remains one of the most challenging areas of competition law and I believe that even the CCI has not been able to fully understand all of the competition law issues relating to joint ventures and their implications for India.
However, one major concern with both the EU Merger Control Regulation as well as the Indian merger control regime is the importance of the asset/turnover test to determine whether a transaction must be notified for approval of the competition authority. A rigid test based solely on asset/turnover of parties to a transaction does not account for cases in technology markets, such as the acquisition of Instagram by Facebook, which arguably altered the social media market (as Facebook acquired its biggest potential competitor); yet this transaction was not evaluated by the EC Commission due to the absence of sufficient asset/turnover of parties in the EU. Similarly, "big data" is fast emerging as a useful tool for advertisers in the online space, and companies dealing with "big data" are often targets for large internet companies whose revenues depend on data offered to advertisers. These transactions more often than not alter the structure of the market irreversibly and should be reviewed by competition authorities. However, these transactions often go below the radar because "big data" companies are usually start-ups that do not meet the asset/turnover criteria for notification of a transaction to the EC Commission.
The EU Merger Control Regulation is otherwise a wellbalanced legislation — it balances the interests of the Member States and also the interests of the EU and provides clear tests for mergers and similar transactions involving the acquisition of control or joint control that should be notified to the EC Commission and those that should be notified to the competition authorities of the Member States.
LE: You have been a corporate M&A lawyer and have also represented clients in complex EC Commission investigations of abuse of dominance, cartels, and mergers. Any challenging case/s you'd like to highlight?
Anand Pathak: I was based in Brussels for nearly 8 years and practiced crossborder M&A and competition law. I helped various clients set up their EU-wide distributorship systems based on EU laws and the laws of the Members States, including under the EC Motor Vehicle Block Exemption, and made merger and other competition law filings with the EC Commission and the antitrust authorities of the Members States, including the UK, Belgium, France, and Germany. As a M&A lawyer, I assisted US companies acquire European companies. During this period, I also assisted clients file claims for compensation in Geneva with the UN Compensation Commission for losses suffered during the first Gulf War resulting from the invasion of Kuwait by Iraq.
After my stay in Brussels, I was in the US for nearly 7 years and practiced as a M&A lawyer doing private- and publiclisted company acquisitions, joint ventures, PE investments, and poison pills. In the US, I am admitted to practice in the States of California and Ohio and practiced as a M&A lawyer and a competition/antitrust lawyer in both Menlo Park/Palo Alto and Cleveland.
I have been practicing as a M&A lawyer and a competition lawyer in India since 2003 after giving up my partnership with a US law firm. Recently, I have also started getting involved in the representation of clients in litigation before the Indian Courts and Tribunals.
As a corporate M&A lawyer, I have represented clients in some of the largest and most complex transactions in the US, EU and India, including acquisitions and dispositions of shares and assets and joint ventures in the US and the EU, privatizations (in Germany after the unification of West and East Germany and in India such as the privatization of Modern Foods and IPCL), large outsourcing transactions (such as the outsourcing transaction between Wachovia Bank and GenPact, British Telecom and Tech Mahindra, and between various banks and HCL Technologies), and private equity investments in Indian companies. The sale by Westinghouse to Schindler of its US elevator division, the acquisition by Huntsman Corporation of Deerfield Plastics in the US, and the acquisition by Zurn Industries of Eljer Industries, by Anthem of Acordia and by CTS Corporation of Dynamics Corporation, in each case pursuant to a public tender offer in the US, were all complex transactions that gave me invaluable learning and experience.
Corporate M&A transactions and PE investments in India, however, have been the most challenging and rewarding for me as compared to transactions in the US and the EU, whether