Six European nations join Iran's barter system

Syllabus subtopic: Effect of policies and politics of developed and developing countries on India's interests, Indian diaspora.

News: Paris, London and Berlin on Saturday welcomed six new European countries to the INSTAX barter mechanism

Prelims focus: about INSTEX barter mechanism, working and members

Mains focus: the significance of the move, U.S-Iran issue and its impact on India’s trade with Iran and other aspects of the geopolitics

What is it?

The Instrument in Support of Trade Exchanges (INSTEX ) is designed to circumvent U.S. sanctions against trade with Iran by avoiding the use of the dollar.

Founding members: France, Germany and the United Kingdom

Six new members: Belgium, Denmark, Finland, the Netherlands, Norway and Sweden

It's objective:

• The Paris­based INSTEX functions as a clearing house allowing Iran to continue to sell oil and import other products or services in exchange. The system has not yet enabled any transactions.

Conclusion:

The accession of the six members strengthens INSTEX and demonstrates European efforts to facilitate legitimate trade between Europe and Iran.

India, Sweden to sign MoU for polar science cooperation

Syllabus subtopic: Bilateral, regional and global groupings and agreements involving India and/or affecting India's interests

News: India and Sweden are likely to sign their first maritime cooperation agreement, Cooperation in Polar Science, during the visit to India of the Swedish royal couple and senior Ministers, including Foreign Minister Anne Linde.

Prelims and Mains focus: about the highlights of the visit, India-Sweden relations

• The Cooperation in Polar Science will encompass both Arctic and Antarctic.

• In the past few years, India has signed a series of maritime information exchange as well as military logistics support agreements, extending the reach of its armed forces. The pact with Russia, in advanced stages of discussion, will give India access to Russian bases in the Arctic for logistics and operational turnaround.

• The Swedish government made it clear that it saw defence as one important area “continually” between the two countries and the Swedish government was “behind Saab’s efforts” to pitch its Gripen fighter for the Indian Air Force’s tender for 114 jets. The company remains very interested.

Approvals needed

Observing that any aircraft today anywhere has components from different countries, Saab had offered to be a partner and obviously, the approvals needed, in this case from the American partners, have been discussed and acquired, otherwise, they wouldn’t be a contender.

U.S. companies Boeing and Lockheed Martin are also in the race with their F­18 and F­16 fighter jets.

Syllabus subtopic: Bilateral, regional and global groupings and agreements involving India and/or affecting India's interests

News: Saudi Arabia became the first Arab nation to take over the G20 presidency as it seeks to bounce back onto the world stage following global uproar over its human rights record.

Prelims and Mains focus: about G20, its relevance and achievements so far

The oil-rich kingdom has promoted a liberalisation drive, including granting greater rights to women, but faced strong criticism over a crackdown on dissent and the murder last year of journalist Jamal Khashoggi.

This presidency will be challenged by a central paradox: global risks like climate change, demographic developments, such as low birth rates, rising life expectancy and aging societies but rising populism and nationalism are preventing progress at the multilateral level.

Rights groups have urged G20 member states to exert pressure on the kingdom over its intensifying crackdown on dissent, which has seen several women activists, journalists and political dissidents jailed.

Campaigners reported that Saudi Arabia had detained at least nine academics, writers and activists, the latest in a series of crackdowns on intellectuals over the past two years.

Activists say that some were subsequently released, but the detention of liberals -- in the midst of the much-hyped liberalisation drive -- underscores what observers call increasing repression and authoritarianism.

About G20

The G20 is an annual meeting of leaders from the countries with the largest and fastest-growing economies. Its members account for 85% of the world’s GDP, and two-thirds of its population.

The G20 Summit is formally known as the “Summit on Financial Markets and the World Economy”.

Establishment:

After the Asian Financial Crisis in 1997-1998, it was acknowledged that the participation of major emerging market countries is needed on discussions on the international financial system, and G7 finance ministers agreed to establish the G20 Finance Ministers and Central Bank Governors meeting in 1999.

Presidency:

The group has no permanent staff of its own, so every year in December, a G20 country from a rotating region takes on the presidency.

That country is then responsible for organising the next summit, as well as smaller meetings for the coming year.

They can also choose to invite non-member countries along as guests. The first G20 meeting took place in Berlin in 1999, after a financial crisis in East Asia affected many countries around the world.

Who attends these meetings?

At first, the G20 was mostly attended by finance ministers and central bank governors.

That changed after the global financial crisis in 2008. With banks collapsing, unemployment rising and wages stagnating, the organisation turned into an emergency council for presidents and prime ministers.

Full membership of the G20: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States and the European Union.

Its relevance in changing times:

As globalization progresses and various issues become more intricately intertwined, the recent G20 summits have focused not only on macroeconomy and trade, but also on a wide range of global issues which have an immense impact on the global economy, such as development, climate change and energy, health, counter-terrorism, as well as migration and refugees.

The G20 has sought to realize an inclusive and sustainable world through its contributions towards resolving these global issues.

Syllabus subtopic: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

News: The Bankruptcy Code will soon be the final word on matters relating to the rescue of sinking companies, even if detective agencies investigating fraud by their owners and executives are itching to take matters into their hands.

Prelims and Mains focus: about IBC, its merits and challenges in implementation, about PMLA

Context

A set of amendments to the Insolvency and Bankruptcy Code (IBC) that the ministry of corporate affairs (MCA) will move in the ongoing winter session of Parliament will make it prevail over other laws including the Prevention of Money Laundering Act (PMLA).

Reason

This is being done so that new investors putting up money to rescue bankrupt companies under the supervision of company law tribunals are protected from liability arising from the wrongdoings of previous managers and shareholders.

BPSL case

The rescue of bankrupt Bhushan Power and Steel Ltd (BPSL) by the second largest private steelmaker in the country, JSW Steel, is currently stalled on account of complications arising from a probe by the Enforcement Directorate and the attachment of BSPL’s assets. The government intends to introduce a ‘non obstante’ clause in IBC that will be sufficient to give the Code primacy notwithstanding any conflicting provisions in other statutes as IBC is a newer law, said the person, who spoke on condition of anonymity. This will give protection to new investors. “In due course, if needed, one could think of amending the Companies Act or the PMLA,” said the person.

The amendments will also make it clear that criminal liability of the previous management and shareholders will continue. There, however, will be no protection to the company in the hands of new investors and management for any contingent liability, which the new investors will anyway take into account while preparing their financial bids.

IBC is a specialized law and bankruptcy resolution is executed under the supervision of company law tribunals. How can an eligible investor, who is not a related party, paying a consideration to take over a bankrupt company as a going concern be encumbered with actions against the wrong-doings of the previous management or promoter?

The move to ring-fence new promoters and management from prosecution and other proceedings arising from the misdeeds of erstwhile promoters and management will help incentivise more bidders to come forward and realise better value for the asset.

Investors buying stressed assets under the bankruptcy resolution process would like to have finality on the total cost and litigation, which is very important to making the investment decision. The challenge, however, lies in dealing with the assets that are suspected to form part of proceeds of crime. If the assets remain exposed to attachment under PMLA it will continue to pose challenges. This is the tough one to deal through an amendment in IBC.

The National Company Law Appellate Tribunal (NCLAT) which had approved a ?19,700 crore bid from JSW Steel to take over BPSL, subsequently stayed the transfer of payment by the bidder to the creditors of BPSL, pending an investigation into allegations of fraud and money laundering by the former owners of the steel mill. Bhushan Power, which had accumulated a debt of ?47,000 crore, was part of the original dirty dozen cases identified by the Reserve Bank of India to be referred to bankruptcy courts.

About Insolvency and Bankruptcy Code 2016

Some of the key highlights of the Code are as follows:

• The Code proposes to cover Insolvency of individuals, unlimited liability partnerships, Limited Liability partnerships (LLPs) and companies.
• Bankrupt individuals would be barred from contesting elections.
• Under the new law, a debtor could be jailed for up to five years for concealing property or defrauding creditors.
• It will strengthen hands of lenders to recover outstanding debts by setting a deadline of 180 days for companies to pay or face liquidation.
• Consolidate all existing laws on bankruptcy and insolvency.
• To cover individuals, companies, limited liability partnerships and partnership firms.
• To use the existing infrastructure of National Company Law tribunals and debt recovery tribunals to address corporate insolvency and individual insolvency, respectively.
• To create Insolvency Professionals who will specialize in such cases, assist creditors, manage liquidation process. These professionals will in turn be certified by a newly created Insolvency Professional Agency.
• It will also create Information Utilities who will collect, collate and disseminate financial information related to debtors.
• The entire operation of insolvency and bankruptcy through these various newly created agencies will be overseen by a regulator – Insolvency and Bankruptcy Board of India.
• Bill can resolve cross-border insolvency through bilateral agreements with other countries.
• To have shorter time frames for speedier resolution.
• Bankruptcy applications to be filed within three months from earlier six months.
• Workers’ salaries for up to 24 months will get first priority in case of liquidation of assets of a company,?ahead of secured creditors.
• Money due to employees from PPF, gratuity fund will not be included in the estate of the bankrupt company or individual.

About PMLA

The initial money laundering law in India was enacted in 2002, but it has been amended 3 times (2005, 2009 and 2012).

The last amendment of 2012 was approved by the President on January 3, 2013 and this law has come into effect from February 15, 2013.

The Prevention of Money-laundering Act, 2002 (PMLA) aimed at combating money laundering in India with three main objectives:–

1. To prevent and control money laundering

2. To confiscate and seize the property obtained from laundered money

3. To deal with any other issue connected with money laundering in India

The PMLA (Amendment) Act, 2012 has put concealment of funds, acquisition of possession, use of proceeds of crime and possession of money in criminal list.

It is worth to mention here that RBI, SEBI and Insurance Regulatory and Development Authority (IRDA) have been brought out under the purview of PMLA, 2002. Hence the provisions of this Act shall apply to all financial institutions, banks, mutual funds, insurance companies and their financial intermediaries.

Note: To know more about PMLA click on the link below.

https://barandbench.com/amendments-to-pmla-by-finance-act-2019-widening-the-scope-of-the-legislation/