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The recent US$200 million international placement of 10-year subordinated notes by Komercni Banka, the Czech Republic's largest commercial bank, was in many respects a watershed. The transaction constituted the first international offering by a bank in central and eastern Europe of subordinated debt that qualifies for inclusion in the bank's regulatory capital base. At a time when Komercni Banka, like most other Czech banks, was required to increase its provisions for classified loans, the issue of the notes enabled the bank to shore up its balance sheet and maintain an acceptable risk capital ratio without issuing new equity. From a legal perspective, the transaction presented a number of novel issues requiring innovative solutions. One of the most vexing challenges was structuring a subordination clause that satisfied both the international marketplace and Czech regulators, because neither existing banking regulations nor the Czech Bankruptcy Act recognized a concept of subordination consistent with international practice and standards. This article examines how the lawyers on the transaction managed to fit a square peg into a round hole to accomplish this feat.

German firm Gleiss Lutz Hootz Hirsch & Partner and Benelux firm Stibbe Simont Monahan Duhot are considering merging. Partners at the two firms will take a vote in December and, if approved, the German firm will continue business as Stibbe Gleiss Simont Duhot on January 1 1999. The move follows the merger last year of Stibbe and French firm Giroux Buhagiar & Associés in Paris. Frans Corpeleyn, managing partner of Stibbe, says: "We will have French, Belgian, Dutch and German lawyers and these are the major jurisdictions in Europe. We want to be one truly integrated European law firm."

Following pressure from the opposition party, the Japanese Prime Minister has decided to withdraw legislation to rehabilitate the financial sector. The government was planning to use taxpayers' money to help bail out Japan's ailing banks but Minshuto, the Democratic Party of Japan, has proposed a rescue plan which will address the problems by allowing market forces to prevail. Naoto Kan, the leader of Minshuto, proposes that the Long-Term Credit Bank (LTCB) be nationalized and no longer entitled to receive public money from a fund which was set up in February following the enactment of a new law to provide financial assistance to banks. Kan also proposes that an independent body be created to deal with failed financial institutions. The creation of this body, under Article three of the National Government Law, will result in a separation of budgetary and financial administration in the Ministry of Finance. However, this move is criticized by lawyers for its lack of long-term vision. Andrew Castle, banking partner at Allen & Overy in Tokyo, says: "These proposals do not provide an answer to the problems. Nationalizing the bank does not really mean anything in itself. The question they must address is whether they will find resources to keep LTCB in business or wind it up."

Delegates at the IBA's Vancouver conference heard how the introduction of the euro will lead to a vast unified European capital market, with the ability to rival the US and Japan. But, says Charles Proctor, a capital markets partner at UK firm Norton Rose, the creation of a European Securities Commission is necessary if the euro market is to become internationally credible. Proctor, speaking at the session Securities - related problems of the Euro, explained how the European Central Bank will have no specific powers over the securities markets. A European Securities Commission would unify the rules applicable to the public debt/equity markets across all member states, not solely the euro-zone. This would enhance the credibility of the euro and of the European financial markets and encourage free movement of capital across the EU.

The International Bar Association's Council has passed a resolution on multidisciplinary practices (MDPs), its first acknowledgment that the joining of legal and accountancy practices is inevitable. The resolution calls on national regulators, including authorities which promote trade in services, to establish rules on MDPs to protect both practitioners and clients. Such rules should include measures to protect lawyers' independence and to prevent MDPs from representing conflicting interests. Client privilege and confidentiality should also be safeguarded.

For some years money laundering prevention measures of considerable effectiveness have applied to banks in Switzerland. These measures did not, however, cover the rest of the financial sector, and as a result the regulatory framework had large gaps. One of these was filled on April 1 1998 when the Federal Statute for the Combating of Money Laundering entered into force. It extends the standard of care exacted in the banking sector to financial intermediaries operating in the non-banking sector. If an attorney-at-law chooses to act as a financial intermediary within the meaning of the statute, he or she is fully subject to its regulatory requirements and may not, in particular, invoke professional secrecy if requested to disclose details of his or her financial activities.

In an attempt to attract more investors to join the Cyprus Stock Exchange (CSE), the income tax law has been amended to offer substantial tax incentives. The incentives aim to attract both offshore and local organizations to invest in the CSE as well as private companies.

In connection with the financial and political crises that swept Russia in August and September, the Russian government has adopted certain extraordinary measures, including the restructuring of the state's obligations under widely-held debt securities, and a moratorium on repayment of certain other hard currency debts. Creditor losses as a result of these measures are potentially enormous; by some estimates, in the hundreds of billions of dollars. Among other effects, the new measures have precipitated the effective collapse of the Russian banking system. From a legal perspective, the imposition of the measures has raised a host of issues, including the effective remedies available to bond creditors and the status of private debtor obligations in view of the moratorium.

Opportunities exist within the Arabian Gulf states for equity investment in large projects. But the creation of bankable project structures requires effective security over project assets. By Martin Amison of Trowers & Hamlins, London

UK firms Herbert Smith and Freshfields have been hired to represent electric companies in a recent £2.7 billion ($4.38 billion) merger. Scottish Hydro-Electric, and Southern Electric announced their merger on Tuesday, September 1. The companies are the only two privatized regional electricity suppliers not to have been involved in a takeover or merger. Scottish Hydro-Electric, which operates chiefly as a generator, has the controlling stake, in line with its larger market capitalization. The merged groupwill be called Scottish and Southern Energy and will be based in Scotland.