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Credit derivatives are contracts intended to transfer credit risk on loans, bonds and other assets (the underlying assets) from the protection buyer to the protection seller. Under these contracts, the payment or other obligations of the protection seller are triggered by credit events affecting the reference asset.

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.

Additional First Provision of Law 28 of July 13 1998 on Installment Sales, in force as from September 13, has solved some of the traditional legal issues concerning financial leasing transactions. The law's main features are as follows.

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.

The National Telecommunications Agency (Anatel) announced on September 8 1998 that the auction of the so-called mirror companies is set for December 2 1998 on the Rio de Janeiro Stock Exchange. The mirror companies will be able to exploit fixed telephony in three regions: region one (Tele Norte Leste mirror), region two (Tele Centro Sul mirror) and region three (Telesp mirror), as well as in competition with Embratel (domestic and international long-distance services, telegraphy, maritime communications and data transmission). Accordingly, there will be four mirror companies, all starting from non-existing structures, which will require considerable investment in infrastructure.

The US is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The New York Convention is incorporated into federal law by Federal Arbitration Act which governs the enforcement of arbitration agreements and arbitral awards. A principal advantage of the New York Convention is that a US party, in whose favour an international arbitration award has been rendered, may use the Convention to enforce the award in another country that has ratified the Convention. But may a foreign party use the Convention to enforce an award arising out of an arbitration proceeding in the US?

Under Article 22 of Legislative Decree No. 58 of February 24 1998, securities and cash belonging to third parties and held for whatever purpose by investment firms or by financial intermediaries and banks, constitute an autonomous patrimony separate from that of the intermediary and from those of other clients. No attachment by or on behalf of creditors of the intermediary, as well as by or on behalf of creditors of a possible depository or sub-depository, can be levied on the patrimony.

The Castagnede Report produced by the Commission this month recommends that the EU should begin a gradual reconciliation of the member states' VAT rates, ie turnover tax, and it should harmonize reduced rates by widening their field of application. The report comments that the level of VAT rates in member states still varies considerably with the normal rate lying somewhere between 15% and 25% and reduced rates lying between 5% and 17%. The report states that there are a number of substantial differences between the member states in their application of VAT. Denmark does not apply any reduced rates; Austria, Portugal, Finland and Sweden apply two reduced rates; the other member states apply a single reduced rate but also apply special rates, including a zero rate on some products. At the moment these differences do not cause distortions in competition or affect trade flows. However, the Commission is concerned that with the continuation of market integration, the arrival of the single currency and the increased use of electronic commerce, competition will increase, creating the need to harmonize VAT.

Since mid-1997, Hungarian legislation has imposed taxes on money transfers in cash so that cash payments made by companies over a certain sum (about Ft1.2 million (US$5.454 million)) entail various tax disadvantages. In an attempt to curtail cash payments, Hungary intended, on the one hand, to encourage non-cash money transfers common throughout Europe and, on the other hand, to gain greater control over the so-called black market.

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.