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A government bill on amending the Finnish Act on the Book-Entry Securities System, prepared by the ministry of finance, was given to parliament in September. The bill pays particular attention to the international relations established between securities depositories and to the handling of foreign securities in the Finnish book-entry securities system. In addition, the provisions governing the entering of foreign securities into the Finnish book-entry securities system have been specified in the bill.

The government has now published its Bill on the UK’s new financial regulatory system, but only time will tell whether the new hybrid will function effectively. By Simon Gleeson of Richards Butler, London

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.

President Jiang Zemin's recent call for restraint of the People's Liberation Army's widespread business activities is only part of a greater campaign to separate government and business in China. In the areas of tax and finance, two events highlight this tendency:

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.

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 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?

ING Group has purchased a leading stake in German bank BHF-Bank. The deal, which is worth DM 2.5 billion ($1.4 billion), involved a number of separate transactions through which ING increased its holding of BHF-Bank shares from 4.5% to 39%. ING is now the largest single shareholder of BHF-Bank. The transaction was completed on September 14. Final completion of the acquisition is dependent on gaining the consent of the regulatory authorities. The shares were sold by Allianz, DG Bank and Münchener Rück.

The Czech subsidiary of Slovak electrical company Slovenske elektrarne has issued Kr3 billion bonds (US$97.6 million). This is the first ever bond issue by a foreign issuer to be fully documented in and solely designed for the Czech Republic. The lead underwriter in the deal was ING Barings Capital Markets advised by US firm White & Case, Prague. Lead partner Ivan Cestr (primary issues/securities) was assisted by associates Kvetoslav Krejci and Josef Otcenasek.