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04 September 2019

Legal Updates August 2019

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Dear valued clients and business partners,

We are pleased to highlight the following legal news and updates for August 2019.

Click here to download the PDF version: Legal Updates August 2019.

EMPLOYMENT AND ADMINISTRATIVE LAW

Major Amendments to Labour Laws to pick up pace

The Employment Act 1955 will be amended to provide for more effective handling of current workplace issues, said Human Resources Minister M. Kula Segaran. He said the current issues to be deliberated include discrimination at the workplace, paternity leave and working hours.

He said discussions on the proposed amendments had been held with stakeholders throughout the country, including the National Labour Advisory Council, Malaysian Trades Union Congress and Malaysian Employers’ Federation.

Other amendments that will be introduced will also cover the Trade Unions Act 1959, Industrial Relations 1967 and the Code of Conduct for Industrial Harmony 1975.

For further information regarding employment and administrative law matters, please contact our Employment and Administrative Law Practice Group.

FINANCIAL SERVICES

Further liberalisation of foreign exchange administration policies

Bank Negara Malaysia (“BNM”) has announced that a Supplementary Notice No. 6 on Foreign Exchange Administration Rules will be issued and take effect on 30 August 2019 in respect of the following liberalisation of foreign exchange administration (“FEA”) policies:

  1. Hedging flexibility
    • residents may obtain BNM’s approval to hedge their foreign currency current account obligations up to their underlying tenure;
    • treasury centres in Malaysia are free to hedge on behalf of their related entities via a licensed onshore bank to facilitate greater efficiency in centralised risk management operations;
    • non-resident treasury centres outside Malaysia will be permitted to hedge on behalf of their related entities in Malaysia and overseas via a licensed onshore bank or an appointed overseas office (“AOO”) upon a one-time registration with BNM; and
    • non-residents will be permitted to hedge on anticipatory basis via an AOO for settlement of trade in goods and services. 
  2. Exemption from the definition of “domestic ringgit borrowing“
    • credit facilities such as corporate credit card and other facilities of similar form which are used by corporates for miscellaneous expenses such as sundry and employees’ travel expenses are excluded from the definition of “domestic ringgit borrowing” under the applicable FEA policies on investment abroad.
Liberalisation of derivatives market rules

The rules and directives of Bursa Malaysia Derivatives Bhd and Bursa Malaysia Derivatives Clearing Bhd respectively have been revamped with effect from 15 August 2019.

The main objectives of the amendments to rules and directives include, without limitation:

  • enhancement of business efficiency and flexibility of doing business in the Malaysian derivatives market;
  • reduction of regulatory burden and accord greater flexibilities towards the participants’ dealings to manage and operate their business while ensuring adequate investor safeguards in place;
  • clearer, more straightforward and streamlined rules to ease compliance. The rules are now updated and directives are consolidated to facilitate easy reading and understanding.

BNM issues exposure draft on Anti-Money Laundering and Counter Financing of Terrorism (“AML/CFT”) — Money Services Business (Sector 3) (Supplementary Document No. 2)

BNM had, on 9 August 2019, issued an exposure draft which sets out its requirements and expectations on money changers licensed under the Money Services Business Act 2011 which implements electronic Know Your Customer (“e-KYC”) for establishing business relationships and conducting consumer due diligence (“Reporting Institutions”).

Pursuant to the exposure draft:

  • Reporting Institutions would be required to obtain the prior written approval of BNM to implement e-KYC for the provision of money changing business through online or mobile channels.
  • Reporting Institutions would be required to implement and maintain the minimum requirements and standards prescribed by BNM in the policy document to ensure effective and robust AML/CFT controls and systems are in place to safeguard the safety and integrity of online and mobile money changing services.
  • Paragraph 18 of AML/CFT — Money Services Business (Sector 3), issued on 15 September 2013, is superseded insofar as it applies to the Reporting Institutions.

The deadline for submission on feedback to the exposure draft is 8 September 2019.

BNM issues exposure draft to revise policy document on operating cost controls for life insurance and family takaful business

BNM is currently seeking industry comment for its exposure draft, which was issued on 31 July 2019, which will apply to:

  1. insurers licensed under the Financial Services Act 2013 to carry on life business; and
  2. takaful operators licensed under the Islamic Financial Services Act 2013 to carry on family takaful business.

The exposure draft:

  1. is intended to come into effect on 1 January 2020;
  2. when it comes into effect, it will supersede the existing policy document on Operating Cost Controls for Life Insurance and Family Takaful Business issued on 26 December 2018 (“Existing PD”);
  3. seeks to set out the following:
    • the roadmap for the deregulation of operating cost control limits;
      expectations on remuneration policies implemented by a licensed person for intermediaries;
    • requirements relating to the implementation of the balanced scorecard framework (“BSC Framework”);
    • the disapplication of, and adjustments to, operating cost controls for specific products and intermediaries;
    • enhancements to, and rationalisation of, requirements relating to agency structures and related expenses; and
    • governance and reporting requirements.

The deadline for submission on feedback to the exposure draft is 30 September 2019.

BNM issues exposure draft to revise policy document on repurchase agreement transactions

An exposure draft was issued by BNM, on 20 August 2019, which seeks to revise the existing regulatory requirements on repurchase transactions (“Repo”) entered into by banks and investment banks licensed under the Financial Services Act 2013.

Amongst the revision sought to be made are:

  1. non-application of the policy document for any Repo entered into with BNM;
  2. extension of the maximum tenor of a Repo from 365 days to five years;
  3. the categories of “eligible securities” are no longer prescribed. Thus, market participants will have flexibility in terms of the types of securities to conduct Repo; and
  4. removal of the requirement to adopt a Malaysian Annex to the Global Master Repurchase Agreement for Repo involving Ringgit securities. 

The deadline for submission on feedback to the exposure draft is 13 September 2019.

For further information regarding financial services matters, please contact our Financial Services Practice Group.

INTELLECTUAL PROPERTY

Heineken Asia Pacific Pte Ltd v Super La Via Sdn Bhd [2019] MLJU 117

The High Court in this recent case of transhipment of counterfeit goods had the opportunity to consider whether a party sued for trade mark infringement could rely on it being a mere middle-man to escape liability under the cause of action on the ground that it was a mere conduit of these goods for third parties/non-Malaysian market.

The High Court Judge answered this in the negative and held that the purported defence was not one of the prescribed statutory defences provided for under section 40 of the Trade Marks Act 1976. In this case, the Court found that the secondary act of abetment of others would still amount to “use” in respect of liability for trade mark infringement.

Facts of the case

The plaintiff (“Heineken Asia Pacific”) is a private limited company incorporated in Singapore and is part of the Heineken Group. Heineken Asia Pacific is the registered proprietor in Malaysia of, amongst others, the “BINTANG” mark and devices (“Bintang Marks”) in respect of alcoholic drinks and other goods in Class 32 including these marks.

The defendant (“Super La Via”) is a private limited company incorporated in Malaysia involved in the business of mini-market, warehousing and storage facilities and general trading.

On 7 June 2018, Heineken Asia Pacific filed an action against Super La Via for trade mark infringement by reason of Super La Via’s acts of importing, exporting, distributing and selling beer bearing marks which are said to be identical to or nearly resembling one or more of the Bintang Marks which are not manufactured by or under the license of Heineken Asia Pacific (“Counterfeit Bintang Beer”).

Has Heineken Asia Pacific proved its trade mark infringement case?

The High Court Judge was satisfied that Heineken Asia Pacific has summarily made out its case of trade mark infringement against Super La Via. Super La Via had used the marks which are identical or so nearly resembling Heineken Asia Pacific’s Bintang Marks in the course of trade to render the use of the marks likely to be taken as being used as a trade mark. Super La Via has further failed to raise any defence or provide triable issues or otherwise to convince the High Court Judge to hold trial.

Secondary act of abetment

In its defence, Super La Via claimed to be a mere middle-man who leased its import licence and imported the shipment of three containers of Counterfeit Bintang Beer for Martens Luxury Sdn Bhd and another shipment of two containers of Counterfeit Bintang Beer for transhipment to another country. As these shipments were meant for other parties, Super La Via claimed that it was not the owner of the Counterfeit Bintang Beer.

The High Court held that Super La Via’s secondary act of abetment of others was sufficient in connecting it with the use of Counterfeit Bintang Beer notwithstanding others may have been the principal party which ultimately owned the Counterfeit Bintang Beer.

Super La Via’s involvement constituted “use in the course of trade” which has been widely defined and liberally interpreted. The High Court Judge took judicial notice on the critical impact of counterfeit alcoholic beverages which is detrimental, if not, fatal to consumers.

Disclosure

It is worth noting that in this case, amongst others, the High Court Judge ordered for disclosure of full details of the factories and/or warehouses that Super La Via had been using to manufacture the Counterfeit Bintang Beer whether in Malaysia or other countries including factories in which Super La Via had pending orders to manufacture goods.

The High Court Judge further ordered the disclosure of the names and addresses of everyone who has supplied Super La Via or ordered to supply Super La Via with the infringing goods bearing the Bintang Marks.

For further information regarding intellectual property law matters, please contact our Intellectual Property Practice Group.

TAX AND REVENUE

Income tax

The Income Tax (Deduction for Payment of Education Loan of Perbadanan Tabung Pendidikan Tinggi Nasional by Employers on behalf of Employees) Rules 2019 have been gazetted on 24 July 2019 and have effect for the years of assessment 2019 and 2020.

The Inland Revenue Board of Malaysia (“IRB”) has issued a new public ruling on Business Expenses In Respect of Disabled Person (Public Ruling No. 3/2019) on 8 August 2019.

Sales tax

A revised version of the Specific Guide on Sales Tax Deduction Facility (as at 9 August 2019) has been published on the Royal Malaysian Customs Department’s MySST website.

Service tax

The following Industry Guides have been published on the Royal Malaysian Customs Department’s MySST website:

  1. Digital Services (new — as at 20 August 2019)
  2. Employment Services (revised — as at 5 August 2019)
  3. Information Technology Services (revised — as at 9 August 2019).

For further information regarding tax and revenue matters, please contact our Tax and Revenue Practice Group.

This Alert is issued for the information of the clients of the Firm and covers legal issues in a general way. The contents are not intended to constitute any advice on any specific matter and should not be relied upon as a substitute for detailed legal advice on specific matters or transactions.