20 November, 2017
Leon Alexander, Clyde & Co’s Singapore-based Trade & Commodities Partner speaks about what trends he’s seeing in the market.
1. Please tell us about yourself and your career to date
My career has been relatively standard having worked for the firm my entire career (I joined Barlow Lyde & Gilbert in 2004 which then merged with Clyde & Co). After various business trips to Asia I witnessed the growth in the trade & commodities ("T&C") sector and the increased business being done there so I relocated to Singapore in 2014 to increase our T&C expertise in the region. Living two degrees north of the equator took some getting used to, but year-round summer has its perks!
2. Singapore has established itself as a leading global commodities hub, can you tell us what key trendsyou have seen in the past 12 months in this region?
The end of the commodities super-cycle left a fair amount of devastation in its wake and regionally the sector has considerably changed as a result. A key trend that I have witnessed over the last 12 months is that traders have increased their presence in Singapore as part of a general power shift towards Asia and the growing regional economies. We are also seeing an increased diversification by the largest companies, such as traders investing across the supply chain to exploit whatever arbitrage is available.
Another key trend has been consolidation within the market, be that in the form of acquisitions by the large agri-commodities traders/purchasers or the alliances formed by Chinese "teapot" refiners. These changes, together with the increasing focus on environmental issues and well documented macro-economic and socio-political changes are disrupting traditional trade flows as new patterns develop.
3. Emerging economies such Indonesia, Myanmar and Vietnam are rich in natural resources and are becoming major players in the global commodities scene. What advice would you give to clients entering into those markets?
The GDP growth figures and investment into these markets make them appear attractive, but they are very challenging places to do business and, in addition to the cultural differences, there are variances in sophistication across the emerging economies in Southeast Asia. It is therefore essential that local experience and expertise is obtained prior to concluding business. We spend a lot of time assisting clients not just with the legal background (e.g. the regulatory framework), but also the practical/commercial implications (e.g. what can I actually do if something goes wrong) of doing business in these countries.
We also work closely with our trade sanctions and compliance specialists as international companies must be aware of the risks of doing business in these jurisdictions and ensure that the correct procedures arein place.
4. Technology is rapidly changing the business world. Could you tell us more about technology [blockchain] and its impact in the trade & commodities sector?
It is a very exciting time for the T&C sector. Over the last 12 months the introduction of new technologies and related developments have been nothing short of spectacular. Singapore is positioning itself as a "Smart Nation" and T&C is one of the areas where technology is being most rapidly adopted.
For example, blockchain solutions in trade finance are already being trialled in Singapore, where IBM has established a Centre for Blockchain Innovation in collaboration with the Port Authority of Singapore (PSA), the Economic Development Board and the Monetary Authority of Singapore. Without boring everyone, what this means is, in the first instance, utilising distributing ledger technology to increase efficiency and reduce cost of financing multi-party international trade; instead of finance documentation being issued and approved by various different parties in a chain, a network of users will do the job instead.
However, what is very interesting is how this can interplay with other technology in the T&C sector relating to the physical movement of goods. This involves utilising the internet of things ("IoT") and smart contracts. As an example, you could have a container of cargo with various sensors which determine the cargo’s condition and location (something which the PSA are physically implementing). The sensors are connected to the internet and transmit data, such as when the goods are loaded onto a particular vessel. Such data being received can be one condition of a smart contract which causes the release of a payment (i.e. without receipt of a bill of lading). It is then the blockchain that ensures authenticity in the data that is transmitted increasing security in the transaction.
The secure nature of these technologies (by way of a private digital signature and verification of the data by all users within the blockchain) will also help to reduce fraud which makes them attractive to banks too and is why they are being adopted so quickly.
The job for T&C lawyers such as myself and is to advise on how these technological changes sit within the existing law on such things as the passing of title or insolvency and how to create contracts which ensures the parties’ rights are protected.
In addition to the T&C legal services that we provide, our smart contracts consultancy, Clyde Code, supports companies with smart contracts needs by providing fully integrated legal and technology advice to help them realise the growing potential of smart contracts and DLT. Clyde Code offers the full range of smart contract services (including smart contract creation, enhancement, verification and enforcement/dispute resolution), thereby bridging the gap between the legal and technical aspects of smart contracts implementation. To find out more about Clyde Code, please visit http://www.clydeco.com/clydecode
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For further information, please contact:
Leon Alexander, Legal Director, Clyde & Co
leon.alexander@clydeco.com
