Legal Update: Deposit Protection Scheme (Amendment) Bill 2024 – improvements to enhance Hong Kong’s banking attractiveness

Providing stability and reassurance, deposits in Hong Kong banks have been guaranteed for nearly 2 decades now under the Deposit Protection Scheme (“DPS”). One of the conclusions of a recent review of the scheme was among others to increase the limit of protection of deposits by HK$300,000. These and other improvements will be implemented from 1 October 2024 onwards, ensuring continued confidence in banking in Hong Kong. This article provides background and additional notes to this welcomed amendment to the scheme.

Deposit protection is considered fundamental and foundational to the stability of a banking system. Since 2006, the DPS was established in Hong Kong pursuant to the Deposit Protection Scheme Ordinance (Cap. 581) (“DPSO”), with the primary objective of protecting depositors from potential default of banks in Hong Kong.

The operation of the DPS is overseen by the Hong Kong Deposit Protection Board (“HKDPB”), an independent statutory body formed under the DPSO.

The notable characteristics of DPS include:

- all licensed banks are DPS members, unless exempted by the HKDPB;

- most types of deposits, whether in Hong Kong Dollars and foreign currencies, are protected by the DPS alike;

- the current limit of protection is HK$500,000 per depositor per bank;

- the DPS is backed by the Deposit Protection Scheme Fund (“DPS Fund”) established under DPSO, to which DPS members contribute by way of levies.

The latest review called for improvements, which paved way for the subject amendment.

The HKDPB conducts regular reviews on the DPS to maintain its effectiveness and to ensure that it stays up-to-date with reference to international practice. The latest review called for improvements, which paved way for the subject amendment.

The Amendment: strengthening protection, reinforcing Hong Kong’s financial hub status

Following the recommendations by the HKDPB, the Deposit Protection Scheme (Amendment) Bill 2024 was first introduced to the Legislative Council (“LegCo”) on 8 May 2024.

The Deposit Protection Scheme (Amendment) Ordinance 2024 (“Amendment Ordinance”) was subsequently passed on 3 July 2024, which aims to enhance the abovementioned function of the DPS as the financial safety net, and strengthen the protection offered to depositors banking in Hong Kong.

Some of the prominent amendments are:

- raising the limit of protection under the DPS from HK$500,000 to HK$800,000;

- providing additional recourses to depositors in the event of a bank merger or acquisition;

- enhancing the levy mechanism such that the DPS Fund may reach the target level within a certain period to facilitate the implementation of the increased limit of protection under the amendment; and

- requiring mandatorily the display of DPS membership sign on electronic banking platforms of the DPS members; and

- streamlining the negative disclosure requirement on non-protected deposit transactions for private banking customers, i.e. clarifying better to customers in case transactions they make are not covered by DPS.

The Amendment Ordinance was gazetted on July 12 and will be implemented in two phases. The first phase will be effective from 1 October 2024, which covers measures calling for less preparatory work, such as the enhancement of protection limit of deposit to HK$800,000, the refined levy mechanism, and the requirements on mandatory display of DPS membership sign. The other amendments will be implemented in the second phase, which comes into effect on 1 January 2025.

The Amendment Ordinance appears to be generally well received and widely welcomed, in the hopes that the amendment’s advanced protection and hence confidence to depositors, enhances stability of our banking system, and reinforces Hong Kong’s niche as an international financial hub.

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Your point of contact in Hong Kong: Stefan Schmierer

Ravenscroft & Schmierer

22nd Floor, Bupa Centre
141 Connaught Road West
Hong Kong, SAR

CELL    +852 9229 6603
TEL      +852 2388 3899
FAX      +852 2385 2696

www.rs-lawyers.com.hk
sschmierer@rs-lawyers.com.hk

Introduction of the right to resale royalty for authors (artists) of works of art

With the entry into force of the Art Promotion Act on July 25, 2024, a resale royalty system for artworks was introduced in Articles 24 to 26. Previously, the artist did not receive any compensation during the resale after the sale of an artwork, so the right to receive resale royalty was introduced to ensure the livelihood of artists and their families and to improve their situation.

Article 24(1) of the Art Promotion Act stipulates that an artist has the right to request a certain percentage of compensation (right to request resale royalty), except in the following cases: (1) when the resale price is less than 5 million won; 2) when a work of art that is a work made for hire is resold; and 3) when the resale price within three years of the acquisition of ownership directly from the artist is less than 20 million won.

The right to receive royalty is non-transferable and lasts as long as the author lives and for 30 years after his or her death; however, if the author is deceased at the time of resale, the author's legal heirs may claim the right to receive royalty (Article 24(2) of the Act). The right to receive resale royalties does not apply if the author is a foreigner and the foreign country does not recognize the right to receive resale royalties for Korean nationals under the principle of reciprocity, but if there are different provisions in an agreement to which Korea is a party, these provisions shall apply (Article 24 (3)).

The right to claim resale royalty cannot be asserted by the artist himself vis-à-vis the re-seller, but must be asserted through an organization for the promotion of art in accord-ance with the Art Promotion Act or an organization designated by the Minister of Culture, Sports and Tourism under certain conditions (Article 25 (1)).

Articles 24 to 26 of the Art Promotion Act delegate to the Presidential Decree all matters related to the types of works of art subject to the right to resale royalty, the rate of royalty, the designation and cancellation of designation of the organization which will collect and distribute the resale royalty, and the collection and distribution of the royalty. However, Articles 24 to 26 of the Art Promotion Act will not come into force until four years after its promulgation, i.e., on July 26, 2027, so the Presidential Decree of the Art Promotion Act does not yet contain the details of the above Articles 24 to 26.

2. Applicability to NFT artworks

Pursuant to Article 24(1) of the Art Promotion Act, the content of the artworks eligible for a resale royalty is delegated to the Presidential Decree, but the details have not yet been set forth in such Presidential Decree, leaving it unclear what type of artworks are eligible for a resale royalty. In particular, there appears to be a larger discussion as to whether the resale right under the Art Promotion Act applies to NFT artwork.

Since the minting of artwork as an NFT typically incurs a royalty for the original issuer and the payment of the royalty is automatically processed through a digital agreement, it could be argued that the right to resale remuneration already exists for NFT artwork, making it unnecessary to include NFT artwork in the Art Promotion Act. On the other hand, so long as the Art Promotion Act provides for the application of a specific statutory rate to protect artists, it may be necessary to apply the right to receive resale royalties under the Art Promotion Act to NFT artworks to achieve the purpose of the system.

In addition, considering that (i) royalties under digital contracts are only the content of a contract between the parties, so royalties may not be applied depending on the agreement between the parties, and that (ii) with the current NFT standard, it may be difficult to pay royalties for redistribution outside the distribution platform, it is also proposed that the right to resale royalty be guaranteed as a statutory right for NFT artworks.

Whether or not the right to resale royalty under the Art Promotion Act should be applica-ble to NFT artworks is not likely to be discussed in more detail until further details of the same are specified in the Presidential Decree.

3. Challenges and outlook

In its recent research report on the Art Promotion Act, dated June 18, 2024, the National Assembly Research Service pointed out the lack of definition of the right to resale royalty, and stated that (i) the determination of an appropriate rate for the right to resale royalty should be carefully considered, and that (ii) the obligation to pay resale royalty should not be limited to the seller, but consideration should also be given to recognizing the liability of galleries and others who play an essential role in the resale of artworks.

The resale royalty system is still about three years away from its implementation, so it may be said that it is just getting started; however, it is significant in that it has introduced some compensation for creators in the area of works of art, just the same as in the area of music, literature, and video.

Whether the right to resale royalty for NFT artworks should be guaranteed as a statutory right requires further discussion; however, at least the introduction of the statutory right to resale royalty for physical works of art has increased the possibility of changing the existing remuneration structure for NFT artworks, and more advanced discussions on the distribution and revenue structure of NFT artworks may be expected.

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Your point of contact in Korea: Joachim Nowak

DAERYOOK & AJU LLC

7 - 16F, Donghoon Tower
317, Teheran-ro, Gangnam-gu
Seoul 06151, Republik Korea

CELL +82 10 9001 6430
TEL   +82 2 3016 9594
FAX  +82 2 3016 5222

www.draju.com
nowak@draju.com

Taiwan HR developments 2024 and Outlook 2025

Taiwan continues to adjust its labor law to reflect amongst others the demgraphic change – Taiwan is close to become a superfast aging society – and to be more competitive to acctract and keep foreign talents.

Retirement Age

In Summer this year the Taiwan Labor law was adjusted. With the amendment of article 54, the Labor Standards Act now allows both employers and employees to negotiate with each other on extending the mandatory retirement age, allowing those who are soon to be phased out of employment to remain in the workforce for longer if their situation requires it, whilst also giving employers to option to retain skilled, highly trained, and experienced workers. Before that amendment the mandatory retirement age was set at the age of sixty-five. The new law complements the Middle-Aged and Elderly Employment Promotion Act, which helps to protect the opportunities that veteran workers have in their respective industries by ensuring that their wages and hours remain uncompromised.

Minimum Wage

Starting with January 1, 2025 the minimum wage shall be increased to TWD 28,590 (USD 889.68) from TWD 27,470 - an increase of 4.08 percent.

Digital Nomad Scheme

Also in 2025, a new scheme to attract Digital Nomads shall be launched by the Taiwan National Development Council (NDC). The initiative aims to attract global talent and enhance Taiwan’s competitive edge. The planed digital nomad visa scheme would offer an initial three-month stay in Taiwan, extendable for an additional three months.

Global Elite Card

The latest program targets high paid foreign nationals. The new card would allow foreign professionals with an annual salary of more than TWD 6 million (USD187,612) to apply for foreign residence within one year. It will also enable them to get work permits for their spouses and permit unrestricted stays for dependent relatives.

Whether the planed schemes will indeed lead to an increase of foreign specialists working in Taiwan would need to be seen and would deeply depend on the final scope of both programs.

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Your point of contact in Taiwan: Michael Werner

Eiger Law

Bldg. A, 2F, 25-2 Ren Ai Rd, Sec. 4
Taipei 10685
Taiwan

CELL      +886 9 8726 1326
TEL        +886 2 2771 0086
FAX       +886 2 2771 0186

www.eiger.law
info@eiger. law

Thailand VAT increase in October 2024 postponed again

The Thai Cabinet confirmed on September 17, 2024 that the planned increase in VAT from 7% to 10% (Sec. 80 Revenue Code) will not take place on October 1, 2024.

VAT was reduced from 10 % to 7 % in 1999, although the return to 10 % has already been postponed several times.

The economy has recovered strongly from the effects of COVID and the Ministry is keen not to exacerbate the effects of inflation. The Ministry of Finance's economic growth forecast of 3.5% this year is likely to be reduced to 2.4%. The cabinet is therefore keen to avoid having to cut the growth forecast even further, as exports have failed to take off. This latest extension is aimed at, among other things, mitigating the impact of the cost of living, boosting consumer spending and strengthening business confidence in the Thai economy.

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Your point of contact in Thailand: Dr. Andreas Respondek

Respondek & Fan Ltd

United Center, 39th Floor, Suite 3904 B
323 Silom Road
Bangkok 10500, Thailand

CELL     +66 89 896 4048
TEL       +66 2 635 5498
FAX       +66 2 635 5499

www.rflegal.com
respondek@rflegal.com