Nearly a decade after the International Financial Services Centre (IFSC) in Dublin was launched, competition between the select few legal players in the sector is greater than ever.
Set up in 1987, the IFSC sought to establish an Irish presence in the global offshore finance industry. It was designed to attract treasury, fund management and insurance work and offered a range of incentives – 10 per cent corporation tax rate, lower personnel costs, an adequate skills pool and an effective telecommunications infrastructure.
Since then, it has made its presence felt in the offshore finance industry and now has more than 400 companies operating within its licence terms, many located in the specially-developed precinct at Custom House Docks. The centre has also captured a share of the world's leading banks and assurance companies.
Legal services to the centre tend to be front-loaded, providing tax and other advice to companies which set up shop there. However, this relationship continues over time and contacts continue between the law firm and its clients although it may be infrequent. Weekly conferences would be the norm for many advising IFSC clients, although those who have targeted the centre most aggressively will have daily involvement.
The legal costs for fund establishment were estimated at around £20,000 per fund by one banker, and with 612 funds registered in the IFSC, the cumulative fee income from this source may have run to eight figures to date.
The incentive to attract such clients leads to an intense rivalry between the niche firms in the sector. Indeed, McCann FitzGerald was so keen to be in the thick of the action, it uprooted and relocated its main office to the centre's confines.
But there is little agreement between the players as to who is most successful in getting the work, although it is mainly divided between 10 firms with two or three getting the bulk.
Fitzrovia International, the London-based offshore finance information specialist, carried out a survey of IFSC-registered funds and legal advisers last year. The survey found A&L Goodbody at top billing, with a 27 per cent market share, followed by Dillon Eustace (24 per cent), Arthur Cox (22 per cent), McCann FitzGerald (15 per cent), Matheson Ormsby Prentice (over 3 per cent) and finally William Fry (just under 3 per cent).
However, there are other interpretations of these figures and since the report was published nearly all the firms have claimed to be the market leader.
Dan Morrissey, of William Fry, says: “The report shows the accumulated position at last year for the previous four to five years. We only entered the market in 1993.”
He says his firm recorded activity on a monthly basis between the firms and claims that “there is not much between ourselves, Arthur Cox and A&L Goodbody” in terms of new business. Morrissey adds that the report does not distinguish between offshore and onshore business. “Business on the international fund side has grown dramatically. In terms of current work, we are one of two leaders. We have hired two additional full-time lawyers.”
David Dillon, of financial services firm Dillon Eustace, says many have found that “the sector has not been quite the golden goose” it first appeared to be. “Some have put a lot of resources into IFSC work and have not got as much out,” he says. “It is a very competitive market.”
Dillon believes some firms leapt in without first assessing the risks because they were “jealous” of rivals cashing in on a burgeoning market. “It is not an area where you can just put up a sign saying 'We do financial services'. It is highly sophisticated financial work.”
But others are looking to increase their stake in financial services. David Beattie, of
O'Donnell Sweeney, says his firm did “a certain amount of IFSC work but not as much as we would like”. Beattie thinks the big success story so far has been in funds management which exceeded all other areas combined.
However, he adds that there was a “lack of lateral thinking in utilising the IFSC” and lawyers and accountants were to blame for not advising on the full extent to which the centre could be used.
But as the professions realise what the IFSC can offer and the goldrush fever that built up false hopes in some firms subsides, Ireland's reputation as an offshore power seems set to go from strength to strength.