In recent years the leading offshore commercial law firms have worked hard at enhancing their performance, status and reputation so as to enable themselves to stand credibly alongside the global onshore players in terms of quality and service. Indeed, the international standing of these major offshore firms has contributed significantly to enhancing the reputation, profile and integrity of the jurisdictions in which they are located.
Critical to the growth and success of the leading edge offshore firms is their commitment to the highest quality standard of client service. Offshore law firms in the Channel Islands, and in particular in Jersey, have been at the vanguard of this development.
Jersey enjoys an excellent reputation among mainland professionals for the quality of its finance industry, its laws and regulations, and its courts (witness, for example, the quality of the Royal Court’s recent judgment in the Esteem Settlement (CA). As a result, Jersey law is increasingly selected as the governing law of documents (particularly in the field of trusts), and as a result commercial lawyers have been getting even busier.
A further element of business growth and enhanced reputation has been the evolving regulatory regime to the best international standards. This has gone a long way towards addressing the ill-deserved perception that there was something unsavoury about doing business offshore. In practice, nothing could be further from the truth, and in terms of quality standards and regulation the leading offshore centres stand alongside (and sometimes ahead) of the leading onshore centres. It is interesting to note that prior to the recent enactment of the Patriot Act 2001, it was easier to open a bank account in the US that it was in Jersey, Guernsey or the Cayman Islands.
The leading offshore centres have worked very hard over a great many years to ensure that only quality business is accepted. Even before the most recent evolution in our regulatory regime, centres such as Jersey were very careful when it came to approving and licensing business. For example, BCCI was twice refused a licence notwithstanding that it was granted a licence by the Bank of England to operate in the UK.
It would be naive to suggest that the leading centres have been able to avoid ‘tainted’ business altogether, but the press has (somewhat unusually) been guilty of an unbalanced focus and presented a coloured view of offshore business.
The negative perception may have been driven by a lack of understanding of the true nature of the key offshore centres and the myth that all assets held offshore are unclean. What offshore centres do is pursue financial services in a way that benefits their own communities; it helps establish them and helps them flourish in exactly the same way as major finance centres around the world. In practice, this differs very little from the UK which, by way of example, offers advantageous tax breaks to foreigners to attract business.
Transparency and a more hands-on relationship with customers should also enable any unsuitable business to be identified before it is accepted. Post 11 September business has to be more transparent.
There is a necessary global drive to reduce terrorism, prevent money laundering and so on, and the know-your-client rules are now more demanding than they have ever been.
In recent years, the offshore centres generally have been under scrutiny and this is likely to result in a global reduction in the number of offshore centres, with most of the business being centred on those with established relationships. There is a balance to be struck between preserving the special status of centres such as Jersey,
Guernsey and the Caymans and cooperating in key areas which affect all of the leading centres. There is, in my view, a consensus that Guernsey, Jersey and the Caymans should be among the best regulated centres. But should we be at the very forefront?
One has to balance the need to be well-regulated with the ability to remain competitive. What is needed is a consistent approach to regulation across all offshore centres to maintain a high standard of business conduct and to uphold the integrity of each jurisdiction.
There is a strong case for the leading offshore centres to work more closely together in areas such as this and where they have a common interest.
In conclusion, has this ‘raising of the offshore game’ been positive?
In my view, it has and it is not over yet. What we now see is the modern day offshore commercial law firms in centres such as Jersey, Guernsey and the Caymans operating very much like City firms, expanding globally and, in so doing, offering multi-jurisdictional offshore services and generally now providing a much better service to its commercial clients than ever before. Long may that continue.
Jonathan White is chairman of the Ogier Group