Vista trusts allow BVI to slough off past and attract global businesses
17 January 2005
29 April 2013
29 April 2013
AIFMD update — Bermuda, BVI, Cayman Islands and Mauritius: approval of third country co-operation arrangements with ESMA
6 June 2013
25 February 2013
23 January 2013
The BVI has become the new offshore battleground as a slew of Bermuda and Cayman law firms target the jurisdiction
Little more than a year ago, a partner at a large law firm from the Cayman Islands dismissed the British Virgin Islands’ (BVI) new Vista trust legislation (the Virgin Islands Special Trusts Act 2003) on the grounds that the territory’s legal infrastructure was inadequate to cope with any litigation that the trusts might engender.
Whatever the merits of the legislation, argued the Cayman lawyer, potential users would be deterred by a lack of top-flight commercial law firms in the BVI. “If you have Harneys on one side,” he said, referring to the leading Road Town firm Harney Westwood & Riegels, “to whom does the other party turn?”
As the lawyer noted, the Vista legislation was largely drafted by a Society of Trust and Estate Practitioners (Step) committee, headed by Chris McKenzie, the founding chairman of the BVI’s Step branch and then head of Harneys’ trust department.
However, McKenzie left Harneys at the beginning of October to take charge of a new trusts and trust dispute resolution team created by the BVI office of Walkers, another Cayman firm – evidence that if concern over the breadth of legal expertise in the jurisdiction was justified in the past, it is no longer the case today.
The growth and development of the islands’ international financial services industry has attracted new entrants such as Walkers, which established its practice in 2002, as well as leading Bermuda-based firm Conyers Dill & Pearman. In February this year they were joined by Appleby Spurling Hunter, itself formed from a merger of Appleby Spurling & Kempe from Bermuda and Hunter & Hunter from Cayman.
The arrival of international law firms has paralleled changes in the financial sector. Under pressure from global regulatory initiatives, the BVI government and industry regulator have encouraged a move away from the high-volume, low-value incorporation and servicing of international business companies (IBCs) to higher added value areas such as mutual funds and captive reinsurance.
“People have been smug about the BVI for a long time, but times are changing,” said Hélène Anne Lewis, an associate at Morgan & Morgan, who is also the former president of the BVI Bar Council and is presently chairman of the Step branch. “In a way it’s gratifying that the big players have an interest in the BVI.”
Lewis credits at least part of the new buzz in the BVI’s financial and legal sectors to the new government, headed by Dr Orlando Smith, which took power in mid-2003. For example, Smith’s administration rushed the trust reforms into law within months after extensive delay under the previous administration.
She said: “There’s a lot happening in the BVI. It reflects, I think, the commitment of the new administration not just to protect, but to enhance the financial services sector. A lot of people are falling into line, putting their shoulders to the wheel and coming up with new ideas and products and better ways to deliver services. We’re all being very proactive in developing the BVI.”
Roadshows in London, New York, Hong Kong and Singapore have highlighted the Vista trust, which is designed to allow business owners to keep their companies in their families’ possession. This relieves trustees of the obligation to intervene in the management of trust-owned companies or to sell their shares in order to diversify the trust’s assets (it applies only where the companies are themselves domiciled in the BVI).
The potential for expanding the BVI’s core activities beyond the creation and servicing of IBCs, and the opportunities this would create for the legal profession, were what attracted Conyers partner Robert Briant to move permanently to the jurisdiction. “When I originally came here from Bermuda to provide vacation cover, I wasn’t particularly keen, but I saw so much potential,” he said. “Many of the firms were general practitioners, while Harneys was the big corporate law firm down here. There are more than 500,000 companies here, mostly holding companies, but a sizeable percentage of these, whether 10 per cent or 1 per cent, are going to have issues that require legal work.”
Briant argues that the territory’s new approach to the financial services industry has been an important plus for the legal sector. “Although the history of the BVI has been about incorporation and anti-regulation, that’s changing now,” he said. “The Financial Services Commission is trying to seek a balance between the continuing holding company volume business and regulated activities that require a more substantive presence, as well as more legal advice.”
Although Conyers has had “a volume incorporation business” in the BVI for 12 years with Codan Trust, Briant stresses that for his office – in which mutual funds account for up to 70 per cent of all work – incorporation is driven by legal work, not the other way round.
He added: “Our companies are expensive in that they come with $20,000 [£10,600], $30,000 [£16,000] or $50,000 [£26,600] worth of legal fees attached to them. They’re no longer so disposable. That’s what makes our incorporation work different from most others on the island.”
Briant argues that leading international law firms are examining the BVI more closely because other markets offer fewer opportunities for growth. He said: “Conyers has been here as a law firm for just over five years, and we’re now 30 people, including five – and soon to be six – lawyers, as well as two corporate managers.
“It’s really an exciting time. The economy may not be as robust as it was, say, five years ago, but firms are still hiring and growing. The feeling here is that the BVI is now the hot market. Bermuda’s a very mature market and Cayman is now mature, but the BVI is just getting up to maturity, starting the growth process. Everyone’s watching the BVI right now.”
Although some areas of law might require outside expertise, Briant argues that this situation can be true of many longer-established offshore jurisdictions. He notes that, in the past, a partner from the firm’s Bermuda office was admitted to the practice and received a work permit to litigate a single case, but a growing demand from clients for litigation business has prompted the recruitment of Mark Forté, who joined Conyers in July as head of litigation in the BVI.
Briant notes that the BVI imposes tough requirements when firms are recruiting lawyers from abroad, although he says the authorities are sympathetic to the personnel needs of firms and focus more on the fitness and qualification of recruits. According to Lewis, the majority of the islands’ practising lawyers, who number around 120, are from abroad – usually the UK, other Caribbean jurisdictions and South Africa.
According to Paul Dennis, a partner with O’Neal Websterand current president of the BVI Bar Association, the expansion in the number of firms (there are currently some 14) should eventually help more BV Islanders to enter the profession. “There are a significant number of islanders, as many as 25 or 30, currently studying law abroad,” he said. “As they return, the proportion of local lawyers will rise.”