E-business Man

Attractive infrastructure and good access to the AIM and LSE markets should allow the Isle of Man to bolster its reputation as a hub for IT firms, says Andrew Corlett

Following on from the Isle of Man’s attempts to position itself as a top-tier offshore e-business centre and attract leading e-businesses, such as Neteller, PokerStars and Microgaming, to the island, the offshore jurisdiction has recently launched a branding exercise to become known as the offshore centre with ‘freedom to flourish’.

But does the island have the necessary focus, infrastructure and ability to deliver the services and support that will give e-businesses the freedom to flourish?

The benefits
The Isle of Man is able to offer a wide range of unique selling points to e-businesses that include:
#active governmental support in attracting e-businesses to, and supporting them on, the island;
#IT-hosting facilities connected directly to London’s international data networks by means of fully resilient and abundant off-island communications links;
#a stable, English law-type legal system;
#an AAA-rated, highly regulated financial centre offering banking and professional services, which provide a well-trodden path to the Alternative Investment Market (AIM) and London Stock Exchange (LSE).

Government support
In addition to taking passive measures to simplify and subsidise the process by which foreign companies may redomicile to, or establish within, the jurisdiction, the island’s Department of Trade and Industry has hired recognised e-business industry experts to help ensure that it remains at the forefront of this fast-evolving industry.

Most recently, it organised the attendance of a multi-disciplinary public and private sector team at the e-gaming industry conference and exhibition Gigse 2006 in Montreal, Canada. The result of the Isle of Man government’s consistent support for e-businesses is a strong pipeline of leading e-business companies in the process of, or seriously considering, relocating to the island.

IT infrastructure
The island’s incumbent telecommunications operator is Manx Telecom. As a wholly owned subsidiary of O2 and part of the Telefónica group, Manx Telecom has had the resources to invest over £50m in its network over the past five years.

Part of this investment was the installation of a Multi-Protocol Label Switching (MPLS) network that connects its £7.5m purpose-built data centre directly to the world’s global data network in London, providing response times fast enough to serve the US-based and the EU-based e-gaming markets.

The island’s other leading IT service provider, Domicilium, also recently announced that it is establishing a purpose-built hosting centre. As a result, the island-based e-businesses should see the increased choice and price pressure that a competitive IT services market will foster.

In addition to developing excellent IT infrastructure, Manx Telecom has also looked to take an innovative partnering approach to working with its e-business customers that is reflected in its contractual documentation.

As even some of the leading e-business firms are only just starting to enter into written contracts with their IT service providers, Manx Telecom has taken the opportunity to introduce service level agreements that require its operations teams to work closely with their customer counterparts so that they can address service-quality issues before they can impact upon the end-user experience.

Manx Telecom’s corporate solutions director, Alyson Hamilton Lacey, explains the initiative: “To meet our customers’ service demands, we realised that we would need to collect all relevant service quality indications as early as possible to enable us to almost spot operational issues before they impacted on service quality.

“Therefore, we have included parallel quantitative and qualitative service measurement procedures in our SLAs [Service Level Agreements] so that we can cooperate fully with our customers at the operations level to deliver the quality of service that our e-business customers require.”

AIM listings
The Isle of Man’s most recent legal reform has introduced secondary legislation that: enables the provision of disaster-recovery services to non-Isle of Man licensed e-businesses; relaxes the previously restrictive software testing procedures; and permits e-businesses to promote e-gaming in and from the island.

As the new disaster-recovery regulations enable overseas-licensed e-businesses to operate from the island following a disaster without needing to secure an Isle of Man e-gaming licence, it is hoped that many e-businesses will see the Isle of Man as a hedge against any technical, environmental or other issues that they may face in their home jurisdictions.

While the full impact of these new regulations has yet to be measured in results, the island’s new corporate and personal tax rates introduced in April 2006 are being well received by the e-business industry.

As the key figures behind e-businesses are quick to take advantage of new opportunities, they have realised corporate profits can be maximised under the island’s zero rate of corporate tax and personal taxation can be minimised thanks to the Isle of Man’s income tax cap of £100,000 and the absence of capital gains taxes and death duties.

Also, e-businesses are realising that the combination of this new corporate and personal tax structure with the island’s existing fast-track route to the capital markets is ideally suited to AIM and FTSE listings. Given the rate of new instructions currently being received by the island’s legal and accountancy firms, it is confidently expected that the island’s already healthy crop of AIM listings will grow significantly.

Following the US legislator’s recent debating of the Internet Gambling Prohibition Act and the Unlawful Internet Gambling Enforcement Act of 2006 (either of which could seriously limit access to the world’s largest target market for most e-businesses) the Isle of Man is hoping that it will provide its e-businesses with enough freedom and support to flourish in the forthcoming uncertain market conditions, while at the same time recognising the need to play its full part as a responsible member of the international community. n
Andrew Corlett is managing partner and Stephen Rodd and Tristan Head are senior associates at Cains Advocates