Jersey has hit the headlines for mostly the wrong reasons of late, but its financial and legal companies are now rallying round to reinforce the positive aspects of the island.
The disquiet began because some argued that the financial services sector had become disproportionately important to the island's economy. The moves to push limited liability partnership (LLP) laws through, for example, became caught up in domestic political disputes.
Perhaps the strongest response to this charge lies in the fact that the regulation of the industry is being moved out of the more overt political realm. Foundations are being laid for the creation of a Financial Services Commission (FSC), which now has a provisional starting date of 1 January 1998.
The body of the existing Financial Services Department (FSD) will transfer to create the secretariat of the new FSC, which will be run by a board of commissioners. Although the commissioners ultimately will be answerable to the government's finance and economics committee, it puts the regulation of the industry at arm's length from the politicians.
One uncertainty hanging over the island is the outcome of the UK General Election; but the prospect of a Labour victory is something that neither Jersey's chief adviser Colin Powell or FSD director Richard Syvret seem to consider a threat.
Syvret says: “Our attempts to diversify geographically have worked: we have welcomed many new banks from outside the UK. Ironically, it has been the Conservatives [in the UK] who have closed many tax loopholes over the years, so we have naturally sought business elsewhere. For instance, we are seeing a great deal of work being referred from Switzerland, and some from Paris.”
Powell is even more positive: “I think both political parties in the UK, as long as Jersey continues to keep its house in order, will continue to recognise the benefits of the island.”
Jersey's financial services community is continuing to thrive. The LLP legislation, for example, will mark something of a sea-change in the nature of partnerships.
Advocate Adrian Garner of Olsen Backhurst & Dorey says: “Partners are going to have to rethink their approach to business completely. The feeling around the partnership table could change: colleagues will not be indemnifying each other out of their own personal assets.
“The assets of the individual responsible partner will, however, be fully exposed. This could bring about a change in attitude and expectations among partners in risk-orientated areas of practice, such as audit work.”
With further legislation either now in force or being debated by the states, the island continues to refine the regulation surrounding its financial services. Most sectors continue to report growth. Advocate Simon Howard, of Bedell & Cristin, says private trust business on the island is booming. “If you look at the situations vacant columns of the Jersey Evening Post you see a demand for experienced trust staff. Jersey's trust law is tried and tested, with a strong depth of local case law. That's what makes us distinctive.”
Roger Bignell, director of banking for the Jersey government, says he will be aided in his newly divided role (he was previously also director of insurance business) by the appointment of two compliance managers, as his department moves to strengthen its active role in international regulatory co-operation.
The island is governed by the Banking Act of 1991, legislation which will be reviewed in the coming 12 months.
Jersey has around £90bn in bank deposits, of which two-thirds is in foreign currencies. There are currently 78 banking licences issued, a figure Bignell does not anticipate changing.
It is important that the legislature in Jersey is seen to take note of developing trends in the other offshore financial centres and legislate where necessary while not losing its integrity and credibility as a financial centre by appearing to “follow the leader” and leap to attention in response to market demands.
It has, for example, not leapt to provide specific “asset protection” legislation. Although there is scope for further refinement of the Trusts Law, this will undoubtedly come over time and, as a common law jurisdiction, Jersey is lucky to have a developing body of case law on this subject.
One feature which may form the subject of a future amendment to the Trusts Law concerns greater recognition of the role of the protector in trust structures. Briefly acknowledged in the 1984 legislation, the question of protectors and their duties and liabilities is becoming the subject of more and more case law.
The governmental and legislative authorities in Jersey have shown themselves to be willing to assist the finance industry in responding to the growing complexity of the structures created and the issues they raise. They must continue to do this without sacrificing the quality assurance offered by Jersey in the financial services sector.