Reputation is everything

The confidentiality of Jersey as a financial centre is occasionally questioned. This is especially true today, as differences between Jersey and UK law are brought into the public arena by cases involving disclosure of information under modern fraud legislation.

Jersey lawyers have become familiar with names such as Norwich Pharmacal, Banker's Trust and Anton Piller, and the island's Royal Court has readily adopted the principles applied in those English cases.

The result is that information and documents are not necessarily as confidential now as they used to be. Moreover, Jersey has enacted a number of pieces of legislation, often based on English models, which provide for forced disclosure of documents and information not only by suspected wrongdoers but also by innocent third parties.

An important example of this legislation is the Investigation of Fraud (Jersey) Law 1991, which is close to the corresponding provisions of the Criminal Justice Act 1987.

The principal reason for such judicial and legislative activity has been to combat the rise in sophisticated, often cross-jurisdictional fraud and to assist the courts of other jurisdictions in their fight against it.

But Jersey is recognised as being different from UK jurisdictions. In the case of Mayo Associates SA & ors v Anagram (Bermuda) & ors the Royal Court said: “We are…an international finance centre, the size of which is a matter of dispute but is certainly one of some significance.

“This is a small jurisdiction, unlike the UK.”

What is in question is whether such differences between Jersey and the UK should be taken into account by the courts.

In the 1990 case of IBL & anor v Planet Financial & Legal Services & anor the court summarised submissions of the defendants: “Jersey has an international reputation as a finance centre; persons who conduct legitimate business should be able to come to our jurisdiction and conduct such business in the knowledge that their private business affairs, properly conducted, are confidential.”

The court – which in that particular case went on to grant wide-ranging orders which it admitted might, though it considered did not, further extend its jurisdiction based on the Norwich Pharmacal and Bankers Trust cases – said: “Of course, we have weighed confidentiality in the balance in reaching our decision. But we do not share counsel for the defendants' fears for the future of the finance industry.

“Confidentiality depends upon legitimate private business affairs being properly conducted. Here, there is a strong prima facie case to the contrary.”

This principle, that justice requires confidentiality to be overridden when fraud or wrongdoing is concerned, has been applied in many subsequent cases. In granting an application for an order for evidence to be obtained for use in civil proceedings in England, the Royal Court, in the case of In re R v Charlton & ors, said: “The question of confidentiality is the very stock-in-trade of this island's jealously guarded reputation. But here we have allegations of serious fraud and crimes.”

Similarly, in holding that decisions of the Attorney General for Jersey to issue notices under the Investigation of Fraud Law were not open to review on the merits, the court cited the words of the Court of Appeal of the Cayman Islands in Bertoli v Sir Denis Malone: “The sanctions imposed to buttress the duty of confidentiality shall give way to the demand for the suppression of crime.”

And in the recent Jersey case of Grupo Torras SA & ors v Royal Bank of Scotland & ors it was said: “…Norwich Pharmacal relief [is] a very strong remedy which cuts across the duty of confidentiality owed by banks to their customers and should not be given lightly.

We agree.

“Norwich Pharmacal relief is, however, a remedy which is available in the interests of justice to enable a person who has been wronged to obtain information.”

The court rejected the argument that such relief should not be granted except as a last resort.

However, there is an opinion, which was expressed most recently in the Mayo Associates case, that the island's reputation as a finance centre is enhanced by the widespread availability and use of the disclosure remedies.

In its decision whether Anton Piller relief should have been granted, the court in that case said: “We think that the court should not be so tender in applying those safeguard requirements so stringently as to defeat the ends of justice…it is important that the court should, as far as possible, uphold and maintain the good name of the island as a reputable finance centre; that does not apply to the same extent in the UK.”

On this analysis, Jersey courts consider that the special position of the island requires remedies in the fight against fraud and if anything these can be more draconian than those employed in the UK. But the courts argue that such remedies reassure potential investors of the good reputation of the island and therefore favour the finance industry.