The Lawyer global offshore report – Malta

The common experience of nations acceding to the EU is an avalanche of new legislation. Malta is no exception. Although preparations have been in progress for more than 10 years, at least since 1993, it was inevitable that more should have been done by 1 May 2004. Fortunately, the main legislative infrastructure was already harmonised to EU law and so the financial services industry did not have to go through great adjustments. Of the 14 acts of parliament passed in 2004, only two were enacted to comply with EU requirements.

One of these relates to the financial administration and audit of the government of Malta and the other is in the form, now notorious, of a combi-law, addressing a multiplicity of issues of relevance. This law amended 29 laws including the Prevention of Money Laundering Act, the Central Bank Act, the External Transactions Act, the Competition Act and others of importance to conforming to the EU treaty principles on the four freedoms. On the other hand, there has been a record number of legal notices issued by ministers implementing laws – these reached 533 in 2004. Many of these address issues of some relevance to the financial services industry.
Of all legal enactments in 2004, by far the most important one, because of its long-term effects on the industry, was the revision of the trusts law in Malta, which met various challenges.

The first was complying with the Organisation for Economic Cooperation and Development’s (OECD) and Financial Action Task Force’s (FATF) requests for the elimination of ‘offensive’ elements in the trusts laws, such as discrimination, exemptions and lack of transparency. This has therefore eliminated all ‘offshore’ features remaining in Maltese legislation as the last step in a process of reorientation of the island’s international strategies started in 1993. The second challenge was to integrate trusts law into the Maltese civil law system governed by a code. The third was to construct a tax regime for trusts. The fourth aim was to introduce modern and robust regulation for trustee and similar fiduciary activities. In this project there is a clear demarcation line between trusts used in commercial transactions, where contract principles are given greater strength, and private fiduciary relationships where equitable rules are dominant. This development is also expected to make Malta much more attractive for the administration of international trusts.

Among the regulations of immediate relevance to the financial services industry are those on passport rights, as they apply to banking, insurance and investment services firms, as well as the Undertakings for the Collective Investment of Transferable Securities regulations. This has opened the doors to Maltese firms and funds to operate within the other EU states and vice versa. Several EU country firms have followed the procedures to passport their services to Malta and we are now seeing some entities in Malta moving in the opposite direction.

There have been new regulations on cell companies carrying on the business of insurance, which opens up Malta for the effective operation of captives and again this has been met with immediate interest on the part of international operators, rather similar to the reaction to the new regulations on redomiciliation of companies in 2002-03.

In the shipping field, the Malta flag continues to fly strongly, with new regulations coming into force for shipping entities or organisations, which can now register ships in other EU states. Maltese law now also allows EU owners to use the Malta flag to register their ships. The new regulations also cater for more appropriate rules for shipping companies, including new rules on pledges of shares and permitting notices for whitewash procedures when financial assistance is given by shipping organisations.

During the past 12 months, the Department of Employment and Industrial Relations of Malta published a number of legal notices in order to continue achieving adherence with the pertinent European Directives. The Equal Treatment in Employment Regulations, the European Works Council Regulations and the amending regulations for the Collective Redundancies Regulations, the Posting of Workers Regulations and the Guarantee Fund Regulations are a prime example of the changes being made due to Malta’s membership of the EU.

Of direct relevance for investors are the Immigration Regulations, which established the criteria and procedure for the application of entry visas, resident permits and employment licences for European and third country nationals.

Of overall relevance is the fact that exchange of information rules have been inserted in many of the relevant regulatory rules and that has affected the level of confidentiality that operated under Maltese law in the past. On the other hand, the level of acceptance of Malta as a suitable jurisdiction for commercial and financial activities has increased.

Max Ganado is a partner at Ganado & Associates, Malta