Finance Update - Issue 8 by Jersey Finance

FINANCE

UPDATE

FOR GLOBAL INVESTORS AND THEIR ADVISORS

The appeal of using Jersey holding companies for stock exchange listings

How itâ&#x20AC;&#x2122;s business as usual for Jersey as AIFMD looms in the EU

hy Jersey structures W are ideal vehicles for asset protection

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PAGE 8

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Issue No.8

Perfectly Positioned Geoff Cook explains how Jersey is perfectly positioned to meet the needs of international investors

Contents 4 INTRO

Perfectly positioned

6 CAPITAL MARKETS

The numbers speak for themselves

8 FUNDS

AIFMD looms in the EU

10 TRUSTS

Clarification and certainty

12 BANKING

Upskilling to meet client needs

14 ASIA-PACIFIC Eastern promise

16 CHINA

Asset protection in Asia

18 GULF A GCC hub

20 RUSSIA

Whatâ&#x20AC;&#x2122;s all the fuss about?

22 EUROPE

Stable, but critical

INTRODUCTION

UAE Evolving Services

Brazil Russia

Jersey

Award Winning Jurisdiction

India China By Geoff Cook Chief Executive Jersey Finance

Perfectly Positioned Jersey is an award winning jurisdiction, evolving its services and positioning itself as a key gateway into western markets for international investors. Recognition in 2012 has come from no fewer than three leading international publishing groups in the financial services industry, who have all selected Jersey as their top jurisdiction. Jersey has continued to develop its service offering with considerable evidence of this across the banking, funds and trust industry sectors in the past year. 

Hong Kong

Jersey is retaining its ranking as the number one offshore location, ahead of jurisdictions including the Cayman Islands, Guernsey and the Isle of Man

Jersey recently introduced amendments to its trust law designed to bring clarity and certainty in a number of key areas. This series of enhancements complement other changes to Jersey’s structures for the wealth management sector, notably the introduction of the Jersey Foundation in 2009, a vehicle that has proved to be extremely popular with international investors. Fund professionals in the jurisdiction have been in close consultation with the regulator to ensure that Jersey is ready for the forthcoming introduction of the European Union’s Alternative Investment Fund Managers Directive (AIFMD). Jersey will continue to facilitate funds business within the EU through national private placement regimes, while it is also committed to introducing the option of a fully AIFMD-compliant regime and to obtaining an EU-wide passport to allow managers to market alternative funds to investors across the region by 2015. As a non-EU jurisdiction however, Jersey is able to offer further choice by maintaining a separate regime outside the scope of the Directive, for managers who do not wish to access EU capital or operate in the EU. Jersey is also stepping up its campaign to increase bank deposits and to attract even more leading banking groups to its shores. Abu Dhabi Commercial Bank opened a branch in St Helier recently and other banking groups from the major new economies are expressing interest in banking licences, which would add to the 42 banking licences already issued in Jersey.

FINANCE UPDATE For international investors and their advisors

In Capital Markets, Jersey tops the rankings amongst jurisdictions 1 outside the UK for registering FTSE 100 companies . This positioning is largely thanks to Jersey’s skilled practitioners, who have advised some of the world’s leading companies on the advantages of registering in Jersey, including its robust regulation, tax neutrality and attractive Companies Law. These factors play a key part in making Jersey an ideal choice for listings. Jersey is perfectly placed to serve clients in new markets such as Brazil, Russia, India and China, where such dramatic growth is taking place. With a strong presence in Abu Dhabi and Hong Kong already, Jersey is now increasing its international presence in these other markets, with a view to replicating the success it is enjoying in the Gulf region and in the Far East. The articles in this publication provide more details about some of these developments, the laws and regulatory changes, and the expertise available in Jersey. They are just some of the reasons why Jersey is retaining its ranking as the number one offshore location, ahead of jurisdictions including the Cayman Islands, 2 Guernsey and the Isle of Man . ■

1 2

Figures compiled by Hemscott Group Limited Global Financial Centres Index

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CAPITAL MARKETS

Jersey’s credentials are impressive and include the number one ranking for FTSE 100 companies registered outside the UK

By Kathy Gillen Partner Moore Stephens Jersey

JERSEY’S IMPRESSIVE STOCK EXCHANGE LISTING CREDENTIALS

THE NUMBERS SPEAK FOR THEMSELVES

5455

Recent activity Jersey is becoming increasingly well known in emerging markets, particularly in the BRIC countries. In the last year, a number of our clients have incorporated Jersey companies with the intention of listing them either on the main London Stock Exchange market or AIM. They are from a wide range of sectors including natural resources, mining, hotels and textiles. A number of these clients are using this period to restructure their affairs, some merging their foreign companies with Jersey companies by taking advantage of the recent changes to the merger provisions in the Companies (Jersey) Law 1991.

15349 351545

There are close to 100 Jersey companies listed on stock exchanges globally, including London, New York, Hong Kong, Toronto, Luxembourg and Oslo, as well as the Channel Islands Stock Exchange, with a total market capitalisation in the region of £135 billion.

6455%

Jersey’s credentials are impressive and include the number one ranking for FTSE 100 companies registered outside the UK. Of the 11 companies in this category, 8 are Jersey registered and there are a further 9 in the FTSE 250 Index. With a total market capitalisation value from both exchanges of more than £78 billion, this is considerably higher than any of Jersey’s closest competitor jurisdictions. Jersey is also one of the leading international finance centres for Alternative Investment Market (AIM) companies registered outside the UK. 

ALMOST

WITH

4555%

Total market capitalisation

Jersey is often represented at international conferences on the subject of stock exchange listings using Jersey holding companies. Moore Stephens Jersey recently presented in Mumbai to the Western India Regional Council of the Institute of Chartered Accountants of India. Platforms such as this serve to increase awareness of Jersey and its capabilities in the capital markets and lead to even more demand for using Jersey holding companies as listing vehicles. ■

76782

35795

452344

3666% 15456

RANKING

100 £135 BILLION No.1 JERSEY COMPANIES Listed on the stock exchanges globally

Due to uncertainty in terms of time frames for the listings, and also for cost reasons, many of the companies we have incorporated are private and will convert to public companies closer to the listing dates. One key reason for this is to avoid the necessity of preparing and submitting audited accounts - a requirement for public companies. The cost savings and the ease of transition from a private to a public company tend to make this option attractive.

For clients, one of Jersey’s key strengths in the global markets is the depth and breadth of its skilled practitioners, who are able to deal with such complex matters in a cost effective manner. This, combined with the attractive Companies Law, robust regulation and tax neutrality, makes Jersey an ideal choice for this type of business.

FTSE 100 For companies registered outside the UK

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OF THE

11 COMPANIES LISTED

8 AND

ARE REGISTERED

IN JERSEY

A FURTHER

Index

FINANCE UPDATE For international investors and their advisors

MAKING

IN THE

FTSE

250

£78 BILLION Total market capitalisation

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4534

48455

FUNDS

Jersey will continue to maintain manager and investor confidence through stability, high standards of supervision, and responsible and appropriate regulation Jersey has a long and established history of providing financial services to the EU markets, especially the UK, and has developed specific expertise in alternative asset classes; particularly in private equity, real estate and hedge funds. While EU jurisdictions will be required to deal with the implementation of AIFMD, subject to EU member state agreements being in place Jersey-based managers and funds will be able to carry on business as usual until at least 2018 through private placement regimes. At the time of writing there is still a great deal of uncertainty regarding the implications and implementation of the AIFMD, however we are seeing that clients are looking for a jurisdiction that can offer an existing regulatory framework governing such vehicles which allow immediate access to the target investor markets but without the need to adapt to the AIFMD in the short term.

The degree of choice and flexibility offered by Jersey enables managers to choose a less onerous and more cost effective solution, whilst at the same time offering those managers wishing to operate within the directive the means to combine the current benefits of the jurisdiction with an AIFMD compliant product. Jersey will continue to maintain manager and investor confidence through stability, high standards of supervision, and responsible and appropriate regulation. The jurisdiction’s expanded product range and flexible regulatory regime offers a route to market that is attractive to all industry participants located in Europe, Asia and Latin America. ■

Jersey can offer the best of both worlds for the management and administration of Jersey funds including...

BUSINESS AS USUAL

By Jenny Swan Country Manager J.P.Morgan

for access to the EU through private placement regimes until 2018

While EU jurisdictions will need to deal with the implementation of the Alternative Investment Fund Managers Directive (AIFMD), Jersey-based managers and funds will be able to carry on business as usual.

FOR MANAGERS

wishing to remain outside of the EU, the existing regime will continue without any change

The ongoing crisis in the Eurozone and the increasing agenda of regulatory reform have unknown outcomes, however both have the potential to fundamentally change the asset management industry. Who would have predicted at the beginning of the financial crisis that the regulatory reform that was initially aimed at the banks would transform virtually every segment of the financial services industry? The AIFMD introduces comprehensive regulatory changes for alternative fund managers operating in, or marketing into, the EU.  Page 7

FINANCE UPDATE For international investors and their advisors

AT THE SAME TIME

Jersey is embracing the directive and working to introduce an AIFMD compliant regime

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TRUSTS

CLARIFICATION AND CERTAINTY

The definition of purpose is non-exhaustive and confirms that a purpose may involve the conferral of any benefit on any person

By Siobhan Riley Partner Carey Olsen

1984

Making Jersey an even more attractive destination Significant enhancements have been made to Jersey’s Trusts Law recently. It will be the fifth time the Trusts (Jersey) Law 1984 has been amended and, whilst specific in nature, the changes will make Jersey an even more attractive destination for wealth management. The prevailing themes of Amendment No 5 to Jersey’s Trusts Law are clarification and certainty. This can be seen in a number of the amending provisions. 

1989

1991

Definition of purpose Non-charitable purpose trusts were introduced to Jersey’s Trusts Law in 1996. Practitioners have debated whether a trustee merely holding a particular asset (such as shares in a company) could be considered, without more, to constitute a genuine ‘purpose’. Amendment No 5 clarifies the position by introducing a definition of purpose. The definition of purpose is non-exhaustive and confirms that a purpose may involve the conferral of any benefit on any person, it need not consume nor be capable of consuming the income or capital of the trust and includes “without limitation, the acquisition, holding, ownership, management or disposal of property and the exercise of functions”. Trustees transacting with themselves on behalf of different trusts It is a generally accepted legal principle that it is not possible for a person to make a valid contract with him/herself. In the world of trusts, it is sometimes the case that assets are transferred between two trusts, for example by way of a sale, where both trusts have the same corporate trustee. An addition to Article 31 of the 1984 Law makes it clear that a person in the capacity as a trustee of one trust may enter into a contract or other arrangement with himself or herself in his/her capacity as a trustee of one or more other trusts. Indemnities Another issue which has vexed practitioners for a number of years has been the development of ‘chains’ of indemnities, when the management of a trust has moved from one trustee to another and this process is repeated a number of times and each retiring trustee seeks indemnities from its successor. An amendment to Article 34 of the 1984 Law now makes it clear

1996

2006

2012

that earlier trustees in the chain can enforce indemnities in their favour from successor trustees notwithstanding the fact that they may not have been a party to a subsequent indemnity given in their favour. Limitations of activities Article 57 of the 1984 Law has been amended to clarify the period within which an action founded on breach of trust may be brought against a trustee by a beneficiary. In most cases the action must now be brought within three years of the earlier of the date of delivery of the final accounts of the trust to the beneficiary, or the date on which a beneficiary first has knowledge of a breach of trust. Save in the case of fraud, no action founded on breach of trust can now be brought against a trustee by any person (not just beneficiaries) once a period of 21 years has expired after the date of the breach. Remuneration of professional trustees Currently a trustee of a Jersey law trust is not entitled to remuneration unless specifically authorised by the trust’s terms, unless all of the beneficiaries of the trust have consented in writing or unless the Court has granted an order permitting such remuneration. Amendment No 5 introduces a statutory right for professional trustees to be remunerated. It is reassuring to see the 1984 Law evolve further. The clear statutory framework serves to underpin Jersey’s position as a leading jurisdiction for the management and administration of trust structures. ■

This article is intended for information purposes only and does not constitute legal advice.

FINANCE UPDATE For international investors and their advisors

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BANKING

Jersey is incredibly lucky to have an experienced, diverse and qualified talent pool

By Simon Prescott Head of Islands Corporate Banking Lloyds TSB

We live in changing times and economic uncertainty has raised questions about the global financial services industry. The result has been a raft of regulation and policy aimed at protecting investors. From a banking perspective, not only has increasing regulatory scrutiny led to a need for growing professional capabilities, but the greater expertise of our clients has also meant that they rightly expect their advisers to be more knowledgeable. 

UPSKILLING TO MEET DIVERSE CLIENT NEEDS

Training colleagues to deliver better results The Retail Distribution Review (RDR) represents a major change for the financial services industry. Initiated by the Financial Services Authority in the UK, it has been designed to help consumers achieve a fair deal in the products that they buy and in the advice that they take. As is often the case in terms of the UK’s legislation and guidelines, Jersey will follow suit to ensure best practice and to further enhance Jersey’s standing as a stable and well-regulated international finance centre. Financial advisers in retail banking have been extending their professional qualifications and, on the corporate side, the Offshore Banking Certificate has been very popular. Training is not only necessary and indeed relevant for client-facing teams but also for those in senior and management positions. Many have undertaken or are undertaking the Institute of Directors’ Chartered Director qualification. External qualifications are complemented by in house training. For example, at Lloyds TSB 25,000 retail customers have recently been migrated onto a new banking platform and in order for those customers to benefit from the additional functionality and enhanced service, our teams have been thoroughly trained.

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FINANCE UPDATE For international investors and their advisors

Local talent Jersey is incredibly lucky to have an experienced, diverse and qualified talent pool. The financial services industry has a commitment to recruiting locally and to upskilling its staff. There will always be a need to temporarily assign colleagues to fulfil specialist roles, but the focus is still on training local individuals to assume those roles in the longer-term. The financial services industry also invests in the future workforce by committing to student work placement schemes. A significant proportion of new employees are school leavers and graduates who have had their first taste of the industry through work experience. Looking to the future The only constant is that things will continue to change. Budgets continue to go under the microscope but it is vital that training remains a priority. Ensuring that staff have the professional capabilities to meet the diverse needs of clients is a crucial investment. ■

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ASIA-PACIFIC

By Stuart Rutledge Head of Global Trust RBC Wealth Management

Asia-Pacific is now home to more HNW individuals than any other region.

1.6% 3.37m

Many clients from the region are entrepreneurs who require liquid or near-liquid investments and particular products to meet their short-term business needs

The region’s population is still largely concentrated in just three countries - Japan, China and Australia – which together account for over three quarters (76.1%) of the population. Despite experiencing a difficult year, Japan remains the largest market, accounting for over 54% of the region’s HNWIs. China, which has witnessed growth of 5.2% in its HNWI population, now makes up 16.7% of the region’s individuals with at least $1 million at their disposal and it remains the single largest opportunity for wealth managers in the region.

Asia-Pacific has now passed North America and is home to more wealthy individuals than any other region, according to the Asia-Pacific Wealth Report 2012, recently released by RBC Wealth Management and Capgemini. Despite a tough year of volatile markets, the number of high net worth individuals (HNWI) in Asia-Pacific grew by 1.6% in 2011 to 3.37 million. 

While the number of wealthy individuals in Asia-Pacific grew in 2011, their aggregate wealth actually declined marginally. This was due to losses amongst individuals with more than $5 million. This group is typically committed to higher-risk and less-liquid assets, such as hedge funds, private equity or commercial real estate markets, that can lose value quickly in declining markets and can be hard to sell amid the volatility that characterised much of 2011.

5.2%

76.1%

54%

16.7%

JAPAN + CHINA + AUSTRALIA = ¾ of the region’s HNW population

JAPAN remains the largest HNWI market in the Asia-Pacific region

CHINA HNWI with least $1 million at their disposal

The rise in the HNWI population in Asia has also driven the development of Singapore and Hong Kong as offshore wealth centres of course. However the increasing internationalisation of wealth means that these locations are more likely to complement, rather than rival, Jersey’s activities. Jersey HNW clients are already demanding more exposure to the emerging Asian economies and greater diversification of overseas holdings - both of which can be easily provided via centres such as Hong Kong and Singapore.

Jersey firms looking to enter the region obviously need to give a great deal of thought as to how they approach the business to maximize the opportunities available. They will need to set realistic and sensible targets based on factors such as resource capacity, understanding the market trends and client profile, and tailor offerings accordingly. Many clients from the region are entrepreneurs who require liquid or near-liquid investments and particular products to meet their short-term business needs. Many of these same clients have also only recently qualified as HNWIs and expect a highly hands-on approach to managing their portfolios. The succession planning opportunities for Jersey in terms of these first-generation HNWIs are considerable. There is no doubt that increasingly HNW assets are going to be held in Asia-Pacific offshore wealth centres in future. There is a huge opportunity for Jersey to act as a welcome partner to these centres thanks to its reputation for stability, rule of law, access to the UK market and history of innovation. ■

The succession planning opportunities for Jersey in terms of first-generation HNWIs are considerable

FINANCE UPDATE For international investors and their advisors

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CHINA

By Marc Farror Director Vistra (Jersey) Limited

In Hong Kong, when you mention the high profile names of Dr Stanley Ho and Nina Wang, almost everyone will be able to regale you with stories about how Dr Ho allegedly lost his $3bn casino empire and how Nina Wang’s feng shui expert purportedly tried to claim her $4.2bn fortune. In Dr Ho’s case, it is suggested that the main cause of the trouble was when he fell ill, his share of SJM Holdings was fought over and divided up amongst his family comprising at least 4 wives and 17 children. It had reportedly been Dr Ho’s intention to pass his share of SJM to his second and third wives. For Nina Wang, her feng shui expert allegedly claimed that they had had an affair for years and it was Nina Wang’s intention to leave him a substantial share of her wealth rather than have her family inherit it.

ASSET PROTECTION IN

Supposedly the problems arose in Nina Wang’s case because her will made no provision for the feng shui expert. In Dr Ho’s case the ownership of the assets were in personal names rather than through a more established asset protection structure.

The most commonly used asset protection structures for ensuring that assets are protected are trusts and companies. At a basic level, assets are separated and therefore protected by placing them into different companies. Each company is owned by a trust. This structure works from an asset protection perspective and offers the underlying client many benefits. Because the assets are separated into different holding companies the risk of losing all assets simultaneously is limited. If an asset is going to be attacked and the company is sued, only the assets held in that particular company are under threat.

ASIA Jersey structures are ideal vehicles for ensuring that assets are protected and for enabling wealthy individuals to determine exactly who inherits which assets going forward. 

The benefits of trusts and companies

With a trust owning all the assets and the underlying client becoming a beneficiary of the trust, legal and beneficial ownership is separated. Therefore it makes it difficult to take legal action against an individual who has settled their assets in this manner.

Jersey trust law does not recognise forced heirship regimes, therefore it is only the named beneficiaries or class of beneficiaries who will ultimately benefit from the trust’s assets

Jersey trust law does not recognise forced heirship regimes, therefore it is only the named beneficiaries or class of beneficiaries who will ultimately benefit from the trust’s assets. It is also possible under Jersey trust law for a settlor to reserve the power to change the beneficial class and therefore rule individuals in and out from receiving trust assets.

The benefits of this type of asset protection are clear. Jersey, a leading international finance centre, is ideally placed to provide sophisticated structures to Asian clients. It is essential that tax and legal advice is taken, in all circumstances, to ensure that personal circumstances are properly reviewed. ■ Vistra (Jersey) Limited and its affiliated companies are regulated by the Jersey Financial Services Commission. The Legal Notice at www.vistra.com applies to this article.

FINANCE UPDATE For international investors and their advisors

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GULF

A GCC HUB Stepping up commercial ties in the Gulf region

Regulatory links This physical presence is complimented by the recent strengthening of regulatory links between the jurisdictions. Earlier this year, Jersey signed a Double Taxation Agreement with Qatar, following the signing at the end of last year of a Memorandum of Understanding between the Central Bank of the United Arab Emirates and the Jersey Financial Services Commission. Such agreements make it easier and more straightforward to conduct business between Jersey and the nations of the Gulf Cooperation Council (GCC) and therefore play an important part in encouraging increasing business flows between the two locations.

By Sean Costello Chief Representative Officer for the GCC and India, Jersey Finance

The opening of the Jersey Finance representative office in Abu Dhabi in early 2011 was a consolidation of Jersey’s presence in the Gulf region. The centre acts as a local hub to help communicate the breadth and depth of Jersey’s offshore financial capabilities and to carefully position the Jersey brand in the marketplace. There has been an increase in the number of Jersey based trust companies and finance houses which have continued to expand their capabilities in the United Arab Emirates as a result. 

Jersey’s finance industry has been working hard at highlighting the benefits of the jurisdiction as a leading international banking centre to the Gulf business community - and these efforts are paying off. The proportion of bank deposits in Jersey emanating from the Gulf currently stands at 13% of the total, with a significant increase in the last two years. Meanwhile, to enhance Jersey Finance’s business development efforts, the Abu Dhabi office has established a Jersey Advisory Group (JAG) to further strengthen ties between Jersey and the GCC. The eminent group consists of senior individuals based in the region, including banking heads, wealth management advisers, senior partners at major law firms and corporate listings specialists. The group provides guidance and support to aid the business development strategy of the Abu Dhabi office in the wider region. JAG meetings are chaired annually by either the Chairman or Chief Executive of Jersey Finance as part of their regional visit programme.

Flexible structures One of the key selling points for Jersey is the industry’s dedication to offering tailored products and services and its flexibility to appeal to the region’s unique cultural and financial requirements. There is a demand for trusts, property holding structures and foundations and Jersey already boasts an expanding range of Shariah-compliant financial products, including Islamic asset management and fund domiciliation, Special Purpose Vehicles (SPVs), Sukuk structures and Islamic private wealth management. Two-way commitment As well as Jersey-based organisations making in-roads in the Gulf region, UAE-based businesses continue to establish themselves in the island. Most recently Abu Dhabi Commercial Bank (ADCB) opened an offshore office in Jersey. Deepak Rochlani, Executive Vice President, Head of Liabilities & Wealth Management Group, ADCB, explains, ‘The launch of Offshore Banking through our Jersey Branch is a testament to ADCB’s continued commitment to the UAE banking sector and is expected to facilitate further positive growth in the industry. With Offshore Banking our customers will get local access to international wealth solutions from a secure and highly regulated jurisdiction. The launch of ADCB Offshore Banking through our Jersey branch is another stride towards helping our customers to achieve their financial ambitions.’ It is clear that the growing links between Jersey and the GCC are testament to its appeal as the jurisdiction of choice for Gulf investors. ■

The proportion of bank deposits in Jersey emanating from the Gulf region currently stands at 13% of the total, with a significant increase in the last two years

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FINANCE UPDATE For international investors and their advisors

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RUSSIA

By Kerry Sunter Head of CI Fund Operations Kleinwort Benson

RUSSIA WHAT’S ALL THE FUSS ABOUT? There have been many references to investing in Russia in the financial press recently. So what’s the deal with this? Isn’t Russia that corrupt country where only the most hardened of investors dare venture to risk their capital at their own peril? That doesn’t seem to fit with the increased recent interest in funds being launched in Jersey, which have specifically focused on investing into Russia, using a variety of sectors for investment into the country, including Private Equity, Infrastructure, Clean Tech and Real Estate. 

We have seen a number of Russian investing funds being launched in Jersey recently, including the Tatarstan Clean Tech Fund LP, which was the first ever international Clean Tech fund with a specific mandate to focus on the Russian Federation

€110m

TATARSTAN FUND

SEEDED

Apparently, the current and general view amongst high profile investors and Investment Managers globally is that although Russia is very cheap to invest in, it is certainly not for the cautious investor, given the country’s history over the last 15 to 20 years, which includes a bail out from the IMF and rumours (and some confirmed reports) of corruption being rife. The Russian government has confirmed in recent years that they recognise corruption as one of the most serious problems facing the country, and have taken steps to counter it. There have also been reports confirming the view that most Russians believe there is no place for corruption in Russia’s future, if it is to succeed in becoming one of the global financial players. But what does this mean for investors, is Russia safe to invest in? The World Bank reported earlier this year that inflation in Russia had reached its lowest point for two decades and that the country’s public debt is currently approximately around 10% of GDP, compared to the US, where it has reached 100%. Russia’s MICEX index has risen 5.42% since the start of the year and Russian stocks are seen as having more attractive price to earnings ratios than other countries that form part of the BRICs (Brazil, Russia, India, China).

FINANCE UPDATE For international investors and their advisors

€200m TARGET

So clearly the growth opportunities are there, but all of that comes with risk, and it seems that some investors are willing to accept that risk. We have seen a number of Russian investing funds being launched in Jersey recently, including the Tatarstan Clean Tech Fund LP, which was the first ever international Clean Tech fund with a specific mandate to focus on the Russian Federation. The Fund has been seeded with €110 million, with a target fund size of €200 million. Clean Tech and Renewable Energy aren’t the only areas in Russia that Managers are focusing on. We have also seen enquiries for funds investing into infrastructure and following some promotion locally by Jersey Finance and other organisations, we expect to see the enquiries for funds in this area increase in the coming year. Managers are beginning to explore launching new structures investing into Russia so this must bode well for Jersey. The jurisdiction has a finance sector which is already experienced in the Russian market and this, combined with a first class regulatory structure for funds, means that it is surely onto a winning formula. ■

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EUROPE

An advantage of Jersey law is its flexibility to adopt solutions from other jurisdictions, where appropriate

STABLE, BUT CRITICAL So what happens if there is no Euro market rate to refer to? The debtor will try to argue that the calculation is impossible, although the Royal Court is unlikely to take kindly to this argument, especially if the debtor owes money in respect of services already rendered by the creditor. Previously, the Royal Court has held that the contracting party cannot avoid his obligations on the grounds they have become impossible, unless they are truly impossible, not merely difficult or onerous to perform.

The law can distinguish between the currency of account (by which the price is measured) and the currency of payment (in which the price so measured is paid). These are usually the same, as there is an express price (e.g. €1,000) which must be paid. However, even where there is only one currency mentioned, there may be a different acceptable currency of payment.

An advantage of Jersey law is its flexibility to adopt solutions from other jurisdictions, where appropriate, and some English cases may provide the answer. In cases decided after the Second World War concerning debts in German Reichsmarks, for which there was no market, the Courts made their best assessment of an appropriate rate on the best evidence available - even if (as they admitted) that amounted to an educated ‘judicial guess’. Although admittedly rough and ready, this shows reluctance to allow even a currency’s disappearance to thwart the obligation to pay, and the Royal Court is likely to adopt this approach as an attractive solution – should the previously unthinkable actually happen. ■

In Jersey, according to the Loi (1835) sur la monnaie, the only legal tender is ‘la monnaie Anglaise’ i.e. Sterling. So, although Jersey’s Royal Court is happy to and frequently does order payment in other currencies because they are specified in the contract sued on, strictly the parties may insist on Sterling as the currency in which they make the payment or are paid. If so, the relevant amount of Sterling (as the currency of payment) must be calculated to match the relevant amount of foreign currency as the currency of account. This is calculated at the market rate.

EURO PORTFOLIOS AND THE EURO CRISIS Although the Euro crisis seems to be more stable, it still appears to be far from resolved - so stable, but critical. Jersey investors with Euro portfolios may therefore eye our Continental neighbours with increasing apprehension, thinking the previously unthinkable: will the Euro survive? If not, of immediate importance amid the chaos will be what happens to debts they have, or are owed, in Euros. 

This will obviously depend on many variables including the steps taken at national and international levels to regulate the position, especially those that provide new currency to replace the Euro. They also include the exact terms of the relevant contract creating the debt, especially (among other things) price, payment and governing law. However, subject to those variables, a starting point to negotiate through them can be ascertained by resorting to first principles applicable to a simple contract without elaborate terms and conditions, subject to Jersey law.

By Richard Holden Senior Associate Collas Crill

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FINANCE UPDATE For international investors and their advisors

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