Business BVI January 2016 by Business BVI

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January 2016 Edition

CONTENTS

Business

34 38

S E C T I O N S

Masthead Opening Remarks Contributors BVI Calendar Ahead of the Curve Business

Bookshelf Spotlight: Insight Tourism and Real Estate Feature Research Article Business BVI Guides Over And Out

A REVIEW OF THE LEGAL PROFESSION ACT, 2015 by Colin Riegels

FISHING IN THE BVI: BECOMING A PLAYER ON THE ECONOMIC STAGE by Todd VanSickle

42 44 48

CTL: STEPPING UP ITS GAME by Ken Silva

PREPARING OUR STUDENTS TO BE GLOBAL CITIZENS An Interview with the Hon. Myron V. Walwyn, Minister of Education and Culture by Russell Harrigan and Freeman Rogers

A BI-METAL STRIP: WHAT IS OUR COEFFICIENT OF LINEAR EXPANSION? Keynote Address by Gerard St.C Farara QC at the 2015 Public Service Execellence Awards 23rd July 2015

January 2016 Edition

FOREIGN REINSURANCE IN THE BRITISH VIRGIN ISLANDS by Rachael McDonald, Simon Lawrenson, James Webb

113

Tourism and Real Estate

Business BVI Guides

114

Contents

118

16 17 18 21 24 68 101 124

TEN YEARS OF REAL ESTATE DEVELOPMENT IN THE BVI by Edward Childs

MOVING TO THE BRITISH VIRGIN ISLANDS

by Business BVI Staff Writer

FAST FACTS ABOUT THE BRITISH VIRGIN ISLANDS

by Patlian Johnson

MASTHEAD OPENING REMARKS CONTRIBUTORS BVI CALENDAR AHEAD OF THE CURVE BOOKSHELF FEATURE RESEARCH ARTICLE OVER & OUT

January 2016 Edition

CONTENTS F E AT U R E A R T I C L E S

56 56

THE BVI: CORPORATE EVOLUTION SERVING GLOBAL COMMERCE

by Greg Boyd

62 94 124

BEYOND MCKINSEY

by Lorna Smith, OBE

ROSEWOOD: A SENSE OF PLACE速

Interview by Russell Harrigan

INTERVIEW WITH JOHN BEECHEY, CHAIRMAN OF THE BVIIAC

Interview conducted, condensed and edited by Russell Harrigan and Freeman Rogers

January 2016 Edition

124

CONTENTS SPOTLIGHT: INSIGHT

72 Statements by the Honourable Premier and Minister Of Finance Dr. The Honourable D. Orlando Smith, OBE on financial services during the fourth sitting of the first session of the Third House of Assembly of the Virgin Islands 2nd November, 2015

BENEFICIAL OWNERSHIP OF COMPANIES

AMENDMENTS TO THE ANTI-MONEY LAUNDERING REGULATIONS AND ANTI-MONEY LAUNDERING AND TERRORIST FINANCING CODE OF PRACTICE

THE AMENDMENTS TO THE BVI BUSINESS COMPANIES ACT, 2004

SAVING THE DREAM FOR ALL

Remarks by Robert A. Mathavious, Managing Director/CEO BVI Financial Services Commission at the Meet the Regulator Forum, 19th November 2015

January 2016 Edition

EDITORIAL BOARD RUSSELL HARRIGAN

CEO, OYSTER GLOBAL MARKETING GROUP

ELIHU RHYMER

CEO, BVI DEVELOPMENT CONSULTANTS

SIMON SCHILDER

LORNA SMITH, OBE CEO, LGS ASSOCIATES

AYANA HULL

SENIOR ASSOCIATE, HARNEYS

KENNETH M. KRYS

PARTNER, OGIER

FOUNDER AND CEO, KRyS GLOBAL

M A N AG I N G E D I TO R PUBLISHER P R O J E C T C O - O R D I N AT O R DESIGN

RUSSELL HARRIGAN OYSTER PUBLICATIONS LTD PORTIA HARRIGAN OYSTER DESIGN TEAM

P H OTO G R A P H Y

BVI TOURIST BOARD TODD VANSICKLE

A D V E RT I S I N G

RUSSELL HARRIGAN KATE MULLAN

B U S I N E S S B V I .C O M

Business BVI is a bi-annual magazine published by Oyster Publications LTD P.O. Box 3369, Road Town, Tortola, British Virgin Islands Tel: 284-494-8011 Fax: 284-494-3066 www.oysterbvi.com Email: info@oysterbvi.com Please send comments and address changes to this address.

PORTIA HARRIGAN

Business BVI and Oyster Publications LTD are divisions of Oyster Global Marketing Group. www.businessbvi.com

All information in this publication has been carefully collected and prepared, but it still remains subject to change and correction. Use this content for general guidance only and seek extra assistance from a professional adviser with regard to any specific matters. Copyright reserved. None of the contents in this publication may be reproduced or copied in any form without permission in writing from the publisher. These articles do not constitute tax or legal advice, and no action should be taken based on the information in these documents without first consulting suitable tax or legal advisers. No liability for actions taken, or in action, based on the information in these articles, will be accepted. 16

January 2016 Edition

OPENING REMARKS

Engaging the Future in a Period of Volatility “The BVI is well positioned to face this period of volatility, but it will require intellectual muscularity and collective steadfastness”

few weeks ago, a friend commented that the selection of each new US President by the electorate is undeniably influenced by his predecessor’s tenure in office. It is the same with every New Year. Undoubtedly, 2015 will be remembered as the year when the global community entered what is clearly a sustained period of volatility. It started in the economic space in China and quickly spread to the social space, with the mass migration from parts of North Africa and the Middle East into Europe and now “terrorism”. Concerns about personal security have raced to the top of the list, ahead of economic issues post Sinai, Paris and San Bernardino. These events have shaken confidence in the world’s major capitals and will have repercussions far beyond. This era of volatility is now the new normal and it will also define 2016. On the global economic dashboard, growth in most of the world’s leading economies has been challenged at best and in the worst case, economies such as Japan and Brazil are back in, or are tethering on the brink of recession. The BRICS have clearly lost their shine as commodity prices have collapsed and financial capital seeks out new havens in search of growth opportunity. As we go to press, the United States continues to be a bright spot, although anxiety has risen driven by the threat of an increase in interest rates by the Federal Reserve. The post Obama fight for the White House is in full stride, adding its share of uncertainty. Meanwhile after a summer of frayed nerves, China has reduced its projected rate of GDP growth for 2016 to 6.5% down from 7%, a rate of growth that would be welcomed with street celebrations in the EU. Engaging the future in a period of volatility is never devoid of head scratching challenges. For the BVI we must fasten our seatbelts as we move forward for what is projected to be a long, bumpy road ahead. However, adversity is always coupled with opportunity. Opportunity for the nimble and the best prepared. We at Business BVI believe that the British Virgin Islands is well positioned to face this period of volatility, but it will require intellectual muscularity and collective steadfastness on our part, both the public and private sector.

Navigating the constantly changing and evolving global economic landscape over the year ahead, one where national security concerns will be a key influence, will be even more treacherous for a micro economy such as the BVI. Survival will mean always being strategic and innovative in our individual and national decision-making. We will be called upon to exhibit acute dexterity to keep moving forward. This issue is packed with articles and interviews, which are intended to provide a clear perspective on what is required to keep the BVI competitive globally and thus providing continued economic growth here at home. We look at how the BVI has evolved to become a heavy hitter on the global FDI stage – The BVI: Corporate Evolution servicing Global Commerce (p.56), We dig deeper into what the implementation of the McKinsey study will mean for the financial services sector and the local economy – Beyond McKinsey (p.62), We speak to the millennial CEO of the Rosewood Hotel Group about what is required to be one of the world’s leading ultra-luxury brands – Rosewood – A Sense of Place (p.94) And we sit down for a detailed discussion about moving arbitration forward with the first Chairman of the BVIIAC – Interview with John Beechey, Chairman of the BVIIAC (p.124). We also speak to the Minister of Education about preparing the next generation to be global citizens, look at what it will take to make fishing a player on the economic stage, the critical role the public service in being globally competitive and take an in-depth look at the development of real estate in the BVI over the last 10 years. Enjoy and please let us have your feedback and comments – info@oysterbvi.com

RUSSELL HARRIGAN Managing Editor

CONTRIBUTORS

“FDI has become the major economic driver of globalisation, accounting for over half of all cross border investments. Companies are rapidly globalising through FDI to access and serve new markets and customers, map out their value chains in the most efficient locations globally, and to access technological and natural resources. In other words, FDI fuels growth of Multinational Enterprises (MNEs) and promotes development in the emerging markets.” GREG BOYD’s articleThe BVI: Corporate Evolution Serving Global Commerce p.56, effectively explains the significant role the BVI plays in global cross border investment. Greg is a Partner at Harneys and he works with many of the world’s leading lawyers, bankers, private equity firms and accountants on cross-border joint ventures, mergers and acquisitions, corporate reorganizations and stock exchange listings.

Ten Years of Real Estate Development in the BVI p.80 “In writing the real estate article each year, I have been aware how tumultuous the market has been, from the first article for the 2009 edition, written just as Lehman Brothers went under in September 2008 and the economy crashed in reaction to the sub-prime mortgage debacle, through the depths of the recession in 2011 and 2012, before finally emerging with a shaky recovery in 2013 and 2014. Understanding the cyclical nature of real estate in the BVI helps to give a better understanding of what the future may bring to this industry.” EDWARD CHILDS’ annual outlook for the real estate sector is perhaps the most anticipated piece in Business BVI, by both locals and visitors alike. It has become a definitive guide about what is taking place in the real estate space in the territory.

Our Fast Facts Guide p.118 is intended to provide top of mind data about the BVI, its economy and doing business in the territory. We rely on PATLIAN JOHNSON to ensure we are current. Patlian is the Deputy Financial Secretary, Ministry of Finance, Government of the Virgin Islands with responsibility for Economic Development and Fiscal Affairs. Ms. Johnson holds a Masters of Science Degree in Economics and Finance from the University of Bristol.

Freeman contributes to two interviews in this edition: 1. An Interview with John Beechey, Chairman of the Board of the newly established BVI International Arbitration Centre p.124 our second interview for our new section OVER&OUT. Beechey brings extensive credentials to the chairmanship. 2. Preparing our Students to be Global Citizens p.44 an interview with the Hon. Myron Walwyn, the Minister of Education, who is on his second tour of duty as Minister of Education. “The crisis of 2008 has essentially placed a premium on competence, so we must make sure that the product – because we’re producing a product in the education system for the business community – is of high quality.” FREEMAN ROGERS is the editor of the The BVI Beacon.

KEN SILVA is the Business Editor of The BVI Beacon. He was born and raised in Cleveland, Ohio, and has been living in the BVI for the last two years. His work has appeared in Yahoo News, Reason Magazine, and the Caribbean Digital Network. Making his first contribution to Business BVI CTL: Stepping up its Game p.42, Ken introduces us to the BVI’s first megastore, speaking to the owners about the challenges inherent in taking their game to this level and the quality of service that local consumers can look forward to.

“The question on everyone’s mind in the prevailing climate is: will ‘offshore’ remain relevant? The answer from several sources including Robert Briant of Conyers, Dill and Pearman is a resounding yes. Robert believes that the key to the BVI remaining relevant and continuing to be a global player depends on our ensuring transparency and effectively diversifying beyond incorporations. He further suggests that BVI relevance is dependent on parties from different jurisdictions, structuring their affairs in a neutral territory, the rule of law not fully prevailing in certain places requiring persons to establish offshore companies and the BVI continuing to maintain the well-regulated jurisdiction that it is.” LORNA SMITH is synonymous with financial services in the BVI. She Chairs the Cabinet appointed Financial Services Business Development Committee and is the CEO of LGS Associates. In Beyond McKinsey p.62, Lorna provides a deep dive into what the implementation of the McKinsey study means for the BVI.

January 2016 Edition

“Reinsurance is a hot topic in the British Virgin Islands (BVI as international reinsurers demonstrate significant interest in expanding their reach into offshore jurisdictions. Peak Reinsurance Company Limited, the Hong Kong based global reinsurer recently announced it has reached definitive agreements to acquire a 50 percent stake in Caribbean insurance group Nagico Holdings Limited.” From Foreign Reinsurance in the BVI p.52 by SIMON LAWRENSON and his colleagues Rachael McDonald and James Webb. Simon leads the banking and finance practice of Mourant Ozannes in Asia, based in Hong Kong.

“In addition to its natural beauty, the BVI is also home to a vibrant local economy, buoyed by a longstanding financial services industry. Financial services account for more than half of the BVI Government’s annual revenue. With more than 450,000 active business companies, the BVI is the leading offshore incorporation jurisdiction, with more incorporations than all other offshore jurisdictions combined.” From Foreign Reinsurance in the BVI p.52 by RACHAEL MCDONALD and her colleagues Simon Lawrenson and James Webb. Rachael is the Managing Partner of Mourant Ozannes BVI office.

“Previously under British Virgin Islands law any person who met the relevant qualifications could travel to the BVI and be admitted as a lawyer. Broadly, one could qualify one of two different ways – either by being admitted as a lawyer in the United Kingdom, or by graduating from a regional law school in the Caribbean. There was a widespread perception (which was probably correct) that the system was being abused. Lawyers would fly to the British Virgin Islands for a day, get admitted, and then fly out again and hold themselves out as a BVI lawyer for life.” From A Review of the Legal Profession Act, 2015 p.34 by COLIN RIEGELS. Colin is a partner and head of the banking & finance global practice group at Harneys Singapore and is a regular contributor to Business BVI.

Fishing in the BVI – Becoming a Player on the Economic Stage p.38 “We now have to embark on a journey to show our fishermen how they can build their homes, send their kids to college and take care of themselves, not only as active fishermen but in retirement,” Dr. Pickering said. For the past 11 years, TODD VANSICKLE has lived and worked in the BVI and has been a journalist and photographer for more than 18 years and regularly contributes to Business BVI.

“The BVI implemented new insurance laws in 2010 to modernise the regulatory framework and ensure compliance with the core principles of the international insurance regulatory community, including the International Association of Insurance Supervisors and the Offshore Group of Insurance Supervisors, whilst delivering a flexible and risk-based licensing regime.” From Foreign Reinsurance in the BVI p.52 by JAMES WEBB and his colleagues Simon Lawrenson and Rachael McDonald. James is based in Mourant Ozannes’ BVI office.

KRISTIAN WILSON is a prolific and established writer on BVI matters in the financial services space. He contributes the feature research article in this edition: The Role of Offshore Jurisdictions in Russia p.101 Kristian is a senior associate at Bedell’s Singapore. An experienced commercial lawyer, he practiced offshore law in the BVI and Jersey and currently advises on BVI law, including corporate, financial, commercial and regulatory matters.

January 2016 Edition

Hong Kong

BVI Singapore

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BVI CALENDAR J A N U A R Y

2 0 1 6

T O

J U L Y

2 0 1 6

Borlenghi/Superyacht Media/Boat International Media January 2016 Edition

Spanish Town Fisherman Jamboree & Wahoo Fishing Tournament

J A N U A R Y

BOMBA SHACK’S FULL MOON PARTY | February 22nd

ANNUAL BEYC MIDWINTER REGATTA www.beyc.com | January11th-18th 24th

TRELLIS BAY FULL MOON PARTY | February 22nd FOXY’S FULL MOON PARTY SERIES| February 22nd

BOMBA SHACK’S FULL MOON PARTY The infamous Full Moon party at Bomba's, West End, Tortola | January 25th TRELLIS BAY FULL MOON PARTY | January 25th

LORO PIANA CARIBBEAN SUPERYACHT REGATTA & RENDEZVOUS www.loropianacaribbeansuperyachtregatta.com | March 9th-12th

FOXY’S FULL MOON PARTY SERIES www.foxysbar.com/upcoming-events |

BOMBA SHACK’S FULL MOON PARTY | March 23rd

January 25th

TRELLIS BAY FULL MOON PARTY | March 23rd

F E B R U A R Y

PAINKILLER CUP www.painkillercup.com | January 23rd 22

January 2016 Edition

M A R C H

38TH ANNUAL SWEETHEARTS OF THE CARIBBEAN & 33RD ANNUAL CLASSIC YACHT REGATTA |February 12th-15th

FOXY’S FULL MOON PARTY SERIES| March 23rd 45TH ANNUAL SPRING REGATTA www.bvispringregatta.org | March 28th April 3rd

FOXY’S CINCO DE MAYO PARTY www.foxysbar.com/upcoming-events | May 5th BVI EXQUISITE BOAT SHOW www.bviexquisiteboatshow.com | May 20th-22nd

VIRGIN GORDA EASTER FESTIVAL March 26th-28th

A P R I L SPANISH TOWN FISHERMAN JAMBOREE & WAHOO FISHING TOURNAMENT This popular fishing tournament attracts many competitors as well as onlookers. Food, music and beach fun are just part of this fun-filled event. | April 26th-27th

FOXY’S WOODEN BOAT REGATTA www.foxysbar.com/upcoming-events | May 21st-22nd

BOMBA SHACK’S FULL MOON PARTY | April 22nd

LEVERICK BAY POKER RUN www.pokerrunbvi.com | May 23rd

TRELLIS BAY FULL MOON PARTY | April 22nd FOXY’S FULL MOON PARTY SERIES| April 22nd JAZZ ON THE HILL | TBA

M A Y BOMBA SHACK’S FULL MOON PARTY | May 21st TRELLIS BAY FULL MOON PARTY | May 21st FOXY’S FULL MOON PARTY SERIES| May 21st LOWELL WHEATLEY ANEGADA PURSUIT RACE www.anegadareef.com | TBA

J U N E BOMBA SHACK’S FULL MOON PARTY | June 20th TRELLIS BAY FULL MOON PARTY | June 20th FOXY’S FULL MOON PARTY SERIES| June 20th HIHO-BVI ADVENTURE RACE 2016 www.go-hiho.com | TBA

SUMMER SIZZLE BVI www.summersizzlebvi.com July 21st - 24th

J U L Y BOMBA SHACK’S FULL MOON PARTY | July 20th TRELLIS BAY FULL MOON PARTY | July 20th FOXY’S FULL MOON PARTY SERIES| July 20th CHRISTMAS IN JULY | July 30th

BVI EMANCIPATION FESTIVAL July 22nd - August 7th

For more information on all that the British Virgin Islands have to offer, visit the official BVI Tourist Board website at www.bvitourism.com or contact 1-800-835-8530. January 2016 Edition

AHEAD OF THE CURVE

January 2016 Edition

T H E S PA AT O I L N U T B AY

oming soon to the Oil Nut Bay community will be their very own Spa located on the southern side of resort between the Atlantic Ridge and the Boulder home sites. Designed by OBM International, the Spa will feature a range of luxurious beauty treatments and massage therapies for those seeking the ultimate pampering experience, with spectacular ocean and cliff views and a gentle breeze to soothe the mind, body and soul. Slated to open in March 2016, the Spa will include two treatment rooms, a full manicure room, lounge deck and infinity plunge pool and a broad menu of beauty treatments and massage therapies to recharge and restore your health and well-being.

www.oilnutbay.com

January 2016 Edition

AHEAD OF THE CURVE

PETER ISLAND RESORT GEARS UP FOR WINTER SEASON WITH BEAUTIFICATION PROJECT, A NEW GENERAL MANAGER AND A NEW EXECUTIVE CHEF

ast year was a year of expected and unexpected change and transition for Peter Island Resort & Spa. The resort has embraced these changes as an opportunity for making the BVI’s largest luxury private island resort better than ever and to achieve its mission to consistently deliver a unique and unforgettable luxury private island experience that keeps guests coming back for more.

BEAUTIFICATION PROJECT IS COMPLETED Last summer, the resort successfully completed the final phases of its Beautification Project, which included significant improvements to the resort’s Mega Yacht Harbor and Ocean View rooms. The project, launched in June of 2014, reinvents the arrival experience, with the relocation and creation of a brand new, bohio-style welcome pavilion and dive shop and the additions of a Captains’ Lounge and Commissary to better suit the needs of marina guests. The project also included the renovation of the resort’s Ocean View Rooms with a complete redesign of the bathrooms, the creation of a new Ocean View Deluxe category and a soft goods renovation of the Ocean View Rooms’ bedrooms and sitting areas. “At Peter Island we are continuously looking for ways to improve and enhance the guest experience,” says Managing Director George Aquino. “This beautification project enabled us to invest in making great strides to implement significant upgrades while still maintaining the unspoiled, one-of-a-kind characteristics that bring our guests back year after year and result in valuable recognition from respected travel industry influencers including Conde Nast Traveler, US News & World Report and Andrew Harper’s.” 26

January 2016 Edition

NEW GENERAL MANAGER, SCOTT HART Scott Hart, one of the BVI’s talented entrepreneurs was appointed as Peter Island’s new General Manager in July. Originally from Canada, Scott came to the BVI for a vacation in 2001, met his future wife, BVIslander Paloma Helm, and has been here ever since. In 2003, Scott and Paloma opened their first venture, The Dove restaurant in Road Town to great success and it quickly became one of the most acclaimed restaurants in the Virgin Islands. In 2008, Scott took on another entrepreneurial challenge -overseeing the relaunch and management of Frenchman’s Hotel on Tortola’s West End. “I’ve always been a great admirer of Peter Island,” says Scott. “The long-term dedication of its employees, the meticulous attention paid to guests and the laid-back private island luxury the resort offers, is a formula for continued success that I wanted to be a part of and contribute to. I am excited to put a fresh-eye perspective on things and work closely with our fantastic team to make the resort even better than ever.

NEW EXECUTIVE CHEF TODD HOWARD One of Hart’s first exciting contributions to Peter Island is his appointment of the resort’s new Executive Chef, Todd Howard who replaces Chef Lisa Sellars who left last spring. He brings an impressive wealth of experience and talent to the table, including working in the kitchens of famous chefs such as Heston Blumenthal of renowned The Fat Duck, Angela Hartnett at London’s Connaught hotel and Gordon Ramsey’s Maze restaurant. “Chef Howard is a great addition to an already strong culinary team,” says Scott. “We are looking forward to building on his and the team’s strengths and benefiting from Todd’s farm-totable background to develop our own island-totable concept. We are planning to use some of the island’s 1,800 acres to grow our own fresh produce, herbs gardens, fruit orchards and bee hives to make Peter Island honey. The vision is to become more sustainable and seasonal with our culinary offerings. We also want to further develop our spa/wellness cuisine to satisfy the growing demand from guest for healthy menu options and we are considering creating a greenhouse program. I’ve been amazed by and grateful for the local BVI farmers who are helping us get this exciting program up and running. We’re excited for Peter Island’s future and where it takes us.” www.peterisland.com

AHEAD OF THE CURVE

THE OFFSHORE INDUSTRY IN 2020:

THE BVI AND THE RISE OF SUPER JURISDICTIONS

or the sixth year running, the BVI has been ranked the most important jurisdiction in OIL’s flagship annual market study, Offshore 2020. This year, 320 industry leaders took part in the research to give their views on the current state of the offshore industry and the trends that will impact its future. Since the study began in 2010, the industry has held the same view: stakeholders rank the BVI as the most important jurisdiction today, (see figure 1), but expect Hong Kong and Singapore to become the most important jurisdictions within the next five years (with the BVI and the Cayman Islands ranked third and fourth respectively), (see figure 2). This reflects industry sentiment that by 2020, business will move towards midshore jurisdictions, which have traditional offshore benefits as well as onshore credibility. However, it is clear that the BVI and the Cayman Islands will continue to be fundamental to the offshore industry.

FIGURE 1 Jurisdictions by importance

TODAY Source: OIL

3.9

The BVI

3.7

Hong Kong

3.7

Cayman Islands

3.4

Singapore

Jersey

2.6

UAE

The rise of super jurisdictions, defined as ‘an originating geographical source of clients, a market where other clients go to conduct business and the jurisdiction itself of the entities that clients use’, was another trend that emerged from this year’s research. These super jurisdictions are considered contenders for usurping traditional offshore centres, such as the BVI, because they offer considerable benefits to clients. Hong Kong, Singapore, London and Dubai all meet the criteria for super jurisdiction to some degree. All have a strong employee base, sound business, residential or travel infrastructure, and financial and legal services for clients. All are large cities or city states that now compete with offshore and midshore jurisdictions. Industry respondents believe this trend will continue over the next five years.

FIGURE 3 Growth drivers in the next

5 YEARS

2.6

Rating out of 5, with 5 being most important

Hong Kong and Singapore are expected to drive future growth in the offshore industry because of the influx of wealth in Asia. In accompanying Offshore 2020 events, OIL Group Managing Director, Jonathon Clifton, has said, ‘Non-tax-related demand drivers, such as wealth planning and asset protection, will increase due to the rise in wealth in Asian countries and a better understanding of wealth management solutions.’

2.8

Luxembourg

Netherlands

RISING WEALTH WITHIN ASIA AND THE EMERGENCE OF SUPER JURISDICTIONS DRIVES FUTURE OFFSHORE INDUSTRY GROWTH

2.2

Source: OIL

57%

Wealth planning

51%

Asset protection

48%

Emerging market wealth

2.1 40%

Cross border trade/FDI

33%

M & A activity

FIGURE 2 Jurisdictions by importance

IN 2020 Source: OIL

3.9

Hong Kong

3.7

Singapore

3.5

The BVI

3.3

Cayman Islands

Double tax treaties

32%

Privacy and client anonymity

2.8

Luxembourg

2.7

New IPOs and capital market movements

2.7

Traditional tax planning

32%

2.6

Jersey

Rating out of 5, with 5 being most important

Increased client sophistication

UAE Netherlands

January 2016 Edition

2.4 2.2

Higher taxes in developed markets

GDP growth

31% 27% 24% 21% 17%

11%

Eastern Europe

72%

Western Europe

12%

North America

Greater China

13% MENA

13% Africa

13%

12% India

50%

Southeast Asia

Latin America FIGURE 4 Top regions for growth in the next

5 YEARS Source: OIL

BVI EXPECTED TO REMAIN A SIGNIFICANT OFFSHORE JURISDICTION IN 2020 Although Greater China and Southeast Asia are identified as the top regions for growth through to 2020, the BVI will continue to be an influential offshore jurisdiction. Despite increasing competition from midshore or super jurisdictions such as Hong Kong, Singapore, Luxembourg, Delaware and the Netherlands, quality traditional offshore jurisdictions still have a significant hold in the industry and this will continue to be the case through to 2020.

OPTIMISM FOR THE FUTURE OF THE OFFSHORE INDUSTRY While the industry faces challenges presented by regulatory initiatives, including the base erosion and profit shifting (BEPS) initiative, common reporting standards and the USâ&#x20AC;&#x2122;s Foreign Account Tax Compliance Act, the survey shows the offshore industry remains positive about its future. The regulatory environment continues to shift. Regulation that balances greater transparency with the need to support companies wanting to expand globally, will strengthen the offshore industry and bring it into the mainstream. However, regulation should enforce best practice within the industry, not seek to stamp it out.

Leading offshore jurisdictions, such as the BVI, offer investors modern, cutting-edge legislation; neutral venues that can be trusted by all parties involved in a transaction; and a tax-neutral environment that ensures profits are not taxed multiple times. Such jurisdictions have long served as neutral venues for companies to make cross-border investments, with their robust and familiar legal systems and professional infrastructure providing reassurance to investors. The offshore industry, including the BVI, plays a vital role in enabling global economic development by reducing cross-border friction costs and facilitating the global flow of capital. The industry serves as the plumbing of integrated modern global economies. OIL believes that by 2020 the offshore industry will be a leaner, more resilient and more confident member of the global economy.

January 2016 Edition

AHEAD OF THE CURVE

2015 CO ND E N AS T TRAVE L E R

ore than 128,000 travelers took part in the 28th annual Readers' Choice Awards survey—the most in its history—submitting millions of ratings and tens of thousands of comments to help create a list of winning favorites. The breadth of their top-rated experiences was impressive, from elegant castles in the Irish countryside to tented safari camps trailing the Great Migration across the Serengeti. They chose tiny private islands in the tropics, small culture rich cities in Europe, and intimate river cruises. Most notably, they declared a passion for the authentic, the personalized, the unexpected—finding all three in both newcomers and stalwarts around the world. Guana Island scored 94.334 and placed in two categories: number 75 in Best Hotels in the World and second in Top 40 Resorts in the Caribbean. The resort is described by readers as a “Caribbean dream” because of the exclusiveness of its powdery beaches and beautiful water. Phone: 1-800-544-8262 • Email: reservations@guana.com • www.guana.com

January 2016 Edition

Something Truly Wonderful Until now, BVI souvenirs have been restricted to t-shirts, an occasional pen, spices and pieces of straw work. Dolls, pins and hats have been added to extend our tourist offerings. That is until last fall which marked a new sojourn in the BVI souvenir market—the birth of something truly wonderful—Wonders of the Virgin Islands (WOVI), a completely locally owned store, inspired by the new Tortola Pier Park, is owned and operated by Ayana Hull and Kareem-Nelson Hull (the brother and sister team who wrote the Virgin Islands Territorial song and both local authors) together with Annabelle Skelton, an established Virgin Islands entrepreneur. Their mission was to create a retail store that would secure an authentic BVI feel. To do so, they didn’t need to look far at all. The Virgin Islands’ backyard is littered with inspiration: century old churches, sugar work museums and relics, pre-West Indian Federation buildings, geological wonders, exotic, record-holding wildlife and fabled natural attractions. They started there and began to create collections: the $16.00 Sunday Morning Well would fall into The Monuments Collection and will be joined by a $25.00 Copper Mine Ruins, an $18.00 scaled replica of the St. Phillip’s Anglican Church—the oldest church in the Western Hemisphere which was built by freed blacks, two sizes of the statuesque Mount Healthy Windmill ($18.00 and $16.00) and others. The Anegada lobster, the Anegada flamingo and its indigenous rock iguana were designed together by the siblings in a piece entitled “Anegada Wildlife” and is produced solely for Wonders of the Virgin Islands in a first time resin figurine, leading the way in the “All Things Bright and Beautiful” Collection. The Turtle Dove—the Territorial Bird, the Territorial Flower—the White Cedar Flower, leather back turtles and other figurines will round out that collection. The Pride Collection will feature a relief of the Patron Saint of the Virgin Islands St. Ursula surrounded by her iconic, significant, metallic, hand painted golden lanterns while figurines of a male and female wearing the Territorial Dress will stand as her guards.

Harneys welcomes BVI lawyer Persia Tobin-Evelyn

www.wondersofthevirginislands.com

Rachael McDonald appointed Managing Partner of Mourant Ozannes' BVI practice Leading offshore law firm, Mourant Ozannes, has announced a number of key changes to its global BVI law practice, which sees the firm strengthen its BVI team in all major time zones. Rachael McDonald has been appointed as the new managing partner of the BVI office. Rachael, who led the Mourant Ozannes team, acting for Rosneft on its US$55 billion acquisition of TNK-BP, the largest ever M&A deal to date in the BVI, will continue to build upon the success of the office, which has enjoyed impressive year on year growth. The growth of the firm's BVI practice in Europe and the MENA region sees Mike Williams returning to Jersey to further develop the BVI practice in the European time zone, building on the firm's already strong BVI law capabilities in the region. Mike's extensive experience, which includes leading the global team that advised Canada Pension Plan Investment Board on the BVI, Guernsey and Jersey law aspects of its £1.1 billion acquisition of the UK student accommodation portfolio of the Brandeaux Student Accommodation Fund, will be an added asset to the team and its ability to deliver an exceptional service to clients in a European time zone. Jonathan Rigby, global managing partner, said, "We are extremely grateful to Mike for the huge contribution he made to the establishment and development of the BVI office over recent years. We have built a fantastic team of talented partners, lawyers and staff in the BVI and we are involved in some of the very best work in market. We are extremely fortunate to have such a great team providing BVI legal advice across American, Asian and European time zones." www.mourantozannes.com

Last November, Harneys announced the appointment of British Virgin Islands (BVI) lawyer Persia Tobin- Evelyn to the firm. Associate Persia Tobin-Evelyn, who was born and raised in the BVI, is a recent graduate of the Eugene Dupuch Law School in The Bahamas. She was awarded 11 academic prizes for her performance in Criminal, Civil and Commercial Law. She was also awarded Most Outstanding Law Student over the entire two year program. "Harneys continues to be committed to hiring and providing opportunities for outstanding BVI lawyers and professionals,” said BVI Managing Partner and Head of the Private Client Department Sheila George. “Persia is indeed a promising newly qualified lawyer and it gives me great pleasure to welcome her to our BVI team.” Prior to pursuing her legal studies, Persia had a range of work experience including five years as the Assistant Director of Youth Affairs with the Government of the British Virgin Islands. www.harneys.com January 2016 Edition

BUSINESS

SOURCE: OIL - Offshore 2020 Report 2015: The New Normal

BUSINESS - BVI BUSINESS

A REVIEW OF THE LEGAL PROFESSION ACT, 2015 by Colin Riegels

n Samuel Beckett’s 1953 play, Waiting for Godot, the two main characters spend the entire time on stage arguing and complaining about things whilst waiting endlessly for the eponymous Godot to arrive. Godot never does arrive, and the play stands as a literary metaphor for the interminable wait. Reform of the legal profession in the British Virgin Islands bears some striking similarities to the play, both in terms of the seemingly endless wait, and the continual bickering and

complaining done by those waiting. However, that wait now finally seems to be nearing an end. In March 2015 the House of Assembly finally passed into law the Legal Profession Act (often referred to by lawyers as simply “the LPA”). It now only awaits a proclamation to be brought into force. Although it appears that some further minor changes are needed to the legislation before it can be brought into force, but the jurisdiction is now nearer than it has ever been to reform of the legal profession.

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BACKGROUND Previously under British Virgin Islands law any person who met the relevant qualifications could travel to the BVI and be admitted as a lawyer. Broadly one could qualify one of two different ways – either by being admitted as a lawyer in the United Kingdom, or by graduating from a regional law school in the Caribbean. There was a widespread perception (which was probably correct) that the system was being abused. Lawyers would fly to the British Virgin Islands for a day, get admitted, and then fly out again and hold themselves out as a BVI lawyer for life. The legal profession complained bitterly about this of course, although they rather overlooked the fact that they themselves were the ones who were prepared to move the applications of these fly-by-night lawyers. There was also concern that admission to practice was for life. There was no ongoing regulation of the profession, or requirement to maintain annual practising certificates. Moreover it was felt that this was a good opportunity to review the entirety of the regulation of the profession which, if we are being honest about, had been almost entirely unregulated to date.

ADMISSIONS CRITERIA Most of the attention paid to the new Act has focused upon changes to the criteria for admission. The two traditional routes (admission in the UK or graduating from a regional law school) broadly continue, but with a number of additional requirements. Firstly, persons will not need to reside in the Territory to be admitted. Secondly, all applicants will need to complete a period of pupillage in the BVI under a qualified pupilmaster in order to be admitted. The Act contains some provisions whereby a portion of pupillage done overseas prior to admission may be counted towards the BVI pupillage, but these provisions are slightly ambiguous and one of the areas which will likely be clarified before the Act is brought into force. The Act also suggests that in future, lawyers admitted in other common law jurisdictions such as Australia, New Zealand and Hong Kong may be eligible for admission, but the legislation is quite vague and non-specific on that point. One of the more controversial aspects of the new legislation relates to the treatment of UK qualified lawyers. Although formerly admitted as of right, now UK qualified lawyers are subject to significant additional handicaps in relation to admission. Firstly, they must additionally have a minimum amount of post qualification experience (initially 3 years, but rising to 5 years after an interim period). Secondly, and more crucially, they must have rights of audience before the superior courts (which is to say, the High Court in England or the Court of Session in Scotland). For barristers this is not problematic, but for solicitors (who make up nearly 90% of the profession) this is almost a total prohibition on admission. This is probably one of the key areas for the legislative committee to review for consistency before bringing the Act into force.

PRACTISING CERTIFICATES Going forward all lawyers who wish to practice in the BVI will need to hold a current practising certificate. However (curiously, given the history) as presently drafted the Act contains no requirement for any lawyer practising BVI law outside of the Territory to hold a certificate. Notwithstanding that, the Act proposes to limit the number of practising certificates which it would issue to non-resident lawyers (even though they don’t technically

require them) by reference to a ratio to the number of certificates which that law firm holds for lawyers practising in the BVI. Even more curiously there is no requirement at all imposed on law firms who practice BVI law but who have no physical presence in the Territory (of which there are an ever growing number). Much excitement has been generated amongst the international firms in BVI who have offices in Road Town and abroad as to what this proposed ratio will be. But to date the Government has been extremely tight lipped as to what the ratio might be. But presumably until the Act is amended to require overseas lawyers to hold a practising certificate it will be academic in any event.

VIRGIN ISLANDS GENERAL LEGAL COUNCIL The Legal Profession Act will also create a General Legal Council to exercise regulatory power over the profession. By any yardstick, this Council has been conferred with extraordinarily wide powers. The requirements for serving on the Council make it unashamedly nationalistic – most positions on the Council either require that the person is a Belonger or works for Government. Although for constitutional reasons the legal profession is independent in the BVI, the Government has nonetheless made sure that it maintains a fair degree of control over the composition of the Council. The Council will control the admissions process for all new lawyers and, somewhat remarkably, retains a power to refuse to admit any person as a lawyer even if they otherwise comply with all the requirements of the Act. The Council also controls the pupillage process, including who may serve pupillage. It is even required to give its consent to any amendment to a private contract of pupillage between the pupil and the law firm. The Council will also have powers to make new disciplinary rules, and even change some of the criteria for admission as a lawyer.

ETHICS The Act also introduces a new code of ethics for lawyers. Most of these are largely uncontroversial and have excited little attention, although some of them come across as a little bit dated in modern times. But by and large they tend to be consistent with existing best practices amongst law firms in the BVI in any event. In particular the requirement that all law firms must maintain professional indemnity insurance (a basic requirement for lawyers in most countries) is both welcome and long overdue. But amongst the more controversial provisions in the code of ethics is a prohibition against law firms advertising. Advertising is of course widespread in the legal profession (and has been for decades) both in the British Virgin Islands and abroad. It is entirely unclear why the Government has suddenly come to the view that it should be banned, thereby leaving BVI law firms at a substantial competitive disadvantage to other jurisdictions. Also notable is a new type of Orwellian sounding misconduct - breach of the requirement of “maintaining loyalty to the Territory”.

DISCIPLINARY TRIBUNAL Prior to the Legal Profession Act, discipline of lawyers was conducted through the High Court. The process was extremely cumbersome, lacked a natural enforcer, and therefore unsurprisingly was never used. The new January 2016 Edition

legislation will replace the old regime with a new disciplinary tribunal with wide powers to review professional misconduct and punish lawyers appropriately, including by awarding compensation to the victims of misconduct. The Act does still retain a number of criminal penalties which would be enforced by the courts in the usual way. It is not clear that these penalties are always consistent. For example, a QC who accidentally uses a junior whose practising certificate has expired - hardly a hanging offence, and certainly more the responsibility of the junior rather than the QC - is subject to a fine of up to $15,000. However, a person who has no legal qualifications whatsoever and fraudulently impersonates a lawyer and deceives members of the public into hiring him or her as a legal practitioner is also subject to a fine of up to $15,000. The offences scarcely seem to be of similar gravity.

FREEDOM FROM OLD STRICTURES Some of the most significant changes to the regulation are actually not in the Legal Profession Act at all, but are provisions of the existing Eastern Caribbean Supreme Court (Virgin Islands) Act which are scheduled to be repealed by the LPA. Amongst two of the more interesting provisions which are being removed are (i) the prohibitions on law firms organising themselves limited liability companies; and (ii) the prohibition on the

admission of non-lawyers as partners. The ability to limit their personal liability in the same way that other people of business can, will certainly be welcomed by lawyers, as will the ability to attract capital from outside sources. As part of the general reorganisation of the profession, the old distinction between barristers and solicitors will disappear – all lawyers will henceforth be known as “legal practitioners” and all will have full rights of audience.

CONCLUSION Although the new legislation has not been universally welcomed by the profession, ultimately, once the final issues get resolved in relation to the Legal Professions Act it will be brought into force. But even those who are most critical of legislation would concede that the protection of the public interest requires that the prior regime of no professional regulation needs to replaced with a proper structure. After that, it will be the job of the profession to work with the regulators to ensure the smooth working of the new regime. -BB

The author is a Belonger who has been practising BVI law (both from within the BVI and abroad) since 1999.

BUSINESS - BVI BUSINESS

by Todd VanSickle

From his office in the Central Administration Building in Road Town, Minister of Natural Resources and Labour, Dr. Kedrick Pickering can sit at his desk and see the BVI Fishing Complex on the edge of Road Harbour. But for the past few years, the minister has been eyeing the Territoryâ&#x20AC;&#x2122;s fishing industry from a different perspective, in hopes of revamping it as a thriving economic pillar.

January 2016 Edition

Fishing in the Virgin Islands has always been recognised culturally and as a food source, but the industry’s potential has not been fully explored. A lack of incentive and the existence of other thriving industries, such as tourism and financial services have relegated the fishing industry to being a small fish in a big pond. Fishermen and legislators agree that if the industry is to become a player on the economic stage — both locally and internationally — changes would have to be made. “We have embarked on a process to make that a reality,” Dr. Pickering said. According to the minister, the first areas to be addressed were the local fishermen’s concerns. Fishermen were not being paid in a timely manner; sometimes it would take two to three weeks before a fisherman received payment for his or her catch. “The incentive for fishermen to sell fish to the fishing complex was lost,” Dr. Pickering said. Today, on average, fishermen receive payment in less than a week. According to Dr. Pickering, the Ministry of Natural Resources and Labour worked with the Ministry of Finance to implement a system to ensure fishermen are now paid in a specified period of time. Jerome Emanuel is a charter and commercial fisherman. His business, Bad Dog Charters, offers sport fishing to several local resorts like Peter Island and Bitter End, but he also depends on commercial fishing to pay his bills. Being compensated in a timely manner has made a big difference in the way he runs his business. “It has been really good,” Mr. Emanuel said. “When you go fishing, you have to buy gas and you have to pay guys. In the past, it took so long to get a cheque from the complex; you would have to go back into your own money. So you weren’t getting ahead.” Another concern, was the storage capacity at the BVI Fishing Complex which limited how much fishermen could sell to the facility. In 2013, the BVI Fishing Complex received some upgrades to tackle the infrastructure concerns, including increased storage capacity. The complex also invested in vacuum packaging and flash freezing equipment, which help preserve the fish for a longer period of time and allows it to be transported more efficiently. For Mr. Emanuel, selling large amounts of fish to the complex is an important part of his business. “Once I don’t have any charters I go out and do commercial fishing too,” Mr. Emanuel said, revealing that recently, over three days he sold 1,000 pounds of fish, mostly mahi mahi and wahoo, to the BVI Fishing Complex. The fisherman has two boats for fishing — a 53-foot custom built and a 35foot standup console. When the fish are biting and he has charter guests, he hires an additional captain and crew to man both boats. During the “busy season” he is on the water four to five days a week. “We try to stay busy,” Mr. Emanuel said. “We love fishing; that is what we do.” During the last year, the BVI Fishing Association was formed. Mr. Emanuel is a founding member and his brother Chad is the president. “I am too busy to hold that kind of position [as president],” Mr. Emanuel said. “I don’t have the time to sit down and do paper work.” The BVIFA has about 20 to 30 members, but continues to grow. “Everyday people are joining,” Mr. Emanuel said, noting that having an association was

a good first step for the fishermen, which allows them to have one voice to air their concerns and have “a little bit of control” over the industry. “It is definitely improving,” he said, adding, “It is getting better by the minute. Government has put a lot of interest into fishing. I don’t have much problems with the industry right now and how things are going. I am getting my fish off to the complex and getting my cheques on time.” Dr. Pickering said these changes were essential for creating reform within the fishing industry and momentum is starting to grow. “We recognised that just to initiate any discussions on fishing, government had to demonstrate some good will and leadership on some of the issues pertinent to the fishermen in their day to day lives,” Dr. Pickering said. “That initial bit of work, I would say was the genesis of getting the fishing industry up and running.” Today, Dr. Pickering and local boat captain, Kevin Gray are continuing to work together to improve and reform the industry, enabling it to become one of the Territory’s economic pillars. “In the BVI we cut roads and build houses, but then we realise we need retaining walls,” Mr. Gray said. “We have the two economic pillars — financial services and tourism. But now we need to take fish and turn it into concrete to brace these pillars.” Dr. Pickering said Mr. Gray’s expertise and good relationships with the Territory’s fishermen have been a valuable resource in restructuring the industry. “He has refused to accept a paid consultancy with government,” Dr. Pickering said. “He has said this is his contribution to his country and it is a love of his life.” Now that government has addressed several key concerns, Dr. Pickering is finding more “laissez-faire” fishermen working with government to provide a steady supply of fish at the BVI Fishing Complex. This has been good news for businesses, like restaurants and charter boats that have customers who want a consistent supply of fish. “We now have to embark on a journey to show our fishermen how they can build their homes, send their kids to college and take care of themselves, not only as active fishermen but in retirement,” Dr. Pickering said. “The economics of it take on another level all together. It becomes not only a vocation or a means of subsistence — it becomes a business.” Just like any other business, fishermen need equipment, but getting the money to purchase a boat, fishing poles or make upgrades can be a challenge. Mr. Gray has submitted a proposal to government for a programme he coined “Going long and going deep.” The programme is designed to provide loans to fishermen to establish their businesses. It would involve the National Bank of the Virgin Islands and the BVI Fishing Complex. “It would be done in a way that the fishermen would be obligated to pay back their loans,” Dr. Pickering said. “We are moving in the direction of the fishing complex becoming a co-operative.” Explaining the logistics of the co-operative, Dr. Pickering said fishermen would sell their catch to the BVI Fishing Complex and from their earnings, a portion would be deducted to repay their loan. Additionally, the co-operative would help fishermen determine how much money they can borrow, depending on several factors such as the type of fish they catch and where they need to go to catch them. “It wouldn’t be a free-for-all, where fishermen can borrow money that they

January 2016 Edition

can’t pay back,” Dr. Pickering said. According to the minister, there is already draft legislation in place to turn the BVI Fishing Complex into a co-operative. “We have dusted it off and we are having some meetings now to see what needs to be done to put that on the legislative agenda,” Dr. Pickering said. He estimates that by early 2016 the legislation will be in front of the House of Assembly. Dr. Pickering said the Territory has not tapped into the fishing industry’s full potential. The International Convention of Conservation of Atlantic Tuna, which is responsible for the management and conservation of tuna in the Atlantic Ocean, sets quotas for countries that harvest tuna. According to Dr. Pickering, the Territory has not even come close to reaching its annual quota and has even had requests from other countries to take some of the VI’s leftover quota. The minister said he wouldn’t be surprised to see that change in the coming years as the fishing industry continues to build momentum. At that point, the Territory would need to consider exporting fish, but Dr. Pickering is divided on the issue. He likes the idea that seafood caught in the VI could be enough of a draw to attract visitors to the Territory’s shores or even dining tables and made reference to the Anegada Lobster Festival as an example. However, if the VI finds itself with a large surplus of fish and a strong international demand, exportation would be a viable option but, to do so, Dr. Pickering said air access would need to be improved. “When our fishermen go out there to catch our fish, we should be able to fly it around the world,” Dr. Pickering said. “People in various places are willing to pay big money for tuna. We should be able to export fish anywhere, because we have the air access and the fish.” Despite the changes to the fishing industry and the optimistic outlook, Dr. Pickering said individuals would still have to work hard, possibly spending days out at sea to maintain a constant supply. However, the minister is hopeful that the improved infrastructure and incentives will be enough to make the fishing industry a viable economic pillar. “Forty to 50 years ago, you didn’t have a choice. …otherwise you wouldn’t have survived,” Dr. Pickering said. “[Today] you are not fishing just to survive; you are fishing because it has real potential.” -BB 40

January 2016 Edition

THIRD ECONOMIC PILLAR: WHERE ARE WE TODAY AND HOW DO WE BUILD IT? by Capt. Kevin Gray

WHERE WE ARE After three years plus, we have begun to see an uptick in the level of confidence fisherman have in our joint ability to work together and with government to develop the fishing industry to the point of it becoming a viable third pillar of the economy of the British Virgin Islands. The current position we have been able to create, has long-term strategic importance for the overall plan to develop the fishing industry. Now we can be more proactive in moving to initiate a better development plan across the broad spectrum of the industry; a plan that will include both commercial and sport fishing, as well as greater collaboration between fishermen and government for the overall good of the Territory and its economic well-being. The work continues daily to invest in local fishermen. Enabling them to succeed in attaining higher goals, means good economics not just for themselves but for the economy of the BVI. With these factors now in play, it is an opportune time to look at the bigger picture. It is important to examine where we are in terms of building the third economic pillar. It is undisputed that the pillar sits on the natural resources of the territorial waters of the BVI. It is referred to globally as an “Economic Zone” and is managed by government. If one considers the building of a pillar in its practical, construction terms, then here’s where we are: The site has been cleared and the foundation is cut, formwork is in place and the steel is being put in by the government. It’s now the job of the fishermen themselves to cast the concrete and see that it is the right mix to make a solid foundation. While that is going on, we can design and lay out the actual structural pillar that will sit on that foundation.

HOW DO WE BUILD IT? There is no quick fix or easy solution. It will take the combined effort of the Ministry of Natural Resources and Labour, the Ministry of Finance and the Premier’s Office - Tourism to co-ordinate an approach to develop recreational marlin fishing in the BVI. The sole purpose will be to fill every slip in every marina and on every Island with visiting marlin boats from July through August and September, with the possibility of some staying year round. It may be an opportune time to look at how current laws affect the marlin boat issue. Many of these boats are on a circuit. They follow the fish to different regions so as to always be in the best fishing grounds at the best time of year. Here in the BVI, we are one of the world’s most desirable locations, and according to many, the finest in the world. That’s the opinion of some of the best captains on the circuit and they know what they’re talking about.

Many of these boats engage in chartering for a week at a time. The guests fly in, rent properties and fish the same boat, in many different locations in the Western North Atlantic and Caribbean Sea. It will be useful to examine how to accommodate those charter boats, so they can come here, bring their guests to our hotels and villas while being moored in our marinas. The relevance of our laws holds the keys to the sustainability of fishing as a third economic pillar. As we all understand, changing the laws is a long and dubious process which can take years to complete. It will make more sense to interpret the existing laws to work in favour of developing the industry in a timely manner. This is clearly illustrated by the fact that we are now able to provide tax free fuel to the larger commercial fishing boats through interpretation of the law that refers to the Fishing Complex being a physical location and not the business operation. Fuel in large volume is now transferred to vessels under the supervision of Her Majesty’s Customs at that location and that location only. Problem solved prior to the busy season and it is a benefit to all parties. There are more solutions in the works for the Fishing Complex and the commercial fishing industry. There are laws in place for foreign charter boats that are not based in the BVI. Those laws are enforced by Her Majesty’s Customs. Foreign boats can presently operate up to seven pick-ups and drop-offs per year. This regulates mega yachts and all types of charter yachts during the busy season. The proposal here is that, that law be applied to marlin boats over the summer season. The seven pick-ups should not include local tournaments when boats are engaged in competitions based in the BVI. This would mean that the circuit boats could now spend the summers here with us and fish the entire summer season. None of these visiting boats would be allowed to interfere with the locally based charter boats and in fact would end up increasing the potential for locals to take charters. The presence of fishing boats is expected to stimulate greater interest because when our visitors see the visiting boats come all this way to fish, they would be encouraged to try their hand at it. Consideration must now be given to the potential for this to be aggressively marketed by the BVI Tourist Board. The time to do so is now as the lead time into next summer’s marlin season is closing rapidly. If this law can be applied in a way that develops this market, then the potential for the BVI could be far north of $50 million annually. It is quite possible for fishing to become the third economic pillar of the BVI. To achieve this, we must never give up, and must always look to how laws are interpreted, with a view to creating an enabling environment. -BB

BUSINESS - BVI BUSINESS

CTL: STEPPING UP ITS GAME by Ken Silva

or decades, shopping for household appliance and automotive parts and accessories was a timedraining experience for residents of the British Virgin Islands. Persons looking to outfit an apartment or store, or find a specific vehicle part, often had to set aside a full day to travel to the United States Virgin Islands and shop at one of the chain stores there. That entails waking up early and taking the 50-minute ferry trip to St. Thomas, spending at least another 20 minutes clearing immigration and customs, then tracking down a taxi or safari bus to go to K-Mart, Advanced Auto Parts, Home Depot, or one of the other retail giants. It is not a leisurely exercise, as shoppers are on a tight timeframe to find all their supplies, then catch the ferry returning to Tortola, which usually leaves around 4:30 p.m. Factor in another 50-minute boat ride and at least 20 minutes in immigration and customs, where all the goods purchased have to be declared, and a traveller is considered lucky if he or she can be back home by 6:00 p.m.

January 2016 Edition

Though head splitting and physically exhausting, many found this ordeal to be worthwhile because of the wider array of products and lower prices available in St. Thomas. The smaller, independent stores in the BVI have to choose between offering many products at a higher price or a few products at a lower price – limited store space and other logistical reasons, the known inhibiting factors. Luckily for residents of the BVI, Clarence Thomas Limited (CTL) now offers a viable alternative. After operating some 40 years in various smaller locations, CTL opened its new megastore in Fish Bay. This flagship store allows CTL to achieve both economies of scale and economies of scope in the products it offers, finally rendering those all-day trips to St. Thomas for electrical appliances and automotive parts and accessories unnecessary. The roughly 70,000-square feet of retail, food-and-beverage, and office space promises to “revolutionise shopping in the BVI,” said CTL Chief Operations Officer, David Thomas. “Instead of heading to St. Thomas, you can shop at the new CTL Megastore,” said Mr Thomas. “It’s going to reverse that trend of money flowing out of the Territory.” Giving Business BVI a tour of the facilities two months before the grand opening, Mr Thomas and CTL Marketing Director, Jason Farque described the atmosphere as “organised chaos.” Indeed, inside the building some technicians were installing air conditioning ducts while others were connecting lighting fixtures, carpenters were putting up drywall, while painters touched up the walls that were

finished. Outside, a crew worked feverishly installing drainage and piping, and levelling off land for the driveway and parking. Walking inside the empty superstructure, it was apparent that the facility’s sheer size alone would be a first for BVI shoppers. The complex’s central retail area alone encompasses 28,000-square feet – more than the combined size of CTL’s old locations on Tortola and the one on Virgin Gorda, said Mr Thomas. It has to be that big because CTL is consolidating its old Pasea location, the lumber yard in Purcell, and a storage warehouse into one location. Mr Thomas touted the consolidation as a way to make CTL more efficient, and to pass those efficiencies and cost savings on the customer. It is logical to think that consolidating three locations into one would render some employees as redundant but Mr Thomas said the company will actually have to hire additional staff – up to 20 more people – to accommodate the expanded services offered. Pointing out the location of the key features of the now fully stocked store, Mr Farque said a customer-service area and showroom will greet visitors as soon as they enter further inside. Customers will find aisles of tools, house ware, automotive and marine equipment, electronic appliances, lawnand-garden supplies, and other goods. On the second floor, there will be an area that features a gymnasium, locker room, showers, and a lounge for employees, along with offices that overlook the retail area. “That’s an added bonus for the employees,” said Mr Farque. South of the store, a dock was constructed that now allows CTL to directly unload supplies on site –reducing transportation costs, Mr Thomas explained. And to the north of the retail area: “That’s going to be our drivethrough lumber yard,” Mr Farque said. Another first for CTL is selling live plants in its expanded lawn-and-garden department. The hardware store is also expanding its array of marine supplies to the point where Mr Thomas said it would match a full-on chandlery. Other expanded departments include a kids toy section and the electronics department. “We had a few TVs in the old store, but nothing too extensive,” Mr Thomas explained as he provided a preview of some of the expansions. “We have some other surprises, too, but you’ll just have to come to the store and find out for yourself,” he added. The departments servicing the mechanics, construction workers and handymen of the Territory are soon to be coupled with a 30,000-squarefoot outlet mall located above the lumberyard – yet another first for the BVI. “There won’t be anything like it in the BVI,” said Mr Thomas. “It gives an added dimension to shoppers.” Mr Thomas said CTL officials are in the process of identifying potential tenants for the estimated 16-store outlet mall. Most of the stores will be local shops, he explained, but CTL is in the hunt for what he called an “anchor store” – a store that’s a household name internationally. “We’re trying to find an anchor store – Victoria’s Secret, Champs, something like that,” he said. “There will be local stores, too, but it needs to have something that’s a draw, to make people want to keep coming back.” The CTL store will have a deli, Mr Thomas said, adding that ultimately there will be a restaurant located 20-30 feet offshore.

When the outlet mall is up and running and the offshore restaurant is a reality, BVI residents might spend just as long shopping at the new CTL Megastore as they would have travelling to and from St. Thomas, but it will be for a different reason; it will be because they want to take in all that CTL has to offer, Mr Thomas said confidently. “Basically, CTL becomes your destination shopping area,” he said. “When you come to the CTL compound, you can literally stay here all day, because you can eat, you can shop, you can relax and have a good time. We are truly revolutionising shopping in the BVI” Having located the new facilities in a previously non-commercial area, CTL officials have the added challenge of not only attracting customers to their megastore but also providing adequate parking space. CTL has addressed this by making parking spaces wherever possible: there are dozens of spaces lined around the store, a parking lot on top by the outlet mall, and another behind the store for employees. Added to that are docks specifically designated for people travelling via boat from the sister islands. All in all, Mr Thomas estimated that there should be about 120 spaces. He is confident these will be enough for the hundreds of customers CTL expects to draw daily. “If it’s not sufficient we’ll try to reclaim some more land,” he said, chuckling. “And if we have to valet park you, we’ll add that service.” Along with the promise of a shopping experience like non-other in the BVI, officials at CTL have also touted the environmentally friendly features of the new location. One of the last things construction workers did before outfitting the store with inventory was grind and polish the floor to expose the roughly 10,000 pounds of recycled glass included in the aggregate used to construct the flooring of the main office. Green & Clean VI provided most of the glass aggregate, revealed Mr Farque, with other glass being sourced from the construction site. The repurposed glass in the concrete mix replaces some of the gravel that would normally be used in a standard concrete mixture, he explained. “There is so much glass on these islands that we can recycle and reuse in a positive way to avoid crowding the landfills,” said the CTL General Manager, Mr Michael Thomas. Other green features of the building include LED lighting, equipment to capture and recycle rainwater, and foam-filled concrete blocks and ceiling sheets that will help keep the building cool. “Once the AC kicks in and gets the building to 73 degrees, it’s going to stay that way,” said David. While the new location in Fish Bay is largely complete, CTL is still in the transition process because it’s seeking a tenant for its old 9,000-square-foot location in Pasea. “We have a couple of people interested in that location,” said Mr Thomas. The lumberyard in Purcell was being rented and CTL is not renewing its lease, and the store on Virgin Gorda will continue to operate. “We will be expanding that in the future hopefully, too,” Mr Thomas said of the VG location. -BB January 2016 Edition

BUSINESS - BVI BUSINESS

PREPARING OUR STUDENTS TO BE GLOBAL CITIZENS Interview conducted, condensed and edited by Russell Harrigan and Freeman Rogers

Education minister aiming high

he National Democratic Party’s mantra during the 2015 election campaign was a straightforward request: “Let us finish what we started.” Voters agreed and the NDP became the first party since 1999 to win consecutive terms in office. Its future success doubtlessly depends on what its members make of the opportunity. For Education and Culture Minister Myron V. Walwyn, there is much to do: Since the businessman was first elected to the House of Assembly in 2011, his ministry has launched several initiatives, many of which are designed to bring the territory’s education system in line with international standards. The new measures include adding a year to the public school system, requiring CXC exams, re-launching the technical school, and ramping up certification requirements for teachers and principals alike. In a November interview with Business BVI, Minister Walwyn discussed his record, his plans for the future and why he believes that a businessman is particularly well positioned to lead the territory’s education system.

“The crisis of 2008 has essentially placed a premium on competence, so we must make sure that the product – because we’re producing a product in the education system for the business community – is of high quality.” 44

January 2016 Edition

AFTER YOUR FIRST FOUR YEARS IN OFFICE, ARE YOU ENJOYING BEING MINISTER OF EDUCATION AND CULTURE?

WHAT ELSE HAS YOUR BUSINESSMAN’S PERSPECTIVE BROUGHT TO THE TABLE?

I am very much enjoying the job. It is one that I think I have a great appreciation for and it is one that I’ve seen the government has put great focus on. We want to make sure that education is seen as the vehicle for socioeconomic advancement; to make sure that our human capital is developed and that persons can develop themselves and also make a contribution to the country so that we can have a much more sustainable economy.

One thing in particular: the need for improved technical and vocational education in the country. I run a hotel and restaurants, and it is very difficult to find local persons who can fill those positions. Under our ministry, one of the things that we’ve done is tackle the unemployment issue head-on. And the numbers are significant numbers: The last count that I received, we were just under 600 persons that we employed through the youth employment programme that we started, in addition to the apprentice programme that we’ve also put in place.

WHAT MOTIVATES YOU? WHAT GETS YOU OUT OF BED IN THE MORNING? I like to look at it as the need to rethink education for the twenty-first century in light of what is happening globally. The crisis of 2008 has essentially placed a premium on competence, so we must make sure that the product – because we’re producing a product in the education system for the business community – is of high quality. We need to develop our minds and our judgment and our reasoning to make sure that we have persons who ten to fifteen years from now can take the country forward. That is what we are trying to do, and it has to start and end with the education system: making sure that you have strong leaders at the helm of the school system. That’s one of the reasons why we were adamant about putting a licensure programme together to make sure that we improve the management of our schools. That has now become a policy of the government: Unless you are a licensed principal who went through a programme designed by the Ministry of Education and by the government, you cannot be a principal of a school. It starts and ends with leadership: making sure we continue to work on the professional development of our teachers. We have introduced financial services and tourism, the two main drivers of the economy. Why is it that we weren’t teaching these subject to our students so that we can have a better connection between academics and work? At the end of the day, you are producing a product for the business community.

I KNOW YOU HAVE FIVE CHILDREN. TO ME, THAT IS A STRONG REASON TO MAKE SURE YOU GET IT RIGHT AS MINISTER OF EDUCATION. IS THERE ANOTHER FACTOR THAT YOU THINK IS THE MOST CRITICAL INGREDIENT OF BEING IN THE POSITION? Certainly that is one. Of course, if you have children who are in the system, you want to make sure that you improve the system for your children and for other children to benefit. The other factor is, I’m a businessman and I know the importance of having good human resources to advance your business. I know from my experience some of the difficulties I’ve encountered with persons who left high school; even persons with a bachelor’s degree working for you and you can see that there are some things that are missing. So, it is good when you come from the other side. If you look traditionally at even the Caribbean, how education ministers are appointed, you would normally take a teacher or somebody who is in the education system, who runs for politics and becomes the minister for the subject. They may not be bringing a different view. There’s always been the development of education in a vacuum. And you can’t do that, because at the end of the day you are trying to make sure that you produce citizens that can work, that can contribute to the community and to the society. Sometimes if you’re on the other side of the coin, you can see what is needed more so than persons who are involved in it on a day-to-day basis.

But when you look at the issue of rising unemployment — not just in the Virgin Islands but in the world — one can make a successful argument that you have more of a skills problem than an unemployment problem. That was the impetus for us to make sure that we double down on technical and vocational education. Hence the establishment of the Virgin Islands School of Technical Studies: to make sure that there’s a better understanding and there’s more relevance between education and employment. If we train our people from early, then the jobs of the carpenters and the masons and so on are jobs that our people can fill as opposed to having to bring persons in from overseas to do those things. It is also one of the easiest tracks to become an entrepreneur. It worked for me: Working in hotels and restaurants when I was going to school, when I moved back home I saw that there was a vacuum. There were some services that I could have provided that I knew were not available at the time or at the level that I was trained at, and so it created an opportunity for me to get involved in business. I think it’s an opportunity for other persons to get involved in opening businesses and employing people and so on. That has been one of the central focuses of our whole education re-thinking strategy.

THE GOVERNMENT RELAUNCHED THE VIRGIN ISLANDS SCHOOL OF TECHNICAL STUDIES WITH EXPANDED FACILITIES IN OCTOBER 2014. WHAT DO YOU HAVE IN MIND FOR THE NEXT LEVEL OF TECHNICAL AND VOCATIONAL EDUCATION IN THE TERRITORY? We want to expand on some of the programmes that we have. We want to again relook at the whole school. It’s been about a year and a half now, and we have to revisit to make sure that it is doing what we intended for it to do. We have already recognised that there are some programmes that we need to expand. For instance, the auto mechanic programme. We’re looking to find a satellite site where we can have a garage and have persons in the community come in to service their cars and so on so the students can actually see the things in action. We want to make sure that we do a similar thing for the agricultural programme to make sure that you can have the experience brought to students of preparing the land, watering, and bringing the produce to the market. I had discussions last week with one of the instructors in the culinary programme to try for us to give the students exposure with catering and different things.

DO YOU HAVE A WORLDVIEW IN TERMS OF EDUCATION? High competence. Making sure that whoever is in the chair as minister of education that you’re paying attention to what is happening worldwide. That you develop your national policies based on what is happening globally, and that you are preparing your students and your people to be global citizens. January 2016 Edition

For instance, technology, and where it’s leading the world now. That was one of the reasons why we started our [Information and Communication Technology] Programme in our primary schools at grade six level. We’re piloting about eight schools right now, to make sure that technology becomes part of the learning process. You want to make sure that you continue to interrogate your education systems; that you have external validation of the system. That’s one of the reasons why we have forged a close relationship with the Caribbean Examinations Council: to make sure that when you send someone out into the world, or you send them on to tertiary education, that you know that person is truly somebody of quality, and you’re not just depending on your national certifications alone.

WHAT PARTS OF YOUR JOB KEEP YOU UP AT NIGHT? Resources is always an issue, and if you talk to any education minister you’ll hear the same thing. Of course, there are other competing national interests that you must pay attention to. But certainly one of the things that keep me up at night locally, is making sure that we improve the Elmore Stoutt High School; the need for a junior high school. To make sure the school is more manageable; that we can arrange the campus in a way that is more conducive to learning physically. And of course we added an additional year: grade twelve. Making sure that we have enough qualified teachers to deliver the programmes, and to make sure that we invest in professional development for teachers, because the buck stops really with the teachers, particularly as it relates to developing critical thinking skills and teaching the students how to learn and how to be independent thinkers. We have to find a way to invest more. And the very ambitious programme that we’ve taken on in terms of making sure that not only our teachers are licensed but also our principals are licenced, is an enormous task that will take a long time to do and will require some resources. But I think if we stick with it, we’ll make it. What comforts me is the fact that the government understands the importance of getting these things done. So even though I might be up at night, I’m still comforted that the minister of finance, the premier, understands the importance of what we’re trying to do. 46

January 2016 Edition

IS THERE A WAY THAT THE PRIVATE SECTOR SHOULD BE HELPING WITH RESOURCING THE EDUCATIONAL STRUCTURE? I must say that they have been helpful in the past. One of the initiatives that pre-dates me is the Adopt-a-School Programme, where members of the business community adopt schools and help to provide certain resources to them. I must say, my office must do a better job of leveraging more support from the business community. A number of businesses have come forward to me to show their willingness to help with scholarships and different things. I think that perhaps the onus is more on us to try to leverage those relationships. But I certainly get the feel from my local discussions with businesspersons that there’s a willingness there. As a matter of fact, in a week or two I’m going to be signing an MOU with LIME to provide broadband Internet access at a very low cost to schools. I met last night with the sales manager at Digicel, who’s also willing to come on board with that programme. So once we get that sort of help, we can improve the technology programmes that we’re planning to put in the schools. Our vision really is for the next five years to have all our classrooms as smart classrooms, using the latest technology: the Promethean Boards and all the other technological devices that go along with that. Of course, reliable Internet would be very critical for the success of that.

EARLIER YOU TOUCHED ON THE ISSUE OF YOUTH UNEMPLOYMENT. ARE THERE SOME OTHER THINGS THAT YOU’RE CONSIDERING TO MOVE THE YOUTH EMPLOYMENT SERVICES PROGRAMME TO THE NEXT LEVEL? Yes. Our efforts over the last four years have focused more on persons who are in formal education. You have a number of persons who are not in formal education that still need support. That is why our strategy speaks to a culture of lifelong learning. We intend to put together something called the Virgin Islands Skills Academy, which would be based on making sure that you provide the training for persons who are not in formal education to be able to gain some skills. It will mirror something in the United States called Job Corps, where you have various programmes: carpentry, IT, and different things that persons

can go to and get the training they need. It also serves as a re-training centre, because you have persons right now who might be losing their jobs for whatever reason – whether it’s in financial services or tourism – and you want to go into another area. That’s an opportunity for you to retool yourself, and to make yourself available for some other job in some other part of the market. The youth unemployment programme was not just about providing jobs for young people. It was also an opportunity for us to look at what the problem was; to see what the level of skill was. All those things were instructive and provided information for us in terms of some of the things that we needed to do in the education system. We found that a lot of persons didn’t have high school diplomas. That says that you had a dropout rate somewhere along the line that perhaps you were not paying attention to. You had a few persons who had bachelor’s degrees, but then when you did some research on them you found that there were some other areas that they were lacking in: soft skills and the like. So again, that brings to mind that you need to train and provide programmes to make sure that you avoid some of those pitfalls.

THE H. LAVITY STOUTT COMMUNITY COLLEGE RECENTLY CELEBRATED ITS 25TH ANNIVERSARY AND I BELIEVE THAT THIS IS THE FIRST TIME THAT IT HAS BEEN ADDED TO THE EDUCATION MINISTER’S PORTFOLIO. WHAT IS YOUR VISION FOR THE COLLEGE AND WHERE DO YOU SEE IT GOING OVER THE NEXT TEN OR FIFTEEN YEARS? I think the college has done well, and has served the community well over the years. We just recently got accredited by the Middle States Commission on Higher Education. It was a major step for us, and there are major benefits that the country will have from that. One of the things that came to my mind was you can immediately almost double the amount of persons who you send away on foreign scholarships. Because now if you form relationships with schools, rather than pay for one person to study for four years, you can do two for four years, because the two years at HLSCC will count towards the four-year programme. So that is something that I think is really significant for us. We want to continue to make sure that the college supports the needs in the labour market. Some of that has started. For instance, the college was able to put a programme together quite recently to help to train the first cohort of new police recruits. We intend to be able to provide those sorts of programmes to immigration and different government entities and so on. Currently, we are looking at reorganising our teacher education programme. We’re going to be calling on them to help us put a programme together for early childhood care; to make sure that the persons who are delivering the services in the early childhood centres are properly trained. There’s a mandate for us to provide more bachelor degree programmes; to form more articulation agreements with other more established schools in England and the United States. Because you have a lot of persons who want the further education but they can’t afford to go overseas. If we can do that at home, that’s what we should be doing. There are great plans for the college to even expand some of the offerings that we have. We’re very lucky to have a commitment from Nanny Cay to help us in delivering a marine programme to make sure that we get persons who can do fibreglassing of boats and rigging and different things.

SO THE MARINE PROGRAMME WITH NANNY CAY IS GOING TO HAPPEN? That is going to happen. The commitment is already made by the developers of Nanny Cay and we’re very grateful to them for that. We also want to make sure that we leverage the professionals that we have at the college. We have a number of persons with masters and doctorates and so forth who have served the college very well. We want to make sure that when businesses want to do research work that the first stop can also be the college, the very same way that the University of the West Indies was instrumental in helping Caribbean countries in forming [National Health Insurance] programmes.

THE GOVERNMENT HAS RECENTLY ESTABLISHED AN OFFICE IN HONG KONG. IN THE FIRST INSTANCE, THE EFFORT WAS DRIVEN BY THE NEED TO MAKE SURE WE’RE COMPETITIVE IN FINANCIAL SERVICES, BUT THE MANDATE WAS BROADER THAN THAT: THERE WERE CULTURAL AND EDUCATIONAL ELEMENTS. DO YOU SEE THE POINT COMING WHERE YOUR MINISTRY WILL GET TO TAKE ADVANTAGE OF OPPORTUNITIES IN TERMS OF EDUCATIONAL AND CULTURAL EXCHANGE IN ASIA? I think it needs to happen, particularly as we’re trying to develop global citizens. One of the things that we’re going to do very soon, is our extended internship programme for persons who are on foreign scholarships, to make sure that you don’t just return home with your academic knowledge, but that when you return home you have some experience that you can bring to the table. And so relationships like that would be very helpful.

YOU ARE AT THE END OF YOUR FIRST FOUR YEARS IN OFFICE, AND YOU HAVE ANOTHER TERM AHEAD OF YOU. HOW WILL YOU JUDGE YOUR LEVEL OF SUCCESS AT THE END OF THE NEXT FOUR YEARS? WHAT BAROMETERS WOULD YOU WISH TO SEE TICKED TO BE ABLE TO SAY YOU DID SOME GOOD WORK FOR THE PEOPLE OF THE BVI? I wouldn’t judge myself. I think the people will judge me. And they judge me well, because as you know I got the most votes in the history of the territorial at-large system. So that in itself tells me that I’m doing something right. Right. But you know how we are: That was then. Tell me four years from now. It’s difficult in education, because you have to look at the complete cycle of the students who passed through the system before you can clearly say that the policies you’ve put in place have actually worked. What is important is to make sure that you follow through on those policies; that you don’t just implement policies and drop them. You have to make sure that they’re working. You have to interrogate them, test them, tweak them where you need to. And then make sure that the delivery on the ground — being the teachers — is actually happening. It takes a long time for that to happen. That’s why education is so important, because you can’t afford to be making mistakes with the citizens that you’re putting out. We’re going to continue to look at the programmes that we put in place – and we put in a number of them, as I said before. I believe that our hearts are in the right place, that we have an understanding of what needs to happen locally in order for the students to be able to compete globally. And if we continue to monitor and build on those things, I believe that four years from now the results will be good. -BB January 2016 Edition

BUSINESS - BVI BUSINESS

A BI-METAL STRIP:

WHAT IS OUR COEFFICIENT OF LINEAR EXPANSION?

t is an honour to have been asked to deliver the Keynote Address at this important event - the 2015 Public Service Excellence Awards. I am particularly pleased to have been invited since I am not a member of the Public Service and my tour of duty as a member of the Public Service of the Virgin Islands dates back to the late 1970â&#x20AC;&#x2122;s, times very different from those prevailing today. My stint lasted a mere 9 months.

Keynote Address at the 2015 Public Service Execellence Awards by Gerard St.C Farara QC 23rd July 2015

January 2016 Edition

Such was my experience in the then Public Service, that I seized the opportunity to leave when an attractive offer was made to me and to begin my career in the private practice of law. This decision was, for me, timely and significant in my development as a lawyer and advocate. However, like most decisions, it carried with it some personal and financial consequences, not least of which was the obligation to repay to the Government the cost of my education as stated in the signed Bond. Repayment was enforced (a first), even though I had every intention of remaining and working in the BVI. Indeed, the record will show that I have remained and worked in the BVI continuously for all of my now 37 plus years of professional life. During that period, I have freely given of what expertise I possess, to the benefit of the Public Service and the wider British Virgin Islands. Accordingly, I was pleased to see that, several years after I left the Public Service, this imprudent and undesirable policy was changed to permit persons to be bonded to work in the BVI. This sort of practice is merely one example of imprudent or outdated policies and rules which have been adopted over the years, some of which serve, in different ways, to further limit

and discourage the development of our own people and in other respects, to hinder the implementation of desirable initiatives and policies designed to further develop these Virgin Islands and to bring greater prosperity. I mention my example, not to seek a refund of what I had to pay back, especially since I had, by signing the Bond, obligated myself to repay the monies expended on my education, were I to leave the Public Service before the prescribed minimum period of employment had expired. I mention it simply to illustrate the point that too often, our prevailing culture and practice are focused more on the strict enforcement of policies (sometimes ill conceived), rules and regulations, than on the exercise of good judgment and discretion in the delivery of service to the public. Service is not about servitude, it ought not to be about the blind application of rules and guidelines or even the exercise of power, but about facilitation, with the object of enabling the desired result to be achieved, once it is lawful and permissible. I say this not to say that rules and policies do not have their place in the orderly working of our Public Service and indeed the wider society, but to make the point that in today’s BVI there is a need for a somewhat different approach or way of thinking to service and to the way we view both the public and private sectors, how they relate one to the other, and what ought to be our respective role in each of them. What then qualifies me to speak to you today on these matters, you the members of the Public Service of the Virgin Islands whose high level of performance and delivery of service in your respective areas and industries, are being appropriately recognised at this event. I am a product of these Virgin Islands, in every sense of the word. I was born here, nurtured here, educated here and have worked here all of my 37 plus years of professional life. But that alone is not what qualifies me as your keynote speaker. The simple answer to that question is that I am a member of ‘the public’, one who relies upon your service and one who directly and indirectly contributes to your remuneration. In short, as a member of that very broad and diverse group called ‘the public’, whom you have taken an oath to serve, I am qualified to speak to you about your role and the kind of service needed in a 21st century BVI. However, my case does not rest there. To do so would be to adopt too simplistic an approach. I actually come with a few more relevant credentials. I am a lawyer and Queens Counsel. I have practiced law here for over 37 years and have interfaced with the Public Service on occasions too numerous to mention. I am pleased to say that most of my experiences have been both pleasant and productive (albeit not always timely), although there are many who can speak to a rather different and less pleasant experience. I have attributed this in large measure to the way I would approach or interface with the appropriate officer concerning the matter at hand. I do not subscribe to going over the head of junior or mid-management officers, to their Head of Department or higher, and certainly not to the politicians. Furthermore, I have served as a member of the Public Service Commission. I have over the years played a role in the preparation of instruments essential to good governance in the BVI, most notably as Chairman of the 2005 Constitutional Review Commission and as a member of the negotiating team which led to the drafting and promulgation of the Virgin Islands Constitutional Order 2007. I have reviewed and made recommendations on the revision of the categories of belonger status, both under the Constitution and the Immigration and Passport Act. I have also served in various capacities, including as chairman, on several boards, committees and statutory bodies. I have also served on interviewing panels for the short listing of candidates for the first Commercial Court judge, and more recently, for the posts of Attorney General and Complaints Commissioner. Finally, I delivered addresses on matters touching and concerning the proper functioning

of the Public Service, including issues such as good governance, financial accountability, transparency and best practices, most notably, the 2012 Frederick Pickering Memorial Lecture. As you can see, I have some relevant knowledge of the Public Service and I can appreciate some of the challenges which you have to face. What then do I wish to speak to you about today? After some thought, I have chosen the topic: ‘A Bi-Metal Strip – What is our Coefficient of Linear Expansion’. A very strange topic indeed! One rooted in the principles of physics. What is a ‘Bi-Metal Strip’? A loose definition is two different metallic strips bonded together to work as one for a common purpose or objective, each with a different coefficient of linear expansion. These are metals with different characteristics, different molecular properties, which cause them to respond differently or to bend to different degrees when heat or cold is applied from an external source. These differing responses of each of the two metal strips making-up the bi-metal strip, are as a result of their different ‘coefficient of linear expansion’. Bi-metal strips are used in many mechanical and electrical devices. The selection of the two metals to make up the bi-metal strip is crucial to the optimum achievement of the desired function or task of the appliance or equipment. In thinking about my address, I have chosen to liken the Public and Private Sectors to a Bi-Metal Strip, that is, two differently constituted, but very important sectors, welded or bonded together to provide the backbone for the proper functioning and orderly development of the country. I think you will agree that both the public and private sectors contribute significantly to our economic success, growth and prosperity. In my formulation of this topic, I have likened each of us as individuals, whether in the public or private sector, to elements or molecules making- up each strip, thus giving each of the two sectors a ‘coefficient of linear expansion’ rating; its degree of expansion or contraction, rigidity or flexibility. I have also attributed to the bi-metal strip (the country) a resulting (and perhaps variable) performance level, depending at any given time on the operative ‘coefficient of linear expansion’ of each sector. It is an indicator of the level of rigidity or adaptability to change or pressure from external sources which affect both sectors and determines how successful our country will be in meeting those challenges. An inappropriate ‘coefficient of linear expansion’ can lead to poor performance in one sector or the other and even to dysfunction, thereby adversely affecting the achievement of common goals and objectives for the development of the country. This is all quite a mouth full and may be difficult to grasp immediately. If that is so, I urge you to give this concept further reflection and thought,and I am certain you will come to see how profound this analogy is. Put simply, the public and private sectors are intertwined and are part of the whole that makes up the backbone of both governance and economic activity. They are intertwined or interwoven in many ways. For example, as regards the financial services industry, government policy, laws and regulations are as necessary and critical to the success and sustainability of this sector, as the role and function of the private practitioners who actually bring in the business and dispense the services. Likewise, in the tourism sector, government policy, its initiatives designed to protect and preserve the environment, its marketing and promotional activities designed to show the BVI as a premier tourism destination, are as crucial to the success of this sector as the various resorts and players within this sector, who actually provide the accommodations and services which go together to make up ‘the BVI Experience’. But one cannot work well or successfully without the other. It is critical for both sectors to interact and to facilitate the other in the proper discharge of their respective roles. January 2016 Edition

In my view, it is critical to the success of the BVI and to its future prosperity, that the public and private sectors are viewed, not simply as two separate sectors, but as two parts of the whole, each integral to the performance and success of the other, and hence the overall success and prosperity of the country. This must be the understanding and thinking of our political leaders and policy makers and of each and every one of us who currently function or make our living in one sector or the other. To the extent that each of us, as individuals, continue to think differently, we alter the properties of each sector and hence its â&#x20AC;&#x2DC;coefficient of linear expansionâ&#x20AC;&#x2122;, thereby adversely affecting the ability of the bi-metal strip (the country) to function the way it should for the overall benefit of the BVI. The result is under performance, retardation in growth and poor economic figures. This phenomenon can manifest itself in many ways. These are some of the questions we must ask ourselves. Do we lack the training and ability to be effective in our assigned task? Are we unable to critically examine, set and reset the proper standards of performance and delivery of service necessary to provide the required services in a timely manner? Are we lacking in the necessary motivation and determination to do the job and to do it well? Are we lacking in the necessary knowledge and flexibility of thinking, and the fresh ideas necessary to be able to recommend measures which will enable us to adapt to changing circumstances and situations and to solve the new and different problems which confront our country in our area of responsibility. Are we unable to craft and implement new strategies and new approaches to meet those issues and problems? Are we lacking in the kind of bold, forward thinking and innovative leadership that are required to surmount the obstacles to progress and growth? Are we sufficiently committed and driven to be the best we can be and to deliver the best service and results in our present post or area of responsibility, or are we just coasting or marking time? Most importantly, by our actions or inaction, are we allowing what we do in our job to frustrate, limit or degrade the legitimate expectations within our sector, and what effect is that having on the ability of the private sector to realise its performance levels and its strategic goals and plans? Put simply, are we seeing ourselves and our role in a more panoramic perspective, or are we still confined in our thinking and approach to our job by the parameters of the task assigned to us to carry out? And so, I am here today really with one central message to you all. A message that is equally relevant and applicable to both the public and private sectors. Itâ&#x20AC;&#x2122;s high time we change or update our thinking as it relates to the functioning of government in a modern 21st century. This cannot happen overnight. The dialogue should begin soon, if it has not already. It will require changes in many areas, the decisions regarding which do not fall within your purview or mine. We have all been trained to think and to function within a culture rooted on the separation of the Public and Private sectors. Thus Government is said to be concerned with governance and with revenue collection; with the implementation of infrastructural and social projects. The Public Sector is concerned with processing, regulating and enforcing and with the issue licences and permits. But government and the Public Service, must also be concerned with setting the climate and putting in place the stimulus which enable the economy to function and to thrive, and by which the private sector can, with confidence, invest and prosper. In the discharge of these roles and functions, we have developed various processes and procedures, each with its own bureaucracy and documentation, without which little will be done to move the matter forward. This is part of the inheritance from the English civil service, although, in many respects, they have taken steps to modernize, modify or change their approach to governance, in order to meet the exigencies (there is an English civil service word) and challenges of a modern world. 50

January 2016 Edition

In my view, a new approach is even more necessary in a small country such as the BVI, with very limited financial resources and human capital. We can least afford to adopt or to continue to adopt a rigid or sterile division as between the public and private sectors. We simply do not have the number of persons or the resources to train all the persons required, in so many areas of expertise, to effectively and efficiently run a modern society such as ours. We have here a modern service based economy in many respects, one which interfaces on a daily basis with First World countries, particularly in the financial services sector, so critical to our sustained growth and standard of living, a standard of living which we have come to enjoy and must protect. It is therefore of importance, as we go forward, to take a closer and more critical look at the roles and functions of both the public and private sectors, and to adopt a new approach to them and how they ought to interface with each other. For example, there should be greater flexibility in the movement of human resources across these two sectors, without loss of accrued benefits, so as to provide for a deeper or more profound exposure, experience and training of personnel in critical areas, leading to a greater understanding and appreciation of the role and functioning of each sector, and to improved knowledge, effectiveness and efficiency of our workers. This cross fertilization can be of critical importance if properly managed, particularly where important new initiatives are being undertaken, especially within government, so as to ensure that we are able to bring to bear the best minds and most experienced among us for the overall success of the initiative, and the greater good. This approach will enable us to maximise the skills and expertise produced through our limited resources, and will go some way towards reducing our reliance on outside or foreign expertise. I therefore urge you all to take a broad and modern view of your role as members of the Public Service and in doing so, to come to the appreciation that in the end we are really one unified Service, one Bi-Metal Strip, made up of public and private. The success of one is directly linked to the success of the other. This does not mean we are to completely marry both sectors creating only one sector. That would be impractical and unrealistic and is not what I am advocating. Each sector is different in terms of its governing and decision-making structures, the applicable rules and procedures and the terms and conditions of service or employment. But in the final analysis, we are and must be of one accord, that is, delivery of a professional and high level of service, thereby enhancing our collective ability to achieve the major goals and plans for the country, such as economic growth, continued self-sufficiency, a high standard of living for all, and sustained progress and prosperity. As such, we must have a deeper appreciation that what is done in one sector can have a direct bearing on the other. This understanding and approach is more critical today than it has ever been in the history of our country. What does this approach require of you in practical terms? First and foremost it means that each of you must set personal standards and gaols by which you live and work. This is an imperative, regardless of which sector we currently work in. Here I am speaking to such standards as honesty and integrity, a culture of discipline and commitment to hard work and to achievements, a spirit of team work, and a no tolerance policy towards wrongdoing of any kind, be it dishonesty or conflict or interest or downright illegality. A simple litmus test of a conflict of interest is: are you present on both sides of a transaction or matter, or are you or someone close to you likely to benefit, directly or indirectly, from that transaction? If so, then you are conflicted. Even the appearance of a conflict, as distinct from an actual conflict, must be avoided. I urge you to remember that you are first and foremost individuals with a conscience and with a good reputation. Do not allow anyone to cause you to do anything in the discharge of your duties which bring your integrity

and reputation into question. Strive at all times to maintain and protect your good reputation and that of the Public Service and be prepared to unearth and expose dishonesty and unethical behaviour of any kind. Next, you must understand and appreciate that whatever position or post you currently occupy, you have done so voluntarily, by choice. It has not been imposed or forced upon you, and whether you like where you are at or not, or whether it is or is not really what you want for yourself, it is what you have signed on for, at least for now. It therefore behoves each and every one of you to give it your all, to strive to give your best at all times, regardless of the frustrations or the personalities which you encounter. Such matters are not to be seen as excuses for poor performance or mediocrity. Remember, you will be judged for your next post or job based, in part, on your performance or the lack thereof in your current job. Thirdly, your standards, and hence that of the Public Service, must be internationally accepted standards. Do not allow anyone to cause you to think or perform otherwise, even if they are doing so themselves. In the BVI we deal, on a regular basis, with many governments, international corporations and individuals from across the globe, people from various counties and nationalities, and from differing professions and expertise. Our standard of professionalism and delivery of service cannot be based on what we think is acceptable locally or in the wider Caribbean for that matter. This includes such things as punctuality and giving a full day’s work for a full day’s pay, and working beyond the standard hours to get the job or task done. I get very cross when I hear people still speaking in these times of doing things on ‘Caribbean time’. This is unacceptable. I have never practiced it and neither should any of you.

Remember, in each sector, we all have clients or customers. The old adage is: ‘The customer is always right’. Frankly, this really is not a truism, but a cautionary guide to our performance and interaction with members of the public who help to pay our salaries or provide for our livelihood. Your approach to service must be that of a facilitator, a doer. This is a critical difference in approach and attitude. It means simply, find a legitimate way to enable the customer to obtain what they seek from the Government, whether they are entitled to it as of right or upon payment of a prescribed fee. Find a way to facilitate them and to deliver on that service in a timely manner. Finally, courtesy is the best antidote for disappointment. Be polite and courteous, even when it is necessary in the discharge of your duties to be firm or to decline a request. I wish to congratulate all awardees and to wish you continued personal growth and development. -BB

As regards standards specifically, a senior lawyer cautioned me very early in my career, not to be or to think of myself as a BVI lawyer, and not to rely on the crutch ‘I Born Here’, but to strive always to be a lawyer equal to the best in such places as New York or London, so that when you receive a call from a top tier lawyer, they must discern, from how you conduct yourself and handle the matter at hand, that at the other end of the line, is another professional lawyer of comparable professionalism and competence. What that lawyer told me in the late 1970s, has been one of the ‘guiding principles’ throughout my career and practice as a lawyer. The others I got principally from my father, who by the way was not a lawyer, but was a public servant for most of the 50 plus years that he lived and worked in the BVI. He was a man with an impeccable reputation for honesty and integrity, and, most importantly, for payment of his debts. The lesson here is that what you do outside your regular work, matters to who you are on your job in the Public Service. Never forget this, because we cannot conveniently compartmentalise or segregate our reputation according to whether we are speaking of our public duties or private business or other activities. Of critical importance, and more so in today’s world, is self-improvement and advancement. You must prepare and continue to prepare and update yourself, in your chosen area. Keep abreast of developments in that area, so you are always on the cutting edge of current thinking and knowledge and fully prepared at all times to render the best advice or to apply the best practices. This requires you to take full advantage of all training and educational opportunities available to you. Be a team player, not a passive one, but one who actually contributes to the team effort and initiative. Be constructive in your contributions, and make sure your ideas are well thought out and of practical value to the task or solution being worked on. In this regard, do not be deterred by negativity or baseless criticism. We all have to deal with this from time to time in our careers. Take each constructive criticism on board and make a renewed effort to do better next time. January 2016 Edition

BUSINESS - GLOBAL

FOREIGN REINSURANCE IN THE BRITISH VIRGIN ISLANDS by Rachael McDonald, Simon Lawrenson, James Webb

BACKGROUND - WIDE RANGE OF COMPLEX RISKS

einsurance is a hot topic in the British Virgin Islands (BVI), as international reinsurers demonstrate significant interest in expanding their reach into offshore jurisdictions. Peak Reinsurance Company Limited, the Hong Kong based global reinsurer recently announced it has reached definitive agreements to acquire a 50 percent stake in Caribbean insurance group Nagico Holdings Limited. In addition, the BVI Government is currently seeking tenders from international reinsurers in relation to the new National Health Insurance (NHI) scheme which is scheduled for implementation in January 2016. Mourant Ozannes regularly receives enquiries from international reinsurance companies about local licensing requirements and this article outlines some of the key issues identified.

January 2016 Edition

The BVI is often referred to as "Nature's Little Secrets". It is not hard to see why â&#x20AC;&#x201C; the islands are largely unspoilt and boast beautiful beaches against a backdrop of luxury villas, private yachts, jets, exclusive resorts and upscale restaurants. In addition to its natural beauty, the BVI is also home to a vibrant local economy buoyed by a longstanding financial services industry. Financial services account for more than half of the BVI Governmentâ&#x20AC;&#x2122;s annual revenue. With more than 450,000 active business companies, the BVI is the leading offshore incorporation jurisdiction, with more incorporations than all other offshore jurisdictions combined. The BVI has shown that it is consistently able to weather literal and figurative storms. Each

year, with the assistance of the Department of Disaster Management, local businesses, property owners and residents prepare for hurricane season, which officially lasts from 1 June to 30 November. The recent financial crisis has proven to be another type of storm, one which threatened many jobs across the BVI's financial services industry. However, the industry has emerged strongly, due in part to the BVI Government's and the BVI Financial Services Commission's (FSC) proactive engagement with international regulators. The BVI is home to many different types of assets and businesses which are exposed to a wide range of complex risks that they need to be insured against. In turn, BVI insurers need to cede their exposures to reinsurers. Mr. Shan Mohamed, Managing Director of Century Insurance Agency Limited (which represents Nagico in the BVI) puts it simply: "without reinsurance we cannot operate". INSURANCE IN THE BVI The FSC recently reported that there are over 220 entities licensed to carry on insurance business in or from within the BVI. Of these, 145 are captive licensees. The BVI captive insurance market is fast growing and supported by over 40 insurance functionaries on the ground in the Territory (including insurance agents, brokers, managers and loss adjusters). The BVI implemented new insurance laws in 2010 to modernise the regulatory framework and ensure compliance with the core principles of the international insurance regulatory community, including the International Association of Insurance Supervisors and the Offshore Group of Insurance Supervisors, whilst delivering a flexible and risk-based licensing regime. The main legislation for the insurance market in the BVI consists of the following: - Financial Services Commission Act 2001; - Insurance Act 2008 (the Act); - Insurance Regulations 2009 (the Regulations); and - Regulatory Code 2009 (Code) INSURANCE BUSINESS AND CLASSIFICATION OF LICENCES The Act defines insurance business as being "the

business of undertaking liability under a contract of insurance to indemnify or compensate a person in respect of loss or damage, including the liability to pay damages or compensation contingent upon the happening of a specified event, and includes life insurance and reinsurance business". The general position is that all insurance business is licensed in the BVI, subject to certain exemptions. Licence applications must be made to the FSC and the current application fee is US$1,000. Licensing decisions are made by the FSC's Licensing and Supervisory Committee (the Licensing Committee) which has responsibility for considering applications from both "BVI insurers" and "foreign insurers". The Act divides insurance business into two classes: general business: specified under the Regulations as motor, property, liability, financial loss, marine and aviation, goods in transit, accident and health and other general insurance; and long-term business: specified under the Regulations as annuity business, life, permanent health and other long-term insurance which, in each case, is subject to a more comprehensive regulatory regime than the general business class. There are four categories of insurance licences available under the Act: Category A: Issued only to BVI business companies and entitles the holder to carry on insurance business, including "domestic business"; Category B: Issued only to non-BVI incorporated "foreign" companies and entitles the holder to carry on insurance business in the BVI, including "domestic business"; Category C: Issued only to BVI business companies and entitles the holder to carry on insurance business that is not "domestic business", including, if the licence permits, reinsurance business that is not "open market" reinsurance business (ie reinsurance business where the insurer is not connected with the reinsurer); and Category D: Issued only to BVI business companies and entitles the holder to carry on reinsurance business, including open market reinsurance business.

An insurer's licence stipulates the category of licence issued and the licence holder is only permitted to carry out that category of business. While there are four categories of insurance licence there is a clear distinction drawn in the licensing regime between: domestic business: being insurance business, excluding reinsurance business, the main objective of which is generally to insure BVI residents or property situated in the BVI; and non-domestic business: insurance and reinsurance business not classified as domestic business. LICENSING REQUIREMENTS Broadly, the Licensing Committee issues insurance licenses to applicants who demonstrate that they meet the following key criteria: - adequate financial resources; - suitability of owners, controllers and others; - suitability of management and organisational structure; - business plan; and - other criteria (including that the proposed business will be conducted in accordance with sound and prudent insurance principles). There are a number of ongoing obligations applicable to licence holders, including the requirement to provide the FSC with a summary of its reinsurance arrangements, together with copies of all reinsurance treaties on an annual basis, as well as audited financial statements. FOREIGN INSURERS Foreign insurers (being entities holding, or entitled to hold, a Category B licence) are required to be appropriately licensed and supervised in their home jurisdiction for the activities for which a BVI licence is sought. Accordingly, whilst an application in the prescribed form must be submitted, the regulation and supervision of a licensed foreign insurer lies with its domestic regulator. Therefore, the capital resource, contributed capital and solvency margin requirements that would apply to BVI insurers as part of the condition to have adequate financial resources, are not relevant to a foreign insurer. The FSC may also exempt a foreign insurer from submitting a business plan. The FSC will not issue a Category B licence unless it is satisfied, amongst other matters, that: January 2016 Edition

- the applicant is authorised by or under the law of its home jurisdiction to carry on insurance business of the relevant classes of business for which a licence is sought; - the relevant insurance business would be lawfully carried on if it were carried on in its home jurisdiction; and - the relevant insurance business will be subject to the supervision of the authority responsible for the supervision of insurance business in its home jurisdiction. Foreign insurers will also need to demonstrate a sufficient nexus with the BVI. LICENSING EXEMPTIONS The requirement to obtain a licence does not apply to: - a member or syndicate of Lloyd's, where the member or syndicate is carrying on insurance business in the BVI in accordance with an approval granted by the FSC; - to an approved reinsurer that enters into a reinsurance contract with a licensed insurer; - to any person exempted from the requirements of the Act by virtue of regulations made under the Financial Services Commission Act, 2001; or

- where an exemption order has been granted by the FSC with respect to the insurer. An exemption order will generally only be granted in circumstances where the FSC is of the opinion that the applicant is willing to insure a risk that no licensed insurer is willing or able to insure, or in situations where a licensed insurer does not have sufficient capacity to insure. APPROVED REINSURERS An "approved reinsurer" is either: - an insurer with a financial strength rating of A++, A+, A or A- assigned to it by the A.M. Best Company (or an equivalent financial strength rating assigned by an equivalent rating company); or - an insurer that is approved by the FSC as an approved reinsurer on the application of the BVI insurer. In our experience, major foreign insurers with adequate financial strength ratings and international reputations are likely to be approved by the FSC as "approved reinsurers" without the need for local licensing, provided all the necessary information and paperwork are submitted to the FSC. This article is only intended to provide a summary of the BVI's insurance laws and regulations relating to reinsurance. Specific advice should always be sought and Mourant Ozannes is happy to assist with enquiries relating to licensing requirements and making applications to the FSC. -BB

BUSINESS - GLOBAL

P E R SP E C T IV E S A ND P ERC EP TI ON S

THE BVI:

CORPORATE EVOLUTION SERVING GLOBAL COMMERCE by Greg Boyd

January 2016 Edition

The end of 2015 marked 20 years in the legal profession for me. During those two decades the legal landscape has changed dramatically, owing to both technological advancement and commercial factors. Globalisation occurred and economic effects were felt on a worldwide basis. As lawyers, we now have computers on our desks, laptops in our bags and smart phones in our pockets, which have all impacted on what we do and client expectations of how and when we deliver our advice. Law firms have expanded globally in reaction to increased cross-border activity and the need to provide round the clock service. Client meetings are routinely an electronic affair and billion dollar deals are closed through the email exchange of PDF scanned copies of executed documents between deal parties.

Commercially the last two decades can be associated with challenging times, rather than the ‘boom times’ that preceded them. We have transitioned through Y2K and recovered from the effects of the 9/11 terrorist attacks on a primary financial centre, the Global Financial Crisis (GFC) and the ponzi scheme fund blow ups. Financial institutions once thought too big to fail, have failed while others only survived owing to public sector bail out plans. Furthermore, China’s former double-digit growth rate has slowed to something in the region of 5-7% sending oil and natural resource prices plummeting. A failure to react appropriately to any one of the above factors can have severely adverse business consequences. The cost of getting it wrong can be operationally fatal. As with nature, the difference between extinction and survival (ignoring the effects of mankind for a moment) is a matter of evolution and the ability to adapt to changing factors and circumstances. Few will argue that the conception of the BVI as an offshore finance centre was initially fuelled by its ability to provide tax efficient solutions for US businesses. And back in the boom period of the 70’s and 80’s, it was considered commercially prudent for businesses to lower their operational costs and maximize profit; lowering the tax burden was part of that business function. However, fast-forward past the GFC to the stagnation of developed economies feeling the effects of their highest ever levels of public debt, budget deficits and soaring tax rates; tax efficiency has become the dirty term of rhetoric for many media publications and political snipers needing someone or something to blame for their worsening domestic fiscal crisis. Offshore finance centres (especially the BVI) have been in their cross-hairs ever since. A summary example follows: Tax havens have been criticised because they often result in the accumulation of idle cash that is expensive and inefficient for companies to repatriate. The tax shelter benefits result in a tax incidence disadvantaging the poor. Many tax havens are thought to have connections to fraud, money laundering and terrorism. This rhetoric may sell newspapers and play well to a part of the electorate not familiar with cross-border finance and the deployment of global capital; however, that does not translate into commercial reality nor does it solve their domestic fiscal crises. And, more importantly, it is not an accurate perspective of the valuable service the BVI provides to global commerce.

F D I – D R IVING GLOBALISAT ION Foreign Direct Investment (FDI) is defined by the Organisation for Economic Co-Operation and Development (OECD) as follows: “Crossborder investment by a resident entity in one economy with the objective of obtaining a long term interest in an enterprise resident in another economy.” The OECD also explains that these are usually long-term investments with a significant influence by the direct investor on the management and control of the enterprise (usually more than 10% of the voting power being acquired by the investor). In short, it’s where a company from one country invests in a company or project in another country. FDI flows have doubled from the previous decade and are ten times more than they were in the 1980s. FDI growth has increased year on year despite the GFC and countries have actually amended their investment policies to attract FDI as a means of counteracting the effects of the GFC. Public debt in developed markets hit unprecedented levels after the GFC while that effect was far less dramatic in developing countries (owing to their lack of linkage to the global financial markets). FDI to developed countries declined, but increased to developing countries (developed economies

being characterized by recovery while developing economies became associated with revenue). FDI has become the major economic driver of globalisation, accounting for over half of all cross border investments. Companies are rapidly globalising through FDI to access and serve new markets and customers, map out their value chains in the most efficient locations globally, and to access technological and natural resources. In other words, FDI fuels growth of Multinational Enterprises (MNEs) and promotes development in the emerging markets. The deployment of FDI is channelled primarily through equity structures, as the key requirements for an FDI are structural in that they focus on management control and voting power. The effective deployment of FDI therefore, requires a corporate legal solution. FDI is a primary catalyst for joint venture and cross-border merger and acquisition (M&A) activity.

T H E B V I A DVA NTA G E Some will suggest that International Finance Centres are much alike. That is only correct up to a point; the evolution of any specific International Finance Centre will dictate its key strengths and advantages. With almost half a million active BVI Companies, the BVI has evolved to be the leading offshore corporate domicile offering an exceptional depth of corporate expertise and experience. Corporate advantage is the renown of the BVI. Multinational investors will make investment decisions based on the risk profile of any given investment. Such factors will include geographic risk, political risk, economic risk and corporate risk. Certain of these risks can be insured against while others are beyond control or mitigation. Investors will not risk investing in a foreign market unless the prospects of success are reasonable and the legal structure is sufficient to protect the investment. The primary motivation to use the BVI is not tax driven, but rather (and more importantly) to achieve a structural advantage that delivers management control and access to new markets while treating all investors equally or as commercially agreed. This structural advantage increases project viability through investment protection and enables FDI transactions to succeed. The BVI advantage includes: • Progressive legislation that evolves with business demands • Commercially focused, responsible and sensible corporate governance • Effective corporate structuring through unrivalled corporate flexibility • Effective exit strategies • Credible and efficient dispute resolution • Transaction fluency achieved through skill set, expertise and professionalism • Tax neutrality that ensures investor equality These advantages are explained in more detail below: Legislation: The BVI Business Companies Act is one of the most progressive corporate statutes in the world. Provisions were cherry-picked from the laws of Delaware, Ontario, Australia and England. And it is frequently reviewed and amended to meet market conditions or improve its functionality. This modern, flexible and commercially minded corporate legislation ensures that transactions proceed with maximum efficiency. Commercial parties get access to progressive laws and a stable and secure legal framework that can accommodate global market standards (for example, the enforcement of New York law or English law governed transaction agreements). January 2016 Edition

2014

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FIGURE 2 Foreign Direct Investments: Inward Flows

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January 2016 Edition

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• Neutrality: Creation of a level playing field for investors; the BVI provides a neutral environment where commercial parties are able to structure deal parameters without any local or foreign law bias. • Class rights: Key to private equity and capital raising transactions is the need to create preferential rights for the investor (voting, dividends, liquidation preferences etc.); easily achieved through a multiple share class structured BVI Company. Share classes with deal-shaped and class specific share rights (control and economic) including class specific director appointment rights and class specific distribution rights are easily catered for under BVI law. • Reserved matters: Broad flexibility exists with respect to actions or activities that can be defined as reserved matters requiring enhanced corporate authorisation at director and/or shareholder level. • Limiting capacity: The ordinarily broad corporate capacity of the BVI Company can be restricted to deal or project specifics. • Directing duty: Designated directors can be empowered to act in the best interests of a parent company, specified JV partner or shareholder rather than the BVI Company itself. • Statutorily binding: The MAA are, as a matter of statute, binding as between the shareholders themselves and between the shareholders and the BVI Company. Additionally, directors are under a statutory duty to comply with the MAA and to ensure the BVI Company complies with the MAA. • Private equity: Much of the genius of BVI corporate law lies within the flexibility and adaptability of the BVI Business Company which ensures that it remains useful and adds value at every stage of the business life cycle. A BVI Company is an ideal vehicle for a start-up because it can be efficiently formed at a competitive cost, is subjected to a commercially appropriate degree of corporate governance and ownership and control rights can easily be safe-guarded. Additionally, as the venture progresses the BVI Company successfully navigates the growth years of equity and debt financings to exit via an IPO or company sale. • Investment funds: There are a number of instances where a regulated fund product is able to overcome various global regulatory issues or hurdles that may have otherwise prevented the use of a BVI Company in certain circumstances. For example, there are a number of jurisdictions that actively seek to prevent the acquisition of assets in that country by an unregulated vehicle and there are certainly pockets of potential

CHI

FIGURE 1 Foreign Direct Investments: Inward Flows

Corporate structuring: The BVI Company has unrivalled corporate flexibility and is successfully utilised from start-up, through the growth years of joint venturing, to a listed company on leading stock exchanges such as the London Stock Exchange, the Hong Kong Stock Exchange and the New York Stock Exchange. The BVI Company is a legally secure and internationally accepted platform for fundraising. Businesses that operate in jurisdictions that restrict access to international finance because of regulatory, political, legal complexity or development reasons, often use a BVI Company as a holding company to the group or intermediary holding company within the group in order to enhance access to capital in the international market via equity investment, IPOs, project and acquisition debt financing. In addition, limited mandatory statutory requirements apply to the composition of the constitutive documents (the Memorandum and Articles of Association, the MAA) of a BVI Company which means that advisers are able to craft very transaction specific MAA (incorporating, for example, special economic and control rights and corporate governance requirements) that provide a robust structure and commercial certainty for the commercial parties. Commercial attributes include:

international investors that seek a degree of regulation in fund vehicles for reasons of credibility and the comfort that there is some form of third party oversight. However, one particular difficulty for investment professionals either operating a regulated fund within the emerging markets or having investment strategies focused on emerging markets is that there is inherently an above average investment risk and lower success profile, resulting in managers operating within this space receiving smaller investment commitments as compared to investment strategies focused on developed markets. Accordingly, a number of forms of the more traditionally operated regulated fund products, are not useful because the applicable minimum investment thresholds (per investor) are not achievable. However, the ever progressive Financial Services Commission in the BVI (BVI FSC) identified this market issue and reacted by recently launching fund products specifically designed to provide the solution. The BVI’s new incubator and approved funds are lightly regulated by the BVI FSC and offer a high degree of flexibility to the manager. The incubator fund has a very low

Exit strategies: The BVI Company’s flexibility is ideal for effective and efficient transaction exit strategies, including: FIGURE 3 Foreign Direct Investments: Outward Flows

2014

NG KO

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INA

2013

C H IN A,

AN ISLANDS

HONG KONG S A IT

ED A

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minimum investment threshold and the approved fund has absolutely no investment threshold, addressing specifically the issues raised above. These new products offer a novel cost effective regulated platform for attracting investors and pooling investment capital for deployment into targeted start-ups; which is ancillary and catalytic to private equity. Corporate governance and administration: The continuing obligations for BVI Companies and their management and owners are progressive, commercially focused, responsible, sensible and cost efficient; which facilitates multinational business functionality. The BVI Registry of Corporate Affairs has an efficient electronic filing system and recently introduced a premium service that includes extended hours of operation on business days (7:30am to 10:00pm) and a guaranteed four hour turnaround time for mergers and consolidations, continuations and discontinuations, amendments to the MAA and security registrations; thereby increasing service to the jurisdiction and its participants.

• IPO: BVI Companies can be listed easily on the world’s leading Stock Exchanges. BVI law does not have listing rules or a take-over code, thereby providing the necessary flexibility for the BVI Company to comply with the relevant listing rules and take-over code of the relevant stock exchange. Taking a BVI Company private is an equally efficient process. • Company sale: Shares of a BVI Company are easily transferred with certainty (owing to a modern system of share registration for proof of ownership). • Asset sale: Assets are easily disposed of by a BVI Company as a matter of BVI law (while balanced against the protection of minority interests too). • M&A: The BVI has a progressive merger code that even allows for the surviving company of the merger to be a foreign entity (effective minority protection provisions are statutorily applicable for dissenting shareholders with an out of court appraisal process for determining the fair value of the shares of the BVI Company). Dispute resolution: The BVI Commercial Court offers efficiency, stability and predictability through strong case precedent and appeal rights to the UK Privy Council. Many of the leading shareholder and corporate dispute cases have been heard before the BVI Commercial Court (with many points of law having been ultimately determined by the Privy Council). The BVI Commercial Court is unlimited with respect to the nature of relief it can order in relation to breaches or potential breaches of the MAA (which is of prime appeal to venture parties that have ensured that the MAA have been properly crafted in line with their commercial objectives). Consequently, BVI litigators have extensive experience of the efficient resolution of shareholder and joint venture disputes. Transaction parties are more willing to form business relationships when they know that potential disputes can be settled efficiently and effectively. Transaction fluency: The BVI is the largest offshore corporate domicile and owing to its high activity in the FDI space for over a decade there has been a superior accumulation of skills, knowledge and experience gained from routinely advising on multinational cross-border transactions. Structuring the transaction through the BVI frequently enables the transaction parties to access corporate stability with more efficient legal rules than those existing in the target or other jurisdictions. The commercially minded professional expertise and service of BVI law firms, corporate administrative service providers, accounting firms, insolvency practitioners and the BVI Commercial Court ensures that transaction fluency is optimised. Tax neutrality: All too often tax neutrality is a misunderstood concept and confused with tax inversion or tax leakage. BVI Companies are exempt from income tax, distributions from BVI Companies are not taxed and no BVI tax is levied on capital gains realised on the shares, debt obligations or other securities of a BVI Company. In addition, there is, generally, no stamp duty imposed on the transfer of shares in a BVI Company. This ensures that multinational investors are treated fairly and equally and an extra layer of tax is not levied in the BVI in relation to a corporate structural solution. Operational profits of the BVI Company in a target jurisdiction will likely be subjected to local taxes in that target jurisdiction (as determined by local tax laws in that jurisdiction) and investor returns will likely be taxed in their home jurisdiction (again as determined by local tax laws in that jurisdiction). January 2016 Edition

Any tax efficiencies gained through the use of the BVI Company are afforded as a consequence of foreign rather than BVI legal factors. Those efficiencies must be balanced against project or investment viability and the socio-economic benefits attributed to the success of any such project or investment. In short, has the local jurisdiction and its people benefited from the project or investment? And would the project or investment have been successful or even carried out were it not for the efficiencies available? Successful projects in emerging markets translate into added value for the development of that emerging market (job creation and infrastructure) and added value for the investor’s supply chain and growth of its home economy (access to new markets, increased revenue and economic growth/ recovery – which sustains or promotes employment and lifestyle in its home jurisdiction). Companies do not accumulate and stock pile idle cash reserves in the BVI – another misconception. The goal of any business is to maximise profit and that is achieved through reinvestment in the business or investment in research and development to grow the business; curtailing that investment would be counter intuitive to emerging and developed markets alike.

AD D ING VALUE TO FDI T HROUGH EVOLUT ION The BVI has an innovative regulatory system and continues to participate in international initiatives relating to transparency, mutual co-operation, information exchange, and anti-money laundering regulation to ensure that it provides an attractive environment for legitimate business transactions. The BVI is recognized by the OECD as a compliant jurisdiction with respect to the exchange of tax information and the combatting and prevention of money laundering and terrorist financing. The BVI continues to expand its treaty network through bilateral tax information exchange agreements (TIEAs) and automatic exchange of information. The BVI has entered into TIEAs with 27 jurisdictions1. The Multilateral Convention on Mutual Administrative Assistance in Tax Matters (the Convention) was extended by the United Kingdom on 1 March 2014 to include the BVI which enables the country to exchange information upon request with more than 76 jurisdictions. The Convention was developed jointly by the OECD and the Council of Europe. The Convention is a multilateral instrument which allows for all forms of tax cooperation for combatting tax evasion. The BVI has signed an Intergovernmental Agreement (IGA) with the United States in order to comply with the requirements of the Foreign Account Tax Compliance Acts (FACTA). The BVI has also signed an IGA with the United Kingdom to improve International Tax Compliance requiring BVI financial institutions to provide data on financial accounts held by its residents to the United Kingdom. The BVI was among the first countries to commit to the new standard for automatic exchange of information developed by the OECD in the form of the Common Reporting Standard, and has committed to begin the first automatic exchange of financial account information by 2017. The BVI is compliant with the recommendations of the Financial Action Task Force (FATF) on anti-money laundering and anti-terrorism terrorist financing. The BVI is a member of the Caribbean FATF, the EGMONT Group (sharing intelligence with other governments on financial crimes) 60

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and the International Organisation of Securities Commission (IOSCO). The BVI remains a primary International Finance Centre for facilitating the flow of FDI to emerging markets. In 2013, the BVI was the World’s fourth largest recipient of global FDI inflows, receiving US$92.3 billion2. To put that in perspective for that year: • the United States (the World’s largest economy) attracted $159 billion3; and • FDI inflow to the BVI was more than that received by India and Brazil combined. Importantly, this is not direct investment or “idle cash” that remains in or is utilised in the BVI. Almost all of that FDI inflow to the BVI was deployed to other jurisdictions (FDI outflow was US$82.5 billion4). The FDI is channelled through a BVI Company and deployed to other regions around the World to fund projects or acquire technology, resources and/or enterprises. It is the corporate attractiveness of the BVI, together with the broad, effective and efficient relief available through the BVI Commercial Court and the political stability of the jurisdiction that provides a very secure legal environment advantageous for the structuring of legitimate FDI transactions. Many FDI transactions will be connected with infrastructure and social development in the target jurisdiction (especially in emerging markets); project success then becomes less about financial gain and more about socio-economic factors such as job creation and primary infrastructure and services (water, power, healthcare and education). A structure that can protect the investment and promote project viability and success becomes essential. Globalisation is dependent on functioning free markets and free trade. Accessing corporate advantage is consistent with the principles of free market specialisation. MNEs will seek out growth patterns that improve their supply and value chains – for example, accessing cheaper labour or resources in target markets. Similarly, using the BVI and the BVI Company for facilitating FDI transactions is a choice driven by corporate structural advantage. The BVI has evolved from “tax haven” to the most progressive corporate International Finance Centre focused on maximizing the facilitation of FDI flows and global commerce. This has been achieved through the implementation of its progressive corporate laws and the flexibility of the BVI Business Company. The BVI’s depth of expertise in relation to crossborder transactions (including, the resolution of disputes related to same) is a significant attraction factor for investors considering an FDI transaction; and the reason the BVI is more frequently chosen as the corporate solution for legitimate FDI transactions. -BB

1United States, United Kingdom, France, Australia, Germany, Czech Republic, Faroe Islands, Finland, Greenland, Iceland, Sweden, Norway, Denmark, South Korea, The Netherlands, Aruba, St. Maarten, Curacao, Portugal, Ireland, New Zealand, China, Canada, India, Guernsey, Poland, and Japan. 2Information obtained from UNCTADstat- the United Nations Conference on Trade and Development statistical platform. 3See footnote 2 above. 4See footnote 2 above.

BUSINESS - GLOBAL

“The stakes are high and the timing is critical, but there is unwavering confidence in the blueprint.” by Lorna Smith, OBE

January 2016 Edition

INTRODUCTIO N In late 2014, the acclaimed firm of McKinsey completed a report in consultation with the financial services industry and the Government entitled “Building on a Thriving and Sustainable Financial Services Sector in the British Virgin Islands.” That report puts in perspective the Industry’s significant growth in past decades and the challenges of recent years that threaten its very core. Most importantly, the report provides a blueprint to guide the industry's future sustainability. Early last year the Cabinet accepted the principles of the report. Through this article, I will examine that blueprint for building a stronger, more sustainable industry. I will look at the implementation of some of its major recommendations, including capacity building for Virgin Islanders, 'adding value' to

existing services, improving the efficiency of the BVI Financial Services Commission (BVIFSC), a new banking opportunity, creating a more business friendly climate and, of course, the critical role of IT and infrastructure. Let us be clear on one fundamental point: The BVI continues to maintain its position as a top-tier financial services jurisdiction despite its many challenges, thanks, in the main, to the deliberate strategic direction that this Government has taken in relation to the future of the industry. What lies beyond McKinsey for the industry? Definitely, we must continue to strengthen our core business of company incorporations. However, the key to our sustainability lies in the diversification of our industry. Do I have a monopoly on such views? Certainly not!

Throughout this discussion, we will draw on the views and observations of some of the thought leaders of this global industry, which spreads, from the BVI to Asia, to Latin America and everywhere in between.

B V I IN T H E G L O BA L EC ON OM Y The question on everyone’s mind in the prevailing climate is: will 'offshore' remain relevant? The answer from several sources including Robert Briant of Conyers, Dill and Pearman is a resounding yes. Robert believes that the key to the BVI remaining relevant and continuing to be a global player depends on our ensuring transparency and effectively diversifying beyond incorporations. He further suggests that BVI relevance is dependent on January 2016 Edition

parties from different jurisdictions structuring their affairs in a neutral locale, the rule of law not fully prevailing in certain jurisdictions, requiring persons from those territories to establish offshore companies and the BVI continuing to maintain the well-regulated jurisdiction that it is.

• Revamping the International Finance Centre (already rebranded BVI Finance)

Robert's namesake and the territory's chief regulator, Robert Mathavious, at the Meet the Regulator Forum last November, added that the BVI remaining relevant (in the global economy) depends on its ability to remain alert to risks and its responsiveness to the continuing external expectations regarding reputation and regulatory responsibility. The BVI must learn to adapt and evolve better in line with the latest market developments.

• Strengthening BVIslander Capability

But BVI’s role in the global economy runs a lot deeper. Harneys London Managing Partner, Peter Tarn recognised this when he wrote in the 2014 issue of Business BVI that '...we ignore the important role that the BVI plays in providing the utility “wiring” which supports cross-border investment and trade. Globalisation has fuelled a doubling of world GDP in a generation, unprecedented in world history. Poverty has declined dramatically across emerging economies, particularly those like China, which have skillfully used and supported the symbiotic financial hubs, which surround them. Trade, not aid, has been the emerging country ticket to success and the BVI has been part of that. This is a largely untold story'. To further substantiate the importance of the BVI to the international economy, BVI Finance expects to engage Capital Economics of the United Kingdom early this year to take a more in-depth look at the BVI model. In its own interests the industry must collaborate with BVI Finance to make this happen. As a recent publication puts it, offshore needs to do a better job of defining and justifying its contributions to the global economy. Empirical information of this nature must be a crucial part of a proactive overall strategy to push back against and silence our critics, which also bolsters confidence in the sector. OIL, in its Offshore 2020 report for 2015 acknowledges that there is still a long way to go before the contribution of offshore jurisdictions is widely understood — but noted too, that industry participants are becoming more forthright in articulating their value to the global economy. Through exchange of information data, it will eventually become clear that there is no great mystery to the use of offshore financial services. According to the same Offshore 2020 report, the BVI remains at the top of the most important offshore jurisdictions today. On the whole, the future looks promising. The regulatory and public relations challenges of the past few years are shaping and honing the industry into one poised to emerge stronger than ever. By 2020, the report predicts that offshore (and BVI) will be a leaner, more resilient, more confident member of the global economy. Although there is a great sense of optimism, the BVI is by no means out of the woods.

M C K INS E Y PRIORITI ES The report of the consultancy, facilitated by McKinsey, identified 40 initiatives, 10 of which now form the basis of the new architecture. Last September, a campaign dubbed 'BVI Forward' was launched with great fanfare to create positive recognition of, and real interest in, a compelling future for financial services in the BVI and the opportunities it represents for its people. It rolled out the priority initiatives as follows: 64

January 2016 Edition

• Strengthening the Business Development function • Engaging the Population • Pursuing Tax initiatives • Enhancing Customer Service at the Financial Services Commission • Attracting Value-Added services • Reforming Immigration & Labour • Investing in Infrastructure • Establishing a dedicated Delivery Unit to coordinate and drive implementation. This new entity, dubbed the Financial Services Implementation Unit (FSIU) has been established and was given a two-year mandate to provide leadership to the relevant government departments and the industry for long-term growth. Let us now examine the initiatives in no specific order of priority.

P O P U L AT IO N E NG A G E M E NT A ND B U IL D ING C A PA BI LI TY Engaging the Population is sine qua non to the longevity and sustainability of financial services. Given the monumental nature of this task, the FSIU, through the BVI Forward campaign has adopted a multi-faceted approach to informing, educating and engaging the residents of the BVI. This is being pushed via multiple media platforms, but digital and social media are specific areas of focus given its pervasive reach among young people. From the youngest to the oldest, the BVI Forward campaign seeks to put financial services in the hearts and minds of every resident, to make the industry relevant to them, to make it matter, to motivate them to see a role for themselves therein. Building BVIslander capability is equally imperative. The education sector therefore, becomes a key focal point, beyond McKinsey. We must engage officials at all levels of the education spectrum – primary, secondary, tertiary, and ensure that professional certification which is inextricably linked to building local capacity, is recognised as an immediate and urgent need. A myriad of questions arise. Some will be answered as we proceed, while the answers to others will emerge from our ongoing dialogue with the relevant stakeholders: How do we engage students even at the primary level and spark their interest in this industry, which is of such importance to the BVI? How do we promote employment in the financial services industry as viable career paths for teenagers in high schools? What guidance counseling resources are available to high school students? Are guidance counselors sharing appropriate industry information? How many college students are pursuing studies in areas relevant to financial services? Are they receiving suitable guidance that will help make them employable in the financial services industry?

A WE L L - R E SO U R C E D T R A INING INST IT U T E The Financial Services Institute (FSI), is envisioned in the report from the consultancy facilitated by McKinsey to be the singular educational pillar that supports capability building and human resource development for BVI

financial services. Significant work is ongoing to create an effective structure to enable the FSI to deliver on its goals. It is expected to be the primary driver and lead educational institution for Financial Services Studies, Financial Literacy, professional qualifications, and other financial services related professional development within this jurisdiction. With the right staff complement, the FSI will develop and impart knowledge and skills through training, career enhancement, personal enrichment, continuing professional development, counseling, and advisory services needed to support the human resource requirements of the BVI as a financial services jurisdiction. Clearly the industry will be expected to play a role in the success of the FSI by providing scholarships, bursaries and indeed manpower at times to deliver the courses.

IMMIG R ATIO N AND LABOUR /ROLLIN G OUT T H E R E D C A R P E T FO R INVES TME NT Creating an environment conducive to setting up and growing business in the BVI is critical. Gerard Farara, QC as a member of the Steering Committee set up to oversee the consultancy and implementation of initiatives, was invited to also chair the Initiative Working Team on Reforming Immigration and Labour. Its charge was to conduct a comprehensive review of the laws, policies and procedures currently applicable within the Labour and Immigration Departments, relative to new applications for and renewal of work and entry permits and to make recommendations intended to bring about reforms to address and resolve the problems of delays and deficiencies which currently exist. The strategic objective of this initiative is to provide for the further development and sustainability of all other major sectors and sub-sectors, and hence the future prosperity of this Territory and its people. McKinsey thought that a critical role of this initiative was to attract and retain excellent foreign talent through a strong and seamless immigration process and policy. While we agree, this must also be balanced with the development and promotion of BVI talent within the financial services industry. The work of this Initiative Working Team transcended financial services, as the mandate was to improve the business climate for all sectors. The team’s report, with recommendations has been submitted to Government and we await their timely response. Among the recommendations that could immediately improve the climate for business are cutting processing time to one month, a system that would enable applicants to apply for and receive permission for a change of employment while in the Territory and according persons managing businesses which the Government considers to be essential to the growth of financial services, an enhanced status. Additionally, spouses would be accommodated hassle free together with children of school age, once they demonstrate the required economic means for their maintenance while in the territory. Taking the BVI financial services industry beyond McKinsey calls for the broadening of the economy to improve the productivity of all sectors, including tourism and construction. Excellent recommendations have also been made in relation to these areas. While it would be outside the scope of this article to expand on these, one such important area that is not financial services specific, but if implemented, could contribute significantly to this economy, relates to the subject of special residency benefits. The objective of this recommendation is “to encourage productive investment ...aimed at stimulating the economy through job creation and capital investment by

foreign investors, by offering residency with its associated advantages to investors with a proven record of success. The purpose of the Residency Programme for Direct Investors is to enable foreign (non BVI) nationals and their families who commit to an approved long term investment in the Territory to enter and exit the Territory whenever they choose. The investments under this programme must be ‘sector specific’, and periodic reviews and adjustments will be made to the listed sectors, as the economic realities and other relevant considerations dictate, with care being taken not to take away rights or entitlements already acquired where the investment has been made. Given the nature of our financial services sector, all persons visiting on business should be able to do so seamlessly and without delay. For instance, if a Ukrainian is visiting the BVI, once he or she has a visa from the United States of America, no further visa should be required to enter the BVI. This should allow the BVI to relax its visa requirements for the individual having recognised that a high level of scrutiny has already been engaged through the US visa regime.

F SC ST E P S U P IT S G A M E Mckinsey rightfully highlighted that the BVI Financial Services Commission be more attuned to the needs of its customers. This did not fall on deaf ears. The commission under the astute leadership of its Managing Director/CEO, Mr. Robert Mathavious, who is also the sponsor of this particular initiative, has already acted. Last November, the commission, announced expanded services and operating hours to support the operations of BVI Business Companies. These services specifically enhance offerings from its Registry of Corporate Affairs, which administers the BVI Business Companies Act. New services include an extension of the Registry of Corporate Affairs workday to almost 14 hours. This move by the FSC means that most transactions will receive acceptance by the Registrar and confirmation to the submitting agent on the same day. The new hours are most welcome particularly to clients and companies operating in geographically distant locations with vast time zone differences. Another excellent move in responding to the needs of the industry is the recently established Premium Services Department, which will result in expedited services - albeit at a cost! Coupled with the commission’s physical presence in Asia Pacific Region, through its representative office in Hong Kong, the addition of access, from Hong Kong, to its VIRRGIN system is another welcomed strategic move. The limited transaction access to the VIRRGIN application system from Hong Kong is described as VIRRGIN Lite. That the service is being unveiled in Asia underscores the Territory’s commitment to continue efficiently serving the corporate needs of clients in the region. VIRRGIN Version 3 (V3) is set to be introduced to practitioners in the BVI financial services sector in March of this year. V3, the latest installment of the online application will introduce transaction processing for regulatory functions including: applications for licensing, approval of directors and senior officers, prudential returns and other post-licensing transactions. The addition of this electronic portal for regulatory transactions is expected to improve communications between the Commission, licensees and applicants, improve information management for informed decisionmaking, facilitate more proficient supervision and add efficiency to the processes. January 2016 Edition

A D D ING VALUE Underpinning this proactive approach to strengthening our financial services industry is the importance of data and its role in facilitating evidence based decision-making. To truly understand where we are and to effectively chart a path to where we want to go, we must continuously investigate, analyse and interpret available data and constantly engage in original research. It is this evidence-based approach together with OIL's latest projections, unveiled in December 2015 that would suggest that there will be some decline in company incorporations in the BVI going forward. Based on trends exhibited, it seems clear that the BVI will not continue to be a high volume driven jurisdiction, with new incorporations growing exponentially. The BVI is therefore moving to find innovative ways to add value to the existing suite of financial services. We must offer incentives to secondary service providers for services such as the establishment of family offices in the BVI to manage clients' needs, while at the same time stimulating the local economy and creating employment and business opportunities. Another opportunity for adding value lies in companies holding board meetings in the Territory. Facilities now exist and I was delighted to recently hear from another hotelier of plans to establish a conference room with all the related amenities required to conduct global business I have previously touched on the importance of a more business friendly climate coupled with clear and simple government processes for potential investors as well as key employees working in the BVI. A number of other areas are being actively explored including the passage of intellectual property legislation, and establishing an aircraft registry. With regard to the former, The Trade Marks Act, 2013 and the related Trade Marks Rules, 2015 came into force on 1 September, 2015. The Trade Marks Registry is already reporting a larger than expected application and transaction volume in the first month of the operation of the new Act and expects the increased volume to continue, as agents are pleased with the modern flexibility that it provides.

AN A R B ITRATION CEN T RE Last November, the board of the BVI International Arbitration Centre held its first meeting under the chairmanship of Mr. John Beachey, former Chairman of the International Chamber of Commerce (ICC) International Court of Arbitration from 2009-2015. At the time, the Honourable Premier acknowledged that â&#x20AC;&#x153;the Arbitration Centre is exactly the sort of valueadded initiative which the report facilitated by McKinsey recommended to strengthen the financial services sector in the BVI.â&#x20AC;? To have as Chairman of the Board a person of such stature, augurs well for the BVI. Last May, Lord Goldsmith, Q.C. former Attorney General of the UK and himself a worldrenowned arbitration practitioner, acknowledged that the BVI has all the ingredients to become a leading Arbitration Centre. He pointed out that arbitration has grown into a worldwide industry practiced across the globe. Among the ingredients that the BVI boasts are: modern arbitration legislation, the fact the BVI is a party to the New York Convention, the strength of Governmental support, a mature, learned and ethical judiciary including a well respected Commercial Court, sophisticated and skilled practitioners, an excellent reputation as a leading finance centre with its 66

January 2016 Edition

450,000 active Business Companies combined with its prosperity and stability. He continued that New York, London and Paris are the leading arbitration centres globally. However, Singapore and Hong Kong, which opened much later, are equally well established. Therefore, there is no impediment to the BVI becoming equally well-established - even if it is to cater to the regions of Latin America, the Caribbean and even North America. The fact that the CEO of the BVI Arbitration Centre is due to be in place by the first quarter of this year confirms that as usual the BVI means to stay ahead of the curve with our diversification efforts.

T H E P R A C T IC E O F L AW The three legal practitioners consulted for this article, view enhancement of the practice of law as another area of diversification in terms of specialization as well as growth size. Perhaps Robert Briant said it best in his response. '... Since arriving in the BVI over sixteen years ago, the growth in lawyers has been dramatic. This is an example of diversification, and I see opportunity for further growth in the BVI for these law firms. ...Two ways to encourage this growth are by having BVI legislation constantly refined, based on guidance from the private sector to ensure it is responsive to client requirements, and by having a strong commercial court. The centres for excellence for BVI law firms should be in the BVI, and focusing on these two areas will help to make this happen. ' Peter Tarn lends his view saying, ' jurisdictions which provide a genuine commitment to the rule of law have an importance far beyond the transactions and companies which they host. Their mere existence and the intellectual principles which they espouse, provide an important and visible counterweight to executives and legislators which are otherwise tempted to see the law as little more than a tool for their administrative convenience.' Of course the Commercial Division of the Eastern Caribbean Supreme Court, which is based in the BVI, has earned its weight in gold as it continues to be a leader for the settlement of international commercial disputes. We are proud of our system not only in relation to the quality of judgments handed down but equally so, of the expeditious way in which they have been handled. Nevertheless, a few legitimate concerns have been expressed about the recently passed Legal Professions Act. The indications are that these concerns will be addressed speedily so that the BVI continues on its forward trajectory.

SP E C IA L E C O NO M IC ZO NE The BVI could benefit greatly from the creation of a special economic zone, which is ideal for small to medium sized enterprises wishing to set up a physical presence in the BVI. Among the benefits to be derived are operating from a tax neutral platform and a fast track establishment of operations. A suite of incentives is being prepared by the Value Added Initiative Working Team for Government's approval.

A N O P P O RT U NIT Y F O R A B V I BA NK The BVI as a jurisdiction has never been a true banking centre. It always comes as a surprise to learn that there is only approximately $2.5 billion

held in all BVI banks. But what is no surprise is that there are over one million Chinese High Net Worth Individuals (HNWIs) with investable assets of over six trillion USD growing at +15% per year and that many of these HNWIs own BVI domiciled business companies. However, a number of factors complicate these individuals' ability to operate efficiently and maximise their investments, including the onshore regulatory burden that makes it next to impossible for large international banks to deal with business companies and legacy systems that impede the ability of established banks to adapt to the needs of the Chinese client. These market structure issues have presented an opportunity for a group of well-established businesspersons in Hong Kong to propose to open a bank in the BVI to service primarily Asian clients. BVI FSC must approve the bank. This new bank would be free from the 'legacy' issues, including outdated systems and processes, and will initially focus on a set of traditional and transactional banking products differentiated through quality of service – speed and seamlessness of the account opening process – and rolled out using best of breed technology specifically designed to meet the unique needs of the ‘do-it-yourself ’ entrepreneur. According to the proposed Chief Executive Officer, the bank will also seek to play a critical role in economic development globally and in the BVI, particularly in public - private partnerships and as an advisor and syndicator of high profile development projects, including China’s high profile ‘One Belt, One Road’ initiative that is expected to require over $8 trillion in financing over the next 10 years. The bank will also collaborate with the BVI on initiatives that help raise the financial services profile of the jurisdiction, including those that help the BVI evolve from a ‘booking centre’ to a more robust ‘financial centre’ with greater onshore scale and diversification. Over time, both to address the needs of individual and family-office clients and to diversify its business into complementary products, the bank expects to rollout a full-service wealth management platform to then be followed by a select set of proprietary investment management capabilities. Where the core banking business is dedicated to largely servicing the financial needs of BVI business companies and other businesses globally, the wealth management and advice platforms are designed to assist the underlying business company owners and other HNWIs with their wealth appreciation and wealth preservation needs.

TR ANS PAR ENCY There are several initiatives that I may not have touched on due to space constraints, such as the rebranded BVI Finance that will be reorganised as a Public/Private Sector Partnership and the various transparency initiatives with which we have been engaged. But tribute must be paid to Neil Smith, our Financial Secretary and his team for moving the BVI way beyond the dark clouds brought about by the Organisation of Economic Cooperation and Development (OECD) to the brilliant sunshine where the Territory is now deemed 'Largely Compliant' by its peers, in relation to meeting the international standards of transparency. However, the OIL Offshore 2020 report acknowledges that it is the jurisdictions that enjoy extensive tax treaty networks, such as Luxembourg and the Netherlands, as well as jurisdictions undergirded by solid British legal frameworks, such as CDs and BOTs, that will continue to see prosperity. Especially successful will be those jurisdictions that strictly adhere to compliance regulations, that anticipate

new curveballs and disruption, and that can provide critical substance. Clearly there is much more work to be done on this particular initiative. The recent changes to the anti-money laundering and combat the financing of terrorism (AML/CFT) regulations that now require that Beneficial Ownership information be accessible to competent authorities in the BVI when needed, were laid on the table of the House of Assembly last October. This development can only result in even greater transparency, a higher profile and more business for this jurisdiction.

INV E ST IN INF R A ST R U C T U R E We cannot add value and ensure the industry’s future survival without improving the infrastructure that will facilitate easy movement and comfortable accommodation for people using the BVI. Our ultimate goal should be to become a 'super jurisdiction', with the ability to attract talent, remain an exciting country and provide excellent services. Convenient air and sea transportation with seamless connections to other parts of the world are therefore imperative. Plans continue for the extension of the Terrance B. Lettsome International Airport to accommodate long haul traffic from North America and upgrades to the ferry services between the BVI and United Statees Virgin Islands must be given priority if we are to compete internationally. It is instructive that the OIL report referenced earlier, predicts that by 2020, Hong Kong and Singapore will emerge as the most important jurisdictions for a number of reasons, not the least being, ease of access and doing business in those countries. The BVI must not be found wanting in this regard. Telecommunications services must also rise to being on par with competing jurisdictions and the markets from which the industry derives its customer base. I cannot end this section without a word about the importance of a well defined business area (Road Town) that appeals to our tourists and our financial services operators alike.

C O NC L U SIO N It is evident that there is an inextricable connection between the various initiatives discussed. They must be developed simultaneously using a comprehensive approach. The Financial Services Implementation Unit represents the epitome of this all-inclusive approach. Initiative Sponsors like me, are integral to the process as we chair Initiative Working Teams who deliberate on recommendations to take the industry forward. The recommendations are in turn passed off to the Steering Committee for consideration, then on to Cabinet for decision-making. The stakes are high and the timing is critical but there is unwavering confidence in the blueprint. So where are we headed beyond McKinsey? What will the BVI Brand look like in 2020?. Yes, all offshore jurisdictions continue to be under tremendous pressure. Yes, the BVI Government has had to address the long term future of the Territory's financial services as a matter of urgency. Yes, I am happy with the initiatives' progress led by my colleagues, Robert Mathavious, Gerard Farara, Neil Smith and others too numerous to mention here. And yes, we do have a long way to go, but the BVI Brand will emerge even more resilient as we collaboratively - industry and Government - continue to implement the sound workable programme for building a stronger, more sustainable financial services industry. -BB January 2016 Edition

BOOKSHELF We hope that you enjoy our selection of current books on leadership, politics, management, economics, business and geopolitics that we trust will provide insight and ideas and above all, will be fun reading.

Wealth Secrets of the One Percent: A Modern Manual to Getting Marvelously, Obscenely Rich by Sam Wilkin

Discover how the super wealthy made it to the top (and you can too!) From the richest Romans to the robber barons to today's bankers and tech billionaires, Sam Wilkin offers Freakonomics-esque insights into what it really takes to make a fortune. These stories of larger-thanlife characters, strategies, and sacrifices reveal how the wealthiest did it, usually by a passion for finding loopholes, working around bureaucratic systems, and creating obstacles to competitors.

Restless Empire: A Historical Atlas of Russia

The Courage to Act: A Memoir of a Crisis and Its Aftermath by Ben S. Bernanke

An unrivaled look at the fight to save the American economy. Rich with detail of the decision-making process in Washington and indelible portraits of the major players, The Courage to Act recounts and explains the worst financial crisis and economic slump in America since the Great Depression, providing an insider’s account of the policy response.

by Ian Barnes

From the first Slavic migrations to the Romanovs’ rise to the Putin era, Russia has endured for centuries as a nation whose sheer size and diversity have challenged its rulers and shaped its identity. Restless Empire illuminates the epic sweep of Russian history in a beautifully illustrated full-color atlas depicting the essential cultural, political, economic, and military developments of Russia’s past. From Ivan the Terrible to Catherine the Great, Lenin and Stalin to Yeltsin and Putin, Russia’s rulers have carved their nation’s destiny into world history, sometimes bending Russia toward despotism or democracy, internationalism or brusque independence. Russia’s titanic conflicts—against the Tatars and Turks, Napoleon, Nazi Germany, and the United States—and its political upheavals from the Time of Troubles to the Soviet Union’s downfall, as well as ongoing strife in Chechnya and Crimea, are presented chronologically in accessible text accompanied by detailed maps and illustrations.

January 2016 Edition

Team of Teams: New Rules of Engagement for a Complex World by General Stanley McChrystal, Tantum Collins, David Silverman, Chris Fussell

In this powerful book, McChrystal and his colleagues show how the challenges they faced in Iraq can be relevant to countless businesses, nonprofits, and other organizations. The world is changing faster than ever, and the smartest response for those in charge is to give small groups the freedom to experiment while driving everyone to share what they learn across the entire organization. As the authors argue through compelling examples, the team of teams strategy has worked everywhere from hospital emergency rooms to NASA. It has the potential to transform organizations large and small.

Bold: How to Go Big, Create Wealth and Impact the World by Peter H. Diamandis and Steven Kotler

From the coauthors of the New York Times bestseller Abundance comes their much anticipated follow-up: Bold—a radical, how-to guide for using exponential technologies, moonshot thinking, and crowdpowered tools to create extraordinary wealth while also positively impacting the lives of billions. Bold is both a manifesto and a manual. It is today’s exponential entrepreneur’s go-to resource on the use of emerging technologies, thinking at scale, and the awesome power of crowd-powered tools.

A Nation of Nations: A Great American Immigration Story by Tom Gjelten

The dramatic and compelling story of the transformation of America during the last fifty years, told through a handful of families in one suburban county in Virginia that has been utterly changed by recent immigration. It’s been half a century since the 1965 Immigration and Nationality Act changed the landscape of America, and no book has assessed the impact or importance of this law as this one does, with its brilliant combination of personal stories and larger demographic and political issues.

The Baby Harvest: How Virtual Babies Became the Future of Terrorist Financing and Money Laundering

Can Singapore Survive? by Kishore Mahbubani

The Emergency: A Personal History by Coomi Kapoor

by Chris Rock

The Baby Harvest is the concept of a criminal syndicate: making and raising virtual babies to adulthood to be put on the shelf for money laundering, fraud and drug and firearm importation. The babies once reaching adulthood now Virtual’s will obtain finance, enter the stock market, obtain large life insurance policies, and eventually be harvested, (‘killed off ’) at investment maturity.

2 Billion Under 20: How Millennials Are Breaking Down Age Barriers and Changing the World

This book poses the question that Singaporeans must wrestle with: can we survive as an independent citystate? Kishore Mahbubani believes that Singaporeans must always ask the question because constant reflection and self-examination should be a part of the core DNA of all Singaporeans. His goal in this book is to create and enhance this culture of reflection among all Singaporeans.

Misbehaving: The Making of Behavioral Economics by Richard Thaler

by Stacey Ferreira and Jared Kleinert

Of the roughly 6.97 billion people on Earth today, approximately 2 billion of them are under 20 years old. Millennials have a lot of reputations these days, but powerful, smart, and affective are not usually the adjectives used to describe them. Jared Kleinert and Stacey Ferreira want to change that and empower these young people to follow their dreams, set goals, and achieve success.

Unmade in China: The Hidden Truth about China's Economic Miracle

Traditional economics assumes rational actors. Early in his research, Thaler realized these Spock-like automatons were nothing like real people. Whether buying a clock radio, selling basketball tickets, or applying for a mortgage, we all succumb to biases and make decisions that deviate from the standards of rationality assumed by economists. In other words, we misbehave. More importantly, our misbehavior has serious consequences. Dismissed at first by economists as an amusing sideshow, the study of human miscalculations and their effects on markets now drives efforts to make better decisions in our lives, our businesses, and our governments.

by Jeremy R. Haft

Good Profit by Charles G. Koch

In Unmade in China, entrepreneur and Georgetown University business professor Jeremy Haft lifts the lid on the hidden world of China's intricate supply chains. Informed by years of experience building new companies in China, Haft's unique, insider’s view reveals a startling picture of an economy which struggles to make baby formula safely, much less a nuclear power plant. Using firm-level data and recent case studies, Unmade in China tells the story of systemic risk in Chinese manufacturing and why this is both really bad and really good news for America.

Drawing on revealing, honest, and previously untold stories from his nearly six decades in business, Koch walks the reader through the five dimensions of MBM to show how to apply its framework to generate more good profit in any business, industry, or organization of any size.

In June 1975, Coomi Kapoor was a young reporter at the Indian Express in Delhi, when Indira Gandhi declared a state of Emergency, suspending civil liberties and sending the opposition leaders to prison. In the dark days that followed, she personally experienced the full fury of the Emergency—her journalist husband was imprisoned on flimsy charges under the draconian Maintenance of Internal Security Act, and her brother-in-law, Jana Sangh MP Subramanian Swamy, was on the run to evade arrest, while her family faced constant threats and harassment from the security forces. Meanwhile Indira Gandhi, her son Sanjay and his coterie unleashed a reign of terror that saw forced sterilizations, brutal ‘beautification’ drives that left thousands of people homeless overnight, and students and other innocent people jailed without cause or trial, while the press was firmly muzzled under strict censorship rules. This eyewitness account of the Emergency vividly recreates the drama, the horror, as well as the heroism of a few, during those nineteen months, forty years ago, when Indian democracy was derailed.

Power Wars Inside Obama's Post-9/11 Presidency by Charlie Savage

In Power Wars, Charlie Savage looks inside the Obama administration's national security legal and policy team in a way that no one has before. Based on exclusive interviews with more than 150 current and former officials and access to previously unreported documents, he lays bare their internal deliberations, including emotional debates over the fates of detainees held on torture-tainted evidence and acts of war that lacked congressional authorization. He tells the inside stories of how Obama came to order the killing of an American citizen, preside over an unprecedented crackdown on leaks, and keep a then-secret National Security Agency program that collected records of every American's phone calls.

January 2016 Edition

SPOTLIGHT: INSIGHT

SOURCE: OIL - Offshore 2020 Report 2015: The New Normal

January 2016 Edition

S P O T L I G H T: I N S I G H T

STATEMENTS BY THE HONOURABLE PREMIER AND MINISTER OF FINANCE

DR. THE HONOURABLE D. ORLANDO SMITH, OBE

ON FINANCIAL SERVICES DURING THE FOURTH SITTING OF THE FIRST SESSION OF THE THIRD HOUSE OF ASSEMBLY OF THE VIRGIN ISLANDS MONDAY, 2ND NOVEMBER, 2015 • 10:00 A.M.

BENEFICIAL OWNERSHIP OF COMPANIES

adame Speaker, at this time, I would like to update this Honourable House on where we are with the issue of transparency as this relates to Beneficial Ownership of Companies. The British Virgin Islands’ financial services industry has long enjoyed a reputation of being a pre-eminent financial services jurisdiction; offering a myriad of corporate and other structures; but we are particularly best in class for our company incorporation regime. As such, we have built a solid industry which helps to facilitate global trade and international capital flows. Our success is underpinned by a strong regulatory and compliance regime that meets global standards and aims to protect the jurisdiction and the global community from persons who may seek to abuse our business structures. To this end, as a jurisdiction, we have always, through the continual review and reform of the appropriate legislative and administrative frameworks, strived to ensure that our regime is fit for purpose, internationally compliant, and can serve the legitimate business needs of our industry’s clientele. Indeed I am pleased that this House over the years has adopted a non- partisan approach to legislative matters involving this industry to ensure just that.

and guard against activities considered inimical to the financial services sector and the reputation of the Territory. However, Madam Speaker, as members are well aware, over these last few years, the BVI’s industry has come under intense scrutiny and pressure from the United Kingdom, G7, OECD and other international bodies, -- each with a strong focus on corporate transparency regarding beneficial ownership. Let me add some context to the issue: In Spring 2013 Prime Minister David Cameron wrote to the leaders of the Overseas Territories, indicating the UK’s government intentions that the Overseas Territories (OTs) and Crown Dependencies (CDs) along with the UK should establish central registries of the beneficial owners of companies and that these registries should be made publicly available.

We have also long given due regard to the developing global trends which impact or have the potential to impact the Territory’s financial services sector including the current global issues related to transparency.

The Overseas Territories collectively agreed to support the UK’s G8 Agenda on transparency and committed to produce action plans on beneficial ownership. However, the consensus amongst the OTs and the CDs of the UK was that, further consultation and consequential discussions must be had before a final decision could be reached on the matter.

This is why successive Government administrations in this Territory, including my present Government, have over the years continuously strengthened our law enforcement, international cooperation and, most recently, effective exchange of information in the areas of tax, to keep in tune with developments

Madam Speaker, I previously informed this Honourable House that in July 2013, the Territory issued an action plan to prevent the

January 2016 Edition

misuse of legal persons. Among other things, the plan committed the BVI to review its legislation and systems, in consultation with its stakeholders with a view to full compliance with Financial Action Task Force (FATF) recommendations (24 and 25) on the beneficial ownership of legal persons. Furthermore, with regard to the issue of a central registry, after a full consultation with the industry on whether the BVI should establish a central registry to hold beneficial ownership information; I laid in this Honourable House a report from that consultation which showed that our industry and other stakeholders were not in favour of a public central register. The industry maintained a high confidence in the jurisdiction’s existing beneficial ownership regime. The findings also found that our system achieves the same outcomes as a central register, using an equally effective mechanism – our corporate services provider regulatory regime. At that time we concluded that our current regime — subject to some modifications — provides an effective mechanism which complies with the standard on beneficial ownership information. All of the other OTs made similar conclusions and in the lead up to, as well as subsequent to our Joint Ministerial Council meeting with the UK Government in 2014 we reiterated our position that we are not in favour of public central registries. Let me point out here, that while the UK Government has opted for a public central register which will make the ownership of companies available centrally to the public at large, this approach has not been widely adopted internationally. It should be noted; however, that the UK Government acknowledges that similarly effective systems could be utilised. Coming out of Joint Ministerial Council ( JMC) meeting 2014, however, the Territories and the UK did commit to continue to work together in raising international standards to tackle money laundering, tax evasion, illicit finance and corruption, agreeing to continue discussing beneficial ownership within the framework of implementing the G20 High-Level Principles on Beneficial Ownership Transparency. This would require jurisdictions to have either central registers or equivalent mechanisms to ensure timely access by law enforcement and tax authorities. Madam Speaker, we all know that BVI has always had a good history of being a compliant and cooperative jurisdiction. Any recommendations that arose from international assessments, evaluations and reviews were always considered and implemented, as appropriate. In fact, we have always kept pace with new and evolving standards, thereby ensuring that we have effective regimes, be it for regulatory purposes, for transparency or for facilitating international cooperation. My Government continues to recognise the evolving international standards of transparency as promoted by the FATF and the OECD, as well as the aims of the Government of the United Kingdom. So Madam Speaker, over the past year and more we have been working internally through an ad-hoc Committee which I Chair, to determine how we will improve transparency of our regime. We have also engaged our local and international partners to help determine how we will further develop our regime to become complaint with international standards. At the same time, the Financial Services Commission, as the competent authority for BVI regulatory standards has also promulgated its proposals for compliance with the international standards. I am pleased to inform this Honourable House that we have agreed on a policy direction which will: strengthen the existing Corporate Service Provider (CSP) model to meet

the revised FATF standards with regard to beneficial ownership and address any weakness in the system; and, Increase the speed of access to beneficial ownership information by competent authorities. In another statement I will elaborate on and introduce the regulatory/legal changes to our regime to give this policy direction effect; by enhancing the AML/CFT regulatory regime. But Madam Speaker, we have been busy on other fronts. The issues of beneficial ownership, transparency and AML are inextricably related. Indeed transparency of beneficial ownership is critical to deterring criminality; as well as investigating and co-operating with law enforcement and other competent authorities. So, we are well on our way to completing our National Risk Assessment to identify and implement measures to strengthen our anti-money laundering and counter terrorist financing regime. The UK Government and many other countries are moving in this direction, as well. In fact, just recently, in October, the UK launched its first money laundering and terrorist financing national risk assessment to identify, understand and assess the risks faced by the UK. It means that we all understand how money laundering and terrorist financing has the potential to threaten the integrity and undermine the stability of our financial markets and institutions. Madame Speaker, our Financial Services Commission has been also doing its part to seek new ways of improving regulatory oversight and monitoring of Registered Agents. In supporting greater transparency, we have been in consultation with industry partners regarding effective and efficient ways of filing of registers of directors in the Registry of Corporate Affairs. Madame Speaker, the crux of the beneficial ownership issue is to ensure that we know who beneficially own BVI companies and to have the ability to share that information with competent authorities and law enforcement in a very timely manner when necessary. We are well aware that the G20 principles on beneficial ownership accommodate different ways of delivering an effective system in this regard. We intend to build upon our current system to ensure that it is fully responsive and efficient to comply with the international standards. Since last JMC, Madam Speaker, we have been engaged with Her Majesty's Government very constructively on this issue and we continue to do so. Moreover, the OTs are collectively engaged on the UK’s transparency agenda. In a few weeks, I and other leaders will meet with the UK Government Ministers and officials at the JMC meeting. We will once again take the opportunity to update officials on what we have been doing to adopt an approach that is effective in the BVI context; but which is compliant and satisfies the objectives of the standards. I can say unequivocally that the BVI will continue to improve our regime to meet the international standards. We have always done so, as sovereignty over our fiscal affairs including financial services from its inception have remained within the purview of the Government of the Virgin Islands. We will continue to monitor the evolution of global standards and best practices and sustain our engagement with the industry to ensure that the BVI remains a pioneering, vibrant and competitive financial jurisdiction for global business. Thank you, Madam Speaker. -BB January 2016 Edition

AMENDMENTS TO THE ANTI-MONEY LAUNDERING REGULATIONS AND ANTIMONEY LAUNDERING AND TERRORIST FINANCING CODE OF PRACTICE

adam Speaker, with your kind permission, I beg to make the following statement with regard to the amendments to the Anti-money Laundering Regulations and Anti- money Laundering and Terrorist Financing Code of Practice that have recently been approved.

intermediary and the service provider in relation to the collection and maintenance of customer information, are clearly defined.

Madam Speaker, the Virgin Islands prides itself on adhering to international standards and takes very seriously its responsibility in the fight against money laundering, terrorist financing and proliferation financing.

To ensure that there is a base standard for these agreements the Antimoney Laundering and Terrorist Financing Code of Practice has also been amended to provide guidance on what, at minimum, these agreements should contain.

The international standard on transparency of customer relationships, including those involving legal persons and legal arrangements, is the Financial Action Task Force (FATF) Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation. These FATF Standards outline the globally accepted requirements for the type of information that should be maintained by and within a country in order to determine true ownership of such entities and arrangements. Madam Speaker, the Virgin Islands has always strived to meet FATF standards, and in fact was among the top countries in to world to do so, as evidenced by the results of our 2008 Mutual Evaluation.

Additionally, the Regulations require service providers to have written agreements with these third parties outlining the responsibilities of each in that regard.

Madam Speaker, in order to ensure that third parties meet their obligations with respect to the collection and verification of customer information once these agreements are signed, the Regulations now put an obligation on local service providers to test their relationships with these third parties to ensure that all relevant information is in fact being maintained in adherence to the terms and conditions of their agreements, and can be provided upon request, without delay. Further guidance on the conduct of such testing is provided for in the Code of Practice.

Since that time, however, the standards have changed, and like other jurisdictions around the world, we have to change and adapt in an effort to ensure that we continue to comply with these global standards, and prevent as best we can, misuse of our financial services products, including corporate vehicles and trusts, for the purposes of ML/TF/PF and other tax related crimes.

Madam Speaker, having regard for the large number of entities that would be subject to these requirements a twelve month compliance period has been provided.

Madam Speaker, I am pleased to say that after months of consultation and review, amendments to the Anti-money Laundering Regulations were approved by my Cabinet on 22nd October.

While my Government recognises that for some of our larger service providers collecting all required information by the end of this compliance period may prove challenging, I encourage all service providers to try their utmost to comply with the timeline provided.

These Regulations have been issued primarily to address the matter of local service providersâ&#x20AC;&#x2122; relationships with third parties and the collection and verification of customer due diligence information, including beneficial ownership information. The Regulations bring the Territory in line with the FATF standards by outlining who may qualify to act as a third party introducer, and ensuring that, where any of our service providers rely on such an intermediary to facilitate its business relationships, the responsibilities of both the 74

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This will allow local service providers time to ensure that all of the relevant information now required to be maintained within the Territory is collected and held for each individual company they represent.

Where service providers are facing difficulties in meeting the compliance date, provision has been made to allow for an extension of time to be granted. Service providers will, however, have to display that they have made sufficient progress in collecting the required information to warrant an extension. The circumstances under which an extension may be granted are outlined in the Schedule to the Regulations and call for service providers to obtain

information on at least fifty percent of their clients within seven months of the Regulations coming into force, or on seventy-five percent of their clients within ten months of the Regulations coming into force. Madam Speaker, it is my Government’s intention to bring the Regulations into force on 1st January 2016, at which time the Code of Practice will also be brought into force. I, therefore, ask the industry’s ongoing cooperation in meeting the terms of these legislative measures to ensure that the Territory remains compliant with global international standards. Such compliance will continue to signal the Virgin Islands’ commitment to the fight against money laundering, terrorist financing and proliferation financing, and will help to underscore the high level of transparency that the Territory has always, and continues to exhibit in the conduct of its financial services affairs. Finally Madam Speaker, amendments of this nature can be challenging and time consuming, as every effort must be made to ensure a proper balance is struck between gaining compliance with the standards and the realities of our existing business environment. It would, therefore, be remiss of me not to say thank you to the members of the private sector who contributed to the development of these legislative amendments, either through their service on the Joint Anti-money Laundering and Terrorist Financing Advisory Committee, or by way of independent submissions on the matter. The cooperation between the private sector and the Government in finalising these amendments speaks to the successful public-private partnership that has served this industry so well over the years. I believe that the current amendments go a long way in satisfying both the industry and the Government’s concerns on the issue of third party relationships and the collection and maintenance of customer due diligence and beneficial ownership information and I look forward to their smooth and swift implementation.

THE AMENDMENTS TO THE BVI BUSINESS COMPANIES ACT, 2004

adam Speaker, with your kind permission, I will now make a brief statement regarding the amendments to the BVI Business Companies Act, 2004. Later today, I will introduce the BVI Business Companies (Amendment) Act, 2015.

This amendment is the result of months of consultation between my Government and industry stakeholders; a process which garnered substantial input from industry practitioners, as well as the Financial Services Commission and the Company Law Review Advisory Committee. Madam Speaker, my Government has worked earnestly to strike a balance between adhering to international standards and supporting the needs of an industry that is so vital to our economy. This amendment, I believe, has to a large extent, accomplished that. While the Bill amends various sections of the BVIBC Act, there are three major issues that it addresses. The first is the maintenance of records and underlying documentation, which has been transferred from the Mutual Legal Assistance (Tax Matters) Act, 2003. The second is the mandatory requirement to file a register of directors with the Companies Registry, and the third, and perhaps most carefully reviewed, is the optional filing of a company’s register of members. I must note however, that information on both registers will only be made available to competent authorities in the execution of their duties as regulators, tax administrators or law enforcement agencies, or to other persons by Order of the Court. Madam Speaker, it is no secret that the Overseas Territories are facing increased pressure to address the issue of access to beneficial ownership information. The current Financial Action Task Force Standards, which every country must adhere to, provide different mechanisms for how this information may be maintained, and my Government has taken painstaking steps to ensure that the amendments to the BVIBC Act meet these standards, without placing our financial services industry in a disadvantageous position against other international finance centres. Madam Speaker, whilst more details of the amendments will be provided when I present the Bill’s Objects and Reasons, I wish to reassure industry practitioners and their clients that this Government is focused on finding solutions that will not only meet international standards, but will help to safeguard the Territory’s business and maintain its competitive advantage. It is my hope that the collaborative effort my Government has enjoyed with the local industry over the years will continue to allow us to do so and I thank them for their ongoing support. Thank you Madam Speaker. -BB

I thank you Madam Speaker. -BB January 2016 Edition

S P O T L I G H T: I N S I G H T

SAVING THE DREAM FOR ALL Remarks by

Robert A. Mathavious

Managing Director/CEO BVI Financial Services Commission Meet the Regulator Forum 19th November 2015 Eileene L. Parsons Auditorium, HLSCC

adies and gentlemen, welcome to our 2nd MTR forum for 2015. As always, we at the Commission are grateful for the opportunity and privilege of engaging and having meaningful dialogue with you on matters of significant importance to the continual well- being of the BVI financial services industry. I have a confession to make. When I was preparing my remarks for this forum, I was tempted to re-read my address, “The Urgency of Now”, presented at the May 2014 MTR forum. I was tempted to re-read it, not because I thought that it fell on deaf ears, but because many, if not all, of the issues and solutions I articulated then are still relevant and urgent today. But I won’t re-read that speech today. Instead, I would encourage you to do so as a reminder of what we need to do now: • Of the urgency we face in moving the BVI financial services industry forward on a more sustainable path towards prosperity and growth; • Of the need to improve transparency while protecting against undue invasions of privacy; • Of the need to refresh, revitalise and reengineer the BVI financial services model to ensure its compliance and compatibility with the heightened international standards against which our financial services industry’s modalities, practices, protocols and programmes will be measured in 2017; and • Of the need to demonstrate through effective implementation of those standards that the BVI is a credible, cooperative and compliant jurisdiction, capable of responding to legitimate requests for exchange of information in criminal law enforcement, taxation and regulatory matters. I also urge you to re-read the speech to remind yourselves of how high the risks are of taking too little action – and that the time for action is now. I know that our industry has withstood a hostile geopolitical international environment over many years. It has faced up well to challenges and pressures both external and internal. But the past is only a guide to the future, not a guarantee. When I think about the issues that must be addressed urgently today if we are to continue to thrive and flourish as an international financial centre, I find myself increasingly reminded of a poem called “The Embattled Dream” by the African-American poet Langston Hughes.

January 2016 Edition

There is a dream in the land With its back against the wall By muddled names and strange Sometimes the dream is called. There are those who claim This dream for theirs alone— A sin for which we know They must atone. Unless shared in common Like sunlight and like air, The dream will die for lack Of substance anywhere. The dream knows no frontier or tongue, The dream, no class or race. The dream cannot be kept secure In any one locked place. This dream today embattled, With its back against the wall— To save the dream for one It must be saved for all. The BVI’s dream of being a resilient and vibrant top-tier international financial services centre is one we all share. Yes today, is it embattled and at risk more than ever. Urgent action is needed not just to retool the model but to ensure that the BVI model evolves, adapts and adjusts to capture new opportunities,

so that the dream can continue. This action must be taken not just by a few of us but by us all. If we do not act together, we will suffer together. As Langston Hughes says, “To save the dream for one / It must be saved for all.” At its most obvious, the urgency of now is to ensure both individually and collectively that the BVI remains a compliant, transparent, cooperative, competitive, vibrant and clean financial services centre. Inaction now, must be considered an unforgiveable gamble that imperils the BVI’s dream and puts at risk the economic fortunes of yourself, your fellow industry practitioners and the territory as a whole. Today as always, the challenge we face both on a firm-by-firm basis and as a jurisdiction is to assess the issues and consider the appropriateness of our response – to prepare thoroughly. We cannot allow the greatest threat to our long-term success to be our own failure to prepare properly for the future. If we prepare as we should, we can ensure that while it may be bruised and battered, the dream is kept alive. So each of us must look into the mirror and ask ourselves, “What am I willing to do to build a stronger, more resilient and more vibrant industry, an industry better prepared to compete, to prosper and to prevail in the years ahead?” As a first step, we must recognise that there are still fractures in the strong foundation we have built over the years. If we do not attend to these with immediate dispatch and with all our energies, they will reverse the dramatic progress we have made as a top international financial centre. Now, more than ever, we are all required to act decisively and pragmatically to keep moving the BVI financial services industry forward. And we all share the responsibility of ensuring that in this less hospitable environment for international financial centres, the future of our territory as an international financial centre is not threatened or placed at risk. Navigating the constantly changing and evolving regulatory landscape, continues to be an arduous challenge for governments, industry practitioners and regulators around the world. Here in the BVI, we have not been immune from the challenges, nor can we expect to be. On the contrary, we can expect the constant scrutiny of, and pressures on, the activities of international financial centres such as the BVI to get more intense in the years ahead. The regulatory environment will become yet more demanding in terms of the initiatives we

will face, the peer review evaluations we will have to endure and the details of what is expected of us. One aspect of the BVI dream has long been to become a smart financial services centre: • A jurisdiction that marries compliance with international standards and innovation; • One which utilises business-friendly industry legislation and harnesses information technology to increase efficiency, effectiveness, productivity and performance; • Which subscribes to high standards and is committed to doing what is right, and doing so transparently and responsibly; and • Which will not provide a safe harbour for the ethically challenged. The Commission remains fully committed to playing its part in building this dream and in consolidating the BVI as a stable, credible and trustworthy financial centre for transacting legitimate cross-border financial services business. We believe that effective regulation attracts the type of business we wish to see conducted from our shores. So as a regulator, we seek to: • Apply sound but purposeful regulation which is sensitive and appropriate to the associated risks; • Be aware of and apply the best international standards in a manner appropriate to the circumstances of the domestic market; • Calibrate responses, interventions and enforcement according to the risk profile, culture and impact of individual licensees; and • Focus more on outcomes than on prescriptive checklists, implementing our supervisory and regulatory modalities in a risk-based way that minimises onerous compliance burdens. The Commission also believes that how the jurisdiction navigates the challenging international financial services landscape depends on us all. We believe that we achieve more, working collaboratively and cooperatively together than by working in isolation on our own or in silos. That each one of us in the industry shares a responsibility for preserving and safeguarding the competitiveness, resilience, integrity and reputation of the financial services sector upon which the fortunes of the BVI depend. I am concerned that, in the face of ongoing global rebalancing initiatives, if we are not collaborative, the BVI risks becoming collateral damage. Unless we have a joined up, “all hands on deck” approach, we will be unable to adapt, evolve and remain a relevant global player in cross-border

financial services. So we must find the courage to do what is right, not what is expedient or what we have always done. The Commission seeks to play its part by pursuing a grown-up and facilitative regulatory approach. In the future, we will continue to be relatively conservative, tending to be early rather than late adopters of new and relevant standards. And we will continue to place a great deal of importance on international standards because these have become the language of jurisdictions, regulators, the standard-setting supranatural bodies and organisations and the international media. If the BVI is to continue to be a relevant player in the international financial services industry, we must all constantly be alert to risks and be responsive to the continuing external expectations as regards reputation and regulatory responsibility. Our jurisdiction will have to learn to adapt and evolve better in line with the latest market developments. I am fully aware that there exists among your ranks a considerable amount of jitteriness and anxiety about the future. You are worried about the resilience of the industry in the face of this incessant and relentless wave of external pressure. Some of you feel we are moving too fast to comply with international demands. I wish to reassure you that the ability to deal successfully with changing, sometimes adverse circumstances is part and parcel of the resilience and nimbleness which are the very DNA of international financial centres. We must remain alive and alert to the impact of the reforms – but we also cannot be on the wrong side of the argument around standards of control and transparency. In this respect, maintaining and safeguarding our hard won, good reputation is of paramount importance. Without it, we cannot begin to gain positive traction with, and endorsement from, the international regulatory and law enforcement authorities, the supranatural standards-setting bodies, the risk management departments of international financial institutions and even the corridors of power in Whitehall and the like. This good reputation should not be tainted by lapses and failure to prevent, deter and properly assess risks, or by indifference, inertia, ignorance or ineptitude on the part of anyone associated with the BVI financial services industry. As an industry, we cannot merely treat symptoms without identifying and undertaking the pathology. We must understand, appreciate January 2016 Edition

and come to grips with the root causes of whatever assails us. We must recognise the concerns of the so-called “enemies of offshore” and deal with them responsibly and effectively. While many individual firms have taken major steps to address issues of governance, controls, transparency and the intermittent abuse of our corporate structures, we cannot pretend these problems have been universally addressed. Those that continue to leave them unaddressed are storing up trouble not only for themselves but for the rest. This is not just dangerous but selfish. As threats and technologies evolve, policy makers, industry practitioners, law enforcement officers and regulators here in the BVI must always be agile to confront them. Our regulated community must consistently enhance risk governance systems to facilitate effective management and mitigation of risks. If this does not happen, individual businesses will suffer first, followed by our jurisdiction as a whole. So you must play your part in ensuring that government, industry, law enforcement and the regulator act in concert to do all that is needed. When we cooperate, every individual firm benefits. “To save the dream for one / It must be saved for all”. The National Risk Assessment (NRA) exercise that is currently being undertaken to prepare the jurisdiction for its 2017 mutual evaluation by the CFATF has entailed a comprehensive review of our regulation, law enforcement, AML/CFT, taxation and international cooperation laws, rules, codes, protocols, practices and modalities. This massive and all-embracing exercise has been done to strengthen our regime by identifying gaps, challenges and risks that could affect the effective implementation of the relevant international standards. The government is studying the NRA’s recommendations to ensure greater compliance with standards and improved and more efficient and effective mechanisms for international cooperation and exchange of information. Moving forward, the agencies involved in the NRA will continue working together to address all recommendations comprehensively. Yet our efforts not just to refresh the BVI model but to reform it where needed will be rendered ineffective if industry practitioners do not make the same effort and also undertake to address identified shortcomings. The NRA may seem onerous but it is no more than sound practice to review a regulatory regime from time to time, particularly where it has been subject to rapid change. It is only common sense to review whether regulatory and supervisory processes are rigorous, transparent, fair and consistent. So the NRA exercise has been an opportunity to take stock of our regulatory framework – to step back and review where we have gotten to. It helps us make sure that the reforms we have already introduced and those soon to be introduced meet the intended objectives, are efficient and do not create misplaced incentives or large compliance costs that outweigh their broader benefits. The outcome should be a more sound, stable, vibrant, dynamic, efficient, compliant and resilient industry in the BVI. The Commission will have a role to play here, of course. We constantly seek to facilitate improvements in conduct and culture in the firms we regulate through the supervisory and enforcement tools we use. We strive to act when there is good reason, and to do so in a manner proportional to the risk or harm that we believe may arise as a result of – or lack of – a practice, behaviour or governance issue. Yet there are limits to what a regulator can do directly. Much of our success depends on getting someone else – you – to take action. To a systemic extent, the future of the industry lies in your hands and you have a major role to play in ensuring that the industry – both you and the others around 78

January 2016 Edition

you – conducts itself properly. As regulators, we prefer to spend our time at the end of the spectrum, where we enjoy willing compliance and just have to describe and explain the outcomes we want. When we are forced to spend a disproportionate amount of our time at the other end of the spectrum in enforcement, something is wrong. So we expect to see evidence of a framework of discipline, prudent management and strong governance. This is fundamental good practice. This means that if we ask you for something or we make enquiries, there is usually a very good reason for our doing so – a harm to be avoided or mitigated, or an outcome that can be improved. I hope you will accept that we are acting in good faith and for good reason. Time and time again, you have heard me say that no jurisdiction can win business or friends by just talking about the excellence of its rules, laws, codes or regulations. If practitioners do not actually obey the rules – if even a few don’t comply – the welfare and reputation of us all are threatened. I hope this helps you understand why the manner in which you respond to our compliance concerns may influence our enforcement response. It must be understood that changes in rhetoric are insufficient – specifics are what matter to us. We need to see demonstrated change in the underlying business practices, structures, systems and controls to support what management says. If we feel you are making genuine, good faith attempts to reach desired outcomes, we will be supportive and pragmatic in our response. Finally, let me turn to the challenging issue of new technologies. As industry practitioners, government and regulator, we need to be proactive in taking preventative measures to mitigate technological risks. We want to be sure that technology continues to support, power and facilitate our financial sector’s development and the efficiency of our service offering. Fundamentally, technology is an enabler of financial services – a source of competitive advantage. But it can also be a double-edged sword if not managed well. As use of technology grows, so too have the risks associated with it. All the evidence suggests that it is not a question of if, but rather when you will be exposed to some form of cyber-attack – whether fraud, virus or malware from, say, staff or a competitor, and whether deliberately or through inadvertence. Just because technology presents risks, does not mean that we should limit its use. That would be impractical and self-defeating. Technology can be both a source of competitive advantage and an agent for efficiency, effectiveness and productivity, enabling real-time access to pertinent information. As with regulatory and compliance risks, mitigating our vulnerability to cyber-attacks requires joined-up action. Private sector, government and regulator must all take cyber security seriously and implement countermeasures and protocols to preserve the confidentiality and integrity of sensitive data. We must conduct regular vulnerability assessments and penetration tests to evaluate the robustness of our cyber defenses. I know this sounds daunting but its importance cannot be overstated. That is why I am delighted to have Mr. John Trundle of Euroclear UK & Ireland here with us today to talk about the constantly evolving cybersecurity risks that we face. I trust you will find his presentation of tremendous help as you prepare and plan to tackle this ever-present threat in the months ahead. Thank you. -BB

TOURISM AND REAL ESTATE

January 2016 Edition

T E N Y E A R S O F R E A L E S TAT E DEVELOPMENT IN THE BVI

2006 - 2016

B Y E D WA R D C H I L D S

t seems hard to believe that it is ten years since the first issue of BVI Business Guide appeared in 2006. Congratulations to Oyster Communications on their ten year anniversary, not only for maintaining an excellent publication, but for the continued improvements that each edition brings. In writing the real

estate article each year, I have been aware of how tumultuous the market has been, from the first article for the 2009 edition, written just as Lehman Brothers went under in September 2008 and the economy crashed in reaction to the sub-prime mortgage debacle, through the depths of the recession in 2011 and 2012 before finally emerging with a shaky recovery in 2013 and 2014. Understanding the cyclical nature of real estate in the BVI helps to give a better understanding of what the future may bring to this industry. As we look back over the last ten years from 2006 to 2016, we can see how the market has changed. 2006 was probably, in hind sight, the height of the market, when developers and purchasers alike could not get enough real estate in the Caribbean. While 2007 is often seen as the peak, by mid year, the first cracks had appeared in the US economy, with concerns over sub-prime mortgages and derivatives. It took a further twelve months for the full impact to take effect, resulting in the demise of Lehman Brothers and KSF (Kaupthing Singer & Friedlander), two banks which were active in the Caribbean region, leading to devastating consequences and stalled real estate development in many islands.

January 2016 Edition

In the BVI, the sales statistics from the period 2005 to 2008 show a rapidly expanding market, reflecting the willingness of developers and purchasers alike to become invested in real estate developments. In contrast, real estate sales in 2013 and 2014 have been more static as the market recovers.

TOTAL VOLUME ($M) OF HOME SALES IN THE BVI: 2003-2015 (Sales over %500,000)

TOTAL SALES VOLUME ($M)

$50.0

Graph 1 shows the total volume of villa sales in the BVI over $500,000 from 2003 to 2014

$46.4

$45.0 $40.0 $35.0

$32.6

$31.4

$30.0

$27.5

$25.0 $20.0

$18.4 $16.5

$15.0 $10.0 $5.0 $0.0

$16.1

$14.6

$12.3

$11.6

$10.0

$8.9

$7.0

$2.6

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013 2014

Jan-Jun Jan-Jun 2014 2015

January 2016 Edition

The dip in sales in 2006 cannot be readily explained, except that stamp duty rates for Non-Belongers changed from 8% to 12% in 2005, possibly affecting the volume of sales in 2006, as purchasers took time to adapt to the new rate. That aside, the annual sales of homes over $500,000 in the above table clearly demonstrates an expanding market. Due to the volume of transactions, it was taking the Government over twelve months to process landholding licences, therefore activity in 2008 reflected contracts signed, for the most part, some twelve to eighteen months earlier at the height of the market. Total transaction volume recorded in 2014 is inflated by a single villa sale at $11.0M. The period 2002 – 2007 resulted in some fundamental changes in the traditional real estate market previously established in the BVI, which comprised a mix of land sales and existing home sales, each generally at low volumes. Purchase of land for house construction was considered risky, as cost over runs and frequently poor levels of finish led to unhappy investors frustrated at the whole development process and there were fewer covenanted estate sub-divisions available with paved roads and underground utilities. As a result, overseas purchasers increasingly looked for developed property which could be renovated. As the market expanded in 2003-04, the scarcity of inventory of existing homes on the market saw house prices starting to rise, with purchasers competing for a limited inventory of homes for sale. In contrast, land values were slower to increase, mainly due to the perceived risk of development. At the same time, buoyed by the healthy economy, riding particularly on the success of the financial sector, there was increased demand for real estate from island residents (both Belongers and NonBelongers) as well as overseas investors looking to purchase a home. As house prices started to increase, this market started to look at the availability of land as an alternative and the development of new homes started to increase as a result. New sub-divisions, such as Trunk Bay and Cooten Bay on the north coast of Tortola provided an opportunity to acquire land on covenanted estates, while on older residential estates such as Belmont Estate, Shannon and Romney Park, villa sales predominated as house lots were already sold out. The real estate boom started in 2001 following several years of growth in the stock market, fueled in particular by the dot com boom. As stock markets began to falter in early 2001, investors sought alternative markets and switched to real estate, which at that time was considered under-valued. The baby boomers of the 1950s/60s were coming to an age when their children were finishing education and disposable income was increasing. Banking institutions were quick to jump on the bandwagon and the availability of credit in the market helped push up domestic property values in the United States. European investors were attracted to the Caribbean by strong US Dollar exchange rates. Homeowners, buoyed by increasing first home values and the availability of financing, took advantage of this increase in home equity and looked to purchase a second home. The Caribbean real estate boom had begun. For many Caribbean islands, the benefits of external investment in real estate are obvious. The acquisition of homes or land by foreign investors brings in much needed hard currency, creating tax income for Governments, creating jobs in construction and tourism and adding to the existing number of hotel or rental rooms through the construction of villas and condominiums, which may or may not be part of a resort community. Many successful residential resort developments exist in the Caribbean today based on the sale of real estate to foreign investors. However, the boom period after 2003 led to larger resort development projects with increasingly costly infrastructure

January 2016 Edition

requirements. To off-set the initial up front cost of the infrastructure, developers began to sell off-plan, taking deposits from purchasers before committing to construction. Banks were quite happy with this formula as it was perceived to reduce the otherwise substantial development risk. However, timing in real estate is everything. Many developments became unsustainable after 2007 when market conditions changed and second home buyers from North America completely exited the market. Development projects ground to a halt and Purchasers lost their deposits along with any additional funds that they had committed against construction. Most islands in the Caribbean were affected by failed developments – except the BVI. It has to be said that the BVI’s good fortune in not ending up with failed real estate developments was not entirely by design. The BVI Government of the day was equally keen to encourage the expansion of the tourism industry through the development of resorts as any other. However, the slow pace of Government approvals in the BVI, combined with antipathy from a local population towards major development projects, resulting in social impacts through the importation of labour, meant that many of the proposed projects simply never broke ground – Scrub Island being the exception. The strength of the financial sector in the BVI had created one of the highest per capita incomes by GDP in the Caribbean (behind only Bermuda and Cayman) and unlike many Caribbean Islands which relied primarily on tourism, the BVI had another, more important, source of revenue to shore up Government expenditure. The hunger for development in the BVI was simply not as strong as in other Caribbean islands which had rolled out the red carpet to developers and foreign purchasers alike. For a while, all sectors of the market in the BVI were happy – sellers had a relatively liquid market (except for the time taken to process landholding licences), contractors were kept busy and there were purchasers for all types of property and price ranges. And then came the crash. Skip forward to 2016 and what has changed? It is not enough to simply state that the real estate market is cyclical and we are now on an upward trajectory again as economies recover. The real estate market now operates very differently. Development in residential resort projects has changed substantially as the vulnerability of the pre-sale development model was exposed by the post 2007 economic crisis. It is now virtually impossible for a developer to obtain financing to fund infrastructure for greenfield developments unless through private funding sources. With a number of stalled developments still hanging over the real estate market in the Caribbean, frequently in liquidation or receivership, investors are looking to acquire these existing projects at cents on the dollar with substantial infrastructure in place, rather than risk the up-front costs associated with the development of greenfield sites. Development is now focused on existing projects which are not cash flowing, but where there is potential to renovate without having to develop infrastructure. This model appeals particularly to private equity firms who are willing to invest in the Caribbean where the upside potential of existing projects can be realized more quickly than from greenfield sites. Anguilla has been a particular focus for private equity firms as has Puerto Rico with recently enacted tax legislation attracting substantial US investment. The other significant demand driver that has emerged in the new post-2007 market is the enactment of Citizenship by Investment Programmes (CIP) by independent Caribbean nations such as Dominica, Grenada, St Kitts and Nevis and more recently Antigua. St Lucia, which suffered significantly post 2007 with a number of stalled projects, is now looking seriously at this legislation to kick start development on the island. A CIP offers investors the opportunity to acquire a passport in return for investing in an approved

project. In return, the investor, frequently from the Far East or Middle East, will benefit from visa free travel, normally to Europe and Canada, should that countryâ&#x20AC;&#x2122;s passport so permit. While many Caribbean islands are keen on taking advantage of such programmes, there remains the risk that Europe or Canada will change their immigration laws and require citizens of these countries to obtain visas in order to travel. This will impact the ordinary citizens of these countries as well as those seeking visa free travel. The Canadian Government issued the following advice to citizens of St Kitts and Nevis : November 22, 2014 â&#x20AC;&#x201C; As of 12:00 p.m. EST today, citizens of St. Kitts and Nevis will require a visa to travel to Canada. Canada has implemented the visa requirement on St. Kitts and Nevis due to concerns about the issuance of passports and identity management practices within its Citizenship by Investment program. Canada is acting to protect the safety and security of Canadians and the integrity of our immigration system. The visa requirement will ensure that Canada will be able to properly determine the true identity of St. Kitts and Nevis passport holders and to deny entry to those who would otherwise be inadmissible to Canada. The BVI is not impacted by either of these demand drivers. Private equity firms have yet to consider the BVI as a potential destination for investment due to the time taken to obtain consents and landholding licences compared with other Caribbean islands offering more attractive incentives for development. This is not necessarily a bad position for the BVI, where investment in resort projects in the past has tended to be undertaken by investors with a more vested, long term and sometimes benevolent interest in the Territory and its citizens. Equally, the thought of selling the BVI passport in return for investment in a project is not one that will pass muster in the BVI, not least due to its status as a UK Overseas Territory. What has impacted the BVI, as well as all other countries in the Caribbean, is the perception of risk by foreign investors seeking a home in the sun. Purchasers are now far more aware of the risks associated with investing in projects overseas and are looking for development projects to be significantly advanced in terms of infrastructure before being willing to commit to investment. This, in turn, places a far greater burden of risk on the developer to provide this infrastructure up front without the benefit of pre-sales. It is notable that the three projects progressing in the North Sound area, Oil Nut Bay, Moskito Island and Blunder Bay, all involve the sale of land rather than developed units, although all three developers had the burden of providing significant infrastructure at the front end of the project. Only the condominium development at Nanny Cay on Tortola has involved the development of residential units, although development risk was reduced by developing in phases once commitments were received on new units. With many of the units being sold into the local market, this was an instance where pre-sales were successful.

January 2016 Edition

Perhaps the most significant difference between the real estate market in 2006 and 2016 is the number of properties available for purchase. While we do not have the statistics for properties on the market in the BVI in 2006, as we have noted above, it was very much a vendorâ&#x20AC;&#x2122;s market, with a limited inventory to choose from and a reasonable supply of purchasers seeking an investment.

January 2016 Edition

We now track property listings in the BVI (for properties listed in excess of $500,000) and summarise the statistics as follows.

Since we started collating listing information in 2013, there have been over 200 properties offered for sale each year in the BVI at a price in excess of $500,000. However, sale transactions in 2013 and 2014 average around 21 sales per year for properties in the same price category. There remains a significant imbalance therefore between supply and demand for developed properties in the BVI. Table 1 shows that more than half of these listings are for villas in the $1.0M - $3.0M price category whereas the majority of sales annually are for villas sold for less than $1.0M. Table 1 also indicates that the average listing price has fallen in 2014 and 2015, although not by a significant amount (7% and 2% respectively in 2014 and 2015).

Total Value and Average Value of Listings Over $500,000 Number of homes listed by price range

2013

2014

2015

$0.5M - $1.0M

$1.0M - $3.0M

108

104

115

Over $3.0M

219

206

207

$484,756,999

$410,673,249

$415,091,999

-15.3%

1.1%

$2,213,502

$2,052,835

$2,005,275

-7.3%

-2.3%

Total

Total Value of Listings Total Change on prior year

Average listing price Average listing Change on prior year

Table 2 shows how listing prices have changed between September 2014 and September 2015 categorized as increased, unchanged or reduced. Overall, the listing price for the majority (73%) of listings remained unchanged while the listing price for only 19% were reduced and the listing price for just 8% of properties was increased. The biggest reduction in pricing was in the $3.0M+ category where the listing prices of 36% of the listings were reduced, compared with only 13% of the properties in the $1.0M - $3.0M category. There were a total of 23 new listings by September 2015 with 22 properties being withdrawn from the market in the same period.

Number and Value of Residential Listings Over $500,000 at September 2015 Total

$0.5 - 1.0M

$1.0 - 3.0M

Over $3.0M

Increased

Unchanged

135

Reduced

184

102

207

115

Total listed at Sep 2014 New listings Total listed at Sep 2015

January 2016 Edition

To provide further context to the question of asking price against selling price, we have analysed the sale of villas over $1.0M since 2010 to determine the difference between asking price and eventual sales price. These statistics are contained in Tables 3 and 4 below.

Analysis of Villa Sales By Year > $1.0M (2010-2015) Year

Villa Sales Analysed

Avg Listing Price

Avg Sale Price

Difference

Avg Years on Market

2015*

$6,650,000

$3,398,500

-49%

6.5

2014

$3,053,571

$2,130,536

-30%

2013

$2,697,143

$2,365,321

-12%

2012

$7,001,500

$5,610,000

-20%

2011

$1,646,667

$1,346,250

-18%

2010

$1,646,667

$1,346,250

-18%

Table 3 analyses the villas sales over $1.0M by year. It is hard to draw firm conclusions from such a small data set. However, the data for the years 2010 to 2013 indicate that average marketing times were short, at between two to three years, and that the eventual sale price achieved was 12% to 20% less than the initial listing price. In contrast, sales in years 2014 and 2015 showed a much greater average marketing time of around six years, and a much higher difference of 30% to 49% between the initial listing price and the eventual sale price.

Data includes asset and known share transactions *Year to June 2015

Analysis of Villa Sales on Virgin Gorda and Tortola > $1.0M (2010-2015) Island

Villa Sales Analysed

Avg Listing Price

Avg Sale Price

Difference

Tortola

$3,386,667

$2,273,933

-33%

Virgin Gorda

$4,484,000

$3,739,375

-17%

Data includes asset and known share transactions

The markets in Tortola and Virgin Gorda show slightly different trends. Table 4 compares the average sale price and average listing price of villas in Virgin Gorda and Tortola that have sold since 2010 in the price range above $1.0M. Virgin Gorda has moved considerably ahead of Tortola in terms of average sale price with properties selling, on average, at 64% above prices achieved on Tortola. Similarly, the data indicates that there has been less adjustment in the pricing of properties on Virgin Gorda with final sale prices achieved being approximately 17% less than initial asking price, compared to 33% on Tortola. This indicates either a stronger market or more realistic sellers on Virgin Gorda, or probably a mix of both.

BVI HOME SALES: 2003-2015 (Sales over %500,000) 30

$50.0

NUMBER OF SALES

$40.0 $35.0

$30.0

$25.0 $20.0

$15.0 $10.0

$5.0

0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Number of sales

Jan-Jun Jan-Jun 2014 2015

SALE PRICE ($M)

$45.0

Analysing the villa sales over $500,000 for the first six months of 2015 in the BVI as a whole, there are seven recorded sales, six of which are priced between $500,000 and $1.0M and one over $3.0M as shown on Graph 2 below. This is similar to the number of sales achieved in the same period in 2014 although the total value of all sales transactions in the first half of 2015 fell by 21%, resulting from the greater number of transactions below $1.0M. Property enquiries remain steady but the level of interest has not approached the pre 2007 levels, when it sometimes seemed as if the phone would not stop ringing.

$0.0

Average home price

January 2016 Edition

With the 2015/16 high season upon us, there is certainly expectation that the level of property enquiries will increase. North Sound remains active with construction continuing at Oil Nut Bay and Moskito Island and sales about to start at Blunder Bay. On Tortola, Nanny Cay is launching its next phase of development with a new marina basin and further town home development in the wake of the successful sale of the first 32 units. Scrub Island is finally out of receivership and looking forward to reviving the development and rekindling interest in their condominium and town home units. The Caribbean will continue to be heavily influenced by the health of North American and European economies. The decision by the Federal Reserve on when to increase interest rates in the United States will certainly play its part in the continued recovery of the real estate market. Recent data showing a slowdown in US growth in the third quarter of 2015 led to the Fed announcing that interest rates would for now remain static, unchanged as they have been since December 2008. Citing continued moderate economic growth, concerns about external influences (the stock market meltdown in China being one) and the home job market, an interest rate rise seems unlikely, at least until 2016.

January 2016 Edition

For the BVI, the tourism industry and resort sector will continue to play an ever important role in shaping the economy as the financial services industry remains under threat from external regulation. The Government is targeting investment and diversification in the economy, keen to start new areas of growth now to stabilize the economy rather than waiting until it is too late. The real estate industry contributes positively to the economy, as external investment in the purchase of villas or land contributes 12% stamp duty from each sale. However, restrictions on foreign investment through landholding licences conditions, combined with uncertainly regarding the ability of overseas investors to rent villas, has contributed to the property market not rebounding as quickly as it might with a corresponding positive cash flow to the Governmentâ&#x20AC;&#x2122;s coffers. For the real estate market to expand, sellers need to price their property in line with the market expectations and the restrictions placed by the Government on the acquisition of property by overseas investors and the ability to rent need to be reviewed. Without either, the recovery of the real estate market will remain steady, but slow. -BB

January 2016 Edition

T O U R I S M A N D R E A L E S TAT E

A sense of place®

t 34, Sonia Cheng is CEO of the Rosewood Hotel Group and the millennial face of a new generation of leading global hoteliers. Under her steady watch, Rosewood plans to add 32 properties globally by 2020. With 55 properties in 18 countries across multiple brands, the company is pursuing an aggressive expansion strategy. “Although our legacy will always remain A Sense of Place, we’re not standing still – that’s not part of our “DNA!” In late November, Business BVI sat down with Sonia for a wide-ranging interview on her vision for what is one of the world’s ultra –luxury hospitality brands and reaching “affluential explorers.”

The interview was conducted by Russell Harrigan, Managing Editor

January 2016 Edition

ROSE WOOD BEI JING LOBBY

RICHARD DAVID STORY – EDITOR IN CHIEF AT DEPARTURES, DESCRIBED THE ROSEWOOD BEIJING AS PERHAPS THE MOST SOPHISTICATED NEW HOTEL BUILT IN THE CITY, WHERE A LOT OF NEW HOTELS ARE GOING UP. HOW DOES THIS PROPERTY REFLECT YOUR VISION FOR THE FUTURE OF ROSEWOOD? AS YOUR FIRST ROSEWOOD, WAS IT A DIFFICULT PROJECT TO GET JUST RIGHT? Yes, I believe Rosewood Beijing ended up beautifully expressing the Rosewood Hotels & Resorts’ core concept -- A Sense of Place – right through from its architectural and interior design and the art pieces that it features, to its services, spa and dining. The whole idea of Rosewood is to create a journey for guests and to be a portal for them to experience and explore the destination. You can sense that right from your arrival at Rosewood Beijing – the journey begins by passing between two “Sons of Dragon” statues at the hotel entrance, then leads up to a courtyard filled with foliage, right in the middle of this urban landscape. It’s very unexpected and sets the stage for the rest of the experience. It’s an impressive introduction, yet also I think very warm and gracious and welcoming. The hotel has definitely become the “shop window” for Rosewood in Asia and points the direction for subsequent Rosewood hotels and resorts we’ll be opening worldwide as part of a very active expansion programme. Beijing is a fascinating city full of histories and stories to tell. We were lucky to be able to work with some of the best consultants to create our first property in Asia, people who really embraced what we were trying to do. They brought a contemporary and innovative approach to the project, combined with sensitivity and good taste. Rosewood Beijing was five

years in the making and in the process we encountered challenges but we were determined to cut through them and now we can be proud of a very beautiful and timeless Rosewood hotel.

HOSPITALITY IS CLEARLY IN YOUR DNA AND THAT OF YOUR HUSBAND PAULO. RICHARD DAVID STORY REFERRED TO YOU AND PAULO AS ‘THE FUTURE OF A SOPHISTICATED GLOBAL OUTLOOK.” A) WHAT ARE SOME OF THE KEY GLOBAL TRENDS DRIVING ROSEWOOD’S GROWTH IN ASIA AND YOUR POSITIONING OF THE BRAND GLOBALLY? B) WHAT’S THE INTERPLAY OF HAVING A MARITAL PARTNER WHO IS IN THE SAME BUSINESS SPACE? IS IT ONE OF RE-ENFORCEMENT AND A SOURCE OF INSTANT FEEDBACK FOR NEW IDEAS? At Rosewood we focus on the “next wave” of travelers – who in fact are shaping the ultra-luxury hospitality industry right now – we call them “affluential explorers.” They want personal connections, authenticity, and travel that is experiential, not superficial. They expect luxury, but they’re also looking for something deeper and more meaningful. My husband has a wide range of interests and as a wine importer, successful restaurateur and art lover, many of his passions are related to my own -- he often gives me an alternative perspective that I haven’t thought of before. Generally though, we both work closely with our respective teams at work – they already give each of us plenty of input and food for thought! But one thing that never changes is that my husband and I adore observing and trying out new dining concepts and venues when we travel and that’s a never-ending source of comparing notes – and often disagreeing! January 2016 Edition

UNDOUBTEDLY YOU ARE THE FACE OF A NEW GENERATION OF LEADING GLOBAL HOTELIERS. HOW ARE YOU DEFINING THE GENERATION’S CONTRIBUTION TO HOSPITALITY AS A CRAFT? I believe that given the changing demographic of the luxury traveler, my age and experience puts me in a very fortunate place and perspective to lead the new Rosewood brand. The luxury travel market has grown significantly in the last few years, and we’re seeing that people of all ages -- from millennials to baby boomers -- are choosing to spend their disposable incomes on more meaningful luxury travel experiences. I’m squarely in the midst of that mindset! And I want to work with, mentor and give opportunities to people who share the same outlook. The world of hospitality is definitely changing and evolving and becoming more layered. It’s exciting to be a part of helping to shape experiences for world travelers.

I READ SOMEWHERE THAT YOU SAID THE LEAD QUALITY YOU LEARNT FROM YOUR GRANDFATHER IS HUMILITY, WHICH REALLY KEEPS YOU GROUNDED AND OPENED YOUR EYES TO HOW THE WORLD IS CHANGING. AS A MILLENNIAL, WHAT DO YOU SEE AS SOME OF THE DEFINING CHANGES TAKING PLACE GLOBALLY? Everyone would agree that technology is the strongest force dominating and changing the ways that people interact, do business, get their information and have their opinions shaped. Just look at how smartphones make social media immediately accessible and allow people to receive instantaneous information and peer input. All hotel brands are trying to carve out their space in the digital world and reach and win the minds and hearts of target audiences, and we’re no different. However…I still believe it is important for us, in the hotel business, to keep the human touch in mind, because at the end of the day this is at the heart of a guest’s experience.

YOU SIT ON TWO ADVISORY COMMITTEES FOR HOSPITALITY INSTITUTIONS IN HONG KONG. IF YOU HAD THE POWER TO CHANGE ONE ITEM ON THE SYLLABUS FOR STUDENTS STUDYING HOSPITALITY AND TOURISM TODAY, WHAT CHANGE WOULD YOU MAKE? The course programmes for hospitality students these days are fabulous and the students I’ve met are so passionate and inspiring! But I think I would always advise practical experience for students – that science and theory are a great foundation, but it is on-the-ground experience that lights the fire. Also, overall I believe that a successful hotelier is a well-rounded person – I would encourage students to study related fields of design and art, and keep on top of trends and popular thinking. It will definitely enhance your professional life in hospitality as well.

WHAT IS THE TRUE ESSENCE OF THE ROSEWOOD BRAND? A Sense of Place. Just look at Rosewood hotels that are absolutely iconic to their locations – such as The Carlyle, A Rosewood Hotel in New York or Rosewood Mansion on Turtle Creek in Dallas, and yes, even though it’s just a year old, Rosewood Beijing in the Chinese capital. This “A Sense of Place” philosophy and the idea of offering “personal journeys of authentic and exquisite discoveries” is embedded in everything we do as a brand. I am tremendously excited at how we’re going to express this individuality amongst the 15 other Rosewood properties that will open globally in the next three years.

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YOU COMPLETED A MAJOR REBRANDING EXERCISE APPROXIMATELY 2 YEARS AGO INTRODUCING A NEW BRAND DIRECTION. HOW DIFFICULT HAS IT BEEN TO MAINTAIN A LASER LIKE FOCUS ON THE FUTURE – MILLENNIALS, WITHOUT LOSING THE BRAND’S CONNECTION TO THE AGING BABY BOOMERS PARTICULARLY IN THE RESORT SPACE? A Sense of Place is our compass and key differentiator amongst luxury hotels. When we rebranded, we were determined to enliven, extend, enhance and reinforce this concept, never abandon it. Moreover, Rosewood has made its reputation both from the individuality of each hotel and the consistency of the type of personalised and genuine service one finds in a fine private home. This core identity is and will be maintained in every Rosewood hotel everywhere in the world. The type of guest we attract can’t really be defined by their age range. Yes, we are offering an experience that resonates well with millennial travelers who appreciate the best but also want what’s “real.” But this appreciation for the genuine and authentic – as the highest expression of “ultra-luxury” – spans ages and cultures. It’s really about these guests’ level of sophistication and what they demand.

THE ROSEWOOD CURATORS’ PROGRAMME IS AN OUT OF THE BOX FORWARD LEADING IDEA. WHAT HAS BEEN YOUR LEVEL OF SUCCESS WITH THE PROGRAMME? We’ve received a tremendous response to our Rosewood Curators programme ever since it was launched in 2013. What I love about it is that we have such an eclectic group, from the 93-year-old New York style icon Iris Apfel to China's prima ballerina, Tan Yuan Yuan to the former American football player Steve Young. People love the idea that the Curators are sharing their favorite tips and advice on their favorite destinations with Rosewood guests who are travelling there. It somehow it feels very intimate and genuine, like getting advice from someone you really admire but is also your best friend. Most recently, we held the very first Rosewood Conversation in London – an event to gather Rosewood Curators together with a panel of other experts to discuss provocative trends in front of a really engaged audience. Our first Conversation topic was about the impact of modern travel on art and design. I wish I could have been there! But we will be developing further Rosewood Conversations and I’m really looking forward to being a fly on the wall at the next one.

TELL US ABOUT YOUR ‘GRAND DIFFERENTIATORS’ AND HOW THEY WORK TO REINFORCE YOUR SENSE OF PLACE PHILOSOPHY? Each Rosewood property has its own unique interpretation of the brand’s A Sense of Place philosophy and they always have a story to tell. All our hotels are individual, but A Sense of Place is the “red thread” that runs throughout them all. That creates a real collection of very special places to stay. Within the hotel, we place a great deal of emphasis on expressing the artistic culture of a destination. We try to create a sense of “journey,” so that even within the space of the hotel guests are stimulated and subconsciously enlivened by their surroundings and interactions. We want them to feel both a sense of ease and comfort as well as pleasant discovery. And off-property, we provide guests ways to explore those hidden sides of a location that don’t appear on a tourist map. It’s a holistic offering, completely dictated by the guest’s interests and needs – we are the platform for whatever they want to experience.

ARE YOU PLEASED WITH THE ROSEWOOD CULTURE YOU HAVE BUILT? AS YOU SAID, THERE IS ALWAYS ROOM FOR IMPROVEMENT, WHAT IS THE NEXT LEVEL OF EVOLUTION OF THAT CULTURE? I’m very pleased with the Rosewood culture and it appears that the market has recognised that we are really trying to do something different. We have already announced 15 new hotels to open over the next few years – everywhere from Bali and Bangkok to Sao Paolo and Santa Barbara. So, not only do property owners want to be on this train, but enthusiastic and passionate hoteliers are keen to work with us as well, which is very gratifying. Ultimately, we hope that travelers will plan their holidays based on wherever there is a Rosewood, so that “Rosewood” becomes a destination in itself. Although our legacy will always remain “A Sense of Place,” we’re not standing still – that’s not part of our “DNA!”

YOUR PATH TO LEADING WHAT IS ONE OF THE WORLD’S LEADING ULTRA-LUXURY HOSPITALITY BRANDS WAS UNORTHODOX, NOTWITHSTANDING THAT YOU GREW UP IN A HOTEL FAMILY. HOW HAS THIS APPROACH INFLUENCED YOUR PERSPECTIVE OF THE HOSPITALITY SECTOR? HAS IT BEEN INHIBITING IN ANY WAY? I grew up with hotels and hospitality professionals surrounding me – my grandfather, my father and the teams they worked with -- and my passion for hotels grew at the same time. What I learned from them and observed firsthand is that this is a people business. I have a clear vision of what type of services and experiences we want to create and offer, but I never forget that it takes the right team of people to make it happen. I never felt inhibited or constricted by my background, or that it limited my way thinking, I think it simply gave me a good foundation and helped me focus on what was really important to lead successful hotel brands. And I’ve found that my previous professional experience in the finance industry has helped tremendously in looking at new deals and opportunities.

YOU ARE CONSTANTLY TRAVELING, HOW DOES THIS INFLUENCE YOUR SENSE OF WHAT YOUR CUSTOMERS ARE LOOKING FOR FROM THEIR HOTEL IN THE CASE OF THE BUSINESS TRAVELER AND RESORTS IN THE CASE OF THE LEISURE TRAVELER? You’re right, I travel a lot, and I always have my feelers out to observe what’s going on around me and what guests really want. Business travellers always look for efficiency and they’re usually on hectic schedules. So, for example, we provide

BALLROOM FOYER

January 2016 Edition

ART OBJECTS IN HOTEL

round-the-clock service in the Manor Club – the executive lounge – at Rosewood Beijing, with butlers at the ready to assist guests with any last-minute or pop-up request. For vacationers at resorts, they appreciate non-intrusive service which is not too much, but also not too less. They don’t need a butler at their elbow; here the butler service is just as effective, but more subtle. For example, at Rosewood Mayakoba in Mexico, if a couple is at the far end of the beach and decide they want to book a table for dinner somewhere in or outside the property, they just use the Rosewood app to send a message to their butler to arrange it.

YOU HAVE AN AGGRESSIVE PRODUCT PIPELINE WITH PLANS FOR DEVELOPING 32 NEW PROPERTIES BY 2020. WHAT IS THE MIX BETWEEN BUSINESS HOTELS IN MAJOR GLOBAL CITIES AND RESORTS LIKE YOUR PROPERTIES IN THE CARIBBEAN? We look at destinations in which we can express and celebrate Rosewood’s core philosophy of A Sense of Place® in true Rosewood style and that includes key gateway cities and exclusive resort destinations. We believe there are always stories to tell in many locations. We have opened up Asia with the opening of Rosewood Beijing and we’re following that with openings in Phnom Penh, Siem Reap, Guangzhou, Sanya, Clearwater Bay (Hainan), Jakarta, Bali, Phuket, Bangkok and our latest announcement – Rosewood Luang Prabang in Laos. Europe is definitely a focus for us as well. Rosewood London opened in 2013 to tremendous fanfare and numerous awards. Since then, we have acquired management contracts for Rosewood Castiglion del Bosco in Tuscany and Hôtel de Crillon, A Rosewood Hotel in Paris, which will re-open following a complete restoration.

IT WOULD BE REMISS OF ME NOT TO ASK ABOUT YOUR PLANS FOR THE FUTURE DEVELOPMENT OF ROSEWOOD LITTLE DIX THE FLAGSHIP RESORT HERE IN THE BRITISH VIRGIN ISLANDS? We are committed to investing in our current portfolio and over the next few years we will be refurbishing a number of our properties, including Rosewood Little Dix Bay. We have no confirmed plans to announce at present but look forward to sharing these at a later date. 98

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ARE THERE PLANS FOR OTHER PROPERTIES IN THE CARIBBEAN GIVEN THAT YOU DROPPED PLANS FOR THE PROPERTY IN THE BAHAMAS? As you know, we have a long-established foothold in the Caribbean with “star” properties including Rosewood Little Dix Bay which of course was originally developed by the conservationist and philanthropist Laurance Rockefeller. This year, both Jumby Bay, A Rosewood Resort and Rosewood Little Dix Bay were included in the Best Resorts in the Caribbean list by the Conde Nast Traveler among many other accolades. We certainly would like to build our portfolio further in the Caribbean with similarly prestigious properties. However, we don’t have anything solid that I can share as of this moment.

YOU LEAD ONE OF THE MOST ICONIC ULTRA LUXURY HOSPITALITY BRANDS IN THE WORLD, WHAT INFLUENCES YOUR CHOICE OF PERSONAL HOLIDAY DESTINATIONS? I appreciate holidays where I can totally relax, explore, and really experience the local culture in my own way. A great local dining scene also helps! So I’m lucky that Rosewood offers so many wonderful destinations for me. But I also love to discover new places – and this also has a business benefit because I can look for new opportunities to establish a Rosewood property! -BB

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KRISTIAN WILSON Bedell Cristin Law Firm (Singapore)

This article was originally published in the Russian Law Journal, Volume III (2015), Issue 2.

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This paper will examine the interaction between offshore jurisdictions and Russia, with particular emphasis on the role played by the British Virgin Islands in structuring offshore transactions. This paper will look at popular narratives about offshore jurisdictions, including traditional arguments about round-tripping and corruption, before examining the legal rationale for the use of offshore structures in Russia. It will be argued that the use of offshore jurisdictions arose as a response to deficiencies in the Russian legal system, particularly in terms of Russian law as it relates to property rights, and the related problem of enforcing such rights. In contrast to these perceived deficiencies in the Russian legal framework, offshore jurisdictions provided a stable and modern legal environment, the use of which allowed Russian investors to gain access to Western common law principles of corporate governance, property rights and shareholder rights.

Keywords: Russia; British Virgin Islands; offshore; property rights; shareholder agreements. DOI:10.17589/2309-8678-2015-3-2-119-136

INFORMATION ABOUT THE AUTHOR Kristian Wilson (Singapore) â&#x20AC;&#x201C; Senior Associate at Bedell Cristin Law Firm (Level 25, North Tower, One Raes Quay, 048583, Singapore; email: kristian.wilson@ bedellgroup.com).

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I. INTRODUCTION This article will examine the use of offshore jurisdictions in Russia, with particular emphasis on the role played by the British Virgin Islands [hereinafter BVI]. The objective of this paper is to understand the reasons behind the popularity of offshore structures in Russian commerce, and to shed some light on the legal rationale behind their use, by examining the interplay between Russian and offshore legal systems. This is an important area for study, given the significant role that offshore jurisdictions play in Russian foreign direct investment [hereinafter FDI]. The prevalence of offshore structures in Russian FDI is well reported, and it has been observed that in 2012, 11 of the main 40 recipients of Russian FDI were offshore jurisdictions which were seen as acting as a transit platform for the movement of capital to other destinations. Of these offshore zones, three jurisdictions are the largest recipients of Russian FDI, being the BVI, the Cayman Islands and Cyprus. These three jurisdictions have played host to increasing and significant volumes of Russian financial flows, with the growth of outward FDI stocks in Cyprus growing from $206 million to nearly $4 billion in the period between 1998 and 2006, the BVI increasing from almost zero in 1990 to $123.5 billion in 2006 and the Cayman Islands increasing from almost zero to $40.4 billion in the same period. Given the popularity of offshore finance centres, and the significant FDI flows passing through such jurisdictions, the question then arises as to why offshore structures have been used in Russia. Unfortunately, this is an area in which there is a lack of significant academic analysis and the few studies that address the topic simply focus on questions of tax avoidance, round-tripping and corruption. The legal rationale, practical use and function of offshore structures are rarely considered. This is a significant deficiency in the existing literature on the topic as legal concerns have been a key consideration behind the use of offshore structures in Russia. This paper will therefore attempt to redress this deficiency and cast some meaningful light on the role of offshore jurisdictions in Russia, by looking to the legal rationale for the use of offshore structures. It is only by looking at the actual use of offshore structures in practice, and the legal environment which gives rise to their use, that we can achieve an understanding of the purpose behind such structures. In order to understand the rationale behind the use of offshore structures, this paper will examine the ways in which the use of offshore jurisdictions arose as a response to certain deficiencies within the Russian legal system and the difficulties faced by Russian

enterprises in accessing international finance. This paper will argue that offshore jurisdictions, such as the BVI, have been used as a platform to overcome legal inefficiencies in the Russian legal system and to manage legal risks in the face of an uncertain political and economic environment. The rest of this paper is divided into three further sections which consider: (i) common narratives and popular misconceptions about the role of offshore jurisdictions in Russia; (ii) the historical and legal context to property rights in Russia; and (iii) the legal rationale for the use of offshore jurisdictions.

2. COMMON NARRATIVES ABOUT THE ROLE OF OFFSHORE COMPANIES IN RUSSIA Before looking at the legal rationale behind the use of offshore jurisdictions in Russia, it will be useful to examine the existing literature in this area in order to understand the popular narratives and misconceptions which frame analysis on this topic. This is important given that most studies in this field assume that offshore structures are either used for the round-tripping of funds or for laundering the proceeds of corruption. It is notable that the studies in this area do not address the legal rationale for the use of offshore structures. As a result, the exclusion of legal issues from this discourse creates an imbalanced and incomplete picture of this topic. Therefore, before looking at the legal context, any discussion of this topic must first consider and address these popular narratives. 2.1. Round-Tripping Claims The most common argument made about offshore jurisdictions is that they are used to facilitate the round-tripping of funds. Roundtripping is essentially a process whereby funds are moved overseas and then re-routed into Russia through the use of offshore vehicles, which thereby mask the original source of the funds. The traditional rationale given for round-tripping is that, by disguising Russian sourced capital as ‘foreign’ through the use of an offshore company, the Russian investor will have access to tax or regulatory benefits that are usually reserved for foreign investors. The round-tripping thesis is commonly held by observers of Russian FDI patterns, although the assumptions underlying this theory are often undeveloped. For instance, one study states that ‘according to data from the Bank of Russia, Bermuda, the British Virgin Islands and Cyprus were the three largest sources of FDI in Russia as of 2010. This reflects the importance of round-tripping Russian investments via tax-haven destinations.’ However, no

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source is provided for the claim that offshore FDI statistics reflect the importance of round-tripping, nor is this point elaborated further. It is simply accepted as fact. This is unfortunately a common problem in this area of study, as many observers adopt the same approach and take the round- tripping argument as orthodoxy, without support or considered analysis. A further problem with this approach is that the round-tripping thesis may not be an appropriate tool with which to understand Russian FDI patterns. For example, the round-tripping argument is generally founded on studies concerning the People’s Republic of China [hereinafter PRC] where it is commonly argued that PRC investors route funds through offshore companies in order to gain foreign investment benefits. However, Russia has not given preferential tax and regulatory treatment to foreign investors in the same way as the PRC, so some caution is required in relying upon such theories when considering the Russian investment environment. This concern has been expressed by some observers, with one paper noting that, in contrast to the investment environment in the PRC, [Russian] state policy towards inward FDI has been less supportive or even restrictive. Moreover, in many Russian regions the regional authorities have erected barriers to foreign investors to protect incumbent firms from outside competition than provided incentives for foreign investors. Hence the financial incentives granted to foreign investors are hardly a key explanatory factor for round-tripping behaviour. Not only is it unsuitable to apply concepts of round-tripping as they relate to the PRC to the Russian experience, but it may also be inappropriate to overstate this concept at all. For instance, the theory rests upon the assumption that the money being routed through offshore centres is Russian money being repatriated through offshore channels. However, this fails to account for the fact that other jurisdictions use the BVI to structure their financial transactions as well as to effect investment into Russia. For instance, a report by the Carnegie Moscow Centre noted that ‘Chinese companies often invest abroad through the British Virgin Islands. The investment from the British Virgin Islands is quite substantial in the post Soviet space including Russia. It can be assumed that part of these investments in fact come from China.’ Additionally, it should be noted that other studies have examined the use of offshore jurisdictions (particularly in the Chinese context) and observed that round- tripping is not a significant or

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sole explanation for the use of offshore structures in FDI patterns. Instead, it has been observed that ‘[t]ax minimisation through the Caribbean offshore thus seems to be less a motivating factor than property rights, investment seeking and institutional arbitrage.’ These other factors are important to bear in mind because offshore jurisdictions perform other roles than tax structuring. As Vlcek notes, ‘[t]he common portrayal of the [offshore jurisdiction] today as a tropical island “tax haven” fails to acknowledge that it provides other forms of regulatory arbitrage beyond taxation. It may be the home to mutual (hedge) funds, captive insurance and re-insurance firms, trust companies, and shipping registries, as well as an international business company (IBC) registry.’ As a result, consideration needs to be given to other factors rather than relying upon undeveloped notions of round-tripping. It will be seen later in this paper that these same motivating factors of property rights, investment seeking and institutional arbitrage, apply equally in the Russian context. 2.2. Corruption Claims Aside from the round-tripping argument, another common assumption that underlines many studies is that offshore structures are used in Russia for the purposes of laundering the proceeds of corruption. A number of papers approach this topic through the lens of criminality and assume, as their starting point, that offshore companies are used by Russian investors for corrupt purposes. A good example of this perspective can be seen in a paper by Ledyaeva, Karhunen, Kosonen and Whalley, who assert that the drivers for the use of offshore jurisdictions in Russian capital outflows ‘mainly include tax avoidance / evasion, laundering the proceeds of corruption and securing the secrecy of an investor’s identity from Russia’s corrupt and autocratic authorities.’ These are strong charges, and the crucial point to note is that, after making sweeping claims as to the nature of offshore transactions, no source or authority is provided for such assertions. Instead, these claims are posited as an assumed starting point for analysis, on which the research is based, rather than a conclusion reached through neutral research and, consequently, no attempts are made to analyse and test these assumptions. Similarly, Ledyaeva, Karhune, Kosonen and Whalley assert that given ‘the persistently high-level of corruption in Russia, it is reasonable to suggest that corrupt public officials in Russia utilize round-trip schemes via offshore centres for laundering the proceeds of corruption.’ Again, no specific source, authority or foundation

is provided for such claims. This approach is therefore troubling, as it operates to ascribe a character of criminality to offshore jurisdictions by association rather than through fact, and is based upon supposition rather than analysis. Without hard facts, it is not ‘reasonable to suggest’ that offshore structures are used for the purposes of laundering the proceeds of corruption. Suggestion is not a sufficient ground on which to conduct analysis or perpetuate myths.

The question then arises as to why some authors persist in ascribing notions of criminality to offshore structures in Russia, when there is clearly a lack of analysis underlying such assumptions and an absence of factual grounds to support these assertions. It would tend to suggest that some of the existing studies and journalistic reporting on this topic are unsound. It would also suggest that many studies may be tinctured by an inherent bias on the part of the observer.

If serious claims are going to be made about the nature and role of offshore jurisdictions, they need to be supported by fact and reasoned analysis. The question then arises as to how, if these types of assertions are accepted, we can test and verify such claims.

The question of bias is important, as the fact that these claims are made on the basis of assertion rather than supported fact suggests that common perceptions on the use of offshore structures in Russia is informed by value judgments. In a sense, it can be seen that many observers of Russian business operate with innate or unconscious anti-Russian bias, where it is assumed (rather than established) that Russian commercial practices must necessarily involve corruption. This bias therefore infects popular perceptions towards the use of offshore structures in Russia as, given the lack of understanding of the legal and commercial rationale behind the use of such structures, an assumption is made that their use must simply be a product of nefarious intent.

One answer is to look to the courts as a source of fact. If offshore structures are used, as some authors suggest, for the purpose of laundering the proceeds of corruption, then these structures, and any claims or evidence of impropriety in respect of such structures, will ultimately come before the courts. As a result, the courts would also provide a key source of factual evidence to support such assertions. If these assertions are correct, then one would expect to see a significant number of court judgments concerning allegations of corruption and criminality. In order to test these theories, research was conducted on all the judgments available at the Eastern Caribbean Supreme Court, where such judgments were made by the BVI courts and either concerned Russian parties or related Russian business or assets. The BVI was used as a sample jurisdiction given that it is the leading offshore jurisdiction within Russia in terms of FDI flows. In addition, the BVI has a robust legal system and a dedicated commercial court, ensuring that there would be a wide and easily available selection of judgments to review. This research found that there were 41 relevant judgments concerning Russian parties or enterprises located in Russia. Of these judgments, there were 7 cases in which fraudulent, dishonest or unlawful conduct was alleged, amounting to 17% of all judgments. Of these 7 cases, there were no judgments in which fraudulent, dishonest or unlawful conduct was proven to the satisfaction of the court. What this research clearly shows is that corruption is not a significant issue before the courts in terms of the use of offshore structures in Russia, given that only 17% of cases alleged such issues and that in no case was any allegation of fraudulent, dishonest or unlawful conduct proven. Based on this review of BVI cases, there is simply no grounding in proven fact or law to justify the corruption allegations raised by some academics and journalists.

It can be seen that this anti-Russian bias has a long history and arises frequently where Russian business practices are involved. To take one example, this bias could be seen in relation to the failed bid by the Russian company Severstal for Arcelor where The Wall Street Journal reported that there was a ‘mounting frustration in Moscow at a perceived anti-Russian bias in European business’ and The New York Times similarly reported that ‘many Western investors still look at Russia in “comic book terms, as mysterious and mafia-run”.’ Given the narratives concerning the use of offshore jurisdictions in Russian FDI, it would appear that this comic book characterisation also extends into journalism and academic analysis. This frustration is shared by some contemporary observers of Russian FDI. For instance, one paper notes that there were problems with creating ‘a positive and attractive image of Russian business abroad [due to] the extendedly created politicised typologies of Russian multinationals’ and another paper observed that Russian investors face ‘a strong degree of suspicion in most parts of Eastern Europe and in the developed world . . . [even though] Russian investors have frequently transformed bankrupt enterprises into thriving companies and are regarded as effective owners and employers.’ Aside from questions of bias, many studies also exhibit a lack of understanding as to the nature of offshore transactions. For example, many studies fail to address the legal rationale for the use

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of offshore jurisdictions, despite the fact that offshore structures are created in a legal context (given that offshore companies are creatures of law, created for legal purposes and governed by legal rules). This is an important consideration and, again, an examination of the BVI court judgments gives insight as to the real concerns surrounding offshore structures. An analysis of the court judgments relating to Russia reveals that, rather than criminal enterprise, the main concerns before the courts related to property rights, shareholder disputes and questions of corporate governance. The types of structures under consideration were joint ventures, holding companies and investment vehicles. In most cases, these were ordinary commercial disputes concerning normal business activities and standard types of investment structures that one would expect to see in a normal and mature legal environment.

legal protections, unclear property rights, and the threat of expropriation of their assets.

The rest of this paper will therefore dispense with the bias and unreliability of common narratives about offshore jurisdictions and instead show how a legal analysis is essential to understanding the role that offshore structures have played, by looking at aspects of the Russian legal system that gave rise to the demand for offshore vehicles and aspects of offshore jurisdictions that made them suitable for use by Russian investors. The Paper will explore how the need for legal certainty has been a key driver of the use of offshore jurisdictions, which has been an issue of key importance given historical deficiencies and uncertainties in Russia’s legal and financial infrastructure.

a key institution affecting FDI is the legal framework, which includes the legislative system as formal institution and law enforcement as informal institution. The unpredictability and arbitrariness of legislative changes combined with the lack of transparency in law enforcement is one of the key challenges faced by investors in Russia.

3. THE HISTORICAL AND LEGAL CONTEXT TO PROPERTY RIGHTS IN RUSSIA In order to understand the circumstances which gave rise to the need to use offshore platforms to structure financial transactions, it is essential to look at the legal context to Russian property rights. By looking at the Russian legal system, it will be possible to have a clearer idea as to what issues created the demand for offshore jurisdictions, and what problems were addressed by the use of offshore vehicles. In order to understand the Russian legal system, it will be useful to consider its recent development. Following the collapse of the Soviet Union in the early 1990s, Russian society underwent a number of changes, which included periods of political and economic instability. Further changes arose in the legal sphere with the development of a new code of law, reflecting the change from a socialist-based economy to a free- market oriented society. These changes had an impact on the investment climate as investors were concerned about uncertain

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Given the changes in Russian society, new corporate laws were enacted to reflect the development of the new market based model. The changes in Russian law and society ‘led to many quick codifications of relatively new concepts. The earliest laws following the collapse reflect this haste.’ The swift enactment of new legislation was described as having created ‘a conflicted body of corporate law that can often prove unpredictable for entrepreneurs and legal counsel alike, particularly where foreign investment is concerned.’ These changes in Russian corporate law also impacted on investors attitudes towards FDI into Russia, with Karhunen and Ledyaeva observing that

Not only did the new legal framework prove unpredictable to investors, there was also uncertainty as to how such laws would be implemented and enforced. This was a legitimate concern for investors, given that Russia had an inexperienced judiciary who were unfamiliar with the new laws and uncertain how to apply them. As Kuzmina observed, although such countries as the U.S. had a long history of courts regulating the issues of reasonableness of defensive actions in takeovers, fiduciary duties, conflict of interest, Russian lawyers and judges had virtually no practical experience in corporate disputes as private business did not exist as a notion during the Soviet era. These concerns were also raised by the OECD, which noted that ‘[t]he main problems are limited experience in interpretation of the law and a lack of guidelines from higher judicial authorities, which could reduce incoherent decisions by lower courts.’ As a result, investors were uncertain as to the scope and effect of the new laws and as to their treatment and interpretation by the courts. Additionally, investors were unclear whether their new rights were actually capable of enforcement. For instance, Dzarasov noted that ‘[t]he new laws contained some clauses which in theory protect the rights of minority shareholders’ such as the rights to take part in

meetings, access to information, demand repurchase of shares and initiate civil action against the company, but [i]n the early 1990s, many of these rights in Russia were purely theoretical, because it was impossible to enforce them through the court or by other legal means . . . [for] in Russia, the most pressing problem is not quality of legislation but its practical enforcement. When abused by insiders, shareholders are usually passive and do not try to secure their rights in court . . . For most judicial disputes, the party with greater administrative and financial resources appears to be favoured. Given the general unavailability of formal legal enforcement, Russian investors often had to rely on informal and extra-judicial enforcement mechanisms when doing business in Russia. For instance, Dzarasov suggested that due to the lack of regulatory enforcement, it was common to have business networks based on family and clan relationships where ‘[e]nforcement of contracts were secured by the mutual trust of family relatives . . . [or] by coercion on the part of clans.’ However, this was clearly an imperfect means of enforcement and remained the privilege of certain social groups, given that this form of enforcement relied on contact networks and informal relationships rather than standardised and universal codes. As a result, investing in Russia was not without risk, given the uncertainty of the new laws and the problems of enforcing them. Investors therefore sought legal certainty and the solution could be found offshore. As some observers noted: In the case of emerging economies, such components of poor institutional environment as corruption, regulatory uncertainty, underdeveloped intellectual property rights protection and governmental interference are commonplace. [Overseas foreign direct investment] to a location with more supportive institutions would provide means to escape those institutional constraints. Offshore jurisdictions, such as the BVI, could provide these more supportive institutions and were therefore chosen as a platform to mitigate the risks inherent in the Russian legal system. Taking the BVI as an example, there were a number of attributes that made it a suitable venue in which to relocate Russian enterprise. For instance, the BVI is a British Overseas Territory, being a self governing dependency of the United Kingdom, and therefore politically stable. It is a common law jurisdiction, based on English law,

whose ultimate court of appeal is to the Privy Council in London. The jurisdiction is noted for the quality of its commercial law and the territory has a dedicated commercial court. Additionally, it offered a zero tax, regulatory light platform with flexible corporate legislation. The importance of this legal flexibility for Russian investors can be seen in three key ways. Firstly, the BVI could offer a neutral third party jurisdiction with a mature and predictable body of law, thereby ensuring legal certainty in terms of rights and the enforcement of such rights. Secondly, the absence of cumbersome regulation in the BVI ensured that corporate vehicles could be operated with the maximum of flexibility. As a result, the BVI offered a commercial environment which was more permissive than in other jurisdictions, it being observed that the advantages of the BVI was that it generally follows ‘the UK legal system for corporate law but [is] not under the FSA or EU regulations.’ Thirdly, the availability of common law rights and remedies provided numerous benefits to Russian investors, as this would (as will be examined further in the following section) allow Russian enterprise to rely on Western principles of corporate governance and to structure joint ventures and co-investment in ways that would not be possible under Russian civil law. As a result, it was for legal reasons, rather than questions of round-tripping or criminal intent, that led to the use of offshore jurisdictions to structure Russian investment. As Kuzmina notes, ‘investors, not satisfied with the rules of Russian corporate law, started searching for a new market for law which eventually resulted in jurisdictional competition between Russia and, not surprisingly, offshore zones.’ The next section will consider, in more detail, some of the specific deficiencies in Russian law that encouraged the move offshore, and the various ways in which offshore jurisdictions would provide solutions to such deficiencies in the Russian legal system.

4. THE LEGAL RATIONALE FOR MOVING OFFSHORE As previously discussed, most offshore jurisdictions, are politically stable jurisdictions with established legal systems based on English common law. The BVI is the pre-eminent jurisdiction for the establishment of offshore companies, with over 482,000 active companies as of the first quarter of 2014, and is well regarded for its modern commercial law, which is based to a large extent on the Delaware Commercial Code. One of the key attributes of the BVI is the quality of its legal infrastructure, as the jurisdiction has a

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modern commercial court with particular expertise in shareholder disputes, which was noted by The Economist recently, where it was observed that the ‘[c]ourts in the British Virgin Islands hear a good share of all disputes involving international joint ventures.’ Given the many advantages of jurisdictions such as the BVI, it was a natural choice for Russian investors who sought a legally secure environment from which to conduct business, in distinction with the legal uncertainties inherent in Russia. In addition, an offshore jurisdiction, such as the BVI, would be chosen over other more mature jurisdictions because, aside from legal certainty, it could offer cost efficiencies and greater corporate flexibility than would be available in onshore legal environments. Offshore jurisdictions were chosen by Russian investors in order to overcome a variety of legal and commercial uncertainties, but chief among these were the need to protect assets, access capital, and rely on common law principles of corporate governance and property rights. These specific concerns will be examined in more detail in the rest of this section. 4.1. Asset Protection Offshore jurisdictions are often used to protect assets against the risk of seizure, whether from other business partners or from the government by locating ownership in a neutral and legally robust jurisdiction. They are also used to protect family assets from dissipation, such as in private wealth structures which provide succession planning solutions. Assets can be protected by using offshore jurisdictions in a number of ways, whether by locating a business enterprise outside of Russia, to avoid expropriation by the state, by establishing a joint venture in a neutral jurisdiction, to reduce the risk of misappropriation by business partners through utilising the protections offered by a mature legal environment, or by establishing the private wealth structure offshore, to take advantage of the trusts laws available in common law jurisdictions. The rest of this Section 4.1 will consider why offshore jurisdictions were chosen to protect against political risk or to ensure the integrity of family wealth, whereas the question of joint ventures will be explored further in Sec. 4.3 below. The question of political risk has always been a key concern for Russian investors. Following the collapse of the Soviet Union, there was uncertainty whether the new free market model would continue and whether private property rights would continue to be protected, and in the first decade of this century, there were fears over possible expropriation by the state following a number of

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high profile cases by the government against Russian businessmen. These factors, together with the continued uncertainty in the legal system, led one academic to conclude that ‘the main factor of the capital flight from Russia is “chronic multidimensional crisis of society, economy and state”.’ As a result of such political uncertainties, Russian investors turned to offshore jurisdictions in order to protect assets against political and legal risks by locating them offshore and ensuring that any dispute concerning ownership would have to occur offshore, under the protection of a neutral and mature legal system. By locating an enterprise offshore, the investor would gain the ‘ability to “manage institutional idiosyncrasies” including the ability to protect against the “grabbing hand” of government and opportunistic behaviour of local business partners.’ Therefore, by incorporating an enterprise in a jurisdiction like the BVI, a Russian investor would be able to rely on the established laws of the offshore jurisdiction to protect their property rights, rather than under the imperfect and undeveloped laws of Russia, and to rely on enforcement mechanisms provided by the offshore jurisdiction, rather than the informal family or clan enforcement system described by Dzarasov, or the uncertain protections offered by the Russian courts. This rationale for the use of offshore companies is not only evidenced by the actual use of such companies, but also confirmed by the opinions of the Russian investors who utilised such structures. For instance, a recent article by the Associated Press noted that ‘[l]eading businessmen have said they would be willing to drop [incorporating offshore] only after Russia launches tangible reforms of the court system and law enforcement.’ Furthermore, one study noted that ‘[i]nterviews with many Russian entrepreneurs confirm the fact that at least partly capital outflows in 90s was a trial to escape country risks, the indicator of rational behaviour of new owners.’ As a result, the use of offshore jurisdictions was a rational response to inefficiencies in the Russian political and economic system, and not simply, as some commentators would suggest, a case of round-tripping or the use of such structures for illicit purposes. Aside from protecting against political and jurisdictional risk, offshore jurisdictions have also been used to protect and maintain assets in private wealth planning structures. This form of asset protection has become increasingly important as the generation that built their fortunes following the collapse of the former Soviet Union now needs to consider how to maintain and protect that wealth. Offshore jurisdictions provide such solutions given that they allow for the establishment of trusts and foundations, which

are commonly used in the West as structures for the preservation of wealth. In contrast, Russian law does not recognise the common law concept of the trust, which explains why offshore jurisdictions were frequently chosen to establish such structures. Trust structures involve a transfer of ownership in assets from a settlor to a trustee, who then holds the assets for the benefit of certain beneficiaries. The advantage of this approach is that they allow the settlor to transfer legal title to assets while allowing some control over the use of such assets and making provision for the future use and enjoyment of such assets. There are various reasons behind the use of trusts and foundations, although these frequently include the preservation of family wealth for future generations, to guard against the fragmentation of family business, to guard against the possibility of divorce, to allow for philanthropy, or to address concerns in relation to political instability and personal safety. 4.2. Access to Capital Aside from being used to preserve assets, offshore jurisdictions are also used as a platform to access international capital. For instance, The Economist noted that investors are drawn to the BVI in particular, as they are ‘attracted by the ease of raising funds, cheaper access to capital markets, speed of set-up and access to reliable courts.’ Aside from these general advantages, Russian investors also sought to use overseas jurisdictions as a platform for capital raising, given that Russia had a number of structural issues which made raising finance difficult and often led to capital flight. Karhunen and Ledyaeva identified a number of these issues, noting that in Russia ‘[t]he root causes of capital flight consist of an unsettled political environment, macroeconomic instability, a confiscatory tax system, an insolvent banking system, and weak protection of property rights.’ In contrast with the perceived problems with the Russian legal, financial and political landscape, offshore jurisdictions were seen as a stable and mature environment with which to access international finance. For example, in reviewing the rationale for using offshore jurisdictions in international trade, Gordon and Morriss noted: [E]xpanding trade increases the need for access to deep capital markets and, crucially, to legal systems capable of handling complex business organization and contractual matters . . . to accommodate such needs, a legal system needs both a group of sophisticated decision makers and regulators capable of adding value without imposing excessive costs and a body of law that allows transaction engineering to structure transactions to predictably accomplish clients’ goals. Financial

transactions may thus be structured to take advantage of such jurisdictions by legally locating crucial steps (e.g., issuing bonds) in them. Given the low costs, legal stability and international recognition of offshore jurisdictions such as the BVI, there was a clear legal and commercial rationale for Russian entrepreneurs to locate their business in such jurisdictions. Indeed, even some of the more critical studies on the use of offshore jurisdictions in Russia admit that ‘firms establish subsidiaries in such locations in order to enjoy more favourable institutional environment such as better functioning financial markets.’ As a result, Russian businesses began to use offshore jurisdictions to structure their operations and raise finance. As Koroliuk and Rudenko observed, ‘very often such jurisdiction is used as staging bases for investment in third countries. For example, leading foreign assets holder, Russian oil and gas multinational “LUKOIL” exercises all its international projects for exploration and extraction of raw material through Limited Liability Company “LUKOIL Overseas Holding” registered in the British Virgin Islands.’ In fact, a number of leading Russian enterprises have located their business in the BVI, including TNK-BP (which was a joint venture between Rosneft and BP) and MTS (Russia’s leading mobile operator). Additionally, the Russian supermarket group Lenta is incorporated in the BVI and recently held an initial public offering on the London Stock Exchange, with a market capitalisation of $4.3 billion at March 2014. It is therefore clear that offshore jurisdictions were integral to the financing strategies of international business structures and that the Russian enterprises using such jurisdictions included Russia’s most prestigious and dynamic companies. This desire to use offshore jurisdictions as a platform for raising international finance can also be seen in practice, with a good source of information contained within the court judgments of the Eastern Caribbean Supreme Court. For example, one BVI court judgment provided insight into the rationale behind choosing to incorporate a company in the BVI, describing how a witness explained under cross-examination that when the volumes of [the Russian company’s] coffee production started to grow, it became necessary to do business with western companies and finance these larger volumes. After the 1998 crisis the western companies refused to give credit to Russia. This was the reason why she decided to incorporate [the BVI company] she said, with the idea that this Company would assist

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in [the Russian company’s] trading and importation of coffee from different parts of the world. [The BVI company] would act as intermediary between [the Russian company] and its coffee suppliers from outside of Russia. This would reduce costs and permit the respondents to better structure their coffee business operations. Again, we see a need to incorporate in an offshore jurisdiction such as the BVI in order to escape the financial constraints within Russia (in this case occasioned by the 1998 financial crisis). Again, the rationale for doing so is to reduce costs, obtain access to international finance and to ensure the efficient structuring of the enterprise. The Russian approach fits international patterns of investment through offshore jurisdictions, as Sutherland, Voss and Buckley noted a similar phenomenon in respect of the Chinese experience, observing that Chinese enterprises moved offshore in order ‘to exploit offshore capital markets and superior institutional environments’ because it is ‘offshore jurisdictions alone that allow them to access capital markets and institutions unavailable to them.’ We see this approach extend to Russia, with observers of the Russian experience noting that, by incorporating offshore, a Russian business could gain advantages over purely Russian enterprises as ‘their access to resources such as foreign banking and financial expertise and managerial know how through the offshore investment puts them in a superior position towards purely domestic firms.’ 4.3. Property Rights Offshore jurisdictions have also been used by Russian investors to take advantage of the property rights available in offshore jurisdictions, in order to overcome specific deficiencies in Russian law. One area in which this can be seen is with joint ventures and shareholder agreements. Joint ventures are frequently located in offshore jurisdictions as a means of protecting the joint venture from legal and financial risks. One way of achieving this is to ensure that the ‘valuable assets of the joint venture might be owned by a legal entity that was bankruptcy-remote from either of the joint venturers.’ A second way of protecting against legal risk ‘is to choose the law and legal institutions of a jurisdiction other than the home jurisdictions of the contracting parties (to avoid potential bias).’ A third way of protecting against risk is to incorporate a BVI joint venture vehicle

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above the Russian operating company in order to ensure that any sale can occur at the offshore level, thereby avoiding the financial and legal risks involved in a sale at the local level, given that ‘the transfer of assets in Russia can be very difficult, mired in red-tap and bureaucracy and time consuming.’In each of these cases, offshore jurisdictions offered simple structural solutions to protect a joint venture against financial and jurisdictional risk. However, joint ventures and other forms of co-investment have also been structured offshore in order to negotiate specific problems arising under Russian law. These specific issues are commonly seen in relation to shareholder agreements. In establishing joint-ventures or other forms of co-investment, shareholder agreements are an important and commonly used tool. Shareholder agreements commonly provide for a number of negotiated rights given to investors in a joint venture, which can include preferential rights as to voting, distributions or liquidation, tailored corporate governance provisions, pre-emption rights on any further issue of shares, rights of first refusal on the sale of shares, dispute resolution mechanisms and governing law provisions. The advantages of such provisions are that they allow for differing economic and voting rights to be provided to different investors and provide mechanisms which assist with the effective corporate governance of a business. However, shareholder agreements were not legally recognised in Russia by the government and the courts, save to the extent that such agreements were consistent with codified law. The problem arose that, up until 2009, Russian law did not recognise contractual provisions relating to share transfers, restrictions on the sale of shares, and tailored corporate governance provisions relating to voting and board appointments. This had the effect that shareholder agreements were void to the extent that they provided for such matters. This problem became pronounced in 2006, when a number of court rulings confirmed that shareholder agreements would be void where they ran counter to provisions of the Russian Civil Code and the Joint Stock Company Law, for example by including pre-emption rights and none- competition clauses. As a result, it was not possible to structure investment in Russia using standard common law shareholder protections, and this had an impact on the willingness of international investors to invest in Russia. It also made it difficult for Russian investors to rely on the sophisticated legal protections that were commonly available in common law jurisdictions. Given that ‘[c]ontractual restrictions on transferring shares, “tagalong” and “drag- along” mechanisms, contractual regulation of

voting procedures and board formation, and call options and put options were all considered illegal . . . institutional investors traditionally used offshore legal entities’ where such provisions were recognised by the law and commonly used. As a result, it was common practice to incorporate the investment vehicle in an offshore jurisdiction, where shareholder agreements would be recognised and enforced, where the provisions of the shareholder agreement could be incorporated within the constitutional documents of the offshore vehicle, where shareholder remedies were available, and where the parties could rely upon the legal certainty provided by a neutral and mature common law jurisdiction. The Russian government was, of course, aware of these deficiencies in Russian law and, in 2009, steps were taken to address this issue. An amendment to the Law on Joint Stock Companies was introduced which formally recognized the legality of shareholder agreements. However, the amendments were widely considered to be problematic as they ‘failed to clarify whether choice-of-lawprovisions that allowed for the application of another country’s law were now available in shareholders’ agreements.’ Another issue was the perceived inflexibility of the 2009 amendments, which led one observer to comment: Russian courts generally interpret codified corporate law as both mandatory and exhaustive. Given that the 2009 amendment sets out what shareholders’ agreements can and cannot include, much of the flexibility inherent to the instruments in other countries is lost, along with much of the value to foreign investors who wish to structure corporate relations in a familiar way. As a result, and despite the 2009 amendments, there was still a need to incorporate a vehicle offshore and rely on shareholder agreements to structure the relationship between investors, where Russian law was silent or deficient. For instance, shareholder agreements could provide for issues that were not addressed by Russian law, such as shareholder deadlocks, and could provide for negotiated rights to appoint board directors. Whereas under Russian law the right to appoint directors was based on the level of ownership, rather than any negotiated individual rights. Additionally, many shareholders faced an inability to assert their rights under Russian corporate law as ‘[i]n many cases, foreign or minority investors were conspicuously excluded from voting arrangements, excluded from decisions regarding share dilution that disproportionately affected them, or saw their investments radically decline in value when the courts refused to protect invested assets.’

However, Russian law is not static and a number of further changes were made to the Russian Civil Code in the years since 2009, with the most recent amendments coming into force on November 1, 2013. The 2013 amendments attempted to resolve the foreign law issue by providing that as long as one party to a shareholders agreement is a foreign person, the agreement may be subject to foreign law. However, some observers have noted that issues still remain in using shareholder agreements in respect of a Russian enterprise. One paper noted that issues may continue to arise due to the fact that the agreement may not override mandatory rules (which are wider in Russia as opposed to common law jurisdictions), that a company cannot be party to a shareholder agreement under Russian law, and that the law does not extend to purely Russian co-investments, in light of which the authors ‘do not see an immediate change to the tendency to structure Russian joint investments offshore.’ As a result, and despite the changing Russian legal landscape, there continue to be issues in using shareholder agreements under Russian law, particularly given the rigidity of corporate law in Russia which has frequently led to the view that with ‘the lack of incentives to attempt structuring a shareholders’ agreement under Russian law, and the benefits available to those who establish an offshore holding company, [the incorporation of an offshore vehicle] is the most prudent’ approach.

5. CONCLUSION The preceding analysis illustrates that when consideration is given to the legal and economic context in which the need for offshore companies has arisen, the reasons for their popularity become clear. When close attention is paid to the function and employment of offshore companies in practice, the rationale for their use becomes apparent. In each case, it is clear that the legal rationale has been a dominant motivating factor for the use of offshore jurisdictions by Russian investors. It can therefore be seen that, contrary to the popular myths that offshore jurisdictions are used for the purposes of round-tripping or laundering the proceeds of corruption, they are actually used in practice to negotiate inefficiencies in the Russian legal system. In cases where offshore companies have been used, they have been employed in order to provide practical solutions to technical legal issues. This usage is confirmed by practice, by theory and by context. This usage is also supported by a close reading of the court judgments relating to the use of such vehicles.

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What the incidences of such usage tell us is that offshore companies are used as an efficient means of managing legal risk. Offshore jurisdictions have enabled investors to manage risk by allowing Russian investors to protect their assets from governments or unscrupulous business partners, to obtain access to finance in an uncertain economic environment, and to rely upon certain and well defined property rights and legal protections when co-investing with others. Offshore centres are used because it is economically efficient and commercially practical to make use of such jurisdictions, given that the use of common law standards enable investors to structure deals to allow for efficient profit sharing and risk mitigation.

RE F E R E NC E S Berezkina, Evgeniya. Recent Developments in Russian Corporate Legislation: Will New Norms Secure the Future for Shareholders Agreements?, 16 The Columbia Journal of European Law Online 31 (2009), available at <http://www. cjel.net/wp-content/ uploads/2010/02/Berezkina.pdf> (accessed May 18, 2015). Chazan, Guy, et al. Moscow Claims Anti-Russian Bias Led Arcelor to Accept Mittal Bid, The Wall Street Journal ( Jun. 27, 2006), <http://online.wsj.com/news/articles/ SB115137274678291456> (accessed May 18, 2015). Dzarasov, Ruslan. The Conundrum of Russian Capitalism: The Post-Soviet Economy in the World System (Pluto Press 2013). Glossary of Statistical Terms, Organisation for Economic Co-operation and Development ( Jan. 4, 2006), <https://stats.oecd.org/glossary/detail.asp?ID=5988> (accessed May 18, 2015). Gordon, Richard, & Morriss, Andrew. Moving Money: International Financial Flows, Taxes, & Money Laundering, 37(1) Hastings Int’l & Comp. L. Rev. (2014), available at <http://papers.ssrn.com/abstract_id=2348144> (accessed May 18, 2015). Koroliuk, Timur D., & Rudenko, Dmitry Y. Russian Multinationals FDI Outflows Geography: The Emerging Dominance of Greater Europe, 67(1–2) European Researcher: International Multidisciplinary Journal (2014), available at <http://oaji.net/ articles/2014/1-1391657820.pdf> (accessed May 18, 2015). Kuzmina, Maria. Jurisdictional Competition in a Developing Economy: Law and Policy Issues of the Offshore Structure Use in Russia, Ill. Bus. L.J. (Nov. 30, 2009), <http:// www.law.illinois.edu/bljournal/post/2009/11/30/ Jurisdictional-Competition-in-a- Developing-Economy-Law-and-Policy-Issues-of-the-Offshore-Structure-Use-inRussia> (accessed May 18, 2015). Ledyaeva, Svetlana, et al. Foreign Investment from Offshore Jurisdictions into Russia: An Analytical Overview, 2013(140) Russian Analytical Digest, available at <http:// www.css.ethz.ch/publications/pdfs/RAD-140-2-6.pdf> (accessed May 18, 2015). Nietzsche, Friedrich. Beyond Good and Evil (Oxford University Press 2008). Pulec, Karina L. Legal Restraints on the Use of Shareholders’ Agreements for Structuring Foreign Investment Deals in Russia, 45(2) Cornell Int’l L.J. (2012), available at <http://scholarship.law.cornell.edu/cgi/viewcontent. cgi?article=1795&context=cilj> (accessed May 18, 2015). Said, Edward W. Orientalism (Vintage Books 1978). Schneider, Richard C., Jr. Developments in Soviet Property Law, 13(4) Fordham Int’l L.J. (1989), available at <http://ir.lawnet.fordham.edu/cgi/viewcontent. cgi?article=1248&context=ilj> (accessed May 18, 2015). Vlcek, William. Byways and Highways of Direct Investment: China and the Offshore World, 39(4) Journal of Current Chinese Affairs (2010), available at <http://journals. sub.uni-hamburg.de/giga/jcca/article/ viewFile/359/357> (accessed May 18, 2015). Wilson, Kristian. Seeking Truth from Fact: Rationale and Use of Offshore Jurisdictions in the PRC, 6 Tsinghua China Law Review 205 (2014), available at <http://www. bedellgroup.com/siteFiles/resources/docs/insights/ Articles/2014/KristianWilson- Spring2014.pdf> (accessed May 18, 2015).

BUSINESS BVI GUIDES

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BUSINESS BVI GUIDES

by Business BVI Staff Writer

any dream of living in paradise, waking up to the sound of breaking waves, relaxing on white-sand beaches and living in a place where both the sky and sea are blue and the people are friendly and laidback. Once you have decided to make this dream a reality and just before you take the leap you need to consider the practicalities such as informing your loved ones of your decision (highlighting the benefits to them as you do so), researching the cost of living and finally securing a job that is going to enable you to make this life style change. The British Virgin Islands, a beautiful collection of 60 islands, cays and rocks in the north eastern Caribbean some 60 miles east of Puerto Rico offer what many expatriates are looking for. The strong economy, characterized by a growing tourism and financial services sector, a strong public sector and a growing private sector continues to draw people from virtually every country in the world. The process of emigration is fairly straight forward once you know what to expect and how to go about it.

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WORK PERMIT AND IMMIGRATION MATTERS Once you have found your ideal job in the British Virgin Islands, if you are not a citizen of the BVI, you must obtain a work permit. This permit allows you to legally work in the Territory for a specific employer. Even if individuals plan to work for a few months, a Temporary Work Permit must be obtained. While work permits are being processed, perspective employees must reside outside of the BVI. Work permit applications are filed by the employer and not the employee. A new work permit application form must be filed with supporting documents, such as: •

Cover letter from employer

•

Prospective employee’s resume

•

Proof of qualifications for the job

•

Copy of newspaper advertisement of the job

•

1 passport sized photo of applicant

Work permit applications are processed within 30 working days. Once the work permit is approved, the application is forwarded to the Immigration Department. Immigration then grants a clearance letter which will be

enter the BVI. Upon entering the BVI, all expatriates must have a return ticket to their home country. Once in the BVI, the employee can receive his work permit by visiting the Labour Department. The Territory’s new work permit cards are a highly sophisticated holographic cards, that can also be used as a pictured identification card and are the size of a regular bank card. It is very important that work permit holders have their work permit cards on their person at all times. Once the card is received, employees must take the card and job letter to the Immigration Department. There a stamp is placed in the employee’s passport showing that the employee is a legal resident of the BVI. Once this process is completed, employees are legally permitted to work, reside and travel in and out of the British Virgin Islands. Labour Department

284 468 3701 ext. 4708/ 4780

Immigration Department

284 468 3701 ext. 4700/ 4770

SOCIAL SECURITY Social Security is a compulsory insurance plan to which employers, employees, self employed individuals must contribute. It is designed to protect insured persons from financial distress by providing partial income replacement when particular contingencies arise. Sickness, maternity, invalidity, age, funeral, survivor’s and employment injury benefits are paid to qualified persons. All working individuals between the ages of 15 and 65 years must register with the Social Security Board and obtain a BVI Social Security card. This is a one time registration. To register, persons must fill out an Employee’s Registration Form and submit proof of birth, i.e. birth certificate or passport. Forms may be collected and filed at the Board’s office in Road Town. Social Security payments are mandatory. Contributions for private employees and self-employed persons are 81/2 percent of insurable earnings. Employees contribute 4 percent of that total and 41/2 percent is contributed by employers. Civil servants contribute 71/2 percent; 31/2 percent by employee and 4 percent by Government. Social Security contributions can also be voluntary for persons who have worked in the Territory and are living abroad or for persons who no longer work but are not at the eligible age of 65 to collect benefits. This contribution is 7 percent of earnings established by the Board. Social Security Board

284 494 3418

TRAVELLING TO THE BRITISH VIRGIN ISLANDS used by the employee to enter the Territory. The employer will be given the clearance letter and a medical form to forward to the employee. A thorough medical must be done and a medical certificate granted before entering the BVI. Once the employee enters the Territory, the medical certificate must be approved by the BVI Health Services Authority. If any additional vaccinations or tests are needed, these can be done by the Government’s health clinic. It is important to note that citizens of particular countries must obtain a visitor’s VISA to enter the British Virgin Islands. This can be obtained at the nearest British embassy in the applicant’s home or residing country. A full list of qualifying countries can be obtained from the Deputy Governor’s Office website at www.dgo.gov.vg. Additionally, while the need for passports to enter the BVI for United States and Canadian citizens have been extended; citizens of those countries are urged to obtain passports to

The Terrance B. Lettsome International Airport is located on Beef Island. It is the Territory’s main airport with internationally recognised airport code, EIS. Some travelers fly into the United States Virgin Islands’ island of St. Thomas at the Cyril E. King International Airport, code STT. After arriving at this airport take a 10 minute taxi ride to the waterfront ferry terminal in Charlotte Amalie where you can catch various ferries over to the BVI. The ferry ride is usually 45 minutes to West End, Tortola or 60 minutes to Road Town, Tortola. In St. Thomas, persons may also travel via sea plane to the BVI’s Sister Island of Virgin Gorda. If you choose to arrive in the BVI, via the USVI, you must clear immigration in the British Virgin Islands.

SHIPPING TO THE BVI Shipping personal effects from home furniture, personal goods and even vehicles can easily be done through a shipping agent in the Territory. Once you have identified the agent you would like to use, you will be informed of the closest company to your address in your home country that you can have items delivered to or packed for pick up. As the sender, you must provide shipping agents with a list of items to be shipped as well as their estimated costs. Make certain you receive all documents and agreements pertaining to your shipment from the partnering agent in your home country in order to retrieve your goods once they have landed in the BVI. Once completed, items are then shipped to the Territory. Once they have arrived you will be notified by the local shipping agent who will sign release forms to be presented to port authority and Customs officials to clear your items. The cost of shipping items to the Territory varies widely. Ensure that you research estimates from companies before deciding on a final shipping January 2016 Edition

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agent. Once your items arrive in the Territory, you will only then be charged for the service. It is always recommended to insure items with the shipping agent. To declare goods with Customs you must have an itemised list of goods shipped and their costs. Government waives up to $1000 for new residents on goods imported. The following is a break down of duty charges for other items: • Vehicles 20% • Household goods/furniture 15% • Electronics/ computer hardware 15% • Clothing 10% • Reading materials 0% Her Majesty’s Customs 284 494 3701 Ext. 6800/6802

tenants and home owners are responsible for finding living arrangements and negotiating the best rent or lease. Many landlords offer short term leases to accommodate the Territory’s migrant labour force. The average starting rent of a two bedroom apartment in the BVI is approximately $800. Most land lords require two months rent as a refundable deposit along with proof of income such as a job letter, before renting to new tenants. If you are in the market to purchase or build a home, all expatriates must obtain a Non-Belonger Land Holding Licence. The application process is managed by the Ministry of Natural Resources and Labour. To obtain this licence the following documents are needed with a completed application form: •

A police certificate

• Four consecutive newspaper clippings of the property’s sale ad

MAIL Though the Territory does not have home mail boxes, the mailing service is much like most postal services world wide. Without a private mail box, persons can collect mail sent to them at their community post office. Residents may apply for private mail boxes by submitting an application with the BVI Postal Service at the main Post Office in Road Town, Tortola. The annual cost for these mail box rentals is $35 for a letter size box. In 2006 the BVI launched its internationally recognised postal codes. These postal codes allow other mail services to have an exact and distinctive code for the Territory. This works just the same as zip codes in the United States and postal codes in the United Kingdom and Canada. This allows mailing companies to process mail to be shipped to the Territory more efficiently. Ultimately, this allows residents in the BVI to obtain their mail in a more timely manner. Residents can also obtain United States mail boxes through various companies in the BVI. This allows persons to have their international mail sent to a US post box and delivered by their hired company to the BVI. This is an excellent resource when ordering items online or to receive mail quickly from the United States. Major courier companies such as UPS, FedEx and DHL also operate in the BVI.

•

A valuation report of the property

•

A financial statement showing one year of banking practices

•

Two references

•

Sale agreement for the property

•

Proposed purpose of property

•

A detailed description and time table of any works to be done on the property.

The Ministry of Natural Resources and Labour reserves the option to ask for additional supporting documents from applicants. A non refundable fee of $200 is required for processing of the application. For corporate groups the application fee is $500. The average processing time for a Non-Belonger Land Holding Licence is 12 to 14 weeks. Once a licence is granted, property owners must follow development agreements that were stated when applying for a licence. Failure to do so may result in a fine of 40 percent of the cost of the property or forfeiture of the property. Property taxes are payable annually to the Government’s Inland Revenue Department. If home owners are seeking to rent their property, non-belongers or persons that are not citizens of the BVI, must seek permission from the Ministry before undertaking such a venture.

Van Dyke. Plane services may also be obtained to travel from Tortola to Anegada and Virgin Gorda.

DRIVER’S LICENSE Visitors to the BVI may obtain a Temporary Driver’s Licence from the Licensing Department or car rental companies. For $10, drivers will get a temporary licence that is good for 3 months. If stopped by authorities, visitors must have this temporary licence along with their passport. If you plan to live and drive in the BVI for longer than 3 months, a BVI driver’s licence must be obtained. To obtain such a licence, once the temporary licence has expired, driver’s must file an application at the Vehicle Licensing Department, along with supporting documents; work permit, passport, BVI Social Security card, and temporary licence. Additionally, a written driver’s test must be taken. The written test is administered from 8:30 a.m. to 1:30 p.m. daily. Once a driver passes this test, a BVI licence will be granted. If a new resident is importing a vehicle into the Territory or purchasing a vehicle in the BVI, the vehicle must be registered and licensed in the BVI. Drivers may purchase licence plates from the Vehicle Licensing Department, then have the car insured and inspected before the car is registered and qualified to be driven in the BVI. Vehicle Licensing Department 284 468 3701 ext. 4938/ 4939

BANKING The British Virgin Islands hosts a variety of private and public banks that are recognised internationally. Some of these institutions are: Banco Popular, Scotia Bank, First Bank. First Caribbean and VP Bank.

Post Office 284 468 3701 ext. 4996

Ministry of Natural Resources & Labour 284 468 3701 ext. 2147/ 2137

HOUSING

Inland Revenue Department 284 468 3701 ext. 2155/ 3140

Presently the BVI does not host any credit unions. Once becoming a resident of the BVI, to obtain a bank account, persons are required to show proof of identification, passport as well as a social security card. Some banks allow residents to use a United States social security card when registering for an account. Account holders may then begin to build a financial identity within the BVI’s banking system. Persons may apply for credit cards, loans and mortgages and even consolidate accounts from their previous country of residence.

TRANSPORTATION

HEALTH SERVICES

The British Virgin Islands does not have a formal public transportation system. However, taxi services may be called from any location on islands. Various ferry services operate inter-island shuttles throughout the major islands of the British Virgin Islands, Tortola, Virgin Gorda, Anegada and Jost

Health care in the British Virgin Islands remains relatively inexpensive to consumers in comparison with other developing Territory’s. Peebles Hospital, the main hospital servicing the BVI is on the island of Tortola. The new Peebles Hospital was officially opened in mid December 2014.

The real estate market in the BVI is growing steadily. At times it may seem difficult to find your right home in paradise, but with persistence and a good realtor, in no time you can be listening to the waves, watching the sun come up from the hill tops or living in a town that still has more greenery than most in other parts of the world. Unlike some countries, the British Virgin Islands does not have a Housing Authority. Prospective 116

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A number of private clinics also service residents of the BVI. These clinics have on staff senior medical professionals that are general doctors as well as practising physicians in a wide range of specialisations such as gynecology and obstetrics, cardiology as well as dermatology. Supporting these clinics are various private pharmacies with competitive pricing for the latest medicines.

EDUCATION There is a wide variety of child care facilities in the BVI. Day care centres accept children as young as 4 months old. The cost of this type of care ranges from $160.00 to $430.00 monthly. The average school year begins in early September and ends in late June. Children that will be at least 5 years old within the school year and up to 16 years old are required by law to attend some form of matriculating educational facility, this also includes home schooling by a child’s parent.

Of the parents, the following documents are needed: •

Work permit card

• Passport •

Contact information

Once the child is approved by the Education Department to attend a public school, a letter is sent to the Immigration Department and the appropriate authorisation is placed in the child’s passport, declaring the child a legal resident of the BVI. There are a number of private primary and secondary schools in the BVI. Monthly tuition for such schools starts at $300. Parents wishing to home school their children are required to submit a course outline as well as the home school programme they intend to follow. Closing dates for school registration are April 30 for entrance beginning in September of the same year and November 30, for entrance in January of the upcoming year.

If expatriate parents are travelling with children to take up residency in the BVI, the parents must seek permission from the Immigration Department to have the child in the BVI for the purpose of attending school. There is a separate application to have the child enrolled in the school system. When in the BVI, the Education Department will facilitate the processing of applications for entrance into the BVI school system. It is important to note that if a parent plans to enroll a child in a private institution or home school their children, they must also register with the Education Department. Parents are then responsible for the filing of applications at private institutions.

The Territory currently has two tertiary institutions. Students may obtain accredited associates degrees from the H. Lavity Stoutt Community College as well as certification for various courses. The BVI also hosts a campus site for the prestigious University of the West Indies. Students are able to enroll in classes and participate in face to face as well as teleconference and distance learning courses. Applications to attend these institutions are available at their offices on Tortola.

Parents have a choice of two schools when entering the public school system. While there are numerous primary schools, there is only one public secondary school on Tortola, Virgin Gorda and Anegada. Students living on Jost Van Dyke must commute to Tortola to attend high school. The following information about the child or children is required when applying to attend public schools: • List of previous schools attended • Birth certificate • Immunisation card • School report or transcript • BVI Health Services authorisation of child’s immunisation card

LIBRARY SERVICES

Education Department 284 468 3701 ext. 2036/ 2037

There are five public libraries in the BVI that are located on the Territory’s four main Islands. Two on Tortola; in Road Town and East End, one on Virgin Gorda, Anegada and Jost Van Dyke. To obtain a permanent library card, persons must be residing in the Territory for at least 6 months. If visiting the Territory for shorter than six months, visitors may obtain a temporary card by paying a refundable fee of $5 and submitting the name of one reference that can return borrowed books in your absence. Library Services

284 468 3701 ext. 4931/ 4932

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BUSINESS BVI GUIDES

FAST FACTS ABOUT THE BRITISH VIRGIN ISLANDS by Patlian Johnson

DEMOGRAPHICS/SOCIAL

GOVERNMENT

Population Density

183.2 km2

Population growth rate

wn To

Dependency Status

64%

Nationality Ratio

British Overseas Territory Head of State

96.9%

Literacy Rate

Queen Elizabeth II represented by the Governor

79.32

Life expectancy at Birth

Judicial System

Common Law

Methodist, Anglican, Roman Catholic

Major Religious Denominations

2.5%

(annual average)

GEOGRAPHY/CLIMATE

COMMUNICATION 57.08 mi

Area (BVI) Rainfall (average annual) Temperature (average) Time Zone

Capital City

Ro a

28,054

Population^

40 in 28˚C

284

Country Phone Code Zip Codes

VG1110, VG1111, VG1112 4

Telecommunication Providers

Atlantic Std Time

2016 PUBLIC HOLIDAYS ECONOMY Currency

GDP (nominal)*

United States Dollar US$ 923, 211 million

New Year’s Day

Monday, 7th March

Commonwealth Day

Monday, 14th March

Good Friday

GDP per capita (nominal)*

US$ 32,377

Easter Monday Whit Monday

1.93%

Inflation Rate (2014)

Sovereign’s Birthday Territory Day

Unemployment Rate*

2.8%

Employed Persons (2014)

18, 859

Source: Central Statistical Office ^ 2010 Population Census * 2012 estimates

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Tourism Financial Services

Friday, 25th March Monday, 28th March Monday, 16th May Saturday, 11th June Friday, 1st July

Festival Monday

Monday, 1st August

Festival Tuesday

Tuesday, 2nd August

Festival Wednesday St. Ursula’s Day

Major Industries

Friday, 1st January

Anniversary of H. Lavity Stoutt’s Birthday

Wednesday, 3rd August Friday, 21st October

Christmas Day

Monday, 26th December

Boxing Day

Tuesday, 27th December

GOVERNMENT The BVI is self-governing overseas Territory of the United Kingdom with the Queen as the Head of State represented locally by the Governor. The Governor is responsible for external affairs, defence and internal security, the Public Service and administration of the Courts. The ministerial system of government is led by an elected Premier, a Cabinet of Ministers and the House of Assembly. Government’s main source of revenue comes from financial service levies followed by payroll taxes and import duties. In order to ensure sustained growth the BVI government continues to implement measures aimed at increasing revenue collection and managing expenditure levels. The Protocols for Effective Financial Management negotiated with the United Kingdom and the 2012 amendments to the Public Financial Management Act, 2004 set out the Government’s commitment to fiscal sustainability. This will be accomplished through medium term planning, regular review and reporting of economic and fiscal affairs, delivering value for money by efficient procurement processes and by managing risk

medical clinics. Patients requiring treatment services beyond the scope of Peebles Hospital are referred to Puerto Rico, the US Virgin Islands, Jamaica, Barbados and mainland United States. The BVI Health Services Authority established under the BVI Health Services Authority Act, 2004 is responsible for managing the public health care service throughout the Territory including the general administration and functioning of the Peebles Hospital and the recruitment and training of health care professionals. The Government of the BVI has embarked on an extensive development of the health care infrastructure and administration with the aim of improving primary health care services. The new Peebles Hospital is now completed and the state of the art facility includes a physical theory unit, psychiatric ward and hydrotherapy pool. The Government has unveiled its National Health Insurance (NHI) Scheme to be implemented January 2016. The NHI Scheme will provide universal affordable health care to all BVI residents.

ECONOMY ECONOMIC INDICATORS

SOCIETY Population The population of the British Virgin Islands (BVI) is diverse and growing. The majority of persons are of Afro-Caribbean decent. Minority ethnicities include Caucasians, East Indians, Middle Eastern, Chinese, and Portuguese. The major force driving population growth has been immigration mainly to meet the shortage in local labour supply. Approximately 68 percent of the employed are foreigners thus accounting for a diverse and varied labour force. The Government sector is the major employer followed by the tourism industry and the financial services sector. Annually there are twelve paid public holidays and the local labour code sets modest requirements for paid sick and holiday leave. Trade unions are virtually non-existent and work days lost through industrial action are infrequent. Local law provides for a work permit regime. Under this system a foreigner will only be granted with a work permit if a qualified local is not available to fill the position. The government has set a minimum wage of $4 per hour. Education Publicly provided education is free at the primary, secondary and now territory levels thereby facilitating access to all children. Education is compulsory up to the age of 16 and the Education Act, 2004 regulates all aspects of the Territory’s education system including Early Childhood Education. The Government’s Ministry of Education operates 17 primary schools and four secondary schools, including a technical-vocational school and a school for disabled students. There are also several private primary and secondary schools; some parochial and some secular. The H. Lavity Stoutt Community College (HLSCC) is a two-year tertiary institution offering associate degrees in the areas of business, natural science, social services, hospitality, computer studies, marine studies and financial services. Through affiliations with other tertiary institutions HLSCC also offers degree and master’s programmes in various disciplines. The College also offers specialty courses based on the needs of the labour market. Health Currently, primary health care is provided by Peebles Hospital, with additional services provided by a small private hospital and several private

MEASURE

2013

2014

Nominal GDP Growth (%)

0.7

2.8

Inflation (%)

1.5

1.93

2.8

Unemployment (%) 1

Source: Central Statistical Office 1

Please note that the rate of unemployment is based on 2010 census figures.

The BVI economy is based on two distinct economic pillars, namely Tourism and Financial Services. Growth in the tourism and the financial services industries has resulted in expansion of the construction sector, both private (residential and commercial) and public, the real estate sector (residential and commercial) and the wholesale and retail sectors. For the majority of the past decade economic growth has been positive with the exception of the negative effects of the global economic crisis. However, the economy is rebounding and is still one of the strongest in the Caribbean. Prices in the BVI have increased moderately over the last five years with an average growth rate of 2-3%. The BVI’s principal trading partner is the United States. The majority of imports (goods) originate from the United States including Puerto Rico and the US Virgin Islands. Similarly, vast majority of BVI exports (in the form of services - specifically financial services and tourism) are used by United State consumers. The BVI is not a major export of goods.

MAJOR SECTORS Tourism at a Glance With its crystal clear waters and white sand beaches, breathtaking scenery, intricate coral formations, tranquil atmosphere and warm people the BVI is a popular destination for sports enthusiasts as well as those who want a peaceful vacation. The largest island Tortola is the major hub for most visitors and the starting point for discovering the other islands. Major attractions include the nature trails at Sage Mountain National Park, the huge boulders at the Baths, the pristine waters of White Bay, the wreck of the Rhone and the flamingos at Nutmeg Point. Yearly scheduled activities which attract numerous visitors include: the Emancipation Festival in August, the BVI Music Fest in May, and the BVI Spring Regatta in April. Sailing is one of the most popular activities for tourists. The year round January 2016 Edition

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trade winds and numerous islands, inlets and cays has given the BVI the title of the ‘sailing capital of the world’. Other water sports such as scuba diving, snorkelling, windsurfing, kite boarding and kayaking are also extremely popular. Sailing is one of the most popular activities for tourists. The year round trade The BVI is also a popular port of call for major cruiseships. The current cruise pier facility is undergoing a significant transformation to be completed by the end of 2015. The improvements include an extension of the pier to accommodate larger ships and the development of the landside to comprise of shops, restaurants and entertainment amenities. The Government continues to upgrade tourist attractions and infrastructure and encourages private investment and public private partnerships in the sector. Other infrastructural developments expected in the near future include expansion of the T.B Lettsome International Airport and upgrades to various ports of entry throughout the BVI. Through the BVI Tourist Board numerous marketing initiatives have been developed to promote and enhance the Territory’s tourism product. The “Jewels of the BVI” programme promotes a collection of locally owned hotels, inns and villas by providing valuable information about the properties and activities via an official website (www.jewelsofthebvi.com) and a hotline. The “BVI VIP Club” rewards repeat visitors with special discounts at participating businesses throughout the Territory, special arrival privileges at the airport and tourism updates via a newsletter subscription.

FINANCIAL SERVICES AT A GLANCE FINANCIAL SERVICES

2013

2014

Banking (general and restricted)

Trust (general) Class I, II & III

110

116

Trust (restricted)

Company Managers

Money Services/Financing Business

Captive Insurance

147

145

Domestic Insurance

Insurance Managers

112

115

1,558

1,511

Banking and Fiduciary

Insurance

Mutual Funds Professional Professional (cumulative active) Private

Private (cumulative active)

550

539

Public

125

BVI Business Companies

53,329

50,835

BVI Business Companies (cumulative active)

459,882

457,971

Public (cumulative active) Incorporations

TOURIST ARRIVALS AT A GLANCE TOURIST ARRIVALS

2013*

2014*

Actual Change

%Change

Overnight

366,108

386,049

19,941

5.4%

Excursionist

(Cruiseship and day trippers)

375,739

386,449

10,710

2.9%

Source: BVI Financial Services Commission

TOTAL

741,847

772,498

30,651

4.1%

FINANCIAL SERVICES

Insolvency Practitioners

The growth of the financial services sector in the BVI was mainly due to the The growth of the financial services sector in the BVI was mainly due to the success of the International Business Company (IBC) (now known as the BVI Business Company subsequent to the enactment of new incorporation legislation – BVI Business Company Act, 2004) first unveiled 30 years ago in 1984. In later years the BVI secured business that was redirected from Panama during the Noriega regime and from Hong Kong when it was handed back to China in 1997. The Asian market thus accounts for a large portion of company incorporations in the BVI.

Source: Central Statistical Office * Estimate

Modern and innovative legislation, a robust regulatory framework, clever marketing, economic and political stability, quality technology and communication facilities and a full range of legal, banking and account services have contributed significantly to the continued growth of incorporations. Closely related sectors such as captive insurance, investment business (mutual funds), trust and estate formation, company management, corporate restructuring, securitisation, insolvency and shipping and trademarks have developed. The industry is regulated by the Financial Services Commission (FSC) which is an autonomous body responsible for the licensing, regulation, supervision and inspection of all financial services business. Marketing and promotion of the products and services of the financial services sector is conducted by the recently rebranded BVI Finance – a department within the portfolio of the Premier’s Office. 120

January 2016 Edition

The Financial Investigation Agency (FIA) which was launched in 2004 functions as a specialist investigative law enforcement arm of the government with the objective of curbing financial crime. Its primary focus is to investigate the BVI financial services industry and support the Virgin Islands mutual legal assistance regimes. The BVI London Office and the BVI Asia House in Hong Kong were commissioned to establish a presence in Europe and Asia to take advantage of economic opportunities not limited to financial services and tourism..

BUSINESS COMPANIES The BVI is one of the largest centres for the incorporation of business companies with around 1 million companies incorporated since the enactment of the International Business Companies (IBC) Act in 1984. Over 450,000 are still active today. Because of the flexibility of its use BVI business companies have been used in a plethora of business transactions and structures including structured finance and securitisation, succession planning, IPOs and listings on stock exchanges and joint ventures etc. The incorporation regime has changed somewhat with the introduction of new company legislation – the BVI Business Companies Act, 2004 which replaced the IBC Act repealed on January 1 2007. The core features of the IBC Act which made it a success remain along with improvements to ensure the longevity of the Virgin Island’s market share. The new Act for instance widens the range of corporate vehicles available for use, simplifies the statement of capital and the registration of charges.

and licensed by the FSC. SIBA also provides a framework for dealing with insider trading and market abuses. The BVI continues to update its regulatory regime to meet the needs of stakeholders. The Approved Managers Regime came into force the end of 2012 and creates a new regulatory environment for fund managers by reducing the regulatory burden under SIBA. The SIBA (Amendment), 2012 facilitates the new regulations for the Approved Managers Regime. The FSC has created two new regulated fund categories – incubator fund and approved funds. They were created in order to provide more flexibility to smaller and start-up financial services businesses. Under the new fund categories, managers and principals of smaller, open-ended funds may be approved to conduct business within a lighter regulatory framework. The Securities and Investment Business (Incubator and Approved Funds) Regulations 2015 come into force on 1 June 2015.

BANKING The Virgin Islands is characterised as a conservative banking jurisdiction. At the end of 2014 there were 6 banking institutions licensed to operate in and from within the BVI with total assets of approximately US$2.5 billion. The domestic market is serviced by six commercial banks which offer a wide range of competitive services: Scotia Bank (BVI) Limited, First Caribbean International Bank, First Bank Virgin Islands, Banco Popular de Puerto Rico, VP Bank (BVI) and the National Bank of the Virgin Islands. The banking sector is regulated by the Financial Services Commission under the Banking and Trust Companies Act, 1990 and subsequent amendments.

INSURANCE (CAPTIVE) The BVI captive insurance market is one of the fastest growing and largest in the world with the majority of business originating from the United States. Other countries of origin include Guernsey, Taiwan, Switzerland, the Middle East and South America. In addition to this excellent geographic spread of business, there also has been a significant distribution of captives from an industry segment standpoint. The captives cover the following industries: finance and insurance, construction, health care and retail trade. The domestic insurance market is, however, smaller in comparison. The new Insurance Act, 2008 which replaced the 1994 provides a modern structure for licensing, supervision and administration of insurance business in the Virgin Islands while simultaneously meeting international insurance standards. The Insurance Regulations 2009 which replaced the 1995 regulations provides clarity on details relating to insurance business in and from within the BVI. Both came into force on February 1st, 2010.

INSOLVENCY

INVESTMENT BUSINESS

Trusts are formed under the Trust Ordinance 1961 (based on the English Trustee Act 1925), as updated and amended by the Trustee Amendment Act 1993 and 2003. The amendment Acts considerably modernise and update the legislation, creating a more flexible regime for trusts. Changes include provisions to make trusts more attractive in a commercial context and a new set of conflict of law rules that contain robust, comprehensive, and carefully crafted provisions to protect BVI trusts against “forced heirship” claims. In addition, the rules surrounding trust duty have been updated to make it clear what documents are subject to trust duty and how this must be paid. At the same time, rules which require no public register of trusts in retained, thereby protecting confidentiality.

The BVI is one of the premier jurisdictions for fund domiciliation and is now is regulated by the Securities and Investment Business Act (SIBA) and Regulations which came into force on 17th May, 2010 replacing the Mutual Funds Act 1996 (as amended 1997). SIBA sets out the new legislative framework under which the Financial Services Commission (FSC) regulates individuals, mutual funds and other investment related entities conducting business in and from within the BVI. Persons such as investment advisers, those dealing in investments or arranging dealings in investments, managers, custodians, those providing administration services with respect to investments, and operators of investment exchanges are now required to be licensed. SIBA introduces the authorised representative regime where all BVI funds are required to appoint an authorised representative resident in the BVI

The Virgin Islands boasts a modern comprehensive insolvency regime that meets the needs of the growing incorporation, investment and financial services activities in the BVI. The governing legislation, the Insolvency Act 2003, makes provisions for the licensing and regulation of insolvency practitioners a wide range of liquidation and rehabilitation alternatives, a director’s disqualification regime and the establishment of an Official Receiver’s office.

TRUST MANAGEMENT Trust Management forms a major component of financial services activity in the Virgin Islands. The BVI trust sector has experienced moderate growth since 1995. Revised legislation, together with the highly flexible BVI Business Company, has opened up wider markets for the BVI trust.

The Virgin Islands Special Trusts Act, 2003 (VISTA) is another piece of legislation which updated the trust regime. VISTA trust, overcomes many January 2016 Edition

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problems associated with the “prudent man of business rule”, which typically made trusts unattractive vehicles to hold assets which settlers intended trustees to retain. The Act enables a shareholder to establish a trust of his company which disengages the trustee from management responsibility and permits the company and its business to be retained as long as the directors see fit. The majority of Virgin Island trusts are exempt from all taxes provided there are no beneficiaries resident in the BVI, and that the trust does not conduct any business in the BVI or own any land in the jurisdiction. There is a large and sophisticated community of professional advisers on trust matters in the Virgin Islands. Companies offering trust services must be licensed under the Banks and Trust Companies Act, 1990.

The International Tax Authority (ITA), established under the Ministry of Finance, is the Competent Authority in respect of all matters relating to Tax Information exchange. It ensures that the BVI effectively exchanges tax information with other countries under the laws of the Virgin Islands and the relevant TIEAs.

REAL ESTATE Buying and Selling Property in the BVI

SHIPPING MEASURE

2013

2014

Annual Vessel Registrations

245

234

Total Vessels Registered

3,743

Source: Virgin Islands Shipping Registry

As the sailing capital of the Caribbean and an esteemed corporate domicile, the Virgin Islands is also a popular jurisdiction for the registration of ships. As a Category One Register, within the Red Ensign Group, large vessels of unlimited tonnage and mega yachts of up to 3,000 gross tons can be registered in the Territory. In both instances, the owners must be a Virgin Islands citizen, British citizen, British Overseas Territories Citizen, British subject, a British national under the Hong Kong Order 1986, a national of a European Union member state, or a body corporate incorporated in a member state of the European Union or a British possession, including the Virgin Islands. If you do not meet the nationality requirement, you may register a company in the Virgin Islands in order to register a vessel. Registration procedure also requires the de-registration of the vessel from its current registry, a survey of the vessel and the submission of ownership documents to the Registrar of Shipping. The registration fee is $550, and an annual fee of $100 is payable to maintain registration. In addition, there will be legal fees charged by the firm you choose to assist you with registration.

TAX INFORMATION EXCHANGE AGREEMENTS A Tax Information Exchange Agreements (TIEAs) is a bilateral agreement that has been negotiated and signed between two countries to establish a formal regime for the exchange of information relating to civil and criminal tax matters. The purpose of TIEAs is to promote international co-operation in tax matters through exchange of information. TIEAs grew out of the work undertaken by the Organisation for Economic Cooperation and Development (OECD) to address the lack of effective exchange of information among financial centres. Information exchange is based on requests relating to specific criminal or civil tax matters that are under investigation. The BVI has a long tradition of providing legal assistance to foreign regulatory and law enforcement authorities and continues to be committed to the OECD’s principles of transparency and effective exchange of information. Under the guidelines provided by the OECD and the new international tax standard emanating from the G-20 Summit in April 2009, jurisdictions are required to sign at least 12 TIEAs. To date the BVI has signed 27 TIEA’s. The BVI has agreements with Ireland, the Kingdom of the Netherlands, Curacao, St Maarten and Aruba, the United States, the United Kingdom, 122

Australia, New Zealand, France, The Faroes, Greenland, China, India, Germany, Poland, Portugal, the Czech Republic, the States of Guernsey, Canada, Japan and South Korea and the Nordic group of countries Sweden, Norway, Finland, Denmark and Iceland.

January 2016 Edition

Foreigners planning to purchase property in the British Virgin Islands require a Non-Belonger Land Holding License. Agreements to purchase property are therefore made contingent upon such a license being obtained by the purchaser. Application for a Non-Belonger Land Holding License is made to the Government of the British Virgin Islands, Ministry of Natural Resources and Labour. If the application for a license relates to undeveloped or partly developed land, the applicant will be required to make a commitment to the Government of the British Virgin Islands to expend a specified sum on development within a specified time period. The purchase of property by all persons including citizens and foreigners is subject to a Government stamp duty subsequent to transference of the property. The rate of 12% of the purchase price or appraised value whichever is higher, is payable by any foreigner and citizens are required to pay a 4%. The stamp duty on leaseholds is lower. Other costs associated with the purchasing of property in the BVI include: legal fee (usually between 1.5% to 2% of the purchase price), bank fees, 10% deposit to the seller's agent to be held in escrow on the signing of the purchase agreement, pending acceptance and completion. There are no restrictions on an overseas investor re-selling a developed property. The property must however, be advertised for four weeks in the local press to give any local person the opportunity to purchase the property on the same terms.

BVI COMMERCIAL COURT The BVI now has a state of the art Commercial Court to serve the expanding needs of commercial litigation in the Territory and the Eastern Caribbean. The commercial court is a division of the regional Eastern Caribbean Supreme Court (ECSC) and will hear commercial matters from nine Caribbean nations and territories, including Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St. Kitts and Nevis, St Vincent, St Lucia and the BVI. The court officially opened on 30th October, 2009 (although it was in operation since May 2009) and specialises exclusively in domestic and crossborder commercial and insolvency matters. Prior to the establishment of the Commercial Court, all cases were handled by the High Court.

BVI INTERNATIONAL ARBITRATION CENTRE The British Virgin Islands’ Arbitration Act 2013 came into force on October 1st, 2014 with the objective of facilitating the resolution of domestic and international disputes. The Act provides for an establishment of an Arbitration

Centre which is responsible for providing the necessary facilities and support for arbitration and mediation proceedings along with promoting the BVI as arbitration jurisdiction. PUBLISHER’S NOTE: The information in this guide has been carefully collected and prepared, but it remains subject to change and correction. Use these contents for general guidance only and seek extra assistance from a professional adviser on all any specific matters. Readers can contact the relevant authorities mentioned in this Fast Fact Guide.

GOVERNMENT LISTINGS Government Ministries Central Administrative Complex Road Town Tortola British Virgin Islands www.bvi.gov.vg

Premier’s Office Tel: (284) 494-3701 ext 2152/2058 Fax: (284) 494-6413 E-mail: premieroffice@gov.vg Ministry of Finance Tel: (284) 494-3701 ext 2144/3306 Fax: (284) 494-6180 www.finance.gov.vg Ministry of Health and Social Development Tel: (284) 494-3701 ext 2174/2172 Fax: (284) 494-5018 E-mail: ministryofhealth@gov.vg Ministry of Communications & Works Tel: (284) 494-3701 ext 2183/2163 Fax: (284) 494-3873 Ministry of Natural Resources and Labour Tel: (284) 494-3701 ext 2147/2137 Fax: (284) 494-4283 Ministry of Education and Culture Tel: (284) 494-3701 ext 2151 Fax: (284) 494-5421 Statutory Bodies/ Associated Agencies Financial Investigations Agency 2nd Floor LM Business Centre Fish Lock Road Road Town, Tortola Tel: (284) 494-1335 Fax: (284) 494-1435 E-mail: fia@bvifia.org www.bvifia.org

BVI Finance Cutlass Tower, 4th Floor Road Town, Tortola Tel: (284) 468-4335 Fax: (284) 468-2590 E-mail: info@bvifinance.vg www.bvifinance.vg BVI Tourist Board 2nd Floor, Akara Building De Castro Street Road Town, Tortola Tel: (284) 494-3134 Fax: (284) 494-3866 E-mail: info@bvitourism.com www.bvitourism.com The BVI Commercial Court Old Banco Popular Building Main Street Road Town, Tortola Tel: (284) 468-2724 Fax: (284) 468-2729 cdecsc@gov.vg Financial Services Commission Pasea Estate Road Town, Tortola Tel: (284) 494-1335 Fax: (284) 494-1435 E-mail: webmaster@bvifsc.vg www.bvifsc.vg Telecommunications Regulatory Commission Road Town, Tortola Tel: (284) 494-6786 Fax: (284) 494-6786 www.trc.vg Virgin Islands Shipping Registry Cutlass Tower, 3rd Floor Road Town, Tortola Tel: (284) 468-2902/2903 Fax: (284) 468-2913 E-mail: vishipping.gov.vg www.vishipping.gov.vg Government Overseas Offices BVI London Office 15 Upper Grosvernor Street London WIK 7PJ United Kingdom Tel: + 44 207 355 9570 BVI House Asia Suite 5106, 51/F., Central Plaza, 18 Harbour Road, Wanchai, Hong Kong Tel: (852) 3468 8533 Fax: (852) 3107 0019 BVI Tourism Offices British Virgin Islands, Asia, Africa & Pacific BVI Tourist Board AKARA Building, 2nd Floor Road Town, Tortola British Virgin Islands Tel: (284) 494-3134 Fax: (284) 494-3866 Email: lharrigan@bvitourism.com Puerto Rico, Caribbean & Latin America Chirino Office Plaza, Ste 202 #1739 Carretera 8838 San Juan, PR 00926-2745 Tel: (787) 721-2525/ 782-8800

Fax: (787) 782-8801 E-mail: tdardet@bvitourism.com E-mail: erivera@bvitourism.com Latin American JG Black Book 594 Broadway, Suite 1001 New York, NY 10012, USA Tel: (212) 967-5895 Email: Alexandra@jgblackbook.com Italy Aigo Communicazione Pizza Caiazzo 3 20124 Milano, Italy Tel: 39-02-667-14374 Fax: 39-02-669-2648 E-mail: staff@aigo.it Germany, Russia & Eastern Europe Schwarzbachstr 32 D-40822 Mettmann Bei Düsseldorf Germany Tel: 49-2104-28-66-71 Fax: 49-2104-91-26-73 E-mail: g.romberg@travelmarketing.de United Kingdom 15 Upper Grosvenor St. London W1K 7PJ Tel: + 44-207-355-9585 Fax: + 44-207-355-9587 E-mail: infouk@bvi.org.uk New York 1 West 34th Street Suite 302 New York, NY 10001 Tel: 800-835-8530 / 212-563-3117 Fax: 212-563-2263 E-mail: info@bvitourism.com

U.S. & Canada 300 Park Avenue South Floor 12 NEW YORK, NY 10010 Tel: (212) 481-7000 Fax: (212) 481-9440 Email: bvi@mbooth.com

Immigration/Labour Information Immigration Department 2nd Floor RJT Edifice Building Wickham’s Cay 1, Tortola Tel: (284) 494-3471 or 4943701 ext. 4700/4770 Fax: (284) 494-4399 E-mail: immigration@bvigovernment.org Labour Department 2nd Floor, Ashley Ritter Building Road Town, Tortola Tel: (284) 494-3451/9 or 494-3701 ext. 4708/4780 Fax: (284) 494-4399 E-mail: labour@bvigovernment.org Emergency Numbers Police, Fire & Ambulance 999/911/112 Virgin Islands Search & Rescue 767 BVI Electricity Corporation 494-3911 Fire and Rescue 494-3473 Hospital 494-3497 Police Headquarters 494-3822 Water and Sewage 494-3416

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OVER&OUT INTERV IEW W I T H

JOHN BEECHEY C H A I R M A N O F T H E B V I I AC

High hopes for BVI Arbitration New centreâ&#x20AC;&#x2122;s first chairman explains plans and challenges. Much is riding on John Beecheyâ&#x20AC;&#x2122;s shoulders. As the first Chairman of the Board of the BVI International Arbitration Centre, he is charged with building the fledgling agency from the ground up. This is no simple task. Arbitration, which involves settling legal disputes outside of a traditional court system, is a competitive business, and other attempts to establish regional centres in the Caribbean have come up short. Mr. Beechey brings extensive credentials to the position: He has more than three decades of experience, and immediately before taking on the BVI assignment he chaired the International Court of Arbitration in Paris for six years. When he sat with Business BVI shortly after his first meetig in November, he explained how he hopes to lead the charge to establish an arbitration centre that will flourish for generations to come.

Interview conducted, condensed and edited by

Russell Harrigan and Freeman Rogers

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CLEARLY YOUR CHALLENGE IS SETTING THE DNA OF THE CENTRE, IF I CAN PUT IT THAT WAY. WHAT DO YOU SEE AS SOME OF THE CRITICAL BUILDING BLOCKS OF THAT DNA? 0

YOUR APPOINTMENT IS FOR TWO YEARS. WHERE DO YOU HOPE TO SEE THE BVI INTERNATIONAL ARBITRATION CENTRE AT THE END OF YOUR TWO-YEAR STINT AS CHAIRMAN? I hope to see it open. [Laughs.] I hope to see some cases coming through the door. It should by then be firmly on the map in the consciousness of international arbitration users. It’s really the first twelve months, which will be the interesting piece, and at the moment it’s moving from being a clean sheet of paper to the beginnings of premises, the beginnings of some serious appointments, not least the CEO. Then I would hope that by the end of the first quarter of 2016 we should be in the position to begin to put out some publicity messages of real content, so that we’re no longer talking about an idea; we’re talking about something which is taking shape and can be seen to be serious and can be seen to be developing. So I would view the two-year span as certainly seeing the realisation of the practical side of the project and then having in place a secretariat, which is able to handle cases as they come in. The first two years are going to be inevitably growing the centre to the position where it has enough of a profile, and it’s understood what that profile is, because we’ve got to find a way to make yet another international arbitration centre something different. In that regard, we’ve got some ideas, but it’s going to be quite a challenge. It really is a start-up.

The easier bit is going to be to establish credibility through bringing in recognised names who would be prepared to sit as arbitrators. In some of the more established markets, that shouldn’t prove too difficult. My aim would be to look essentially to the younger generation of arbitrators: that is to say those who are already making a mark but have a way to go. We don’t want to have, as it were, a bevy of very senior, very distinguished arbitrators. It seems to me that’s not quite the right model. We’re certainly not saying no to them, but we wouldn’t want that to be a preponderant element in the image. The difficult bit is encouraging participation from the region, because in the past it would be fair to say that the Caribbean has not been strongly represented on the arbitration circuit. There’s been a number of very large cases from the Caribbean, but the number of arbitrators who are from the region is small. So one of our tasks would be to identify and to encourage members of the profession regionally to become associated with the centre in that way. That’s really quite a major task for us. The third element of it is to connect very firmly with what I’ve described informally in meetings as the “backyard:” Hispanic Latin America, where it seems to me there is real potential. It’s going to be a bit of a balancing act, but the intention is to produce a list, which looks fresh, which is full of people who have a fair amount of get-upand-go, and we can rely upon them to be of the level of proficiency, competence and experience to stand the centre in good stead.

WHAT DO YOU SEE AS SOME OF THE GLOBAL TRENDS IN THE ARBITRATION SPACE THAT COULD POTENTIALLY PRESENT OPPORTUNITIES FOR THE BVI?

WHY DO YOU THINK THE CARIBBEAN HASN’T BEEN STRONGLY REPRESENTED ON THE ARBITRATION CIRCUIT? It’s been a combination of factors, I think. First, if it’s relatively small work, then it simply hasn’t gone to the established international arbitration centres. Economically, that makes no sense. There’s been a number of attempts to start up regional centres. There’s not been a fair wind behind them for whatever reason, and they haven’t really begun to flourish. The third reason is that if there are big cases coming out of the region, then they tend to be of such size that they’ve inevitably become the meat of the international law firms, be it in the United States or in Europe or a combination of both — sometimes with local counsel, but not always. So it’s been a combination of factors, and it’s very difficult to get a profile if you’re not seen on the circuit. It’s like so many other walks of life: For the first five years, people say, “Who the dickens is that?” And ten years in, you’re welcomed if you’re part of the club. And that’s something one wants to avoid, but by the same token one can’t avoid altogether.

Let’s take it up one level, in a sense: If people choose a place in which to operate, they’re generally looking to satisfy a number of criteria. The first is that it is a place where there is a degree of political stability. Second, that there is a recognised and supportive judicial system, which is imbued with integrity and experience and understanding of arbitration — but principally has integrity. The third thing is they need support infrastructure. They want to know they can get in and out; they want to know that there are hotels where Wi-Fi works and all that sort of thing. So the practical elements of the matter can be more or less taken for granted, and they can focus on the real issues that are involved in the arbitration. Tied to the judicial element, they want to know that the arbitration process will be allowed to continue without interference, and to the extent that there is interference it’s supportive rather than negative. Now this jurisdiction has a considerable advantage in that it is a well recognised common-law English-law-based jurisdiction. It enjoys political stability. It enjoys a judicial system with a good reputation. All those particular criteria are very important, and they were underlined by the [premier] yesterday, who made it absolutely clear that this project has cross-party support, so this is not a one-government wonder. There is a clear intent to make this part and parcel of the BVI’s financial community. There’s also clearly political will behind this. He underlined the fact that this institution would be independent. It is not in any January 2016 Edition

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shape or form an arm of government. It is an independent institution set up here with clear support from government to operate in its own right and to offer a service that is reliable and acceptable to the international market. It’s also fair to say that it is well recognised that there are issues here. Getting in and out is not easy. And we’re going to have to address certain immigration issues to make sure that people who are involved in arbitrations can come and go freely. 0

YOU MENTIONED IMMIGRATION ISSUES, ACCESS ISSUES: ARE THERE OTHER ISSUES THAT WE AS A JURISDICTION NEED TO MAKE SURE ARE AT THE TOP OF THE AGENDA IN ADDRESSING AS YOU BEGIN TO BUILD THE CENTRE? I think one of the factors with which we’re going to have to grapple, is meeting expectations of what comes out of all this for the local economy, and particularly for the local bar association. I don’t think it at all irreconcilable to the interests of the local bar to have an institution here, which is bringing in international work, hopefully of high quality. Occasionally, it would involve BVI law, but quite often it won’t. Indeed, I think it is quite important that it is made very clear that it is a venue open to anyone who wants to bring a case here. There will be obvious opportunities for the local bar to become involved, but it’s something where they’re going to have to see that their role is complementary to on occasion — or sometimes it’s exclusive to — any international firm that comes in to present a case. But there’s a way of dealing with this to make sure that it is understood that this is something, which ultimately brings benefit to the island. And through that, further referral work will come in, I have no doubt. But it also means that you have to develop hotels which cater both to the leisure market, which they do admirably well, and the business community. It’s factors like that, which are very real concerns to parties. Just to give you an indication of the sort of halo effect this can have — and it’s not a direct comparison, nor is it intended to be — when the [International Chamber of Commerce] was considering a move out of Paris, and the French government finally realised that this might be a 126

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real issue, what galvanised attention at official levels was the fact that they received an independent report to the effect that if the ICC Court left Paris then the potential hit to the revenues of the city would be something like two to three hundred million euros a year. It gives you an indication that if this thing is allowed to develop [in the BVI], it won’t bring two to three hundred million a year, but it should certainly be something which has a spinoff. 0

WHAT ARE SOME OF THE GLOBAL CENTRES THAT YOU CONSIDER TO BE LEADERS IN THE INTERNATIONAL ARBITRATION SPACE? [Laughs.] That’s almost an invidious question given my background. There is a small number of institutions which are in my view truly international. The ICC is one. The [International Centre for Dispute Resolution] would profess to be another. And there are places like Stockholm, London, which generally attract work from many parts of the world. But I think the ICC — if you look at the real stats and see where the parties come from — then that probably is one of the few genuinely international operations. There’s a number of very, very effective regional centres. Both Singapore and Hong Kong are well established, and rightly so: They’re fine operations, and neither has made any secret of a wish to expand out of the region in which they’ve done so well. Let’s see how they do. There’s a number of smaller centres around, and I think it’s fair to say that the results are at the moment patchy: They simply haven’t got the length and track record to make a fair comparison to the longer standing players. In Latin America, there are places like Bogota, where there is a real interest in arbitration: They say they have a very large market, and I have no reason to disbelieve them. I suspect that it may be largely domestic. But centres like that need to be watched. And then places like Brazil: An enormous quantity of work for the ICC came out of Brazil. What’s so significant about Latin America — not least from the point of view of this place — is that this is a continent which twenty, thirty years ago demonstrated a real antipathy to arbitration in any shape or form. In some of these states it was illegal. And that has changed now dramatically. Mexico led the charge; Brazil has been close behind. In many of the economies in Latin America now, there is a healthy understanding of and appreciation of arbitration as a way of resolving international disputes, major commercial disputes. And you have the peculiarity of the political wind which has caused Ecuador, Bolivia and Venezuela to remove themselves from the Washington Convention [on the Settlement of Investment Disputes between States and Nationals of Other States], and to consider setting up something separate. This is a huge backyard market for a place like [the BVI], which is demonstrably neutral. Assume for a moment that Cuba opens up tomorrow: There will be all sorts of legacy reasons why one can imagine it would be difficult for Cubans to contemplate arbitrating in Miami or New York. But if there is a centre in the Caribbean where there is a reliable system of common law and there is a great deal of understanding of the way in which the civil law system works — and you have Spanish as a recognised major language here — then these are opportunities for this particular regional centre. So I think it’s a matter of saying, “All right, we recognise that there’s a number of global players: What have we got to offer that’s different?” And I would hope it would be fair to say in two years’ time that there would be nothing like this anywhere else in the Caribbean. 0

HAS THERE BEEN ANOTHER RECOGNISABLE ATTEMPT REGIONALLY TO DO SOMETHING LIKE THIS? There have been attempts. The [London Court of International Arbitration] has tried to get something going in Barbados, and there has been an attempt in Trinidad. But I’m not sure that they have had the same good fortune in the sense that suddenly here there is the coincidence of the political will, a recognised economic reality, and the determination to develop something which is effectively new to the financial community. I think it’s a question of seizing the opportunity.

The role as I see it is this over the next couple years: We will do all we can to get this platform set up in a way that it should flourish. No one can guarantee that it will, but if we can demonstrate that we have not been overambitious, that we’ve not sought to spend public money on sumptuous marble halls; if we’ve been realistic in the assessment of what is needed to get the thing moving and sensible about the way we’ve sought it, then nobody can say we haven’t given it our best shot. 0

WHAT WAS THE DRIVING FACTOR IN SAYING YES TO THIS NEW POSITION? I spent 30 years as counsel and occasionally as an arbitrator in one of the City of London law firms and built an international arbitration practice there, and then spent six years doing what I hope is quite a lot to turn around — or at least to take forward — the ICC Court. To come to the other end of it and be faced with something, which is not there at all, and not to have to worry about the history and baggage and all that went with that, it was a completely different sort of challenge. And I’m now at the stage of my career where I’m able to spend time serving as an arbitrator, which I very much like doing, but I’m quite happy to do something else as well. Had there not been that degree of political backing, I wouldn’t have wanted to get involved, because it would have seemed to me it would just run into the sand. But there does seem to be an impetus here, which is very positive.

OUTSIDE OF THE GEOGRAPHIC NICHES YOU MENTIONED, ARE THERE OTHER AREAS THAT YOU SEE THAT MIGHT PRESENT OPPORTUNITIES FOR THE BVI? The obvious starting point is to look at what the BVI legal sector does best, which is the offshore financial market: companies; trusts, maybe. Who knows? One can look at all of that. And then it’s really a question of looking across the region. Cuba is the obvious example. But it’s picking the opportunities quite deliberately and then determining how best to go about securing such business as we can, bearing in mind that it’s highly competitive, this market. What I’m determined we do is that we sell the positive side of the offer rather than doing it on the strength of denigrating other sectors, because the moment you do that you’re just setting yourself up for the same compliment to be paid the other way. 0

IS THERE A SINGLE ATTRIBUTE FROM YOUR PRIOR ENGAGEMENT WITH THE ICC THAT YOU SEE AS BEING THE MOST USEFUL TO THIS ASSIGNMENT? [Laughs.] It’s by no means flippant to say that the stock answer to any question the first time around in France is generally no. I suppose if I bring anything to this, it’s a pretty dogged determination not to take no for an answer. So the intent is to try and find a way to make things work.

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Premier, Dr. the Hon. D. Orlando Smith welcomes the new Board of the BVIIAC

W H E R E A R E Y O U I N T E R M S O F S E C U R I N G P E R S O N N E L , A N D W H AT ’ S N E X T ? We can hope by the end of 2015 we will have identified and secured a CEO. We’re quite a way down that track already. It’s very much his or her call as to how the staffing then goes, but I think the realities are that for the first six to nine months the principal concerns are getting the building fitted out, and then beginning to wrap up marketing and all the rest. We have the good fortune that the [Financial Services Commission] is incubating this project, so to the extent there’s a requirement for support which can be provided from within the ranks of the FSC, then that’s fine. Whenever possible, we would certainly be looking to recruit locally. We won’t be looking to recruit many. We may well have somebody coming in and just indicate to the CEO that if he wants to get a secretariat organised in a particular way then this is how it has to be done, and we’ve got to be realistic as to what we can do with our own resources and when we need

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to go outside for help. But I would imagine that we wouldn’t be looking at hiring more than one or two people certainly in the first six months, at a relatively junior level. And then if the thing begins to ramp up, we’ll take it forward. We’ve got to be realistic enough to know that we’re not going to be filling the centre from day one. There’s not going to be a queue at the door of people bringing their arbitrations in. But if we’ve got premises which are usable and adaptable, then there’s no reason, for example, why you couldn’t put a court sitting in there if there’s pressure elsewhere; why you couldn’t put a conference meeting in there, or mediation or whatever else. What would be a great mistake would be to open it and then wrap it in polythene and say no one can touch it until such time as we have a real arbitration in the door. Once it’s there, it’s going to have to be used. -BB

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