ISOLAS Communique Number 5 - September 2009

ISSUE 5

SEPTEMBER 2009

HISTORY AND PROFILE OF THE FUNDS TEAM

by Joey Garcia

ISSUE 5

SEPTEMBER 2009

ISOLAS IS PROUD TO WELCOME... KARL TONNA Karl was called to the Bar in 2002. He has been an Associate in the Commercial and Litigation Departments of a local law firm and has wide-ranging experience on different transactions, including corporate restructures, acquisitions and general civil and international funds litigation.

Gibraltar’s position as a rapidly growing jurisdiction for Funds has been well recognised and ISOLAS have been on the front of this development. Our position within the EU, and the advantage of working within a jurisdiction that is highly regulated, operating internationally recognised and EU standard anti-money laundering and Organisation for Economic Co-operation and Development (‘OECD’) conventions, makes Gibraltar a very attractive alternative funds jurisdiction within Europe.

The Experienced Investor Fund (EIF) regime was launched in 2005 and has seen many other jurisdictions follow suit with similar styled products. The speed and ease of set up along with the degree of flexibility that the EIF allows makes it an excellent alternative/hedge fund/private equity/property vehicle. EIF’s can also be structured as protected cell companies under the Gibraltar Protected Cell Companies Act 2001. This allows for a single corporate body, with an internal ‘umbrella’ structure consisting of any number of subdivisions that allow for the legal segregation of assets and liabilities into different Cells allowing for multiple strategies.

ISOLAS have advised private clients, family offices and an international base of investment managers on the structuring and set up of Gibraltar based fund solutions. We are regarded as one of the leading Fund teams in Gibraltar, offering a first class and personal service while also developing synergies with our clients in the Funds sector. Our team is able to advise on all aspects of a fund set up and to assist in taking any project from concept through to launch and beyond as well as being able to act as a central reference point for all counterparties to make the procedure seamless. ISOLAS have also advised international firms on Gibraltar fund related issues, and on the promotion of collective investment schemes in Gibraltar as well as the effect of the newly proposed Alternative Investment Fund Manager Directive.

SEPTEMBER 2009

ISSUE 5

www.gibraltarlawyers.com

In addition to his legal training and insurance qualifications, Karl has also had four years industry experience as Managing Director of a leading Gibraltar-based Insurance Broker. The rise in personal injury claims in the past decade has given Karl a unique outlook of the real issues for both claimants and defendant insurers. Karl has also garnered firsthand experience of the range of issues a local business may face and is thus well placed to provide thorough yet sensible advice. Karl is an active member of The Round Table Gibraltar.

Communiqué Introduction

The rise in personal injury claims in the past decade has given Karl a unique outlook of the real issues for both claimants and defendant insurers.

Welcome to our September edition of the Communique. In this edition a variety of subjects of importance have been covered by our lawyers: Selwyn Figueras explains how the Gibraltar Government’s efforts are driving the jurisdiction on course and on schedule for the placement of Gibraltar on the OECD’s white list of companies complying with the internationally agreed tax standard. Steven Caetano covers the principles and use of injunctions in respect of executives starting up in similar businesses on their own in the absence of restraint of trade clauses. The third and last item on the professional front is an explanation by Joey Garcia of our funds team and the impact of the Alternative Investment Fund Managers directive on the funds industry in both a global and local sense.

Up and coming events Date

Event

Location

October 2009

Gibraltar, London Day

London

October 2009

ISOLAS Charity Cycle

Portugal - Gibraltar

September/October 2009

Switzerland Seminars Week

Switzerland

Associated with

www.gibraltarlawyers.com Portland House Glacis Road PO Box 204 Gibraltar Tel +350 200 78363 Regulated by the Gibraltar Financial Services Commission. Licence Numbers FSC00277B FSC00276B

By Christian Rocca

As you may be aware, we are looking to raise funds for a number of charities in Gibraltar and would be grateful for any support you can offer in this regard.

Polo Tournament. Our hospitality suite was well attended on all match days and the atmosphere proved warm, friendly and as casual as we had hoped. This being the September edition of the Communique, we will at the time of going to print have enjoyed our annual Golf Tournament at La Reserva in Sotogrande where a total of around fifty players will have tried their hand on a hot September’s afternoon. On one final, social note, the Cape St Vincent (Portugal) to Gibraltar Charity Cycle is now literally around the corner and final preparations are now under way. As you may be aware, we are looking to raise funds for a number of charities in Gibraltar and would be grateful for any support you can offer in this regard.

I write at the conclusion of what I hope will have been a restful summer for most of the team and what was certainly a busy social couple of months. During the month of August we had the opportunity of spending some time in a casual/informal setting at the Santa Margarita Polo Club as we watched Finally, I have the great pleasure of the teams vie for the silverware in the Annual welcoming Karl Tonna onboard, a lawyer

joining our firm as an associate about whom you can read on the back page and who I am certain will prove to be a valuable addition to the team here at ISOLAS as we continue to develop and look for ways of providing the service of which we are so proud.

In this issue Page

1. Introduction 2. Springboard Injunctions for Bad leavers 3. On the White Road 4. AIFM Directive Implications 5. History and Profile of the Funds Team 6. ISOLAS welcome...

SEPTEMBER 2009

ISSUE 5

SPRINGBOARD INJUNCTIONS FOR BAD LEAVERS not subject to any restrictive covenants.

G obtained an interim injunction against W and the case went to trial.

by Steven Caetano

The Judge found that W breached his fiduciary duty to G by failing to alert it that he was threatening to compete with them by approaching their customers and taking confidential documents with him.

G was therefore restrained from any competing activity for 12 months after his resignation.

This decision is a helpful one for companies whose former directors or senior employees set up new business in competition with them in four main aspects: 1. It adds two matters to the list of relevant principles to be applied by a court in cases where a company seeks to restrain the activities of a former director or senior manager in the absence of restrictive covenants cases (see Foster Bryant Surveying Limited v Bryant [2007] 2 BCLC 239) namely: (i) it is impermissible to copy or take documents belonging to the company with a view to using them to compete with the company after the relationship has ended and (ii) a director is obliged to alert the company to any nascent threat to its business, even if he is himself part of that threat; When a senior executive leaves your company and takes with him valuable information and contacts, to help him in a new and competing business, there is no time to waste if you want to get a “springboard injunction” to prevent that person and his new business unfairly taking advantage of information and contacts belonging to the company.

Restrictive covenants and confidentiality provisions in a contract of service or employment are the first line of defence for any prudent employer. But if it is clear that the person leaving was actually a “fiduciary” occupying a senior position such as a director (whether formally appointed to the Board or not) then an employer may rely on a whole new series of options to protect company interests, not just against the leaving executive occupying a fiduciary position as regards the company, but also against anyone knowingly assisting him.

2. It finds that the nature of the conduct the company or has taken with him a of a fellow employee which gives rise to project or opportunity that he acquired a duty to report on the part of the and incubated whilst working with the company director need not itself be company, the courts will bend over such as would amount to a breach of backwards to restrain the fiduciary that employee’s duty of fidelity; from taking advantage of the 3.

It provides guidance as to exactly information/business opportunity that he when, and how, a director crosses the took with him. The recent UK decision in line into impermissible activity whilst the case of Attwood v Woodward below preparing to compete with his former shows that the courts continue to take a employer/company - for example, hard line against “fiduciaries” that cross the when the possibility of contracts with line in these circumstances, something the new company was discussed with which, sadly, is very common. the old company’s customers; and The recent Judgment in G Attwood Holdings Limited and Another v Gordon 4. It shows the Court imposing a Springboard Injunction of as long as Woodward and Others [2009] EWHC one year despite the absence of any 1083 (Ch) can be summarized as follows: such restrictive covenants in the W, a former director of G, a company express terms of employment of that supplying technical personnel to the US former director or senior executive.

Government, took steps to set up a

competing company and took other preparatory steps to promote his new business whilst still a director of G. Where the “fiduciary” has either started W then left and took a number of setting up his new business before leaving confidential documents with him. W was

It is obvious then that, as regards to threats to existing companies from elements within eventually looking to establish themselves as competitors, the law is no slouch.

ON THE WHITE ROAD?

by Selwyn Figueras

The OECD’s Secretary General, Angel Gurria, is, by all accounts, having a pretty good run of form recently. In the last few days he’s had the opportunity of revealing to the financial world at large that the major economies of the world excluding, not surprisingly, the UK, are now on the road to recovery. As common sense no doubt dictates he did encourage governments to continue to take measures to stimulate their economies to minimise rising unemployment and other ill-effects of the crisis/turnaround.

in respect of the OECD’s objective of eradicating banking secrecy laws and tax evasion, that ‘we have delivered more in 10 months than we achieved in 10 years.’

Spurred on by German and US authorities’ attacks on Liechtenstein and Switzerland, the OECD has seen a dramatic increase in the number of model tax information agreements signed between member countries and so-called ‘tax havens’ currently on the grey list of countries committed to achieving the standard.

Whilst Mr Gurria heralds ‘the end of an era I say ‘not surprisingly’ in respect of the of banking secrecy as a shield for tax havens’ downgrading of the UK’s status in the others aren’t quite as impressed.

OECD’s survey because throughout the Anthony Travers, Chairman of the Cayman crisis, if there’s been any bad economic news Islands Financial Services Association coming out of Europe, British Ministers believes that the news that the OECD’s and spokespersons have typically fallen over newly announced global monitoring and themselves to claim, later the same day, peer review process, to ensure that members that however bad the European news may implement their commitments, will only be, the UK is always worse off by a reveal the inconvenient truth that the significant margin. Some might argue offshore centres targeted through this that this was part a textbook exercise process were not, in fact, the rogue, money in economic/political machiavellianism laundering and tax evading capitals of the designed to maintain the pound’s weakness world the OECD indicated they were. and, therefore, the domestic export and Travers believes that this process will reveal tourism sectors. Others might just think the ‘not so hidden agenda’ of the OECD, that this was a Government fast losing namely the achievement of a one size fits all, control of its economy and being overly global tax system and, furthermore, lead to frank about it! an eventual dwindling of support for its To aid him in his smugness, however, the work as this objective becomes clearer.

OECD’s Secretary General can also claim, Travers further believes that the OECD will

AIFM DIRECTIVE IMPLICATIONS:

by Joey Garcia

find itself embarrassingly short of teeth when the time comes to target Beijing and other centres paying not even lip service to the international pressure in respect of the exchange of tax information.

across the EU, but this might not be an option for most smaller managers currently operating within the EU who will face a different set of implications and potential restrictions.

Whatever one’s views on the OECD’s objectives, compliance is key if the level playing field is to be achieved. Switzerland has recently entered into an agreement with the UK and Gibraltar continues apace with its efforts to comply. As at the date of writing, Gibraltar has entered into seven agreements with various countries, just five short of the magic number twelve, following which, Gibraltar will be placed on the white list of jurisdictions by the OECD. It is expected, following the most recent signing with Denmark, that the remaining five agreements will follow briefly with Sweden, Finland and the other Nordic economies.

Marketing Non-European Funds in Europe

We are well on our way and will shortly achieve the objective of being white-listed by the OECD, a status which will vindicate all the work done by the local industry in complying with European and worldwide directives in relation to money laundering and tax evasion. Gibraltar’s continued presence on the white list is, by virtue of the hard work put in by all those involved and the dedication to enjoying business on a level international playing field, virtually guaranteed.

The classic scenario might be of a smaller manager managing a Cayman Island hedge fund, or a Jersey limited partnership property fund (Non-EU). If the Directive were to come into force in 2011 as proposed, rules on non-European funds and non-European managers would come into effect three years later in 2014. Until then, existing rules will continue to apply, for example, marketing on the basis of the private placement regime (if one exists) in the relevant country where the fund is being marketed. However, there is also the clear possibility that some European countries could restrict their private placement regimes in the meantime which could result in managers finding it even more difficult to market offshore funds in Europe.

The Alternative Investment Fund Directive and implications for Non-EU funds Much has been published on the newly proposed Alternative Investment Fund Directive (‘AIFM’) which if it materialises in its proposed form would affect all fund managers in Europe who manage or market a fund which is not regulated in Europe as suitable for retail sales (effectively, any non-UCITS fund). This would include not only funds in their purest form, but any arrangement that can be characterised as a ‘collective investment undertaking’ that is either managed in Europe or is seeking investors in Europe.

The burdens of the AIFM are weighty and include among other things, rules relating to suitable qualification, risk management, liquidity management, the management of conflicts, and prescriptive disclosure to potential investors while the benefit on the flip side would be easier marketing to professional investors (as defined by MiFID) but this is of little comfort to most managers.

The Commission’s justification for the directive is the management of risk arising from Alternative Investment Funds (AIF’s)

After 2014 the Directive (Article 35) provides clear limitations on the distribution of Non-EU funds. No fund domiciled outside of Europe can be marketed to any professional investor unless the country in which that fund is domiciled has signed an agreement with the relevant member state in which the marketing will take place. This agreement must comply with the standards set in Article 26 of the OECD Model Tax Convention and ensure effective exchange of information in tax matters. This is a significant burden and ultimately, European-domiciled funds, such as Gibraltar funds, could be placed at a significant advantage to their offshore counterparts.

based on recent market events and to address issues raised in previous consultations. This seems strange given that the detailed analysis of these same events (such as the Larosiere report, the Turner Review and the work produced from the G20 summit) has laid no blame for market events on hedge funds or other private pools of capital involved in the financial markets.

It is unclear why all non-UCITS funds should be affected by the directive in such a broad way and although the Commission has maintained that this is not a one size fits all approach it is difficult to envisage a scenario where those AIF’s which present very limited risks (other than to the investors in them) would not be Furthermore, Non-EU managers will not be able to rely on the private placement unintentionally ‘caught’ by the Directive. regime and will also need to be authorised The potential effects of the Directive are but this deals with a separate issue. already being felt in the industry with several of London’s largest hedge funds Gibraltar is a member of the European poised to launch onshore funds in order to Union by virtue of Article 229(4) of avoid any uncertainty. The Financial Times the Treaty establishing the European recently reported that Cheyne Capital, the Economic Community. All EU Directives £3.6bn hedge fund manager, was set to and Regulations are fully transposed into become the latest high profile London Gibraltar law. For further information on name to launch a UCITS III fund. This how your fund or business may be affected would allow the fund to operate within the by the AIFM, or on re-domiciliation existing European regulatory framework for procedures, contact Joey Garcia an investment vehicle that can be marketed joey.garcia@isolas.gi.

SEPTEMBER 2009

ISSUE 5

SPRINGBOARD INJUNCTIONS FOR BAD LEAVERS not subject to any restrictive covenants.

G obtained an interim injunction against W and the case went to trial.

by Steven Caetano

The Judge found that W breached his fiduciary duty to G by failing to alert it that he was threatening to compete with them by approaching their customers and taking confidential documents with him.

G was therefore restrained from any competing activity for 12 months after his resignation.

This decision is a helpful one for companies whose former directors or senior employees set up new business in competition with them in four main aspects: 1. It adds two matters to the list of relevant principles to be applied by a court in cases where a company seeks to restrain the activities of a former director or senior manager in the absence of restrictive covenants cases (see Foster Bryant Surveying Limited v Bryant [2007] 2 BCLC 239) namely: (i) it is impermissible to copy or take documents belonging to the company with a view to using them to compete with the company after the relationship has ended and (ii) a director is obliged to alert the company to any nascent threat to its business, even if he is himself part of that threat; When a senior executive leaves your company and takes with him valuable information and contacts, to help him in a new and competing business, there is no time to waste if you want to get a “springboard injunction” to prevent that person and his new business unfairly taking advantage of information and contacts belonging to the company.

Restrictive covenants and confidentiality provisions in a contract of service or employment are the first line of defence for any prudent employer. But if it is clear that the person leaving was actually a “fiduciary” occupying a senior position such as a director (whether formally appointed to the Board or not) then an employer may rely on a whole new series of options to protect company interests, not just against the leaving executive occupying a fiduciary position as regards the company, but also against anyone knowingly assisting him.

2. It finds that the nature of the conduct the company or has taken with him a of a fellow employee which gives rise to project or opportunity that he acquired a duty to report on the part of the and incubated whilst working with the company director need not itself be company, the courts will bend over such as would amount to a breach of backwards to restrain the fiduciary that employee’s duty of fidelity; from taking advantage of the 3.

It provides guidance as to exactly information/business opportunity that he when, and how, a director crosses the took with him. The recent UK decision in line into impermissible activity whilst the case of Attwood v Woodward below preparing to compete with his former shows that the courts continue to take a employer/company - for example, hard line against “fiduciaries” that cross the when the possibility of contracts with line in these circumstances, something the new company was discussed with which, sadly, is very common. the old company’s customers; and The recent Judgment in G Attwood Holdings Limited and Another v Gordon 4. It shows the Court imposing a Springboard Injunction of as long as Woodward and Others [2009] EWHC one year despite the absence of any 1083 (Ch) can be summarized as follows: such restrictive covenants in the W, a former director of G, a company express terms of employment of that supplying technical personnel to the US former director or senior executive.

Government, took steps to set up a

competing company and took other preparatory steps to promote his new business whilst still a director of G. Where the “fiduciary” has either started W then left and took a number of setting up his new business before leaving confidential documents with him. W was

It is obvious then that, as regards to threats to existing companies from elements within eventually looking to establish themselves as competitors, the law is no slouch.

ON THE WHITE ROAD?

by Selwyn Figueras

The OECD’s Secretary General, Angel Gurria, is, by all accounts, having a pretty good run of form recently. In the last few days he’s had the opportunity of revealing to the financial world at large that the major economies of the world excluding, not surprisingly, the UK, are now on the road to recovery. As common sense no doubt dictates he did encourage governments to continue to take measures to stimulate their economies to minimise rising unemployment and other ill-effects of the crisis/turnaround.

in respect of the OECD’s objective of eradicating banking secrecy laws and tax evasion, that ‘we have delivered more in 10 months than we achieved in 10 years.’

Spurred on by German and US authorities’ attacks on Liechtenstein and Switzerland, the OECD has seen a dramatic increase in the number of model tax information agreements signed between member countries and so-called ‘tax havens’ currently on the grey list of countries committed to achieving the standard.

Whilst Mr Gurria heralds ‘the end of an era I say ‘not surprisingly’ in respect of the of banking secrecy as a shield for tax havens’ downgrading of the UK’s status in the others aren’t quite as impressed.

OECD’s survey because throughout the Anthony Travers, Chairman of the Cayman crisis, if there’s been any bad economic news Islands Financial Services Association coming out of Europe, British Ministers believes that the news that the OECD’s and spokespersons have typically fallen over newly announced global monitoring and themselves to claim, later the same day, peer review process, to ensure that members that however bad the European news may implement their commitments, will only be, the UK is always worse off by a reveal the inconvenient truth that the significant margin. Some might argue offshore centres targeted through this that this was part a textbook exercise process were not, in fact, the rogue, money in economic/political machiavellianism laundering and tax evading capitals of the designed to maintain the pound’s weakness world the OECD indicated they were. and, therefore, the domestic export and Travers believes that this process will reveal tourism sectors. Others might just think the ‘not so hidden agenda’ of the OECD, that this was a Government fast losing namely the achievement of a one size fits all, control of its economy and being overly global tax system and, furthermore, lead to frank about it! an eventual dwindling of support for its To aid him in his smugness, however, the work as this objective becomes clearer.

OECD’s Secretary General can also claim, Travers further believes that the OECD will

AIFM DIRECTIVE IMPLICATIONS:

by Joey Garcia

find itself embarrassingly short of teeth when the time comes to target Beijing and other centres paying not even lip service to the international pressure in respect of the exchange of tax information.

across the EU, but this might not be an option for most smaller managers currently operating within the EU who will face a different set of implications and potential restrictions.

Whatever one’s views on the OECD’s objectives, compliance is key if the level playing field is to be achieved. Switzerland has recently entered into an agreement with the UK and Gibraltar continues apace with its efforts to comply. As at the date of writing, Gibraltar has entered into seven agreements with various countries, just five short of the magic number twelve, following which, Gibraltar will be placed on the white list of jurisdictions by the OECD. It is expected, following the most recent signing with Denmark, that the remaining five agreements will follow briefly with Sweden, Finland and the other Nordic economies.

Marketing Non-European Funds in Europe

We are well on our way and will shortly achieve the objective of being white-listed by the OECD, a status which will vindicate all the work done by the local industry in complying with European and worldwide directives in relation to money laundering and tax evasion. Gibraltar’s continued presence on the white list is, by virtue of the hard work put in by all those involved and the dedication to enjoying business on a level international playing field, virtually guaranteed.

The classic scenario might be of a smaller manager managing a Cayman Island hedge fund, or a Jersey limited partnership property fund (Non-EU). If the Directive were to come into force in 2011 as proposed, rules on non-European funds and non-European managers would come into effect three years later in 2014. Until then, existing rules will continue to apply, for example, marketing on the basis of the private placement regime (if one exists) in the relevant country where the fund is being marketed. However, there is also the clear possibility that some European countries could restrict their private placement regimes in the meantime which could result in managers finding it even more difficult to market offshore funds in Europe.

The Alternative Investment Fund Directive and implications for Non-EU funds Much has been published on the newly proposed Alternative Investment Fund Directive (‘AIFM’) which if it materialises in its proposed form would affect all fund managers in Europe who manage or market a fund which is not regulated in Europe as suitable for retail sales (effectively, any non-UCITS fund). This would include not only funds in their purest form, but any arrangement that can be characterised as a ‘collective investment undertaking’ that is either managed in Europe or is seeking investors in Europe.

The burdens of the AIFM are weighty and include among other things, rules relating to suitable qualification, risk management, liquidity management, the management of conflicts, and prescriptive disclosure to potential investors while the benefit on the flip side would be easier marketing to professional investors (as defined by MiFID) but this is of little comfort to most managers.

The Commission’s justification for the directive is the management of risk arising from Alternative Investment Funds (AIF’s)

After 2014 the Directive (Article 35) provides clear limitations on the distribution of Non-EU funds. No fund domiciled outside of Europe can be marketed to any professional investor unless the country in which that fund is domiciled has signed an agreement with the relevant member state in which the marketing will take place. This agreement must comply with the standards set in Article 26 of the OECD Model Tax Convention and ensure effective exchange of information in tax matters. This is a significant burden and ultimately, European-domiciled funds, such as Gibraltar funds, could be placed at a significant advantage to their offshore counterparts.

based on recent market events and to address issues raised in previous consultations. This seems strange given that the detailed analysis of these same events (such as the Larosiere report, the Turner Review and the work produced from the G20 summit) has laid no blame for market events on hedge funds or other private pools of capital involved in the financial markets.

It is unclear why all non-UCITS funds should be affected by the directive in such a broad way and although the Commission has maintained that this is not a one size fits all approach it is difficult to envisage a scenario where those AIF’s which present very limited risks (other than to the investors in them) would not be Furthermore, Non-EU managers will not be able to rely on the private placement unintentionally ‘caught’ by the Directive. regime and will also need to be authorised The potential effects of the Directive are but this deals with a separate issue. already being felt in the industry with several of London’s largest hedge funds Gibraltar is a member of the European poised to launch onshore funds in order to Union by virtue of Article 229(4) of avoid any uncertainty. The Financial Times the Treaty establishing the European recently reported that Cheyne Capital, the Economic Community. All EU Directives £3.6bn hedge fund manager, was set to and Regulations are fully transposed into become the latest high profile London Gibraltar law. For further information on name to launch a UCITS III fund. This how your fund or business may be affected would allow the fund to operate within the by the AIFM, or on re-domiciliation existing European regulatory framework for procedures, contact Joey Garcia an investment vehicle that can be marketed joey.garcia@isolas.gi.

SEPTEMBER 2009

ISSUE 5

SPRINGBOARD INJUNCTIONS FOR BAD LEAVERS not subject to any restrictive covenants.

G obtained an interim injunction against W and the case went to trial.

by Steven Caetano

The Judge found that W breached his fiduciary duty to G by failing to alert it that he was threatening to compete with them by approaching their customers and taking confidential documents with him.

G was therefore restrained from any competing activity for 12 months after his resignation.

This decision is a helpful one for companies whose former directors or senior employees set up new business in competition with them in four main aspects: 1. It adds two matters to the list of relevant principles to be applied by a court in cases where a company seeks to restrain the activities of a former director or senior manager in the absence of restrictive covenants cases (see Foster Bryant Surveying Limited v Bryant [2007] 2 BCLC 239) namely: (i) it is impermissible to copy or take documents belonging to the company with a view to using them to compete with the company after the relationship has ended and (ii) a director is obliged to alert the company to any nascent threat to its business, even if he is himself part of that threat; When a senior executive leaves your company and takes with him valuable information and contacts, to help him in a new and competing business, there is no time to waste if you want to get a “springboard injunction” to prevent that person and his new business unfairly taking advantage of information and contacts belonging to the company.

Restrictive covenants and confidentiality provisions in a contract of service or employment are the first line of defence for any prudent employer. But if it is clear that the person leaving was actually a “fiduciary” occupying a senior position such as a director (whether formally appointed to the Board or not) then an employer may rely on a whole new series of options to protect company interests, not just against the leaving executive occupying a fiduciary position as regards the company, but also against anyone knowingly assisting him.

2. It finds that the nature of the conduct the company or has taken with him a of a fellow employee which gives rise to project or opportunity that he acquired a duty to report on the part of the and incubated whilst working with the company director need not itself be company, the courts will bend over such as would amount to a breach of backwards to restrain the fiduciary that employee’s duty of fidelity; from taking advantage of the 3.

It provides guidance as to exactly information/business opportunity that he when, and how, a director crosses the took with him. The recent UK decision in line into impermissible activity whilst the case of Attwood v Woodward below preparing to compete with his former shows that the courts continue to take a employer/company - for example, hard line against “fiduciaries” that cross the when the possibility of contracts with line in these circumstances, something the new company was discussed with which, sadly, is very common. the old company’s customers; and The recent Judgment in G Attwood Holdings Limited and Another v Gordon 4. It shows the Court imposing a Springboard Injunction of as long as Woodward and Others [2009] EWHC one year despite the absence of any 1083 (Ch) can be summarized as follows: such restrictive covenants in the W, a former director of G, a company express terms of employment of that supplying technical personnel to the US former director or senior executive.

Government, took steps to set up a

competing company and took other preparatory steps to promote his new business whilst still a director of G. Where the “fiduciary” has either started W then left and took a number of setting up his new business before leaving confidential documents with him. W was

It is obvious then that, as regards to threats to existing companies from elements within eventually looking to establish themselves as competitors, the law is no slouch.

ON THE WHITE ROAD?

by Selwyn Figueras

The OECD’s Secretary General, Angel Gurria, is, by all accounts, having a pretty good run of form recently. In the last few days he’s had the opportunity of revealing to the financial world at large that the major economies of the world excluding, not surprisingly, the UK, are now on the road to recovery. As common sense no doubt dictates he did encourage governments to continue to take measures to stimulate their economies to minimise rising unemployment and other ill-effects of the crisis/turnaround.

in respect of the OECD’s objective of eradicating banking secrecy laws and tax evasion, that ‘we have delivered more in 10 months than we achieved in 10 years.’

Spurred on by German and US authorities’ attacks on Liechtenstein and Switzerland, the OECD has seen a dramatic increase in the number of model tax information agreements signed between member countries and so-called ‘tax havens’ currently on the grey list of countries committed to achieving the standard.

Whilst Mr Gurria heralds ‘the end of an era I say ‘not surprisingly’ in respect of the of banking secrecy as a shield for tax havens’ downgrading of the UK’s status in the others aren’t quite as impressed.

OECD’s survey because throughout the Anthony Travers, Chairman of the Cayman crisis, if there’s been any bad economic news Islands Financial Services Association coming out of Europe, British Ministers believes that the news that the OECD’s and spokespersons have typically fallen over newly announced global monitoring and themselves to claim, later the same day, peer review process, to ensure that members that however bad the European news may implement their commitments, will only be, the UK is always worse off by a reveal the inconvenient truth that the significant margin. Some might argue offshore centres targeted through this that this was part a textbook exercise process were not, in fact, the rogue, money in economic/political machiavellianism laundering and tax evading capitals of the designed to maintain the pound’s weakness world the OECD indicated they were. and, therefore, the domestic export and Travers believes that this process will reveal tourism sectors. Others might just think the ‘not so hidden agenda’ of the OECD, that this was a Government fast losing namely the achievement of a one size fits all, control of its economy and being overly global tax system and, furthermore, lead to frank about it! an eventual dwindling of support for its To aid him in his smugness, however, the work as this objective becomes clearer.

OECD’s Secretary General can also claim, Travers further believes that the OECD will

AIFM DIRECTIVE IMPLICATIONS:

by Joey Garcia

find itself embarrassingly short of teeth when the time comes to target Beijing and other centres paying not even lip service to the international pressure in respect of the exchange of tax information.

across the EU, but this might not be an option for most smaller managers currently operating within the EU who will face a different set of implications and potential restrictions.

Whatever one’s views on the OECD’s objectives, compliance is key if the level playing field is to be achieved. Switzerland has recently entered into an agreement with the UK and Gibraltar continues apace with its efforts to comply. As at the date of writing, Gibraltar has entered into seven agreements with various countries, just five short of the magic number twelve, following which, Gibraltar will be placed on the white list of jurisdictions by the OECD. It is expected, following the most recent signing with Denmark, that the remaining five agreements will follow briefly with Sweden, Finland and the other Nordic economies.

Marketing Non-European Funds in Europe

We are well on our way and will shortly achieve the objective of being white-listed by the OECD, a status which will vindicate all the work done by the local industry in complying with European and worldwide directives in relation to money laundering and tax evasion. Gibraltar’s continued presence on the white list is, by virtue of the hard work put in by all those involved and the dedication to enjoying business on a level international playing field, virtually guaranteed.

The classic scenario might be of a smaller manager managing a Cayman Island hedge fund, or a Jersey limited partnership property fund (Non-EU). If the Directive were to come into force in 2011 as proposed, rules on non-European funds and non-European managers would come into effect three years later in 2014. Until then, existing rules will continue to apply, for example, marketing on the basis of the private placement regime (if one exists) in the relevant country where the fund is being marketed. However, there is also the clear possibility that some European countries could restrict their private placement regimes in the meantime which could result in managers finding it even more difficult to market offshore funds in Europe.

The Alternative Investment Fund Directive and implications for Non-EU funds Much has been published on the newly proposed Alternative Investment Fund Directive (‘AIFM’) which if it materialises in its proposed form would affect all fund managers in Europe who manage or market a fund which is not regulated in Europe as suitable for retail sales (effectively, any non-UCITS fund). This would include not only funds in their purest form, but any arrangement that can be characterised as a ‘collective investment undertaking’ that is either managed in Europe or is seeking investors in Europe.

The burdens of the AIFM are weighty and include among other things, rules relating to suitable qualification, risk management, liquidity management, the management of conflicts, and prescriptive disclosure to potential investors while the benefit on the flip side would be easier marketing to professional investors (as defined by MiFID) but this is of little comfort to most managers.

The Commission’s justification for the directive is the management of risk arising from Alternative Investment Funds (AIF’s)

After 2014 the Directive (Article 35) provides clear limitations on the distribution of Non-EU funds. No fund domiciled outside of Europe can be marketed to any professional investor unless the country in which that fund is domiciled has signed an agreement with the relevant member state in which the marketing will take place. This agreement must comply with the standards set in Article 26 of the OECD Model Tax Convention and ensure effective exchange of information in tax matters. This is a significant burden and ultimately, European-domiciled funds, such as Gibraltar funds, could be placed at a significant advantage to their offshore counterparts.

based on recent market events and to address issues raised in previous consultations. This seems strange given that the detailed analysis of these same events (such as the Larosiere report, the Turner Review and the work produced from the G20 summit) has laid no blame for market events on hedge funds or other private pools of capital involved in the financial markets.

It is unclear why all non-UCITS funds should be affected by the directive in such a broad way and although the Commission has maintained that this is not a one size fits all approach it is difficult to envisage a scenario where those AIF’s which present very limited risks (other than to the investors in them) would not be Furthermore, Non-EU managers will not be able to rely on the private placement unintentionally ‘caught’ by the Directive. regime and will also need to be authorised The potential effects of the Directive are but this deals with a separate issue. already being felt in the industry with several of London’s largest hedge funds Gibraltar is a member of the European poised to launch onshore funds in order to Union by virtue of Article 229(4) of avoid any uncertainty. The Financial Times the Treaty establishing the European recently reported that Cheyne Capital, the Economic Community. All EU Directives £3.6bn hedge fund manager, was set to and Regulations are fully transposed into become the latest high profile London Gibraltar law. For further information on name to launch a UCITS III fund. This how your fund or business may be affected would allow the fund to operate within the by the AIFM, or on re-domiciliation existing European regulatory framework for procedures, contact Joey Garcia an investment vehicle that can be marketed joey.garcia@isolas.gi.

ISSUE 5

SEPTEMBER 2009

HISTORY AND PROFILE OF THE FUNDS TEAM

by Joey Garcia

ISSUE 5

SEPTEMBER 2009

ISOLAS IS PROUD TO WELCOME... KARL TONNA Karl was called to the Bar in 2002. He has been an Associate in the Commercial and Litigation Departments of a local law firm and has wide-ranging experience on different transactions, including corporate restructures, acquisitions and general civil and international funds litigation.

Gibraltar’s position as a rapidly growing jurisdiction for Funds has been well recognised and ISOLAS have been on the front of this development. Our position within the EU, and the advantage of working within a jurisdiction that is highly regulated, operating internationally recognised and EU standard anti-money laundering and Organisation for Economic Co-operation and Development (‘OECD’) conventions, makes Gibraltar a very attractive alternative funds jurisdiction within Europe.

The Experienced Investor Fund (EIF) regime was launched in 2005 and has seen many other jurisdictions follow suit with similar styled products. The speed and ease of set up along with the degree of flexibility that the EIF allows makes it an excellent alternative/hedge fund/private equity/property vehicle. EIF’s can also be structured as protected cell companies under the Gibraltar Protected Cell Companies Act 2001. This allows for a single corporate body, with an internal ‘umbrella’ structure consisting of any number of subdivisions that allow for the legal segregation of assets and liabilities into different Cells allowing for multiple strategies.

ISOLAS have advised private clients, family offices and an international base of investment managers on the structuring and set up of Gibraltar based fund solutions. We are regarded as one of the leading Fund teams in Gibraltar, offering a first class and personal service while also developing synergies with our clients in the Funds sector. Our team is able to advise on all aspects of a fund set up and to assist in taking any project from concept through to launch and beyond as well as being able to act as a central reference point for all counterparties to make the procedure seamless. ISOLAS have also advised international firms on Gibraltar fund related issues, and on the promotion of collective investment schemes in Gibraltar as well as the effect of the newly proposed Alternative Investment Fund Manager Directive.

SEPTEMBER 2009

ISSUE 5

www.gibraltarlawyers.com

In addition to his legal training and insurance qualifications, Karl has also had four years industry experience as Managing Director of a leading Gibraltar-based Insurance Broker. The rise in personal injury claims in the past decade has given Karl a unique outlook of the real issues for both claimants and defendant insurers. Karl has also garnered firsthand experience of the range of issues a local business may face and is thus well placed to provide thorough yet sensible advice. Karl is an active member of The Round Table Gibraltar.

Communiqué Introduction

The rise in personal injury claims in the past decade has given Karl a unique outlook of the real issues for both claimants and defendant insurers.

Welcome to our September edition of the Communique. In this edition a variety of subjects of importance have been covered by our lawyers: Selwyn Figueras explains how the Gibraltar Government’s efforts are driving the jurisdiction on course and on schedule for the placement of Gibraltar on the OECD’s white list of companies complying with the internationally agreed tax standard. Steven Caetano covers the principles and use of injunctions in respect of executives starting up in similar businesses on their own in the absence of restraint of trade clauses. The third and last item on the professional front is an explanation by Joey Garcia of our funds team and the impact of the Alternative Investment Fund Managers directive on the funds industry in both a global and local sense.

Up and coming events Date

Event

Location

October 2009

Gibraltar, London Day

London

October 2009

ISOLAS Charity Cycle

Portugal - Gibraltar

September/October 2009

Switzerland Seminars Week

Switzerland

Associated with

www.gibraltarlawyers.com Portland House Glacis Road PO Box 204 Gibraltar Tel +350 200 78363 Regulated by the Gibraltar Financial Services Commission. Licence Numbers FSC00277B FSC00276B

By Christian Rocca

As you may be aware, we are looking to raise funds for a number of charities in Gibraltar and would be grateful for any support you can offer in this regard.

Polo Tournament. Our hospitality suite was well attended on all match days and the atmosphere proved warm, friendly and as casual as we had hoped. This being the September edition of the Communique, we will at the time of going to print have enjoyed our annual Golf Tournament at La Reserva in Sotogrande where a total of around fifty players will have tried their hand on a hot September’s afternoon. On one final, social note, the Cape St Vincent (Portugal) to Gibraltar Charity Cycle is now literally around the corner and final preparations are now under way. As you may be aware, we are looking to raise funds for a number of charities in Gibraltar and would be grateful for any support you can offer in this regard.

I write at the conclusion of what I hope will have been a restful summer for most of the team and what was certainly a busy social couple of months. During the month of August we had the opportunity of spending some time in a casual/informal setting at the Santa Margarita Polo Club as we watched Finally, I have the great pleasure of the teams vie for the silverware in the Annual welcoming Karl Tonna onboard, a lawyer

joining our firm as an associate about whom you can read on the back page and who I am certain will prove to be a valuable addition to the team here at ISOLAS as we continue to develop and look for ways of providing the service of which we are so proud.

In this issue Page

1. Introduction 2. Springboard Injunctions for Bad leavers 3. On the White Road 4. AIFM Directive Implications 5. History and Profile of the Funds Team 6. ISOLAS welcome...

ISSUE 5

SEPTEMBER 2009

HISTORY AND PROFILE OF THE FUNDS TEAM

by Joey Garcia

ISSUE 5

SEPTEMBER 2009

ISOLAS IS PROUD TO WELCOME... KARL TONNA Karl was called to the Bar in 2002. He has been an Associate in the Commercial and Litigation Departments of a local law firm and has wide-ranging experience on different transactions, including corporate restructures, acquisitions and general civil and international funds litigation.

Gibraltar’s position as a rapidly growing jurisdiction for Funds has been well recognised and ISOLAS have been on the front of this development. Our position within the EU, and the advantage of working within a jurisdiction that is highly regulated, operating internationally recognised and EU standard anti-money laundering and Organisation for Economic Co-operation and Development (‘OECD’) conventions, makes Gibraltar a very attractive alternative funds jurisdiction within Europe.

The Experienced Investor Fund (EIF) regime was launched in 2005 and has seen many other jurisdictions follow suit with similar styled products. The speed and ease of set up along with the degree of flexibility that the EIF allows makes it an excellent alternative/hedge fund/private equity/property vehicle. EIF’s can also be structured as protected cell companies under the Gibraltar Protected Cell Companies Act 2001. This allows for a single corporate body, with an internal ‘umbrella’ structure consisting of any number of subdivisions that allow for the legal segregation of assets and liabilities into different Cells allowing for multiple strategies.

ISOLAS have advised private clients, family offices and an international base of investment managers on the structuring and set up of Gibraltar based fund solutions. We are regarded as one of the leading Fund teams in Gibraltar, offering a first class and personal service while also developing synergies with our clients in the Funds sector. Our team is able to advise on all aspects of a fund set up and to assist in taking any project from concept through to launch and beyond as well as being able to act as a central reference point for all counterparties to make the procedure seamless. ISOLAS have also advised international firms on Gibraltar fund related issues, and on the promotion of collective investment schemes in Gibraltar as well as the effect of the newly proposed Alternative Investment Fund Manager Directive.

SEPTEMBER 2009

ISSUE 5

www.gibraltarlawyers.com

In addition to his legal training and insurance qualifications, Karl has also had four years industry experience as Managing Director of a leading Gibraltar-based Insurance Broker. The rise in personal injury claims in the past decade has given Karl a unique outlook of the real issues for both claimants and defendant insurers. Karl has also garnered firsthand experience of the range of issues a local business may face and is thus well placed to provide thorough yet sensible advice. Karl is an active member of The Round Table Gibraltar.

Communiqué Introduction

The rise in personal injury claims in the past decade has given Karl a unique outlook of the real issues for both claimants and defendant insurers.

Welcome to our September edition of the Communique. In this edition a variety of subjects of importance have been covered by our lawyers: Selwyn Figueras explains how the Gibraltar Government’s efforts are driving the jurisdiction on course and on schedule for the placement of Gibraltar on the OECD’s white list of companies complying with the internationally agreed tax standard. Steven Caetano covers the principles and use of injunctions in respect of executives starting up in similar businesses on their own in the absence of restraint of trade clauses. The third and last item on the professional front is an explanation by Joey Garcia of our funds team and the impact of the Alternative Investment Fund Managers directive on the funds industry in both a global and local sense.

Up and coming events Date

Event

Location

October 2009

Gibraltar, London Day

London

October 2009

ISOLAS Charity Cycle

Portugal - Gibraltar

September/October 2009

Switzerland Seminars Week

Switzerland

Associated with

www.gibraltarlawyers.com Portland House Glacis Road PO Box 204 Gibraltar Tel +350 200 78363 Regulated by the Gibraltar Financial Services Commission. Licence Numbers FSC00277B FSC00276B

By Christian Rocca

As you may be aware, we are looking to raise funds for a number of charities in Gibraltar and would be grateful for any support you can offer in this regard.

Polo Tournament. Our hospitality suite was well attended on all match days and the atmosphere proved warm, friendly and as casual as we had hoped. This being the September edition of the Communique, we will at the time of going to print have enjoyed our annual Golf Tournament at La Reserva in Sotogrande where a total of around fifty players will have tried their hand on a hot September’s afternoon. On one final, social note, the Cape St Vincent (Portugal) to Gibraltar Charity Cycle is now literally around the corner and final preparations are now under way. As you may be aware, we are looking to raise funds for a number of charities in Gibraltar and would be grateful for any support you can offer in this regard.

I write at the conclusion of what I hope will have been a restful summer for most of the team and what was certainly a busy social couple of months. During the month of August we had the opportunity of spending some time in a casual/informal setting at the Santa Margarita Polo Club as we watched Finally, I have the great pleasure of the teams vie for the silverware in the Annual welcoming Karl Tonna onboard, a lawyer

joining our firm as an associate about whom you can read on the back page and who I am certain will prove to be a valuable addition to the team here at ISOLAS as we continue to develop and look for ways of providing the service of which we are so proud.

In this issue Page

1. Introduction 2. Springboard Injunctions for Bad leavers 3. On the White Road 4. AIFM Directive Implications 5. History and Profile of the Funds Team 6. ISOLAS welcome...