Uncertainty Reigns in Pre Brexit Britain

Uncertainty Reigns in Pre Brexit Britain Monday, March 13, 2017 With the date for triggering Article 50 being perhaps imminent but also subject to the opposing decisions made by the House of Commons and House of Lords, for investors in the UK and those that make their living in financial markets, the future outside the European Union looks fraught with uncertainty. This uncertainty envelopes everything from the outcome of trade negotiations with every country in the world, plus the unravelling of decades of EU legislation, while it is not yet even fully clear who the UK will be negotiating its exit with, as a number of important European elections are still to be resolved. For now, the collateral damage to markets has been limited to the sharp slide in the pound, which looks increasingly comfortable at lower levels but underlines the difficulties faced by both businesses and investors in terms of making any serious plans for the future. As the relationship between the UK and the rest of Europe comes under the microscope, it is right that the impact on its Crown Dependencies and Overseas Territories is also assessed. For the Cayman Islands, the fact of the matter is that because Cayman itself was not a member of the European Union, the UK’s exit from the European Union will have little overall effect and the Cayman Islands’ long history of financial stability is a situation that is not expected to change. The greater level of uncertainty prevalent in the UK, however, is at odds with the desire for clarity and certainty in regard to investment and wealth transfer objectives, with investors’ preferring structures to be established in stable jurisdictions. Another factor set to remain in the Cayman Islands is the strong local community of financial professionals, which means investors can be assured that the legal, accounting and fiduciary talent operating there is of an equivalent standard to any major financial centre in the world. While the Cayman Islands and other Overseas Territories are a step removed from the uncertainty regarding Brexit, important links with the UK, in terms of the rule of law and the common law legal system are maintained. The strength and predictability of the financial environment in the Cayman Islands has always been one of the cornerstones of its success and that is now without any of the headaches associated with the UK’s eventual Brexit. As a tax neutral jurisdiction, no additional tax is imposed in the Cayman Islands at the level of the structure, which is a situation that is not expected to change any time, regardless of political upheavals in Cayman or the UK. As far as the UK is concerned, however, it is completely conceivable that the fiscal position will change directly as a result of Brexit and it is impossible to ascertain if that would be a positive or negative for financial asset structures already established, as well as those to be set up in the future. Notably, the creditor friendly legal system in the Cayman Islands is often considered a model, not just for the offshore world, but all financial centres. Many of the largest and most significant disputes in recent years have been litigated in the Cayman Islands, which is a testament to the high quality practitioners and widely experienced judges. A specialised Financial Services Division was introduced in the Grand Court in 2009, in recognition of the need for the judiciary to be sufficiently versed in international financial issues in order to properly deal with the complex, high value cases coming out of the financial crisis. The FSD has been a major success and the laws and rules coming out of the judgements in Cayman have underlined the quality of the jurisdiction and provides an important differentiating factor compared with the British Virgin Islands and Bermuda. With regard to trust matters, decisions from the Court have been both reasonable and highly reasoned, made with the practical interests of the trust taken into account and not just points of law. In our work, providing Trustee, Registered Office and Company Management Services, and more recently banking services, Sterling has assisted a wide range of clients to set up structures in the Cayman Islands, including corporations, family offices and high net worth individuals. In many cases both the legal system and the predictability of the financial services sector feature highly among the motivations to establish trusts and other instruments in the Cayman Islands. While uncertainty reigns in the UK regarding the outcome and further fallout from Brexit, a greater degree of predictability with Cayman Islands structures can provide welcome relief. By Tom Mylott