OFFSHORE

End of the storm?

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The Caribbean is used to coping with crises and has not been immune to the impact of Covid-19. LB assesses the reaction from the local legal market AMY ULLIOTT

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he Caribbean’s oshore financial centres have faced their fair share of challenges in recent years thanks to the increased international scrutiny of the tax Thaven environments, the impact of falling oil prices and the business interruption caused by the seemingly endless cycle of hurricanes, which sees the region bear the brunt of the ever-pervasive impact of climate change. Add to that a global pandemic, and there’s certainly the potential for a substantial economic disaster. t is oen the years when there While the Covid-19 infection numbers for the Caribbean as a whole have remained are sinicant challenes low thanks to quick action by the local governments to close borders, enact market disruptions or temporary lockdowns and implement testing and contact tracing methods, the primary important global changes that impact of the coronavirus pandemic on the Caribbean is undoubtedly on tourism. For we see some of the greatest Bermuda, the British Virgin Islands (BVI) and the (Cayman), the tourism demand for top-notch legal industry contributes 28%, 52% and 70% of the average GDP respectively and figures suggest advisers.’ Jonathan Green, that, at worst, 2020 could see a 71% reduction in the number of international visitors. Maples Group With the main victims of the downturn being hotels, airlines and other service industry businesses, the region has shiŽed its eorts to focus on local residents and ‘staycations’, while several jurisdictions have also oered temporary residency permits to attract more freelance and mobile businesspeople to their shores; Bermuda is a notable example, which is advertising its Work from Bermuda Certificate, which allows workers and students to work remotely from Bermuda for a year. Caribbean territories have also utilised business continuity plans originally created to assist businesses with the aŽermath of the pandemic on business activity has been hurricanes to put themselves a step ahead ‘extraordinarily limited in reality’. As he when it comes to weathering the economic recalls: ‘Of course March was moderately storm that Covid-19 has brought. But with the scary but month on month through the year devastation of the tourism industry (including we have seen great performances from the its eect on the peak Christmas holiday businesses and by mid-September it had period) and the impact still being felt from become apparent that the world had far Hurricanes Irma and Dorian in previous years, from ended.’ it is no surprise that it has been a rough year Maples Group’s global managing partner for the region. Jonathan Green adds: ‘It is oŽen the years That being said, as is oŽen the case in when there are significant challenges, market times of substantial crisis, the law firms in disruptions or important global changes that the Caribbean’s oshore markets are doing we see some of the greatest demand for top- surprisingly well and have proven their notch legal advisers – lawyers that can really resilience. Harneys’ chair and corporate add value for their clients.’ He continues: ‘If specialist Peter Tarn states the impact of our experience is anything to go by, then the

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legal market is generally managing the impact oice, which opened in 2016 and Harneys’ extraordinarily well.’ oice in Shanghai, which was established Firms in the Caribbean were also already in 2017. ahead of the game in terms of remote With dierent parts of the world impacted working as Christian Luthi, chair of Conyers, to varying degrees at diering times, the explains: ‘From a practical perspective, legal Caribbean oshore firms with bases in and financial services were already largely locations such as Shanghai, and provided remotely so were little aected. In Hong Kong alongside their UK and European our jurisdictions of operation, the regulatory oices have been able to benefit from a authorities and the courts rapidly transitioned broader international oice network, as Tarn to remote working/remote hearings, ensuring notes: ‘Like any firm with a wide geographical that business was able to continue more or footprint it has been interesting – and helpful less as normal.’ – having dierent locations at dierent stages Ingrid Pierce, global managing partner of the virus impact and government reaction of , agrees: ‘While the eects of through the year, and slightly bizarre to the pandemic have given rise to certain have Shanghai back to ordinary operating challenges, it has reairmed the resilience of procedures at times when, say, London is our business. Our infrastructure enabled us to fully remote.’ continue to engage with clients in many of the As is the case globally, one area that is same ways as before.’ being given notable thought, however, is Another factor playing to the strengths of the question of oice space, given the now many Caribbean firms is their broad global widespread acceptance of virtual meetings footprint, with many expanding in recent and working from home. Tarn says, ‘it’s years, including Carey Olsen’s Hong Kong reached cliché proportions, but of course u

‘In our jurisdictions, the regulatory authorities and the courts rapidly transitioned to remote working/remote hearings, ensuring that business was able to continue more or less as normal.’ Christian Luthi, Conyers

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u we are thinking long and hard about the purpose of physical oices’, while Luthi adds: hile the eects o the pandemic have ‘Although most of our oices are once again open, a more flexible approach to working given rise to certain challenges, it has practices is here to stay.’ While the means and methods of advising reairmed the resilience o or bsiness the firms’ global client rosters remain fairly resilient, the type of work coming through Ingrid Pierce, Walkers the doors has seen some substantial changes and shiŽs. Unsurprisingly, restructuring work has increased across the board, and is now a mainstay practice for most firms. For and holiday business, working with Herbert Finance departments have also been Harneys, recent top-drawer work included Smith Freehills and Allen & Overy as onshore noticeably active, with refinancing advising the Virgin Group on the oshore counsel in London, while Conyers advised transactions and debt capital markets work elements of Virgin Atlantic’s £1.2bn private- Caribbean telecoms giant Digicel on its $7bn keeping local lawyers busy. In this arena, only solvent recapitalisation of its airline debt restructuring. Conyers’ Bermuda oice assisted cruise ship

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company Carnival with its private oering of $6bn in two tranches of notes in the early months of the pandemic and also handled Avalon Holdings’ two private oerings totalling $2.4bn, while the firm’s Cayman oice advised on the Cayman elements of Stonegate Pub Company’s $1.57bn bond issuance program, the largest in the UK since Virgin Media issued £1.1bn of senior secured notes in 2013. The firm’s BVI team also assisted Despegar, a leading online travel company in Latin America, with a series of financing transactions to supplement its liquidity levels. For Maples Group, its financing department has been active advising both Delta Air Lines and United Airlines on their $9bn and $6.8bn financing plans respectively, and also acted as Cayman counsel for Ninebot on the first- ever listing of Chinese depositary receipts on the Shanghai Stock Exchange science and technology innovation board. The use of special purpose acquisition companies (SPACs) – shell companies created to raise capital via an initial public oering – is becoming increasingly common, and Pierce says recent months have seen ie any rm with a wide eoraphical ‘a surge’ in work for the firm in advising on the formation of such structures. ‘Established footprint it has been interesting – and fund managers have been tapping the public markets for capital, with Oaktree, Apollo helpl havin dierent locations at and SoŽBank, among others, successfully bringing SPACs to the market,’ she notes. dierent staes o the virs impact and Walkers has also been active in advising on asset loyalty programmes, a novel way government reaction through the year.’ in which airlines are aiming to ride out the Peter Tarn, Harneys pandemic by raising capital using Cayman- domiciled loyalty programmes as security against debt. u

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u Litigation has also shiŽed focus, with pure commercial litigation taking something of a back seat to be replaced by insolvency and shareholders disputes. Christian Hay, managing partner of Collas Crill’s Guernsey oice notes: ‘Our Cayman team is all about contentious insolvency, and that is where all the work is in Cayman at the moment due to the collapse of substantial investment funds that have lots of planes flying out of them. In the BVI it’s all about shareholder disputes as companies get into trouble and the principles behind them start falling out with each other.’ Alongside changes in types of work, regions of interest have also changed for a market traditionally reliant on mandates originating from Europe and the US, two regions aected far more intensely by the pandemic than the rest of the world. According to Jason Romer, group managing partner in Collas Crill’s oice: ‘We’ve seen a lot of really interesting BVI deals coming out of Russia and the Far East. Potentially, those markets have started to pick up more than the traditional European and US markets.’ With changes rife, some aspects of the legal market have remained fairly consistent and as active as they were prior to the global lockdown. Regulatory issues have dominated discussions in the Caribbean in recent years with a wide variety of policies introduced to try to change the mindset surrounding the ‘’ status of some of the region’s jurisdictions. This culminated in 2019 with the introduction of the economic substance rules, a series of requirements for companies (primarily in the banking and financial services sectors) stating the company must have adequate expenditure, physical premises and employees in the jurisdictions it claims to do business. ‘We’ve seen a lot of really interesting This trend continued in 2020 with the Cayman Islands Monetary Authority (CIMA) BVI deals coming out of Russia and the implementing the Private Funds Law, which increases the number and types of closed- Far East. Potentially, those markets ended Cayman-based investment vehicles required to register with the CIMA. Maples have started to pick up more than the Group has been particularly active here – Green states ‘in terms of regulatory work, traditional European and US markets.’ we assisted clients in registering many Jason Romer, Collas Crill thousands of private equity funds with the CIMA. This was an enormous undertaking on an extremely compressed timetable. When one considers that it was also achieved under pandemic

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‘Our Cayman team is all about contentious insolvency, and that is where all the work is in Cayman at the moment due to the collapse of substantial investment funds that have lots of planes flyin ot o them Christian Hay, Collas Crill

operating conditions it is all the more the pandemic will only increase eorts by that jurisdictions like the BVI and Cayman are impressive’. onshore tax authorities to de-legitimise regulated very heavily, more so than onshore For some though, the continued oshore jurisdictions.’ jurisdictions.’ regulatory scrutiny is not necessarily Phillip Kite, global head of dispute always welcome. Luthi comments: resolution, insolvency and restructuring at A NEW HOPE ‘Increased regulatory scrutiny of oshore Harneys and managing partner of the firm’s This diversified oering is ultimately jurisdictions has been ongoing for several London oice, concurs: ‘Whenever there is the key to law firm survival, Luthi argues: years, regardless of the direction of the any seismic negative global event it seems ‘Firms that have a diversified practice global economy. However, it is likely that the oshore world gets blamed for it at some are better positioned to survive the impact of the financial diiculties brought about by stage in the process but it is important to note the pandemic than those with a boutique u

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Technology at the Forefront: Legal Advice Digital Solutions in the BVI Corporate & Trust Services Conyers’ Rachael Pape and Matthew Brown on the BVI Global Experience Author bios: developments that have taken place due to Covid-19 Local Knowledge Rachael Pape is When considering key trends and developments BOARD AND SHAREHOLDER MEETINGS an experienced in the legal sector in 2020, it is impossible to ignore Lockdowns and travel restrictions have associate in Proven Results the global Covid-19 pandemic and its impact on made physical meetings largely impossible, the corporate working practices around the world. The BVI has but BVI law provides an extremely flexible department of risen to these challenges thanks to its modern and approach to meetings. Subject to the Conyers in the flexible legal framework and proactive adoption requirements of their articles, BVI companies British Virgin of innovative new technology including virtual may hold board and shareholder meetings Islands. She hearings and meetings, online filing systems, and by audio or video conferencing or by way of has a broad electronic execution of documents. written resolutions which may be executed in corporate and counterparts. There is no general requirement finance practice COMMERCIAL LITIGATION for a BVI company to have an annual with particular expertise in corporate Even prior to the outbreak of the pandemic, the shareholder meeting unless required by finance and reorganisations, capital BVI Commercial Court had already moved to a its articles (which is o‡ en the case for listed markets and investment funds. Rachael system of e-litigation, allowing for electronic filing BVI companies). is recognised as a Rising Star in The Legal 500 and IFLR.

T: +1 284 852 1114 E: [email protected] YOUR Lockdowns and travel restrictions have made Matthew physical meetings largely impossible, but BVI Brown is an associate in the law provides an extremely fl exible approach litigation and restructuring to meetings. department of Conyers in the British LEGAL Virgin Islands. and service of all court documents in claims issued INCORPORATIONS AND CORPORATE FILINGS His practice a‡ er November 2018. However, as a direct result The BVI Registry’s innovative VIRRGIN online covers all of Covid-19, an emergency Practice Direction was system and the BOSS electronic platform allow contentious aspects of commercial, trusts issued in March 2020 which introduced a number corporate incorporation and other filings, and insolvency law. Since joining the firm of new measures overnight, including: including the public registration of charges and in 2017 Matthew has been involved in annual economic substance filings, to be made some of the jurisdiction’s leading cases, EXPERTS n electronic filing and service of court online, with filing fees payable by wire transfer. and has appeared in a number of cases documents in claims not already subject to in the Commercial Court and the Court of the existing e-litigation provisions; ELECTRONIC EXECUTION OF DOCUMENTS Appeal. Matthew is recognised as a Rising n remote hearings (on Zoom) as the default BVI law provides a comprehensive and Star in The Legal 500. position – the BVI court’s Zoom platform has flexible approach to electronic execution of been in operation successfully since 2017; and documents. PDF scanned copies of signatures T: +1 284 852 1121 n provision for electronic court bundles. are valid with no requirements for original E: [email protected] documents or ‘wet ink’ signatures. In addition, The court, and its legal practitioners, digital signatures (including systems such as adapted swi‡ ly and seamlessly to these Docusign) are generally permitted under BVI changes. Indeed, since March 2020, a law for documents other than deeds, wills or significant number of hearings, including the conveyance of interests in real property. for the signature to be witnessed. Provided that trials, have been conducted entirely remotely There are no requirements for documents to be the consent of the signatory is obtained, BVI law and have proved to be popular with clients legalised, notarised or apostilled and, subject also expressly permits pre-executed signature and court users alike. It is likely that remote to the company’s articles, documents (including pages (whether under hand or under seal) to hearings will remain the default position for deeds) may be executed by any one director of be attached to documents, including deeds, the foreseeable future. a BVI company without the need for a seal or governed by BVI law.

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u o ering.’ Pierce adds: ‘Law firms that were able to adapt to an agile approach to working during the early stages of the pandemic and actively supported their employees while making necessary budget cuts to adjust to a more virtual work have a good chance of survival. Firms that are less GLOBAL able to diversify may find it tough to keep their doors open.’ Likewise, firms without sound IT and operations infrastructure are likely to face more di iculties, but Green argues that ADVANTAGE TO this diversification is nothing new for Caribbean firms: ‘Operating in the Caribbean, with its annual hurricane season, for over 50 years has meant that Maples Group has always had to maintain a level of IT infrastructure and business continuity WORLD CLASS preparedness that would likely impress even the most stalwart geek’. So, what for the future? There’s no doubt that there will be notable repercussions from the pandemic that will leave a lasting CLIENTS impact. Whether it be the businesses that weren’t able to survive or the additive e ects of the pandemic on the recovery e orts from previous years’ hurricanes, the island nations certainly have their challenges to face. ‘The coronavirus pandemic will have socio- economic e ects for many years to come,’ states Luthi. ‘We will likely see continued economic turbulence for the next 12 months as the pandemic plays out, and we expect continued high demand for legal services as a result. It will likely be four-to-five years before we can anticipate a return to “normality” – assuming no other black swan event comes along meanwhile.’ However, while 2020 has thrown up myriad problems, there is a returning sense of hope. As Green states: ‘The coronavirus has challenged us to work in novel ways and, in its way, has also presented us with opportunities.’ For Pierce: ‘There are signs of light at the end of the tunnel and ‘Whenever there is any seismic negative increasing commitments from government, lobal event the o shore world ets blamed industry and citizens to work together to LEGAL SERVICES better the circumstances.’ Pierce also argues that even the pandemic has a silver for it at some stage but it is important to note FIDUCIARY SERVICES lining: ‘The pandemic has undoubtedly spurred a greater sense of community as that jurisdictions like the BVI and Cayman FUND SERVICES we continue to find ways of maintaining REGULATORY & COMPLIANCE connectivity. It has also led to unprecedented are regulated very heavily, more so than levels of innovation, with many firms Phillip Kite, Harneys ENTITY FORMATION & MANAGEMENT completely reimagining the way to stay front onshore jurisdictions.’ of mind with clients and conduct business going forward.’ LB maples.com 84 Legal Business November/December 2020

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