2012 has been an eventful year for Mourant Ozannes. The firm moved into new premises in Camana Bay and expanded its Cayman offering. It also opened new offices in Hong Kong and the BVI. This year Mourant Ozannes plans further development in Cayman. Cayman managing partner Neal Lomax discusses some of the business issues of 2013.
First and foremost Mourant Ozannes aims to continue to build greater critical mass in Cayman and to increase its market share. Lomax expects to see growth across the firm’s core practice areas of funds, finance and commercial litigation. Geographically Asia and Latin America remain the main growth regions which will yield increased volumes of work, he says.
In the long term, new business opportunities will emerge in response to what is happening onshore.
The international pressure on offshore financial centres and low tax jurisdictions, at a time when onshore countries are becoming increasingly desperate for tax revenues, is often regarded as undermining of the long-term future of the Cayman Islands financial services industry and the longevity of an economic and business model based on tax neutrality.
Lomax, however, does not think a transformation of Cayman’s economic model is likely. “I don’t expect a movement away from a tax neutral model. Tax neutral jurisdictions like Cayman are needed to encourage investment and business development in high tax countries.”
Rather than inhibiting the development of offshore financial centres, regulatory initiatives onshore will lead to financial innovation offshore, he believes.
“I expect regulation in onshore jurisdictions, for example the EU Alternative Investment Fund Managers Directive and the Foreign Account Tax Compliance Act, to be a key driver for innovation in Cayman.”
Lomax also anticipates global economic conditions to have a knock-on effect on the Cayman economy. Although it is a difficult time of year to try and crystal ball gaze given the uncertainty around the fiscal cliff in the US and the future of the euro in Europe, he says, “if the fiscal cliff is avoided and the euro zone experiences a period of relative calm then that may have a positive impact on the economy in Cayman and globally in 2013.”
However, Lomax is concerned about growing operational costs in Cayman. “There is a danger that business will start to gravitate elsewhere in the future if the cost of doing business in Cayman is perceived to be uncompetitive,” he warns.
Lomax refers specifically to the costs faced by clients when setting up structures or using services in the Cayman Islands rather than the provision of Cayman legal services from other jurisdictions. 2012 saw some debate about the difficulties Cayman will have to attract talent to the financial services industry and the pressure to outsource certain services for cost reasons.
When the draft Legal Practitioners Bill was presented in December 2012 the role of overseas offices of Cayman law firms practising Cayman law was conflated in the argument.
The government cited some Caymanian attorneys who expressed concerns about the ability of law firms to operate satellite offices abroad. The claim was that Cayman legal services could potentially be outsourced and solely provided from other countries.
Lomax says Mourant Ozannes’ Hong Kong office for example will attract more business to Cayman. “Overseas offices of Cayman law firms are designed to promote the growth of the Cayman offices by referring work back to Cayman. The idea is not to do work in overseas offices that could be done in Cayman. That would not make economic sense as the cost of doing business in a jurisdiction like Hong Kong is far higher than the cost of doing business in Cayman.”
The purpose of overseas offices is rather to provide a better quality of service and to tap into potential new business.
“In order to be competitive, it’s essential that we are able to interact with clients in time zones that are convenient to them,” Lomax explains.
The opening of Mourant Ozannes’ office in the BVI in turn was in some respects ancillary to the opening in Hong Kong as Asian clients have historically favoured BVI vehicles for certain structures and transactions. In some cases these structures combine Cayman and BVI entities.
Overseas offices will also offer valuable training opportunities for Caymanians, Lomax adds.
“We view the training and development of Caymanians as being extremely important. Overseas offices give Caymanian lawyers the opportunity to work and gain experience in leading financial jurisdictions overseas.”
Immigration and politics
One crucial item on the political agenda for 2013 is the review of immigration rules and specifically the future of the rollover policy. The existing suspension of the term limit is going to end in October 2013.
“I’d hope that any future immigration changes will attract more business to establish a presence in Cayman and encourage those businesses that already have a presence here to expand their offering,” Lomax says. “A sensible immigration regime is absolutely critical for our business and for the financial services industry as a whole.”
Meanwhile the political turmoil in 2012 certainly had an effect on the political landscape in Cayman. But its impact on international business and potential reputational damage is still not clear.
“It may be too early to assess this properly,” says Lomax. “However, the vast majority of our clients are highly sophisticated and understand that the Cayman financial services industry is not affected by changes in government leadership,” he states, echoing a common view in the financial services industry in Cayman.