Offshore: Caribbean calling

UK offshore law firms are increasingly offering British Virgin Islands and Cayman Islands legal services from Caribbean offices or their Crown dependency bases. LB assesses the changing landscape of the Caribbean legal market

UK-based offshore law firms have been enjoying a Caribbean sojourn this year. In June Carey Olsen announced it would be opening an office in the Cayman Islands; Bedell Cristin established its British Virgin Islands (BVI) office at the start of 2012; while Mourant Ozannes launched in the BVI in September.

In recent years, traffic largely went in the other direction, with certain Caribbean-based global offshore firms moving into the UK Crown dependencies. Cayman-based Walkers is in Jersey and the Isle of Man (IOM) and Appleby, originally from Bermuda, has a presence in all three Crown dependencies. Additionally, Walkers and Maples and Calder have been in Dublin since 2010 and 2006 respectively.

Yet this is not the first time that Channel Islands firms have gone to the Caribbean. Ogier created the first transatlantic offshore law firm when it merged with Cayman’s Boxalls in 2004, before merging with BVI and Hong Kong-based outfit WSmith in 2007; and Jersey firm Mourant du Feu & Jeune – now Mourant Ozannes – joined forces with Quin & Hampson in 2007 to develop a Cayman presence.

The onshore world is also joining in. US litigation boutique Kobre & Kim opened BVI and Cayman offices in May and June this year, while Dillon Eustace became the first Irish firm to move into an offshore territory when it opened in Cayman in April.

The arrival of outside legal practices to Cayman’s legal market is testament to the sustainability of Cayman as a funds jurisdiction and the demand for Cayman-based legal services. And with approximately 500,000 active, registered businesses on the island, it is unsurprising that the BVI also attracts new entrants.

Some market commentators are asking whether Bermuda is the next target for incoming offshore practices. But it is not just outsiders stepping up their Caribbean presence: the market is awash with partner movements, as established Caribbean firms also expand both in Cayman and the BVI.

Client demand

A formal launch of Carey’s Cayman office took place in September 2012. ‘We didn’t want to launch the office until we first had significant depth on the ground,’ says Jersey-based managing partner, Alex Ohlsson.

The launch was in response to client demand, partly to provide a multijurisdictional funds offering. A large number of Cayman funds have Jersey or Guernsey managers and the financial services promoters expect their legal advisers to be multijurisdictional in the same way that they are. ‘We also realised that there was strong demand from the Middle
East and the Far East for both Cayman and BVI legal services,’ says Ohlsson. ‘To capture offshore work generally, you must offer Cayman and BVI services.’ In response, Ohlsson adds that Carey’s clients have been very encouraging.

Opening a new office is always a significant, administrative challenge: Carey planned it
for six months before making the announcement. However, the process turned out to be relatively straightforward. ‘And I have to say that the Cayman authorities have been very welcoming to us as a new entrant,’ says Ohlsson.

The Cayman team includes partners Jarrod Farley, Nick Bullmore and Anthony McKenzie. Farley and Bullmore joined from Maples and Calder, where they were partner and associate respectively, while McKenzie arrived from Allen & Overy in Perth, having previously worked as an investment funds attorney at Maples’ Cayman office between 2007 and 2010. At the end of November, former Maples partner Jason Allison will also join the team. The group currently focuses on corporate, funds and finance matters and may add litigation capabilities in time, if the demand is there.

‘Cayman is a thriving offshore centre and there are plenty of opportunities for offshore firms to develop business there’

‘We welcome new entrants to the market,’ says Ingrid Pierce, a Cayman-based partner at Walkers. ‘It is always good to have competition, provided everyone is delivering a quality product. This jurisdiction demands it and our clients should expect no less.’

Peter Bubenzer, Appleby’s Bermuda-based group chairman, is also pleased to see other firms growing their businesses in Cayman, and wishes these firms well. ‘Cayman is a thriving offshore centre and there are plenty of opportunities for offshore firms to develop business there,’ he says. ‘Anything that further improves the level of professional services in Cayman is good for clients and for the development of the jurisdiction’s business.’

Ohlsson acknowledges that firms like Walkers and Maples are likely to continue to dominate the Cayman funds market in the near future. ‘We are there primarily to service our existing client base and to build from there,’ he says.

Virgin territory

The BVI is another popular destination for investors doing deals involving offshore targets.

Bedell Cristin launched its BVI presence in February through Jersey-based partner Simon Pascoe – who joined in 2005 from Walkers, where he was BVI managing partner – and Alasdair Hunter. Stephen Adams arrived in the new office from BVI firm Barker Adams at the start of the year, before relocating to Singapore this summer (see ‘Asia bound’, page 84).

Bedell’s offering includes BVI corporate, finance and investment funds law, joint ventures, BVI banking and capital markets.

Explaining Mourant’s September 2012 launch, Rachael McDonald, who joined from Ogier’s BVI office one month earlier as BVI corporate head, tells LB that the firm is seeing increasing demand from clients and intermediaries for BVI legal services.

In response to this demand, especially in the areas of corporate, banking and finance, and litigation, Mourant is committed to establishing a top-tier legal practice in the BVI to service its international and local client base. The BVI office will also be fully integrated with the firm’s Hong Kong-based BVI practice.

Shaun Folpp, a contentious and non-contentious insolvency specialist, joined Mourant’s BVI office from Ogier in Cayman and BVI-qualified partner Michael Williams will shortly relocate from Jersey to become BVI managing partner.

Mourant’s greatest challenge was opening amid the current economic conditions. ‘But we are confident that we will build a successful BVI practice in the coming years,’ says McDonald.

According to McDonald, a leading offshore law firm such as Mourant establishing an office in the BVI is viewed locally as a tremendous endorsement to the island as an offshore financial centre. Moreover, Mourant’s clients are delighted that the firm offers the choice of BVI, Cayman, Guernsey or Jersey law or, where a transaction demands it, advice on all those laws.

‘As a jurisdiction your ability to grow is dependent upon having key market players participating,’ says Harneys’ Cayman-based partner Joss Morris. ‘Most of the other major offshore law firms have helped develop and strengthen the jurisdiction when they opened in BVI. Obviously, we hope that Mourant will too.’

The new Cayman and BVI offices will need time to build up a track record in the local markets and the depth of resource to provide the right level of service, according to Walkers’ Pierce. The cost of doing business is also a factor. ‘But we are sure that these firms have done their homework and will be up to meeting the challenges,’ she says.

Home front

Carey is also offering BVI law capability, primarily from Guernsey through dual-qualified Guernsey and BVI law partner Andrew Boyce. Boyce previously worked at Farara George-Creque & Kerins (now Farara Kerins – Barristers & Solicitors) in the BVI.

‘By adding BVI legal services, we have filled out our Jersey and Guernsey service offering,’ says Ohlsson, meeting demand from a number of the firm’s fiduciary clients in the Channel Islands who tend to use BVI vehicles.

There are no current plans to launch an actual BVI presence, although this is an option if Carey decides to extend the service. ‘We are focused on our core jurisdictions,’ says Ohlsson. ‘Unlike certain offshore law firms, we do not have a multijurisdictional approach when it comes to opening up foreign offices.’ Cayman was specifically targeted because it was client-driven.

Because the widespread use of BVI companies has led to an increasing requirement for BVI legal advice around the globe, Appleby, which established its BVI office in 2005, now also offers BVI advice in the UK. In early 2012, the firm brought together seven of its BVI-qualified lawyers to make up an IOM legal team – including IOM corporate and commercial head Nick Verardi, and former Harneys senior associate Kyle Sutherland – that provides BVI legal services in a GMT time zone.

Appleby’s BVI offering in Europe came into play this year when Playtech, the world’s largest publicly traded online gaming software and services supplier, redomiciled from the BVI to IOM. Verardi led the IOM team; in the BVI, Appleby’s BVI corporate and commercial group head, Michael Burns, led the advice.

‘I would expect new offshore law firm entrants to start looking at Bermuda, not just for the insurance sector, but also to make inroads into the US market’

Similarly Walkers, which has operated a BVI office since 2002 and has been in Cayman since the 1960s, taps into its resources in those offices when it wants to offer Caribbean legal services from Jersey. Corporate and finance group partner Jack Boldarin, who practises both BVI and Cayman law, spent several years in the firm’s BVI and Cayman offices, and led the corporate and finance group in the BVI for three years before relocating to Jersey in 2009.

In April Boldarin’s team advised BVI-based Altimo, a Russian telecoms investment company, on the BVI aspects of the $8.5bn restructuring of Russia’s second-largest mobile phone operator, OAO MegaFon. This was the latest in a series of high-profile Russia and CIS deals involving the firm.

Alternative targets

Bermuda could be the next target. ‘I would expect new offshore law firm entrants to start looking at Bermuda, not just for the insurance sector, but also to make inroads into the US market,’ says Conyers Dill & Pearman’s Bermuda-based managing director John Collis. Beyond Bermuda’s commoditised products, the US corporate and commercial market is a significant consumer of Bermuda services.

Appleby’s Bubenzer is convinced that Bermuda would benefit from more international offshore firms marketing the jurisdiction and, as the US economy recovers and the US election passes, he anticipates more interest from large offshore firms.

Nonetheless, he does not expect Bermuda to be next on the hit list. It is still under the influence of the slow US economic recovery; consequently, prospects for the growth of a new office would be limited. ‘Of course,’ he adds, ‘I could be completely wrong and someone is about to announce something tomorrow.’

Significant movement is also occurring among established firms. Recently, an investment funds team, including BVI partner Tim Clipstone and several Cayman partners, left Walkers for Maples. Four associates joined Maples in Cayman, and the remaining six partners will join in October 2012. Clipstone moved in August, but at the time of press neither firm was able to name the other partners joining.

‘We believe that these outstanding individuals will enhance our reputation as a world-class law firm and help us to continue to grow our funds practice in Cayman,’ says Maples’ Cayman partner, Jon Fowler.

Meanwhile, Walkers relocated Tim Buckley – Dubai managing partner for the last two years – to Cayman. He now splits his time between there and Dubai, where he remains managing partner; Ashley Gunning, the Singapore managing partner since its 2009 opening, relocated back to Cayman; and recently promoted partner Michael Padarin returned from Hong Kong to Cayman in May 2012. Walkers also made promotions in its Cayman investment funds group, and hired Melissa Lim as senior counsel from Maples in August.

Walkers’ Pierce tells LB that its funds practice is stronger than ever. ‘We have a great group of partners and a deep bench of senior and junior associates; and we will continue to grow our practice organically and promote our stars.’

In addition to the recent departures of McDonald and Folpp, Ogier was hit when its former litigation head, Cayman-based Christopher Russell, joined Appleby in May
as a partner, which had already recruited Peter McMaster QC as a partner from London’s Serle Court Chambers four months earlier. Ogier responded to Russell’s departure by appointing Richard de Lacy QC, who joined from London’s 3 Stone Buildings, as head of litigation in Cayman.

According to Ogier’s Cayman managing partner, Nick Rogers, de Lacy’s appointment has been exceptionally positive. ‘To have attracted a QC of Richard’s calibre was a major coup,’ he says. ‘We now have, within our Cayman office, an acknowledged advocate from the first rank of England’s Bar. This gives our clients a valuable extra dimension to our service and potentially a competitive advantage over their adversaries. Adding this degree of experience and expertise to the senior talent we already have gives us a team of the highest calibre.’

There were also departures from Harneys’ Cayman office. Former litigation head Sarah Dobbyn departed for Stuarts Walker Hersant in 2011, while Michael Mulligan, a cross-border insolvency specialist who joined in 2011, left for Conyers’ Cayman office in August 2012.

Morris says that the recent departures had no negative impact on Harneys’ Cayman offering, either within or outside Cayman, and have been wholly outweighed by the arrival of new hires.

Overall, Harneys has beefed up its Cayman presence considerably since arriving with two lawyers in late 2008. As of July, the office fielded over 25 staff, including 18 fee-earners. Recent arrivals include senior associate Louise Groom, a Cayman law expert, joining from Walkers’ Cayman office in September 2011, and commercial litigator Alexia Adda arriving as an associate from Higgs & Johnson’s Cayman office in April 2012.

Cayman and BVI-admitted Morris is also a recent arrival, having joined the firm in May from Walkers, where he practised in its Cayman and Jersey offices for six years. He tells LB that he was drawn to Harneys in Cayman because it has demonstrated commitment to the development of its Cayman offering across all practice areas, not only through its recruitment of experienced lawyers, but also its overall client development and services offering. ‘An opportunity to join Harneys in Cayman came up that offered these characteristics in a long-established, offshore firm that has a great reputation and client base,’ he says. ‘This was the combination I was looking for.’

Healthy levels

Investing resources in the Caribbean must be matched by top-quality mandates. Cayman is currently the most popular offshore destination for investors doing deals involving offshore targets, says Stephen James, Appleby’s Cayman-based banking and asset finance global head. And while the number of Cayman deals were down in Q2 2012 on the previous year, aggregate deal value has increased; Appleby’s Q2 2012 Offshore-I report reveals that the Cayman Islands enjoyed the highest aggregate deal value during this period, with $19bn of $37bn-worth of deals, representing 51% of the total deal value of all nine offshore markets included in the report.

In the BVI, banking and finance work returned to healthy levels after a slow 2009 and 2010, according to Appleby’s Burns. In the past 12 months, he has seen new financing coming in for transactions and debt capital markets work and multijurisdictional financings have increased.

Examples of recent, high-profile deals requiring Cayman advice include Appleby’s Cayman partners, Simon Raftopoulos and Stephen James, acting as Cayman counsel to BNP Paribas in the $9.5bn sale of its diversified energy business to Wells Fargo in April. A team from Maples’ Cayman office, led by partner Matthew Gardner, acted as Cayman counsel to Wells Fargo.

Highlight transactions for the BVI include BVI company Justice Holdings completing its business combination with Burger King Worldwide Holdings, which stipulated that 3G Capital, Burger King’s principal stockholder, would receive approximately $1.4bn in cash and continue as the majority shareholder of the company. Maples’ BVI partner Richard May advised Justice Holdings; Burger King and 3G Capital were represented by Conyers’ BVI office head, Robert Briant.

Over in Bermuda, the island remains a leading offshore market for financial services transactions and home to the world’s biggest offshore insurance industry.

‘We’ve seen NASDAQ and NYSE listings pick up in Bermuda,’ says Conyers’ Collis. ‘Although funds instructions are not back to the high-flying days of 2007/08, we have experienced a retooling in the funds’ sector, with a number of exotic fund products coming onto the market.’

Standout work includes Appleby’s Bermuda partners, Judith Collis and Tonesan Amissah, acting as Bermuda counsel to Global Crossing on its $3bn, October 2011 amalgamation – structured as a share-for-share exchange – with Level 3 Communications. Conyers’ Bermuda-based director, Graham Collis, acted for Level 3.

The jury is out on Bermuda’s ability to attract outside law firms in the same way that they have flocked to Cayman and the BVI, but the Caribbean remains a top-flight destination for quality, offshore mandates. The islands’ new entrants and established players have reason to be optimistic. 

julian.matteucci@legalease.co.uk