‘Anyone who says they’re not struggling would be lying,’ says Tim Pearce, global managing partner of Bedell Cristin, referring to the Jersey market. ‘Every sector of the economy and every business has struggled or suffered as a result of Covid, though businesses have struggled in different ways. Some financially, others socially. Others are struggling in terms of pure management. But for us, and indeed for the offshore industry as a whole, we’ve weathered the storm OK so far.’
Pearce’s cautiously optimistic outlook reverberates throughout the discussions with partners across the Bailiwicks of Jersey and Guernsey in the Channel Islands archipelago and the Isle of Man in the Irish Sea to the north – the jurisdictions collectively known as the Crown Dependencies. Unlike the UK, domestic property is booming, buoyed by numerous factors. ‘In times of crisis, people invest in what they know,’ says Pearce. ‘People are looking for safe havens right now and property in all of our offshore jurisdictions is benefiting from that.’
Guernsey in particular, due to low Covid death rates (16 at the time of writing), is being viewed as a safe haven for those in the market for a second home, further enticed by generous outdoor spaces and greater room for home working than typically found in London. Novel instances of property deals being signed off over WhatsApp have even been witnessed.
‘The local market went absolutely crazy,’ according to Collas Crill’s head of Guernsey property Jason Green. ‘Guernsey’s open market, availed to UK and EU citizens, has become much busier, with people seeing that Guernsey is a safe place to live. Once they started opening restricted business tunnels, people started coming over, viewing houses. It’s been far busier than we ever could have predicted.’
The construction sector is also reaping the benefits of the residential property boom, however commercial property hasn’t quite experienced the same windfall. Transactions are still happening though, with numerous commercial deals being signed off for over £500,000 above the asking price.
But although things are not as rosy for those practices focusing on international property deals, and corporate M&A took an inevitable hit across the board, certain core verticals are managing to sufficiently bolster full-service firm revenues. Litigation is showing no signs of slowing down, even if Covid-specific disputes are yet to arise. Somewhat surprisingly, upticks in insolvency procedures are yet to be witnessed, though partners are expecting this to change down the line.
‘Anyone who says they’re not struggling would be lying. Every sector of the economy and every business has struggled or suffered as a result of Covid.’
Tim Pearce, Bedell Cristin
Trust litigation continues to exceed expectations, according to Christian Hay, Collas Crill’s Guernsey managing partner and dispute resolution head. ‘Trust disputes have been on the up in recent years due to the transfer of wealth between generations, but now it just seems to have gone into overdrive. During lockdown, beneficiaries have perhaps had more time on their hands to assess their circumstances and the options available to them, as well to perceive unfairnesses in their situation.’
Despite the downturn in private M&A origination, corporate lawyers are not simply twiddling their thumbs waiting for things to pick up again, with maintenance work and facility amendments keeping them busy. A number of funds, including Blackstone, Legal & General and Aviva, remain acquisitive, owing to the long-term investment strategies of pension and insurance policies. Speculative money from South-East Asia and the US is also flowing in; working in tandem with Latham & Watkins, Bedell Cristin recently advised CPA Global – a portfolio technology company of US buyout firm Leonard Green & Partners – on its combination with Clarivate for an enterprise value of $6.8bn.
Further trends include an increasing interest in public takeovers, predominantly due to deflated valuations, and a relatively usual Q4 in terms of financing activity. ‘In the early stages of the pandemic, it was difficult to assess the true impact of Covid on the market,’ notes Katrina Edge, Ogier’s European head of banking and finance. ‘During the first lockdown some deals fell through, however as the year progressed and the markets remain uncertain, we are seeing some new-money deals in addition to loan extensions and covenant waivers. We expect this to continue in the near future although we are preparing for an increase in restructuring and insolvency-type work in the next 12 months.’
‘The most affluent people, those dealing in private wealth, are not touched by the current circumstances so much.’
Stephen Baker, Baker & Partners
Christopher Jones, also in Ogier’s banking and finance team, adds that ‘there is a lot of pressure on the banks at the moment not to enforce. There have been a lot of waivers on covenants, but at some point the banks will want to be repaid’.
Headline capital markets deals are also being secured, such as Guernsey-based legal finance firm Burford Capital’s listing on the New York and London exchanges; the first dual listing of its kind as handled by Ogier’s Bryon Rees and Charlotte Brown.
Local versus international
That the Crown Dependencies are a major benefactor of significant international wealth has been another saving grace. As Stephen Baker, senior partner of Jersey dispute resolution specialist Baker & Partners, simply puts it: ‘The most affluent people, those dealing in private wealth, are not touched by the current circumstances so much.’ This evidently has negative implications for firms without a significant international network to draw from, he adds. ‘I would say that the high-street solicitors have been hit very hard. Firms with a local focus will be suffering when those dealing with international money flows such as corporate, funds or banking work – or indeed litigation – are going alright.’
However Clare Nicolle, head of estate planning at Jersey-centric outfit Voisin Law, offers a similarly positive outlook, pointing to redundancy rates in fact lower than certain global firms, an employment team that saw a 100% increase in instructions this year and a booming private wealth practice spurred on as ‘everyone started facing up to their own mortality’.
Despite international money flows continuing unabated, and the local population taking advantage of looser lockdown restrictions, foreign footfall has drastically declined, which has also inevitably harmed the hotel industry. The uptick of staycationing has had a beneficial knock-on effect for Guernsey’s neighbouring island of Alderney, which ‘has had a difficult few years,’ according to Jason Green. ‘But in the past few months since lockdown, the property market has seen a bit of an upsurge, due to people looking to buy holiday homes there. And that will continue to happen in the short term.’
The Isle of Man similarly took advantage of an open airbridge between itself and Guernsey to sustain a degree of tourism revenue, made possible by similarly low infection rates. Legal market activity on the island appears to be largely positive and business as usual, according to John Aycock, contentious employment expert and director of local firm M&P Legal. ‘Our experience is that overall the market has not suffered material adverse effects from the pandemic. Some sectors have experienced growth while others have seen a slowdown. The island itself currently has no internal restrictions so domestically it is business as usual.’
The diversified Manx economy has been another driving factor behind the generally positive outlook, specifically the substantial local agricultural sector and a lower reliance on financial services than its Channel Islands cousins. Unfortunately the famous Isle of Man TT, a major source of revenue for the tourism and hospitality sectors, was inevitably cancelled in 2020 and also, just recently, the 2021 event.
Much like the Channel Islands, Manx corporate activity closely follows London trends, so there was an inevitable dip during the first lockdown, followed by a post-lockdown surge. The same can be said for the property market, with a number of high-value transactions having been signed off over the past months, driven by local demand as much as international buyers. Headline deals include the famous £6m local landmark Bishopscourt, which sold to a US couple purportedly via Skype.
Contemplating the current state of the Manx legal market, John Rimmer, sole practitioner of private client boutique Advocate John Rimmer, contemplates: ‘One would think that those most likely to get hit would be the big commercial firms like Cains and Appleby, and that’s if there’s going to be a big downturn. There are a number of smaller firms which are fairly well positioned because they handle a broad spectrum of work. Firms like Callin Wild and Long & Humphrey will likely have done pretty well because they have a good spread of different service lines.’
Largely due to Guernsey’s substantially more draconian lockdown measures, including a compulsory 14-day quarantine period for new arrivals, firms have routinely expressed frustration when it comes to sustaining quality recruitment throughout the pandemic. Nick Robison, dispute resolution partner at Guernsey firm Babbé, states: ‘That has been by far the hardest thing. We’ve had five people agree to arrive but have pulled out at the last minute. And because of the travel ban, people are reluctant to move away from their families. We’ve had someone arrive from Australia after experiencing visa issues, then when he arrived, he had to self isolate… it’s been hugely disruptive.’
‘During the first lockdown some deals fell through, however as the year progressed and the markets remain uncertain, we are seeing some new-money deals in addition to loan extensions and covenant waivers.’
Katrina Edge, Ogier
He continues: ‘While we have locked borders, we’ll find it harder to recruit, and when we find it hard to recruit, we have to recruit people of a lower standard, people we wouldn’t otherwise be hiring. And if we have people of a lower standard, we offer products of a lower standard. If we’re doing that not just as a firm but as an island, we will cease to be competitive compared to other jurisdictions that have open borders. That to me is the biggest threat to Guernsey in the short term.’
So they might be more inclined to head over to Jersey where it is more open? ‘I’ve in fact seen that. We had two lawyers who signed up to join the firm who said “no, we’re off to Jersey instead, sorry”.’
House in order
If there is one widely discussed positive development for the legal industry arising from the global pandemic, it is that of rapid technological acceleration, and the Crown Dependencies are no different in this regard. While in London remote hearings and cross examinations have received a rather cold reception from judges, the same cannot be said in the offshore world, where such proceedings have become routine, and largely seamless. Jersey’s famously high broadband speeds – consistently ranking in the top three globally – have further contributed to the seamlessness of remote working on the island.
Nicolle, who sits on the Law Society’s subcommittee for wills and succession, speaks of further innovative procedures in private client work: ‘We were really fortunate to benefit from a flexible government. We worked together to very quickly get remote witnessing of wills up and running. In England and Wales it happened maybe only a month or so ago, whereas we passed legislation in April. And that combination of work between the Law Society, the government, the court and the law draftsmen enabled us to keep business going as usual. The corporate team benefited from that team effort as well because we then brought in remote witnessing of powers of attorney, which further facilitated business, whereas the UK was probably hamstrung.’
For better or worse, the rapid expansion of remote working and increasingly sophisticated virtual networking platforms have led to a seismic shift in the way client interaction and business development are performed. According to David Pike, chief operating officer of Bedell Cristin: ‘We’ll see less of the old-fashioned way of doing things in terms of the long lunches and the dinners and the paintball sessions, which will still have its place. I can’t begin to think of when we’ll be allowed 50,000 people congregating in Cannes for MIPIM, or thousands of people in one bar again. I just don’t think that’s the world we’re going to be living in in the future.’
‘There’s a real convenience and cost efficiency from operating still face-to-face but using electronic means, now that we have the technology to do so.’
Jean-Marie Renouf, Seymour Law
But is there an appetite to make this the new normal, or is there a desire to get back to the traditional ways of interaction? Jean-Marie Renouf, dispute resolution partner at Jersey-based Seymour Law, says: ‘There’s a real convenience and cost efficiency from operating still face-to-face but using electronic means, now that we have the technology to do so.’ According to Renouf, ‘the creeping tendency towards hot-desking’ will have consequences for commercial property, with law firms and financial institutions reconsidering their expensive leases.
However, Hay says: ‘Everyone I speak to misses the face-to-face interaction. There’s nothing like sitting down together over a cold beer and getting to know each other properly. But on the other hand, we’ve saved an absolute fortune by not travelling all over the world to these conferences. So I imagine when it comes to setting budgets, we’re going to be looking really carefully whether we really need to spend a week traipsing around in business class flights for the minimal benefit you get from it.’
The surge in remote working and the associated increase in autonomous working conditions are also evolving traditional relationships between younger lawyers and senior management. Those firms adhering to old-fashioned models of micromanagement may very well want to assess whether this way of operating will serve them well in the brave new world ahead.
So while it is predominantly good news for the legal markets and economies across the Crown Dependencies, what the future holds is unknown. But what can firms do to prepare themselves for the ride?
‘While we need to deal with what’s going on now, we also need to be planning to be in good shape when we get out of it,’ says Ogier’s global managing partner Edward Mackereth. ‘Whether that’s by investing in those service lines that are going to take off in six months’ time or being part of the solution to some of the serious questions which are currently being discussed – things like the environment, on diversity, on providing meaningful 21st century careers for our people. When Covid goes away, suddenly we’re going to be faced with a whole raft of other things and now is the time to be putting your house in order.’ LB