Publications

The Hiring Incentives to Restore Employment (HIRE) Act

On 18 March 2010, the President of the United States of America, Barack Obama, signed into law the "Hiring Incentives to Restore Employment Act".  A number of incentives are contained within the Act for boosting employment, such as payroll tax relief and business credits for "hiring and retaining unemployed workers". 

The funding for such incentives is intended to come from the "Foreign Account Tax Compliance" provisions that are set out within Title V of the Act titled "Offset Provisions". 

In a nutshell, the Offset Provisions introduce reporting requirements for foreign financial institutions in relation to United States account holders or to be subject to a 30 per cent withholding tax on various forms of transactions.  Similar provisions apply to individuals. In this briefing, Stephen Platt examines the effects of the various Offset Provisions.

The New Test for Setting Aside Trusts, when a Party is Mistaken  

The legal test in Jersey on an application to set aside a mistaken disposition into trust by a settlor has been reconsidered and overturned by Jersey’s Royal Court in an important new judgment. This will have implications for trustees and settlors alike.

The judgment means that individuals who have made a mistake as to the fiscal consequences of transferring assets into a Jersey trust are able to make an application that the transaction and the trust be set aside. The judgment also determined the issue, which had been left undetermined for some time, whether the transaction (and the trust) was rendered void from the outset or simply void from the date of the declaration by the Court.

David Wilson and Emma Jordan of BakerPlatt acted for the settlor and successfully applied to set aside the dispositions and the trust in this case. 

Winding up Fiduciaries - Considering the Clients

Jersey’s Royal Court has recently demonstrated the extent to which it is prepared to exercise its discretion in insolvency proceedings in order to help the underlying clients of a failing financial services business.

On 6 October 2009 the Jersey Court ordered the winding up of Centurion Management Services Limited ("Centurion") pursuant to Article 155 of the Companies (Jersey) Law 1991 ("the Companies Law") on the grounds that it was just and equitable to do so.

The case potentially offers a role model in terms of a board of directors working with the regulator, the prospective liquidator, the creditors and importantly a purchaser of the client entities who is prepared to be dynamic and flexible in order to wind down the financial services business in the best interests of all concerned.

BakerPlatt acted in relation to this matter.  Advocate David Wilson made the successful application to the Royal Court and Edward Shorrock, FCA, Director of Forensic and Regulatory Services, was appointed liquidator.

Saisies Judiciaires - The Lifting of Freezing Orders

In this article Ed Shorrock analyses a recent judgment concerning an application by a defendant to discharge a freezing order granted by the Jersey courts on behalf of the US Department of Justice.  In what is an important judgment which shapes Jersey’s policy towards international co-operation, it is clear that the Jersey courts will exercise their discretion in such matters and not simply rely on technical legal analysis.

Divorcing Beneficiaries - A Practical Guide for Trustees

A Jersey law trust. A Jersey corporate trustee. Divorcing beneficiaries, both of whom are resident in a foreign jurisdiction.

What should you do? What shouldn’t you do?

Joanna Woods considers three key matters; the provision of information, submission to the jurisdiction of the foreign Court and the enforcement of a judgment in Jersey, in this practical guide for trustees.

Caselaw Update March 2009

TRUSTS

The thorny issue of what a trustee must disclose at the request of any beneficiary is a topic which has received much judicial guidance over recent years. The key decision for trustees is still that of Schmidt v Rosewood [2003] UKPC 26 which imposes judicial supervision over disclosure decisions in proper cases. Two recent cases, Breakspear v Ackland [2008] EWCH 220 and Wingate v Butterfield Trust [2008] WTLR 357 give further guidance to Jersey trustees in this most difficult area.

In Breakspear v Ackland the key question was whether a letter of wishes should be disclosed. In Wingate v Butterfield, the question was whether the documents of a wholly owned subsidiary company to a discretionary trust should be disclosed.

INSOLVENCY

Article 155 of the Companies (Jersey) Law 1991 (as amended) ("the Law") provides that a company can be wound up on just and equitable grounds on the order of the court. The decision by the court to order the winding up of Poundworld on just and equitable grounds on 5 February 2009 adds to a growing body of recent authorities on the topic. What marks out the Poundworld case is that the decision of the court was
based on grounds which had not been considered previously.

Lloyds TSB busted by Uncle Sam for ’Stripping’

The U.S. Government has asserted jurisdiction over a non U.S. person for the first time and levied the largest ever penalty for violations of U.S. sanctions.

On January 9th 2009 the British Bank Lloyds TSB entered into a deferred prosecution agreement with the U.S. Department of Justice (DOJ) and the New York County District Attorney’s office (NYDA) concerning the bank’s admitted non-compliance with the OFAC sanctions regime pertaining to Iran and Sudan.

TIEAs - The Essentials

Following the announcement on 10th March 2009 of Jersey’s agreement of a Tax Information Exchange Agreement (TIEA) with the UK we have have released a Guide to TIEAs that we hope will be of interest to you.

Should you require any advice in relation to TIEAs please contact either Stephen Platt  or William Redgrave.

Mubarak v Mubarik - A Clarification of Article 47 of the Trusts (Jersey) Law 1984

The notorious litigation in Mubarak v Mubarik may finally have come to a conclusion in the Jersey Court of Appeal decision on the 19 November 2008. The judgment is the appeal against the decision in the Royal Court of the Deputy Bailiff in In the Matter of IMK Family Trust (15 August 2008). The two decisions confirm the Jersey Court’s approach to the English Family Division’s purported variation or alteration of Jersey trusts.

Caselaw Update February 2009

TRUSTS

Emma Jordan reviews the important trusts judgment in Freeman v Ansbacher, where the Deputy Bailiff of the Royal Court of Jersey has clarified the Jersey law position in relation to two points. Firstly, whether the object of a mere power has standing to sue for breach of trust against trustees. Secondly, whether the principle of ’reflective loss’ is directly applicable to a discretionary trust which wholly owns a company.

REGULATORY AND FINANCIAL CRIME
 
Financial institutions that have suspicions about funds they hold are now obliged to file a Suspicious Activity Report ("SAR"). Ever since the Proceeds of Crime (Jersey) Law 1999 came into force, long before the reporting obligation was introduced last year, filing an SAR has provided the vital comfort that if the police consent to the payment out of the funds the institution has a defence to any criminal money laundering charge. If the police refuse consent, however, the institution will invariably refuse to free up the funds.
 
In this briefing Nicholas Hills and William Redgrave outline the importance of the decision taken last week in Gichuru v States of Jersey Police [2008] JCA 163A, where the Court of Appeal confirmed that two legal avenues are available to challenge the freezing of funds in this way: civil action against the financial institution, and judicial review of the police’s refusal to consent. 

America’s New War?

As President Obama takes his seat in the Oval Office, committed to a humbler foreign policy, the drumbeats of a new American offensive, a War on Offshore, are beginning to grow louder. Unfortunately, as Ed Shorrock reveals in this briefing, the "evidence" being put forward to justify this new campaign is worryingly reminiscent of the flimsy and flawed intelligence that laid the path for the invasion of Iraq. And it is being spun by politicians, and partially reported by a lazy press, in just the same way.

Fiction Clouding Fact - A Comparative Review of Jersey’s Efforts to Counter Financial Crime 

"The financial crisis began with the collapse of the structured investment vehicles, which accountants and lawyers working offshore put together"... "transparency and openness’ are ’virtues that the offshore banking industry hates with a passion."
The Observer, 14 December 2008
 
In this briefing, Stephen Platt counters, with empirical evidence, the misplaced but increasing hostility to offshore financial centres that has intensified as a result of the global financial crisis.
 
Based on an independent review carried out by BakerPlatt, designed to discover whether there are grounds for concern so far as offshore centres are concerned, it concentrates on compliance with international standards of financial regulation and anti money laundering procedures and on the mechanisms for exchanging information in tax related matters.  It also considers whether the term ’offshore’, when intended to convey levels of compliance, regulation and co-operation, can meaningfully be applied to a diverse range of jurisdictions.

’Death by a Thousand Reviews?’

In November 2008, in their Pre-Budget Report, the British Government announced that they would be commissioning an independent Review of British financial offshore centres within the Crown Dependencies and Overseas Territories. In this briefing Stephen Platt, BakerPlatt Group Chairman, examines the possible motivation for such a review, and what its aims and parameters may be.

The ’Stop Tax Haven Abuse’ Bill

"We lose $100Bn every year because corporations get to set up mailboxes offshore so that they can avoid paying a dime of taxes in America. Imagine if you got to do that......I will shut down those offshore tax havens and corporate loopholes as President, because you shouldn’t have to pay higher taxes because some big corporation cut corners to avoid paying theirs"
Barack Obama - 22nd September 2008

Tracking polls currently give Barack Obama a 10% lead over John McCain in the race for the White House. If he enters the White House then the ’Stop Tax Have Abuse’ Bill introduced by Senate Colleague Carl Levin and publicly supported by Mr Obama may gain unstoppable momentum.

In his briefing on this impending risk, Stephen Platt examines the Bill. and argues that it goes too far.

Offshore Tax Havens are ’Al Capone Safe Houses engaged in Economic Warefare against the US’ according to US Senators

The current investigation, ’Tax Haven Banks and US Tax Compliance’, being carried out by the US Senate Committee on Homeland Security & Governmental Affairs was seething with drama last week when, on 17th July 2008, UBS, Switzerland’s biggest bank and the world’s largest manager of private wealth, announced at a hearing before the committee that it would be withdrawing provision of offshore banking and security services to US residents.

A ’White Paper’ prepared by BakerPlatt which examines the exclusion of Jersey from the latest EU White List of Equivalent jurisdictions. The White Paper is based on our detailed analysis of the compliance of those countries with international standards that made the EU White List. Our analysis is being utilised by the Society of Trust and Estate Practitioners (STEP) in its submissions to the UK Treasury Select Committee.

The Clarification of a Catch 22 Situation for Financial Institutions

In Gichuru v Walbrook Trustees (Jersey) Limited and Ors [2008] JRC 068, the Court provided useful guidance for the Catch 22 situation that arises when JFCU consent is refused following an SAR but no criminal proceedings are initiated. How should a responsible financial institution, who maintain an informal ’freeze’ on client monies in the absence of consent, respond to a legal action by the client for payment of those funds?

US Sanctions Breaches: Non-US Businesses and Reputational Risk

This article addresses the effect of US sanctions on foreign domiciled companies and other businesses. More specifically, it deals with the exposure of foreign domiciled companies to reputational risk arising out of breaches of the US sanctions regime.

The Export of US Compliance Obligations

September 11 was a seismic event. The effects are now being felt by UK banks caught in the aftershock of US foreign policy as they come under pressure from the United States to comply with its sanctions regime.

This Briefing Paper aims to provide an overview of key changes to Jersey’s AML regime arising as a result of the Money Laundering (Jersey) Order 2008 ("the 2008 Order").

Until now the rudest question that a Jersey lawyer has had to ask a client is ’can you pay my fees". Not for much longer. Lawyers in Jersey are about to get a taste of the medicine that their financial services clients have been swallowing since the introduction of the anti money laundering regime in Jersey since 1999.

In relation to regulatory requirements imposed on overseas branches of Jersey bodies corporate and / or Jersey limited liability partnerships, there is an apparent difference between the requirements set out in the draft Money Laundering (Jersey) Order 200- (’the draft Order’) and the draft Handbook for the Prevention and Detection of Money Laundering and the Financing of Terrorism (’the Handbook’). The Handbook appears to provide a broader concession for overseas branches of Jersey businesses to follow the relevant overseas regulatory requirements and guidance although there are confusingly two potential credible interpretations of the concession.

The consent provisions of the Proceeds of Crime (Jersey) Law 1999 have been criticised by the finance industry and legal profession in Jersey. This is largely because of the uncomfortable position which the legislation sometimes puts financial services providers and others in when they have suspicions about the origin of funds they hold and where the States of Jersey Police shares that suspicion.

Civil Search Orders: The end of privilege against self-incrimination?

In C PLC v P & Attorney General (Intervenor) [2007] EWCA Civ 493 the Court of Appeal decided that the privilege against self-incrimination cannot be relied on to hold back incriminating material found in the course of the execution of a civil search order (also known as an Anton Piller order).

Mere Suspicion - Breaking Down the Banker’s Door

In a competitive international banking environment where clients value confidentiality and there are jurisdictions vying to give it to them, an incursion into the privacy offered by Jersey banks ought to be of concern to the island’s business and legal community.

Da Silva - Defining Suspicion and the Need for Reasonableness

This case is noteworthy in that it represents the furthest extent to which the Court has gone in numerous attempts to define the state of mind required for ’suspicion’; a word in common usage throughout both UK and Jersey money laundering legislation.

The Space between Rational and Reasonable - A Threat to Financial Professionals

As long as financial institutions fail to recognise the distinction between what is right and what they can rationalise as reasonable, the risk of criminal prosecution will remain.

Terrorist Financing Update - Recent Arrests in Europe

The series of arrests made last year on various terrorist cells highlights the issues around terrorist financing.

When is Suspicion Reasonable?

2J and Ace Telecom Trading Ltd -v- Cater Allen, (Unreported, 21 February 2006) is another recent English High Court judgment in relation to Part 7 of the UK PICA 2002 which considers the reasonableness or otherwise of a suspicion for the purposes of the Act.This case highlights, yet again, the vital importance of having, and applying, a KYC policy.

Treatment of the Proceeds of Bribes 

Daraydan Holdings & Ors v Solland International Limited & Ors 2004

A Potential Beneficiaries Right to Trust Information

Schmidt v Rosewood Trust Ltd (2003 - Privy Council) A case that has ramifications for trustees who will need to tread carefully in this area.

Understanding Money Laundering

The ’smoke and mirrors’ world of money laundering explored.

Mad for It

The proposed changes to the Jersey insider dealing and misleading statements legislation is in draft form. The forthcoming European Commission directive on insider dealing and market manipulation (the Market Abuse Directive: ’MAD’) is driving these changes.

R v Montila and Others (House of Lords) (2004)

Is there a requirement to prove property derived from crime to prosecute an offence of money laundering?