City of London Corporation welcomes more 'joined-up' approach to financial services

12 December 2008

Stuart Fraser, Chairman of the Policy and Resources Committee, City of London Corporation, said today:

“Bob Wigley and his team have produced a thorough and timely report. I have been involved throughout as a member of the panel and I know that the review reflects months of open, pragmatic debate between experienced practitioners.”

“I support the key recommendations of today’s review, and particularly the creation of a new organisation under the leadership of the City of London Corporation to promote London’s financial services - which will bring a more joined-up approach. These are difficult times for the City as we face the financial crisis, tough competition from emerging markets and negative public opinion. So a strong voice for financial services is more relevant than ever.”

“The City Corporation has agreed to go ahead and set up the new board, which, working with the Government and the Mayor of London, will bring together the best City brains to sustain London’s position as a world-leading financial centre. The challenges which confront us in the current economic climate are huge, but with a coordinated approach, the necessary resources and the right machinery, we can meet these challenges successfully. This report sets the path and the new board can deliver the results the City needs.”

Lord Mayor of the City of London Ian Luder said: “The reputation of financial services globally has suffered in the current crisis. This board will take the lead in sustaining London’s credibility as a world leading centre for international business. ”

The Wigley Report’s key recommendations are:

1. Rebuilding the UK’s reputation for leading global financial regulation
   The industry and the regulatory authorities working together to rebuild the UK's reputation in the wake of the financial crisis.
   Supporting the FSA's planned and published move from risk based supervision to a more intense supervisory model, and supporting the creation of a new global policy framework.
   The Government must urgently review the UK's administration laws to restore trust in London based financial services subsidiaries of overseas firms.
   Statutory immunity must be granted to whistleblowers to deter insider dealing.
   An annual independent survey of UK financial services regulation benchmarking it globally, to be carried out by the new International Centre for Financial Regulation
2. Creating a Financial Services Board to promote London as a financial centre
   London should form a single powerful, properly resourced body, under the leadership of the City of London, to promote London’s position as a global financial centre.
   The agency shall promote London’s financial services sector overseas, anticipate strategically important trends and highlight domestically the industry’s contribution to the UK.
   A chairman of top industry calibre should be appointed to oversee the new body.
3. Boosting infrastructure
   That the Greater London Authority set up a “financial services infrastructure group”, in co-operation with the City of London Corporation, to plan for the long term infrastructure needs of the industry.
   The group would co-ordinate a solution to the industry’s fast-growing data processing requirements, collaborating to establish a common data centre.
4. Making London the location of choice for financial services careers
   A Chancellor’s High Level Group-led programme to ensure that London remains the location of choice for professionals starting and progressing their international financial services careers.
   The programme would help London become the centre for academic excellence in financial services, deepening the links between industry and academia and upgrading the facilities of the capital’s universities.
5. Improving the competitiveness and predictability of the UK’s tax regime
   The Review developed three specific proposals for tax reform for consideration by HM Treasury:
   Improve the process of introducing new tax policy by forming a panel of industry experts to support HMT and HMRC pre consultation
   Use the tax system to reinforce the UK as the most attractive geographic location for companies to base their headquarters or regional holding companies
   Formalise corporation tax policy to demonstrate the UK’s intention to remain globally competitive
   An annual independent international benchmarking of the UK’s tax regime to be carried out by the widely respected Oxford Centre for International Taxation

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Mauritius: International Arbitration Act 2008

The Mauritian Parliament passed a new International Arbitration Act (“the Act”) on 25 November 2008.

The passing of this legislation represents the culmination of two and half of years of work undertaken by the Mauritian State Law Office, assisted by the Mauritian delegate at UNCITRAL (Mr Salim Moollan, of the Chambers of Sir Hamid Moollan QC, Mauritius, and Essex Court Chambers, London), the UK delegate at UNCITRAL (Mr Toby Landau QC of Essex Court Chambers), and Mr Ricky Diwan of Essex Court Chambers, and in close collaboration with the UNCITRAL Secretariat and the Permanent Court of Arbitration at The Hague (“the PCA”). The Act is based on the UNCITRAL Model Law on International Commercial Arbitration, as amended by UNCITRAL in 2006 (“the Amended Model Law”). It will come into force on 1 January 2009. Pursuant to its Section 3, the Act will apply to all arbitrations commenced after that date (irrespective of the date when the relevant arbitration agreement was concluded) and not to arbitrations commenced before that date.

In addition to the Act itself, the drafters of the Act have – following a specific request by the Mauritian Prime Minister in Parliament – prepared Notes of the travaux préparatoires of the Act (“the Notes”), which are intended to be a companion to the Act, and to assist future users of the legislation. These were released for access to the general public on 8 December 2008. While the only official version of the Act is the English version, the Act and the Notes are being translated into French, and it is intended that they will be published in leading English and French arbitration journals over the coming months to facilitate general access thereto.

Mauritius’ strong commitment to developing international arbitration

The Act has received the direct personal backing of the Mauritian Prime Minister (Dr. the Honourable Navinchandra Ramgoolam), who has driven the project, and who – in introducing the Bill to Parliament – highlighted the following features which – it is hoped – will help Mauritius in its endeavours to become a state-of-the-art and attractive jurisdiction for international arbitrations:

(1) Mauritius has a perfect geographical situation to become a centre of reference for disputes involving Africa, South East Asia, India, China and Europe.

(2) Mauritius has the infrastructure to become such a centre, contrary to a great number of its neighbours.

(3) The extensive network of Double Taxation Agreements which Mauritius has with a large number of Investor Countries as well as Developing Countries makes Mauritius a perfect conduit for international investments, and a place for the resolution of investment disputes.

(4) The facility Mauritians have with languages, being naturally bilingual if not trilingual.

(5) The fact that Mauritius is, and is perceived, as a neutral country from both a developed world and a developing world perspective.

The Act received the support of all members of the Mauritian legislature, and was passed on an expedited basis.

The main features of the Act

The main features of the Act are as follows:

(a) The Act establishes two distinct and entirely separate regimes for domestic arbitration and for international arbitration. It covers only the latter.

(b) The provisions of the Amended Model Law have been incorporated within the Act itself (rather than in a separate schedule). In order to assist international users, a Schedule (The Third Schedule to the Act) has been prepared setting out where given Articles of the Model Law have been incorporated in the Act. The Amended Model Law has been modified by reference (in particular) to the current works of UNCITRAL on its arbitration Rules, and to the English, Singapore and New Zealand Arbitration Acts.

(c) A number of specific features have been incorporated in the Act:

• (i) The Act provides that all Court applications under the Act are to be made to a panel of three judges of the Supreme Court, with a direct and automatic right of appeal to the Privy Council. This should provide international users with the reassurance that Court applications relating to their arbitrations will be heard and disposed of swiftly, and by eminently qualified jurists.
• (ii) The Act adopts a unique solution, in that all appointing functions (and a number of further administrative functions) under the Act are given to the PCA. In order to ensure that the PCA is able to react swiftly in all Mauritian arbitrations, the Mauritian Government has negotiated and will conclude a Host Country Agreement with the PCA pursuant to which the PCA will appoint a permanent representative to Mauritius, funded by Government, whose tasks will consist inter alia of assisting the Secretary-General of the PCA in the discharge of all his functions under the Act [Signature of the Host Country Agreement should take place in February 2009].
• (iii) Specific provision has been made in the Act for the arbitration of disputes under the constitution of offshore companies incorporated in Mauritius in order to provide a link between Mauritius’ thriving offshore sector and the new intended international arbitration sector.
• (iv) The Act expressly clarifies that foreign lawyers are entitled to represent parties and to act as arbitrators in international commercial arbitrations in Mauritius.

A specific focus on investment arbitration

The Act has a specific focus on investment arbitration. First, the text of the Amended Model Law has been modified to ensure that the Act will apply to investment arbitrations conducted in Mauritius. This has been done by making the Act applicable to “international arbitration” generally rather than “international commercial arbitration” (compare Section 3 of the Act with Article 1(1) of the Amended Model Law), and the definition of “arbitration agreement” of Article 7 (Option 1) of the Amended Model has been extended to include arbitration clauses “in a contract or other legal instrument” for the specific purpose of covering investment treaty arbitrations arising under bilateral or multilateral investment treaties (see Section 4 of the Act, and para. 38 of the Notes).

In addition, a conscious decision has been taken not to include provisions as to confidentiality in the Act (contrary for instance to the detailed provisions included in the New Zealand International Arbitration Act in 2007), in order (in particular) not to hinder the application of such transparency rules as already exist or may be developed in the future in the field of investment treaty arbitration (see para. 104 of the Notes).

An invitation to all users

Despite the numerous failed attempts of one local institution (the Mauritian Chamber of Commerce and Industry) to develop a form of local institutionalised arbitration on the Island over the past twenty years, there are currently very few international arbitrations taking place in Mauritius.

As a result, the Mauritian Government has taken a policy decision not to create a Mauritian International Arbitration Centre (similar to SIAC, or to the new Dubai Centre) in the immediate future, but rather to engage with the leading arbitral institutions and to create the conditions for established form of institutional arbitrations (as well as ad hoc arbitration) to flourish in Mauritius. Contacts to that end have already been made with the leading institutions.

Feedback from interested parties

In the course of the Second Reading of the Bill, the Deputy Prime Minister and Minister of Finance and Economic. Development (Hon. Rama Sithanen) stated that the International Arbitration Act would be monitored over the years, in order to detect any problems – or possibilities for improvement – in the legislation, with a view tocorresponding amendments being implemented from time to time.

In order to facilitate this process, a specific e-mail address will be set up and publicised for users of the Act, academics, and other interested parties to provide comments and suggestions on the legislation to the Mauritius State Law Office.

STEP Mauritius: Giving a new impetus to Training in the field of trusts in Mauritius

Paper to be presented to Society of Trust and Estate Practitioners (STEP) Education Committee by the Mauritius Branch of STEP

Strategically located in the Indian Ocean at the crossroad of international investments, Mauritius has throughout the last decade forged a strong reputation as a premier international financial centre. Although the initial thrust of the business arose through the use by foreign institutional investors using Mauritius as a base to invest in India taking advantage of the generous provisions of the India-Mauritius Double Taxation Treaty, the other attributes of the jurisdiction namely the legislative and regulatory framework, low taxation, innovative financial products and competitive cost base resulted into other forms of business being attracted to the jurisdiction.

The trust industry kicked off through banks (Standard Bank and Deutsche Bank) which operated large trust operations in the Channel Islands, looking at Mauritius as an ideal base to outsource some of their back office trust administration to Mauritius, and gradually offering full fledged trust services from Mauritius, taking benefit of a very good trust legislation comparable to that of the more mature trust centers. Thereafter, other service providers followed heed and the government through its promotion agency, the Financial Services Promotion Agency, started to promote Mauritius as a competitive Trust jurisdiction. The growing number of members of the local branch of the Society of Trusts and Estate Practitioners (STEP) is a vivid testimony of the mounting interest in Trusts in Mauritius.

STEP Mauritius is committed to the growth of the trust industry in Mauritius and recognizes that this can only be achieved through the development of its human resources capabilities which are the backbone of any successful service industry. STEP Mauritius would like to work in tandem with STEP and Central Law Training (CLT) to pursue this objective and is looking ahead to a partnership which will be beneficial to the trust industry and by necessary implication to the association as a whole.

Guernsey - The Symbol of International Finance

Guernsey - The symbol of international finance highlights recent tax, legislative and regulatory changes on the Island, assessing their impact on the development of its financial services sector and just why Guernsey is considered the jurisdiction of choice in many major financial centres for corporate and individual investors. It includes the current activities and strategic vision of the Island’s authorities, the GFSC and GuernseyFinance, outlining initiatives planned for the foreseeable future, towards developing the finance sector and maintaining Guernsey’s impressive economic growth.

To view this book click here.

Legal Aspects of Financial Services Regulation and the Concept of a Unified Regulator

Kenneth Kaoma Mwenda

Senior Counsel

Legal Vice Presidency

The World Bank

Over the years, financial regulation and supervision in many countries has been organized around specialist agencies that have distinct and separate responsibilities for banking, securities, and insurance. In recent years, however, there has been an emerging trend in some countries towards restructuring the financial supervisory function, and in particular creating unified regulatory agencies (agencies that supervise two or more of these areas). The fact that a number of countries are now moving towards integrating the different supervisory functions into a single agency, and that different types of financial services and products continue to spring up in the financial sector of many countries, are indications of the changing global landscape of the financial services industry. Equally important as indicators of the evolving course of financial services regulation are increases in the number of countries where universal banking is practised and in the numbers of parent and subsidiary companies providing different types of financial services and products.

This study examines the policy bases of different countries adopting various regulatory and institutional models of unified financial services supervision and addresses some of the key characteristics of these models. The study also highlights the progress achieved by the unified regulators in adopting a consistent framework for the regulation and supervision of all financial intermediaries they oversee. Practical problems faced by countries in setting up unified regulators are identified, and the study highlights important legal and policy issues that should be considered when developing regulatory and institutional models of unified financial services supervision.

This study deals with legal and policy issues underpinning the development and strengthening of the regulatory and institutional framework for unified financial services supervision. The study discusses developments in a number of jurisdictions, among them Australia, Canada, Estonia, Germany, Hungary, Ireland, Latvia, Malta, the Scandinavian countries, the United Kingdom, and the United States.

Chapter 1 examines conceptual issues to be taken into account in designing a sound regulatory and institutional framework for financial services supervision. The chapter also provides a working definition of “regulation” and delves into the intricacies of designing the appropriate regulatory framework. Chapter 2 analyses the concept of an independent financial services regulator, arguing that a unified regulator that is both independent and accountable would help promote the development of a sound financial sector. Chapter 3 discusses the concept of a unified regulator, examining the question of whether every country should adopt a model of unified financial services supervision. Chapter 4 provides country studies, addressing the efficacy of the framework for unified financial services supervision in Latvia, the United Kingdom, and the Scandinavian countries. Finally, Chapter 5 spells out policy recommendations and possible constitutional and legal challenges that might be encountered when a country is considering unifying its regulation of financial services.

SEO Economic Research: The Dutch Trust Industry

This report describes the main results of a study commissioned by the International Management Services Association (VIMS), supported by the Dutch Fiduciary Association (DFA) and carried out by SEO Economic Research. Interviews with stakeholders and a questionnaire among trust offices and extensive desk research are the main pillars of this study. The aim of this inquiry is answering the following questions:

• What services does the Dutch trust industry provide?
• How and to whom are services provided?
• What is the economic impact of the Dutch trust industry on the Dutch economy?
• What is the (competitive) position of the Dutch trust industry in an international perspective?

In order to answer these questions, SEO Economic Research carried out interviews with trust offices, industry organizations, regulators and providers of related professional services. In addition, SEO Economic Research set out a questionnaire among all trust offices in the Netherlands in possession of an ASTO-license and reviewed existing literature.

SEO Economisch Onderzoek: The Dutch Trust Industry

Het rapport The Dutch Trust Industry: facts & figures geeft inzicht in de activiteiten van trustkantoren, de rol van trustdiensten in het internationale financiële systeem en de omvang van de trustsector binnen de Nederlandse (financiële) economie. 

Globalisering en het daarmee gepaard gaande opknippen en uitbesteden van (delen) van de productieketen, doen het belang van de transactiekosten verder toenemen. Regio’s met een adequate financiële infrastructuur hebben vanuit dat perspectief een concurrentievoordeel als vestigingsplaats. Nederland heeft zo’n infrastructuur. Die is onder andere gelegen in een op internationale handel georiënteerd fiscaal stelsel, via de participatievrijstelling, een uitgebreid netwerk van belastingverdragen en een betrouwbaar en stabiel fiscaal klimaat. Een ander sterk punt van Nederland is de aanwezigheid van een grote en professionele financiële sector, die ingesteld is op internationaal zaken doen. 

Bedrijven die zich administratief in Nederland vestigen, doen dat om hun grensoverschrijdende financiële transacties af te handelen, en hun belastingplanning op concernniveau te optimaliseren. Administratieve vestiging in Nederland loopt via zogeheten doelvennootschappen: rechtspersonen in Nederland, met buitenlandse aandeelhouders, waarvan er meer dan 20.000 zijn. Trustkantoren zijn in veel gevallen de beheerders van deze doelvennootschappen en vervullen daarmee een belangrijke functie in de Nederlandse transactie-economie.

Mauritius : Offshore Fund / Collective Investment Scheme holding a Category 1 Global Business Licence (Global scheme)

A Collective Investment Scheme (“CIS”) is defined under the Securities Act 2005 (“SA 2005”) as a scheme approved by the Financial Services Commission (“FSC”) in Mauritius:

• whose sole purpose is the collective investment of funds in a portfolio of securities, or other financial assets, real property or non-financial assets as may be approved by the FSC;
  
• whose operation is based on the principle of diversification of risk;
  
• that has the obligation, on request of the holder of the securities, to redeem them at their net asset value, less commission or fees; and
  
• where the participants do not have day to day control over the management of the property, whether or not they have the right to be consulted or to give directions in respect of such management.

A "Global scheme" is defined under the Securities (Collective Investment Schemes and Closed-end Funds) Regulations 2008 (“Regulations”) as a company or any other legal entity approved by the FSC, holding a Category 1 Global Business Licence (GBL 1) and authorized to carry out activities falling within the definition of a Collective Investment Scheme.

Conditions applicable to Global schemes

The FSC may grant an authorisation for a Global scheme provided that:

1. information relating to the CIS Manager and the custodian as prescribed in the Regulations is submitted with the application for authorisation;
   
2. a CIS administrator [e.g. OCRA (Mauritius) Limited] with a place of business in Mauritius is appointed;
   
3. the accounting and reporting services are carried out by the CIS Manager, or the CIS Administrator of the scheme, having a place of business in Mauritius.
   
4. The prospectus or other offering document contains the following statements in a prominent position -
   
   "Investors in [name of the Global scheme] are not protected by any statutory compensation arrangements in Mauritius in the event of the fund's failure."
   
   "The Mauritius Financial Services Commission does not vouch for the financial soundness of the fund or for the correctness of any statements made or opinions expressed with regard to it."
   
   
5. a certified copy of the prospectus or other offering document filed in a jurisdiction where the collective investment scheme is regulated or exempted from regulation is filed with the FSC;
   
6. information is provided on the CIS Manager and the custodian, including name and registered addresses and where regulated, if applicable;
   
7. information is given on whether the collective investment scheme is regulated, or shall be subject to regulation, in any jurisdiction and if so, a copy of the authorisation or similar consent of the regulator and if not, indication on what basis it is exempted from securities regulation in other jurisdictions;
   
8. adequate measures are taken to prevent money laundering and financing of terrorism and provided that the FSC is satisfied that these measures meet legislative requirements.

An authorisation under section 97(5) SA 2005 may be granted subject to such terms and conditions the FSC considers necessary or desirable for the protection of participants.

Subject to FSC approval, a Global scheme may appoint and retain a CIS Manager and/or a custodian established in a foreign jurisdiction.

The Securities (Collective Investment Schemes and Closed-end Funds) Regulations 2008

Part VIII of the Securities Act 2005 contains substantive provisions relating to collective investment schemes. These provisions are supplemented by the Securities (Collective Investment Schemes and Closed-end Funds) Regulations 2008 ("the Regulations"). The Regulations introduce a comprehensive legal regime for the establishment, management and regulation of collective investment schemes.

The Regulations provide a wider array of vehicles that could be used for structuring collective investment schemes. Further, the Regulations clarify the responsibilities of the operators and functionaries of a collective investment scheme and introduce measures to improve corporate governance in relation to collective investment schemes in general and to their functionaries in particular.

Double Tax Treaties

International double taxation results when the same income is being taxed twice: once in the state where the income arises (Country of Source) and another time in the state where the income is received (Country of Residence).

International double taxation arises because each country has its own sovereign right to tax income and own set of tax rules. The areas in which two countries’ tax systems could differ include:

• The scope of taxation

Some countries are on the territorial system whereas others have adopted a worldwide taxation basis.

• Source rules for income

The source rules determine whether income is sourced in the state where income arises, or in the state where the income is received. Conflict of source rules can result in an income having a source in both countries.

• Rules for determining the tax residence of an individual or a company.

• Measures provided for under a country’s domestic laws to relieve double taxation.

Double taxation invariably increases the burden of tax on foreign income. This has a negative impact on cross-border movements of investment, technology and expertise.

To mitigate the effects of double taxation on its residents deriving income from outside its own national boundary, one measure that a country can take is to conclude a Double Tax Treaty (“DTT”) on a bilateral basis with other countries.

The DTT is an agreement usually entered into between two countries seeking to avoid double taxation. The main objective of a DTT is to provide certainty regarding when and how tax is to be imposed in the country where the income-producing activity is conducted or payment is made. In a DTT, the taxing right of each country is defined and there are provisions for one of the countries to give tax credit or exemption to eliminate double taxation.

Under a DTT, the taxation rights over income derived by a resident of one country from the other country can be allocated in any of the following ways:

1. full rights to tax only in one country, i.e., the other country exempts the income. The full rights may be allocated either to the country of source or residence;
2. full rights to tax by both countries but with tax in the source country limited to no more than a specified level and the country of residence giving a credit for tax paid in the source country. This form of allocation normally results in a sharing of tax between the two countries;
3. full rights to tax by both countries without limitation and the country of residence giving a credit for tax paid in the source country.

Although an item of income may be deemed to be sourced in a particular country under that country’s domestic laws, that country could give up totally or partially the source taxation by agreeing to share the rights to tax with the DTT partner.

Mauritius International Finance Centre

The future of business is in Mauritius and the International Finance Centre is an outstanding building designed specifically for businesses looking for an exclusive location.

The International Finance Centre boasts a sleek design with ultra modern facilities. A symbol of prestige and prominence, designed to suit your business needs and personal requirements .

An abundance of office space, equipped with state of the art facilities and technology, the International Finance Centre will help your business to soar by ensuring that you have everything you need at your fingertips, including a gym and coffee shop to fulfill your personal requirements.

The international finance centre will be located in the Finance and IT hub of the Ebene Cybercity. It is situated just 10km from Port Louis, the capital of Mauritius, and not only acts as a link between African and Asian markets but it is also a cable landing point of the SAFE high-speed submarine communications cable between South Africa and Malaysia.

Foreign firms looking to invest in Mauritius are offered low corporate tax rates, free repatriation of profits and exemption of custom duties on resources. So, all in all Mauritius is the place to be if you want your business to thrive.

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