29 June 2016

FSC Mauritius issues communiqué - FSC Mauritius Member of the L'Institut Francophone de la Régulation Financière

L’Institut Francophone de la Régulation Financière (IFREFI) was established at the initiative of French regulators in 2001 to strengthen cooperation and exchanges between regulators members by promoting training, coordination, technical cooperation and that the study of any matter relating to financial regulation.

At the last Annual Meeting of the IFREFI held from 1-3 June 2016 at Beyrouth, the FSC Mauritius was admitted as a member of IFREFI together with Andorra (INAF) and Vietnam (SSC).


R (on the application of Bancoult (No 2)) (Appellant) v Secretary of State for Foreign and Commonwealth Affairs (Respondent) [2016] UKSC 35

BACKGROUND TO THE APPEAL

The Chagos Islands are part of the British Indian Ocean Territories (“BIOT”). In 1962 they had a settled population of 1,000. In 1966 the UK Government agreed to allow the USA to use the largest of the Chagos Islands, Diego Garcia, as a military base. Pursuant to this arrangement, the Commissioner for BIOT made the Immigration Ordinance 1971 (the “Ordinance”). Section 4 of the Ordinance made it unlawful for a person to be in the BIOT without a permit and empowered the Commissioner to make an order directing that person’s removal. Between 1968 and 1973 the UK Government procured the removal and resettlement of the Chagossians by various non-forceful means.

In 2000 the appellant, Mr Bancoult, obtained a High Court order quashing section 4 of the Ordinance. The then Foreign Secretary announced that he accepted this decision, such that the prohibition on the resettlement of BIOT was lifted. He also announced that work on the second stage of a feasibility study into the resettlement of the former inhabitants would continue.

The second stage of the feasibility study was published in 2002. Part B (the “2B report”) concluded that the costs of long term inhabitation of the outer islands would be prohibitive and life there precarious. In 2004 Her Majesty by Order in Council made the BIOT Constitution Order (the “2004 Order”) which introduced a new prohibition on residence or presence in BIOT.

In 2008, the appellant’s challenge to the 2004 Order by judicial review was dismissed by a majority of 3 (Lord Hoffmann, Lord Rodger and Lord Carswell) to 2 (Lord Bingham and Lord Mance) in the House of Lords (R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2008] UKHL 61) (the “2008 judgment”). In separate litigation concerning the Government’s declaration of a Marine Protected Area (“MPA”) around BIOT, the respondent in 2012 disclosed certain documents relating to the drafting of the 2B report (the “Rashid documents”). The appellant seeks to set aside the 2008 Decision on the grounds that (i) the Rashid documents cast doubt on the reliability of the 2B report and should, pursuant to the respondent’s duty of candour in public law proceedings, have been disclosed prior to the 2008 judgment, and (ii) four heads of new evidence have come to light, constituting independent justification for setting aside the 2008 judgment.

In 2014-15 a new feasibility study concluded that, assuming for the first time possible re-settlement of Diego Garcia itself, scope existed for supported resettlement of BIOT (the “2014-15 study”).

JUDGMENT

The Supreme Court dismisses the appeal by a majority of 3 to 2. Lord Mance gives the majority judgment, with which Lord Neuberger agrees. Lord Clarke gives a separate judgment, concurring with Lord Mance. Lord Kerr gives a dissenting judgment, with which Lady Hale agrees in a separate dissent.

REASONS FOR THE JUDGMENT

The Supreme Court has inherent jurisdiction to correct injustice caused by an unfair procedure which leads to an earlier judgment or is revealed by the discovery of fresh evidence, although a judgment cannot be set aside just because it is thought to have been wrong on points unrelated to such procedure or evidence [5, 154, 190]. The authorities indicate as the threshold for setting aside a previous judgment whether a significant injustice has “probably occurred” in case of non-disclosure or whether there is a “powerful probability” of significant injustice in case of fresh evidence. But Lord Mance leaves open the possibility of the egregiousness of the procedural breach and/or the difficulty of assessing its consequences militating in favour of a lower threshold, and considers the application on that basis too [8]. An applicant must also show that there is no alternative effective remedy [6].

As to the non-disclosure, the essential questions are (i) whether due disclosure of the Rashid documents would have led to a challenge by Mr Bancoult’s representatives to the 2B report in the original judicial review proceedings, and, if so, (ii) whether it is likely that such a challenge would have resulted in a different outcome to the 2008 judgment [61].

Assuming without deciding that (i) was satisfied, Lord Mance concludes as to (ii), after reviewing the 2008 judgment [16-19] and the Rashid documents [20-64], that there is no probability, likelihood, prospect or real possibility that a court would have seen, or would now see, anything which could, would or should have caused the respondent to doubt the conclusions of the 2B report, or made it irrational or otherwise unjustifiable to act on them in June 2004 [65]. As to the alleged new evidence, the first head consists essentially of analysis and submissions which the majority takes into account, the second and third heads consist of material outside the respondent’s knowledge at the relevant times and neither they nor the fourth provide any basis for setting aside the 2008 judgment [66-71].

Even if the threshold for setting aside were crossed, circumstances have changed in the light of the 2014-15 study and/or governmental confirmation that the MPA does not preclude resettlement [72-75]. It is now open to any Chagossian to mount a fresh challenge to the failure to abrogate the 2004 orders in the light of the 2014-15 study’s findings, as an alternative to further lengthy litigation and quite possibly a fresh first instance hearing about the factually superseded 2B report. [72-76, 78-79].

Lord Kerr, with whom Lady Hale agrees, would have set aside the 2008 Decision. Although the appellant accepted that it must be shown that the non-disclosure probably had, or may well have had, a decisive effect on the outcome [155], Lord Kerr would have held that it is enough for there to be a real possibility that a different outcome would have occurred had the information been available at the time of the original hearing [160-163]. The Rashid documents might well have caused the 2008 Decision to be different [168, 193]. Lord Kerr disagrees with the majority that the conclusions of the 2014-2015 feasibility study render the present application moot. The mere possibility that the Chagossians might be allowed to resettle is insufficient. It would be necessary to demonstrate that they would achieve the same result as would accrue on the successful re-opening of the appeal [179]. Moreover, there is no question of pragmatic justice being done here as the Supreme Court in this appeal is unable to vindicate the appellant’s right to resettle in the BIOT [180].

References in square brackets are to paragraphs in the judgment

28 June 2016

How the Brexit vision of UK freedom risks turning sour

Radical change has been the dream of the UK’s triumphant Brexiteers, but what, beautiful or not, will be born? An absence of clarity about the impact of Brexit on the UK, the rest of Europe, and worldwide will last for a decade at least. The notion that Britain can neatly cut the links binding it to continental Europe will quickly prove absurd, as will the idea that the surgery will be painless and only local.


Giles Merritt was named by the Financial Times in 2010 as one of 30 'Eurostars' who most influence thinking on Europe's future, along with the European Commission's president and the secretary-general of NATO. For 15 years a Financial Times foreign correspondent, Merritt has reported and commented on European affairs since the early 1970s. He went on to found Friends of Europe, one of the leading think tanks in Brussels, and the policy journal Europe's World, of which he is the Editor-in-Chief.  He is the author of Slippery Slope: Europe's Troubled Future. His previous books include World Out of Work, an award-winning analysis of unemployment issues, and The Challenge of Freedom, on the difficulties facing post-communist Eastern Europe.

Mauritius - Wave Energy Project: Deployment of a wave monitoring device

A wave monitoring device, aiming to explore the prospects of developing wave energy for the Republic of Mauritius and harness the potential of ocean energy, was deployed yesterday during a launching ceremony held at Le Batelage Restaurant, in Souillac.

This initiative follows the Collaborative Agreement signed in June 2015 by the Mauritius Research Council (MRC) with Carnegie Wave Energy Ltd on the prospects of developing wave energy for Mauritius.  Based in Australia, Carnegie Wave Energy Ltd is a leader in wave energy technology and harnessing wave energy for the production of electricity and desalinated water.

Following the signature of the Agreement, Carnegie Wave Energy Ltd in partnership with the MRC began in November 2015 the project ‘High Penetration Renewable Energy Roadmap, Wave Resource Assessment and Wave-Integrated Micro grid Design in Mauritius’. The project is being jointly funded by Carnegie (19%) and the Australian Government (81%).

The Minister of Ocean Economy, Marine Resources, Fisheries, Shipping and Outer Islands, Mr Premdut Koonjoo, and the Minister of Civil Service and Administrative Reforms, Minister of Environment, Sustainable Development, and Disaster and Beach Management, and the Australian High Commissioner to Mauritius, Ms Susan Coles, were present at the deployment of the wave monitoring device at Souillac. The event was organised by the MRC in collaboration with the Australian High Commission in Mauritius.

Five potential locations that are no further than 3 km from Souillac have been identified for the deployment of the wave monitoring device. The aim is to use the site closest to Souillac for the deployment of the device.

It is recalled that the Republic of Mauritius has a total area of 2.3 million square kilometres of Exclusive Economic Zone and is geographically well positioned to harness ocean energy. This may be in the form of offshore wind, ocean wave, ocean current, ocean thermal and ocean saline energy.

Wave energy

Wave energy possesses unique characteristics that offer an advantage over other renewables such as wind and solar energy. These include:
  • Less variable and with the variability being more gradual and with notice;
  • More predictable: Wave energy is estimated to be at least three times more predictable than wind energy;
  • The proximity of favourable wave energy sites to ultimate end users, thereby minimising transmission issues.  Notably, approximately 60% of the world’s population lives within 60 kilometres of a coast.

Mauritius: Workshop focuses on rigorous standards of Corporate Governance

Companies must demonstrate a strong commitment to the development and enforcement of rigorous standards of corporate governance so as to maintain public confidence. These standards must encompass the relationship between a company’s board of directors, its management and its shareholders. Corporate leaders are required to be faithful to shareholders interests and act with both competence and integrity. 

This statement was made by the Permanent Secretary of the Ministry of Financial Services, Good Governance and Institutional Reforms, Mr Jugdish Dev Phokeer, at the opening of a workshop on Corporate Governance held yesterday in Ebène.

Mr Phokeer pointed out that Government has demonstrated its commitment to fighting fraud and corruption and to introducing good governance best practices by creating a Ministry dedicated to good governance.

Corporate governance has become the sine qua non for any business which cares about its reputation”, he said.

Government has recently passed the Good Governance and Integrity Reporting Bill the objects of which are to promote a culture of good governance and integrity reporting in both the private and public sectors, to disclose malpractices and recover unexplained wealth.

The workshop’s focus is on Corporate Governance and good governance and is borrowed from the Cadbury Report in 1992. UK Corporate governance is the system by which companies are directed and controlled. Some 175 participants from different departments and organisations attended the workshop.

It served as a platform to provide an understanding of the nature of corporate governance and the vital role that leaders of organisations have to play in establishing effective and good governance practices. For most organisations, those leaders are the board directors who decide the long-term strategy of the company in order to serve the best interests of the owners, members, shareholders and, more broadly, stakeholders, such as customers, suppliers, providers of long-term finance, the public the financial community and regulators.

FSC Mauritius issues communiqué - Update on Velankani Companies

The Supreme Court of Mauritius has, on 28 January 2016, delivered its judgment (2016 SCJ 31), inter alia, refusing leave to Mr K. C. Reddy to apply for a judicial review of the decision of the Financial Services Commission, Mauritius and setting aside the application with costs.


IFC Economic Report: The Truth Behind The Headlines - Business In The IFCs

In the first issue of the IFC Economic Report we considered how IFCs are important to the world economy – what they offer to the economy, with case studies considering examining in particular their contribution to emerging markets.

In this edition of the Report we look at what IFCs must do to protect their existence and their business model in light of EU, OECD and US rhetoric on stopping the use of so called ‘tax havens’ and ‘offshore’.

In our lead article, Prof Gilbert Morris considers the need for an Organisation of IFCs to speak on behalf of IFCs in the international forum, research, explain and foster the role of IFCs in the global financial system, whilst working towards fair cross border tax regulations and against tax harmonisation. 

Andrew Morriss, Chair in Law & Professor of Business, University of Alabama, considers the damage that could be caused to the world economy if IFCs are eradicated and the role IFCs play in pushing regulatory competition. 

Professor Philip Booth, Economist and Director of the Institute of Economic Affairs looks at the repercussions of the financial crisis and considers why IFCs are the scapegoats for bad government policy and one by one counters the arguments brought up time and again against IFCs.

While IFC Forum members provide case studies with examples of what IFCs are doing in practice to adapt their business models to the changing global economic and political demands.

THE BIG DEBATE: Can and should morality be applied to corporate tax planning?

We put this question a wide spectrum of people involved with the wealth management industry: With opposing statements on the subject from NGO Action Aid and private practitioner Anthony Travers, followed with sound bites from academics, economists, tax planners, the EU and the OECD.

RESEARCH: Professor Vera Troeger questions the legitimacy of the recurrent hypothesis that tax competition results in a race to the bottom. She highlights the many factors that influence an economy that make this statement nothing short of a myth.

INTERVIEWS: The IFC Economic Report includes interviews with Monica Bhatia, Head of the Global Forum on Transparency and Exchange of Information for tax Purposes, OECD; Philip Kermode, Directorate General of Tax at the EU Commission; and Helene Anne Lewis, STEP Chair.

Also in this edition: FATCA unveiled – US FATCA and the EU sons and daughters of FATCA; Francoise Hendy takes on the OECD and the aftermath of the email leaks scandal.

After the Panama Papers: How to dismantle tax havens (and bring justice to 99 per cent of the world)

Welcome to the secret world of offshore. Your goal is to navigate this parallel universe and hide your cash away. Don't worry! Lawyers, wealth managers and bankers are there to help you. Pick a character and don't get caught.


27 June 2016

Mauritius: Ministerial Committee set up to look into repercussions of Brexit issue

Ministerial Committee under the Chairmanship of the Minister of Finance and Economic Development, Mr Pravind Jugnauth, was set up following Cabinet meeting on 24 June 2016 to look into and make recommendations on the repercussions of the exit of the United Kingdom from the European Union (EU).

The Minister of Finance and Economic Development met with representatives of both the private and public sectors on Friday regarding the issue of the exit of the UK from the EU. A communiqué issued on the same day by the Ministry of Finance and Economic Development says that Brexit will undoubtedly have repercussions globally and in Mauritius. 

Article 50 of the EU Treaty provides for a transition period of 2 years for the UK to negotiate the terms and conditions of its exit. It stipulates the following:

the Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification, unless the European Council in agreement with the member state concerned, unanimously decides to extend this period.

The Committee noted that it would be left to the next UK Prime Minister to initiate any action to trigger Article 50. Hence, it is expected that a status quo would be maintained for at least the next three months.

Further, it was highlighted that Mauritius will thus be able to retain its current preferential market access and will continue to trade on a duty free and quota free basis during that period since the transitional period of two years would only begin after the UK notification.

The share of our total exports to the UK has dropped from 34 per cent in 2008 to 12.6 per cent in 2015 stemming, inter alia, from our market diversification strategy. Mauritius’ export denominated in UK Pound Sterling which was 18 per cent in 2008 has declined to 6 per cent in 2015.

The Committee pointed out that Brexit may weaken the UK economy in the medium term with implications for some sectors of the Mauritian economy. In this context, the Joint Public-Private Sector Technical Committee agreed to pursue its assessment of Mauritius trade with the UK in various sectors with a view to identifying areas which may be vulnerable.

On the other hand, the Bank of Mauritius (BOM) is monitoring closely all developments in the international financial markets. The BOM has re-affirmed that it stands ready to intervene and take measures, if necessary, to protect the economic interest of Mauritius.

Government will continue to monitor all developments related to Brexit very closely through the inter-Ministerial Committee.

17 June 2016

Tit-bits: More DTAA revision?

Since the signed and Cabinet-approved revision of the long-standing DTAA treaty between India and Mauritius, there has been a lot of comment on the potential downsides, the significant economic impact analysed by Moody's, the difficulties of a short transition period for operators, the imbalance with other international centres channelling FDI into India and many other aspects. The MOU signed off in July 2015, and approved by our Cabinet, signalled a major triumph of powerful revenue and finance Indian bureaucrats who, at last, held the upper hand and a signed outcome, publicly praised by our own negotiating team, that even Indian political overlords, had they wished or desired a different outcome, would have found extremely difficult to pitch for. In essence, India could not be “plus royaliste que le roi”.

Excerpts:
True also that our offshore sector and political nexus may not have done enough to thwart the growing negative perception of Mauritius by entrenched top-notch Indian bureaucrats, while several other competing centres were lying low and were spared the onus. The status-quo ante was probably harder to maintain against such a rising tide but where we may have lost out, through a largely inexperienced negotiating team, are on far better treaty renegotiation terms...
Was inexperience of international poker-pressure negotiations the only reason that facilitated the cardinal July 2015 outcome? We understand that the apparently generous tied-in grant of 350 million$ India waved in front of a political team that had been actively scouting the world for international investors in the property deal dubbed Heritage City, could have been judged extremely rewarding and was duly announced as such by Minister Bhadain. A great prize but, as it turned out later, little better than the 200 million offered ten years previously to former Minister Sithanen...
Mauritius Times

15 June 2016

The Panama factor: offshore investment in an era of unprecedented tax transparency

Offshore centres should be more proactive in presenting their case to the public, the Legal Week Offshore Investment Forum heard. The Panama papers featured heavily during Legal Week's inaugural Offshore Investment Forum in London.

Global Business: Mauritius sets to woo international investors

The Financial Services Promotion Agency (FSPA) has undertaken a promotion mission in London in order to attract international players to Mauritius.


14 June 2016

Offshore Pilot Quarterly (June 2016, Volume 19 Number 2)

Into the Light

The first several hundred words were meant for my Private Client Adviser blog which I have been writing for almost 3 years. But as with so many specialist publications competing for market share, the PCA has succumbed to market forces and is no longer being published.

The blog topic I was to cover, not surprisingly, was the sensational Panama Papers scandal which centred on the Mossack Fonseca law firm and which revealed in May more than just client names. What have we learned from it? That Panama is the Mecca of malfeasance to which the corrupt, rather than the faithful, look towards? Hardly. Anymore than because the British Virgin Islands features prominently in the revelations, can you suggest that companies formed there should be avoided by those with honest intentions. T.S. Eliot, the 20th-century essayist and poet, said that April was the cruellest month; for Panama, May turned out to be.

As this year is the 400th anniversary of Shakespeare’s death, one of his most famous plays, Hamlet, will be celebrated. It is, in fact, a play-within-a-play in which the player Queen is thought to protest the reality of the situation too much and so loses her credibility in the eyes of Hamlet’s mother, the real Queen of Denmark. As for the Mossack Fonseca affair, reality points to the law firm being only the play-within-the-play; in other words, it is not the big story. The first thing to understand is that what has transpired is not a unique Panamanian phenomenon; one only has to scroll through the names and places professionally linked to discover that. Importantly, when noting how far back so much of the activity occurred, a line must be drawn between the relative international regulatory climate and due diligence laxity existing in the last century versus today.

Having spent almost 40 years in several offshore jurisdictions, including 3 of them as a banking regulator in the Caribbean for the United Kingdom government, I know the reality whereof I speak and so I hope to avoid opprobrium similar to that meted out by Hamlet’s mother as you read on. But the truth is, thanks to the Mossack Fonseca affair, light has been shed in some dark corners beyond Central America; I shall point out some of the most egregious examples which prompt me to quote John Milton, England’s 17th-century poet: “neither man nor angel can discern hypocrisy, the only evil that walks invisible”.

The swingeing attack on secrecy made at the recent Anti-Corruption Summit in London, which brought together 12 heads of state and included more than 40 countries, was itself revealing by displaying, unashamedly, the double standards which exist, especially on the part of the United States of America. A report, for example, by the Institute on Taxation and Policy entitled “Delaware: An Onshore Tax Haven” has said that the state’s tax code made it “a magnet for people looking to create anonymous shell companies, which individuals and corporations can use to evade an inestimable amount in federal and foreign taxes”. I am sure that the vice president of the US, Joe Biden, is cognizant of the problem, considering he was the senator for the state between 1978 - 2009.

And yes, in fairness to him, I know that two huge hurdles need to be overcome to remedy the situation: Congress and the powers enshrined in each state’s constitution. I need not dwell on the difficulties of a consensus in Congress (where lobbyists can shape laws), and especially when dealing with a state’s finances.

Much can be blamed on Britain (often the case) for the US legal system because states applied principles developed by Sir William Blackstone, England’s famous 18th-century jurist, and which, in the words of chief justice Lemuel Shaw of the Massachusetts Supreme Court in 1852, empowers state politicians to enact “wholesome and reasonable laws, statutes and ordinances… as they shall judge to be for the good and welfare” of the state. Historically, the federal government and the states were organised according to distinct principles, allowing each state to make laws and regulations for the benefit of their communities. Clearly, Delaware, which has more companies than people sees the “wholesomeness” of corporate business.

The Panama Papers are the start, one hopes, of a cleansing process where only the fittest and the compliant, wherever they operate from, will survive. Thanks to the exposure brought about by this incendiary gigantic leak, the Organisation for Economic Cooperation and Development’s card hand has been weakened; some speak of righteous hypocrisy. During the summit in London at which a global standard on the automatic exchange of beneficial ownership information was debated, the premier of the Cayman Islands, Alden McLaughlin, made comments which reminded me of Hans Christian Andersen’s emperor who wore no clothes. John Kerry, America’s secretary of state, had said it was vital to show a zero-tolerance approach but that his country was not in a position to sign the Summit Communiqué which had been agreed to by the other participants and this made Mr. McLaughlin say that without the US on board no standard could be described as global. The Cayman Islands’ financial services minister, Wayne Panton, has reminded us that there were more companies without oversight at  just one address in Delaware than all of those registered in the UK crown dependencies and overseas territories, with the exception of the British Virgin Islands; I have not independently verified that, but believe, if anything, it probably understates the facts.

The Black Holes of South Dakota

President Obama said at the London summit that some countries would want to step in and fill the demand for secrecy if others were persuaded to abandon total secrecy; his already has. And whilst like most commentators I have tended to direct much of my fire on Delaware in the past, this would be a mistake. Trusts touting anonymity and privacy are increasingly being set up in Wyoming, Nevada and South Dakota. Assets held in trusts in South Dakota, for example, have gone from US$32.8 billion in 2006 to over US$226 billion in 2014 according to state records; there were 20 trust companies in 2006 and now there are at least 86. International interest in America is growing as foreign practitioners experience the vice-like grip of non-US regulation and see the attractiveness of the US, encouraged by the comments of Heather A. Lowe, the legal counsel and director of government affairs for Global Financial Integrity, a research and advocacy group in Washington. She argues that those 3 particular states, which market themselves internationally, are the tip of an iceberg because “You can create anonymous companies anywhere in the United States”.

The US is the world’s fastest growing offshore tax haven, and any efforts to reverse this process will have to overcome Sir William Blackstone’s influence. I have written about particular Latin American concerns regarding public disclosure of wealth, and you can expect a lot more of it to move to the US to stay under the radar. One estimate suggests that 90 per cent of the registered trust companies in South Dakota have, basically, a post office box or a token office. Somebody will come twice a year to hold board meetings to meet regulatory requirements. There are 40 trust companies sharing one address at a two-storey nondescript white building in Sioux Falls; inside it is estimated that US$80 billion in trust assets is administered. One definition of a black hole is a place where people or things, especially money, disappear, without trace. Up to now we’ve been more aware of the Black Hills, rather than the black holes, of South Dakota.

The Maroon Private Trust Company is in another building in Sioux Falls which shares a receptionist with a roofing company on the same floor and, I am sure, that it needs no help from its neighbour to shelter its activities. Besides hypocrisy, John Milton famously wrote about paradise lost and regained, but for the trust company it remains comfortably marooned in splendid isolation, sheltered (at least for now) from the madding crowd baying for blood and railing against, in its view, and egged on by a hostile press, practitioners of perverse practices ensconced in offshore financial services centres whose fate it is to have, if only metaphorically, an albatross around their respective necks. In the 21st century – at least in the West – they have upset the reformed economic order of the universe, and let us hope that they will not travel a slow and thirsty path toward madness, tormented by an albatross, like the hapless sailor described in Samuel Taylor Coleridge’s epic poem, “The Rime of the Ancient Mariner”.

The Biggest Little Secret

Public dissemination of beneficial ownership is “a reckless violation of personal privacy and stands to put in physical danger law-abiding individuals and their relatives around the world”. Those were not the words of a practitioner in Panama or anywhere else offshore; they were spoken by the president of Reno’s Alliance Trust Company in Nevada. Obviously, the “biggest little city in the world” is trying to protect the biggest little secret in the world about Nevada’s, and other states’, friendly approach to secrecy. He is perhaps emulating the Las Vegas boast: what happens here stays here; CRS, which stands for Common Reporting Standard, is an acronym for Can Remain Secret in the US and Nevada, known for its gambling, is betting on things not changing.

The International Consortium of Investigative Journalists doesn’t share the value system of the head of Reno’s Alliance Trust Company. According to its moral compass, public interest trumps any twinges of conscience over theft, violation of secrecy laws or the illegal access of a data base. Let’s detour, at this point, and consider Antoine Deltour. He is the mild, former auditor with PricewaterhouseCooper, an international firm of accountants, who has gone on trial in Luxembourg. Called “LuxLeaks”, it was the biggest financial leak before the one in Panama, when, in 2012, he passed on 28,000 pages of documents to a French journalist, much of which has been put online by the ICIJ. If found guilty he could be heavily fined and face up to 10 years in prison (although prosecutors are asking for an 18-month sentence).

The government’s lawyers argue that Mr. Deltour revealed tax arrangements that were legal while the accused says that his action was in the European public interest; the ICIJ gave the same reasoning in respect of the Panama Papers, and which has also revealed legal arrangements (ask the UK prime minister), although it did not restrict itself to European concerns. It is true that LuxLeaks could assist the OECD’s plans for closing its Base Erosion and Profit Shifting loopholes, but this ignores the impact on those exposed. I must agree with Luxembourg’s justice minister who says his country’s secrecy laws do not permit persons such as Mr. Deltour to “denounce everything and anything according to his own moral values”. Quite.

In its defence, the ICIJ has said that it took legal advice before disclosing the Mossack Fonseca information and upon being questioned on the issue of receiving the stolen data, the ICIJ implication was that you can do some things in the US (where the consortium is headquartered) that can’t be done elsewhere. We know that this is a fact, not just in the case of transparency, and to explain why requires more space than I have to spare, except to mention again (see the March Offshore Pilot Quarterly) the sad case of the collapsed Caledonian Bank in the Cayman Islands, brought low by a US Securities Exchange Commission investigation that produced no indictment of the bank but impelled the judge in the US to castigate the prosecution council.

The nomenclature, Panama Papers, deflects geographic attention from practices in other countries that need to be put under scrutiny. With Panama’s colourful history and its past battles with the OECD, it is far too easy to parade Panama as the whipping boy of wayward practices. To do so ignores the central role played by Mossack Fonseca in only supplying companies incorporated for others to operate, with wealth directed from offices in the UK, Hong Kong, Switzerland and elsewhere. You can only, however, sweep so much dirt under Panama’s carpet before lumps begin to show, prompting inconvenient questions. Where were the majority of illicit acts actually performed and by whom? Regardless of the past, why has Panama now been put on the Financial Action Task Force’s white list? The play-within-theplay.

America has been called the new Switzerland. As a professional trustee I find it astounding to read that only in 2016 does the US Treasury Department intend to issue a rule compelling banks in the US to identify the people behind shell-company account holders following the international uproar over hidden wealth disclosed in the Panama Papers. In 2011 the Florida Bankers Association told Congress there were hundreds of billions of foreign deposits in US banks because for nearly a century the government has enticed foreigners by exempting their deposits from taxes and reporting. The Boston Consulting Group reckons that up to US$800 billion of offshore wealth is in the US, with nearly half of it coming from Latin America; I have little doubt that the material contribution towards its management made by Mossack Fonseca will have been minimal.

The cat is out of the bag. And what of the self-appointed arbiters of moral and public interest judgements? When the ICIJ on its Panama Papers website assures us that there are legitimate uses for offshore companies and trusts and that it is not implying that persons, companies or other entities mentioned “have broken the law or otherwise acted improperly”, this comes with no guarantee that others who read its Leaks Database will not break the law or otherwise act in an improper manner themselves to the detriment of the innocent exposed on the website.

Offshore Pilot Quarterly (independent writing for independent thinkers) has been published since 1997 by Trust Services, S. A. and is written by Derek Sambrook

13 June 2016

Mauritius: FSC Communiqué - Invitation for comments on FSC LLP Concept

Communiqué - Invitation for comments on FSC LLP Concept

Mauritius Business Law Review

Mauritius Business Law Review focuses on business law and related topics, including arbitration and international law, relevant to Mauritius, the Indian Ocean Islands and beyond.

10 June 2016

Moody's: Mauritius's financial sector brings both economic growth and systemic risk

While Mauritius's financial sector has supported economic development and generated foreign-currency earnings, it is also a source of systemic risk, Moody's Investors Service said in a report this week.

The Mauritian authorities have supported the sector's competitiveness through financial innovation, the preservation of tax and non-tax competitive advantages, and through the maintenance of macroeconomic stability.

However, the sector's complexity, size and linkages between financial institutions contribute to contagion risk. Moreover, changes to Mauritius's Double Taxation Avoidance Agreement (DTAA) with India, due to come into effect in April 2017, will weaken an industry that contributes to approximately 9% of GDP and 15% in net foreign inflows annually.

The authorities have intensified efforts to strengthen the country's crisis management framework and to reduce the costs of resolving troubled banks for the government. However, their mandate for preserving macro stability is becoming increasingly challenging in the meantime.

The primarily off-shore financial sector is large and interlinked and constitutes a source of vulnerability to financial stability. The off-shore sector, mainly composed of Global Business Companies (GBCs) that hold assets worth almost 50 times the country's GDP, supports the banking system and contributes to Mauritius's positive balance of payments position.

Offshore deposits account for 43% of the banks' liabilities or 120% of GDP. Moody's considers the banks' foreign-sourced deposits to be sensitive to potential disruptions in the off-shore sector that could result in a loss of confidence and could expose banks to refinancing risks.

While the financial sector is a source of vulnerability, Moody's views a systemic banking crisis as being unlikely, given factors such as the system's sound capital and liquidity buffers.

The report, "Government of Mauritius -- Financial Sector Is a Source of Growth and Diversification, But Also Systemic Risk", is now available on www.moodys.com. The research is an update to the markets and does not constitute a rating action.

Mauritius's external position is also vulnerable to the financial centre's performance. Driven by the financial sector, Mauritius's positive balance of payments dynamic has enabled the country to accumulate relatively large foreign exchange reserves which reached a record high in March 2016 of $3.9 billion. Moody's estimates that the DTAA changes with India could curtail net financial flows by between 1% and 2% of GDP annually.

09 June 2016

Mauritius: FSC Communiqué relating to Directions to Lancelot Global PCC, The Four Elements PCC and Two Seasons PCC

The Financial Services Commission issues Directions to Lancelot Global PCC, The Four Elements PCC and Two Seasons PCC to initiate the necessary actions for the orderly dissolution of their businesses and the discharge of their liabilities

The Financial Services Commission has today, 08 June 2016, issued directions to Lancelot Global PCC (‘Lancelot’), The Four Elements PCC (‘Four Elements’) and Two Seasons PCC (‘Two Seasons’) (together the ‘entities’) to initiate the necessary actions for the orderly dissolution of their businesses and the discharge of their liabilities in accordance with the Insolvency Act 2009 within 21 days from the date of the orders. The relevant extracts of the directions are summarised below:
  1. The Financial Services Commission (the “FSC”) refers to the revocation of the Category 1 Global Business Licences and the withdrawal of the authorisations to operate as a collective investment scheme of Lancelot and Four Elements dated 20 March 2015 and of Two Seasons dated 14 September 2015.
  2. In the interest of the investors of the entities, the FSC invited those charged with governance, typically with executive management of the cells to submit their requests for: (i) the transfer of cellular assets from a particular cell to another cell of a PCC or to another Company as provided under Section 15 of the Protected Cell Companies Act 1999 (the ‘PCC Act’); and/or (ii) an administration order of a particular cell as per the provisions of the PCC Act.
  3. Following due consideration of the requests received, the FSC has approved the transfer of cellular assets based on merit and those charged with governance of the respective cells have been informed of the FSC’s decisions accordingly.
  4. Since the exercise mentioned at point 3 above has been completed, a process should be initiated so that the remaining investors may have access to their investment.
  5. Based on the above, directions have been issued to the entities to initiate the necessary actions for the orderly dissolution of the businesses of the entities and the discharge of their liabilities in accordance with the Insolvency Act 2009 within 21 days from the date of this order.

Financial Services Commission
09 June 2016

08 June 2016

Financial Post - Neil Mohindra: In defence of ‘tax havens’

Countries like the Cayman Islands, Singapore, Mauritius and the Channel Islands of Jersey and Guernsey actually specialize in providing vital global pipelines through which foreign investment flows.

Neil Mohindra is a public policy analyst based in Toronto and a former senior manager of the Financial Services Commission of Mauritius.

Externalisation juridique: une offre en plein essor

Si le LPO était autrefois l’apanage de destinations comme l’Inde, le Sri Lanka, les Philippines ou encore l’Afrique du Sud, Maurice s’est depuis quelques années positionné sur ce marché. L’avantage de l’île, outre les salaires compétitifs, reste le bilinguisme de la population mais également la nature même de notre juridiction, inspiré des systèmes anglais et français.

06 June 2016

Murli Dhar - India Today & AgustaWestland: Another hit below the belt to Global Business

Mauritius has not yet recovered from all the damage done from the revision of its Double Tax Avoidance Agreement (DTAA) with India. To add insult to injury, as it were, India Today, an Indian newscaster, broadcast on 24 May a televised documentary purporting to portray Mauritius as a whole as a centre indulging in money laundering, on the strength of an interview its journalists, disguising themselves as real estate agents, had with a Mauritius Global Business practitioner.

03 June 2016

Mauritius: Civil Aviation (Amendment) Regulations

The Civil Aviation (Amendment) Regulations regulate the operation of Remotely Piloted Aircrafts and Remotely Piloted Surveillance Aircrafts, commonly known as Drones, to ensure the safety and privacy of the public and keep our airspace safe.  The regulations, among others, underline the following requirements -

(a) the operation of a Remotely Piloted Aircraft must not endanger anyone or anything;

(b) no individual shall cause or permit any vehicle or animal to be dropped from a Remotely Piloted Aircraft;

(c) no operation will be carried out unless the individual flying a Remotely Piloted Aircraft  is satisfied that the flight may be safely made;

(d) the operation should be within the visual line of sight of the operator to avoid collision with other aircrafts, individuals, vehicles, walls and structures;

(e) the flying height will be up to a maximum of 400 feet above ground level, unless authorised otherwise by the Director of Civil Aviation;

(f) the permission of the Director of Civil Aviation will be needed to fly a Remotely Piloted Aircraft in Class A, C, D or E airspaces as notified in   the Aeronautical Information Publication; and

(g) the permission of the Air Traffic Control Unit will be needed to fly a  Remotely Piloted Aircraft within an aerodrome traffic zone during notified hours.

Government of Japan to open a Diplomatic Mission in Mauritius

Cabinet has agreed to the proposal of the Government of Japan to open a Diplomatic Mission in Mauritius. Japan is the world’s third largest economy and is an important development and trade partner for Mauritius. Japan and Mauritius established diplomatic relations in 1969.  The opening of the Mission would further consolidate the existing bilateral ties, and strengthen collaboration in regional and international fora. It would also help increase the visibility of Mauritius as an attractive destination for Japanese tourists and investment.