Offshore jurisdictions – or tax havens to their detractors – have had a bad press recently. During a briefing on 4 May 2009, President Obama returned to a subject he first raised during his election campaign: a building in the Cayman Islands which is the registered office for more than 12,000 companies. This "outrage", said President Obama, is either "the largest building in the world or the largest tax scam in the world". The President supports the Stop Tax Haven Abuse Bill currently before US Congress.

In the UK, Gordon Brown has written to the governments of the British Overseas Territories and Crown Dependencies on the subject of tax transparency, asking them to put "clear water" between themselves and other offshore jurisdictions. The Treasury has commissioned a review of the economies and regulatory systems of the British offshore financial centres.

The tendency is to portray offshore jurisdictions as a harmful abuse of the international financial system. Is this fair?

Of course not. There is much to be said in their defence:

Many offshore jurisdictions, notably those with British constitutional ties, are well-regulated and have strong legal systems.

Offshore jurisdictions which use English law often have a well-developed body of jurisprudence, in particular in trusts and company law. Such jurisdictions are the home of innovative legislation which has furthered the law of trusts, allowing the use of purpose trusts or extended perpetuity periods – for example, STAR trusts in Cayman, VISTA trusts in the British Virgin Islands (BVI) or Foundations in the Bahamas.

The judiciary in such jurisdictions is often drawn from experienced English or Commonwealth judges. Members of the English Chancery and Commercial Bars regularly appear as advocates.

Many offshore jurisdictions have tightened their financial regulation and improved co-operation with onshore tax authorities. For example, since 2005, Cayman has had a tax information exchange arrangement under the EU Savings Directive with 27 EU member states. In 1990, Cayman entered an all-crimes Mutual Legal Assistance Treaty with the US and, in 2001, a US Tax Information Exchange Agreement. On 18 September 2009, the OECD promoted Bermuda, BVI and Cayman from its grey list to its white list of tax-compliant states. Anecdotal evidence suggests it is now much harder to open a bank account in, say, Jersey than in the UK.

There is hypocrisy in the onshore world's attack on offshore jurisdictions. The banks that collapsed during the credit crunch were onshore banks. The principal actors in some of the most notorious frauds in recent years were based onshore not offshore. During the boom years, the City of London thrived on relatively light-touch regulation; the State of Delaware is the jurisdiction of choice for incorporation because of its minimal company disclosure requirements. One suspects there is self-interest in the onslaught against offshore jurisdictions. The Treasury's review of the British offshore jurisdictions estimates that £5.5 billion of their annual GDP comes from financial services: no doubt it would suit the UK to drag some of that income onshore.

Offshore jurisdictions provide a tax neutral environment where it is possible to arrange complex financial transactions which simply could not be implemented in a high-tax environment. Such transactions are also facilitated by more flexible company laws found in offshore jurisdictions. Offshore investment transactions are an integral component of the modern financial system. Indeed, some offshore investment vehicles are now helping to clean up the mess left by the credit crunch by buying up toxic US bank assets.

Therefore, before writing off all offshore jurisdictions, we would urge President Obama and his fellow law reformers not to overlook the many well-established offshore centres or the beneficial role they play in the global economy.

Edward Sawyer and Andrew Mold are barristers at Wilberforce Chambers.