Although Jersey and Guernsey have different legal systems, renewed scrutiny of offshore jurisdictions could be pushing the Channel Island rivals into closer co-operation, writes Lucy Fisher

The scrutiny of offshore jurisdictions as part of a wider clampdown on aggressive tax avoidance in the run-up to this summer's G8 meeting acted as something of a catalyst for renewed talks about co-operation between offshore islands. For the Channel Islands, this also meant renewed talk about a potential confederation, something that is raised every now and then but, for the time being, remains academic. While Jersey and Guernsey are both crown dependencies and lie less than 25 miles apart, they also have differing legal systems and integration or amalgamation would be far from straightforward.

'Better united'

Jessica Roland, Guernsey managing partner of Mourant Ozannes (pictured, below), says that she for one hopes that something comes of the renewed talks. "We work better united, but the detail would take an awful lot of unpicking," she says, adding that there has been fairly limited co-operation between the islands thus far. 

This seems to be changing, albeit slowly, she says, pointing to CICRA (the Channel Islands Competition and Regulatory Authorities) by way of example, established in 2010 and which she says works very well. "But if you look at how many times the Channel Islands work together, it's not very often," she adds. 

She also admits to a long-standing concern in Guernsey that Jersey might "take over" in the event of any formal confederation: "There's a lot of small place politics as well as a lack of political will. The current chief minister Peter Harwood talks the talk, but little happens."

This said, many offshore lawyers point out that pan-offshore or multi-jurisdictional firms work very well. Often there are shared profit pools that operate to facilitate this type of work-flow and Ed Stone, of Collas Crill's Guernsey office, says: "When I go round visiting people in far flung places, I have a Jersey and a Guernsey hat on. The lawyers are already doing that."jessica-roland-mourant-ozannes-web

Spot the difference

What's more, outside of the Channel Islands, Guernsey and Jersey are often grouped together as a single entity – and that's if people know where they are. "Clients think of us as the Channel Islands," says Stone, noting that, while offshore centres including the British Virgin Islands, Cayman Islands and Bermuda are rivals on the ground, as a lawyer, they are much more joined up. 

Jason Romer, managing partner of Collas Crill's Guernsey office, agrees and says that while confederation of the Channel Islands would be a very difficult thing to achieve and is still "a long way off", he notes renewed interest in pan-Channel Island co-operation, and puts this down in no small part to the fact that newer – and often increasingly important markets – "don't understand that difference between the two". 

In a globalised world, and since the financial crisis, there is an increasing need for such jurisdictions to market their services further afield and offshore lawyers note that Asia in particular is booming. But none of this takes away from the fact that the Channel Islands are rivals. "For so long as they're competing, then a truly joined-at-the-hip confederation is very difficult," adds Romer, although he's keen too to point out that when the offshore centres come together, they are "pretty powerful".

But Nigel Weston of Walkers' Jersey office warns that any 'teaming up' between islands would need be very much on a case-by-case basis. He agrees that CICRA is a good example of combining resources and cutting down on bureaucracy within the Channel Islands, but says that a degree of flexibility needs to be built in to any proposed developments to work across the two territories.jersey-channel-island-map-web

Competitive spirit

Weston also stresses that the sense of competition between the islands is still very much alive. He notes that he is currently working on an e-gaming case – an industry with which Alderney, part of the bailiwick of Guernsey, has seen a lot of success. 

"Jersey feels it has more to offer as it's bigger," he says. "We want it to be the case that, if people are thinking of establishing a business like this, then they put Jersey on the top of the list. The idea of a Channel Islands confederation or the teaming-up of the two jurisdictions is genuinely on people's minds at the moment, but only where the symbiosis pays dividends."

That said, being small jurisdictions, both islands spend a lot of money relative to their size and there can be very practical reasons to team up. 

Jersey-based Nick Kershaw, chief executive of the Ogier Group, points out that the Channel Islands share a waste incinerator and have had discussions regarding the shared management or operation of various other facilities, such as hospitals. But he believes that sharing resources in the highly competitive financial services industry would be another matter and a "big task". 

One stumbling block, he points out, is that the funding for promotion of the islands is derived partially from businesses, some of which operate on one island only: "They'll be expecting them to promote that island."

Co-ordinated response

Yet Kershaw is in agreement that there has been a notable increase in collaboration between international financial centres worldwide since the financial crisis and in the lead-up to the G8 meeting and that this is a very positive development. 

"The challenges that the offshore islands face are pretty much identical so it makes sense to have a coordinated response," he explains. "They are stronger if they act in a co-ordinated way, especially vis-a-vis international scrutiny and the development of common international standards."

Of course, economies of scale and greater clarity in terms of regulatory issues and standards will benefit clients, too – and this is something that multi-jurisdictional firms have been aware of and acting on for some time. 

Peter Astleford of Dechert, who works with a variety of offshore jurisdictions on a day-to-day basis with regards to the setting up of funds in particular, says that clients shift from jurisdiction to jurisdiction. For them, he says, politics is not as much a concern as getting the job done efficiently. "I welcome these developments, as a user," he says. 

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What the politicians say

Guernsey's Chief Minister Peter Harwood says that increased co-operation between the Channel Islands is particularly evident in the field of external affairs. He notes that the islands had joint representation at the recent political party conferences and points out that they also work jointly in Brussels. 

Senator Sir Philip Bailhache, Jersey's new external relations minister – a recently created role which reflects the need to promote the islands to increasingly far-flung markets – admits that there is no room for complacency when it comes to marketing the Channel Islands. Formerly the island's assistant Chief Minister, he too notes an increasingly busy programme of foreign engagement. 

But Harwood does point out that it is important to remember that the two islands operate different systems of government. He admits that there has always been a concern that one partner would dominate in any formal confederation – "with Jersey as the majority partner."

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The view from the Caribbean

Michael Gagie, one of the partners responsible for running Maples and Calder's British Virgin Islands (BVI) practice, points out that the British Overseas Territories meet on a regular basis to discuss economic and political issues which collectively affect them and he says that this is "no doubt helpful" in formulating a collective response to issues.

Ross Munro, partner at Harneys in BVI, believes that willingness to co-operate is often a result of recognition of the intellectual and capacity challenges which small jurisdictions face. With an increased regulatory burden he notes that small companies are really struggling. He says: "It is just such a huge challenge. Even the US and the UK struggle with some of the things they've introduced." 

But he believes that this is very unlikely to lead to any formal confederation in the Caribbean. While jurisdictions such as Cayman, BVI and Bermuda appear to be co-operating more than they have done in the past, he says, they are not neighbours – unlike the Channel Islands.

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Viewpoint: Andrew Corlett

"There is more of a structured relationship emerging between the Channel Islands and the Isle of Man. It makes complete sense post-2008. My view, in relation to financial services, is that regulatory authorities could work more closely together, potentially via shared platforms

"When I look at the three islands, I see it as something like a Venn diagram. There is overlap in certain areas where you are competing head-on. And I think I'm slightly heretical about this but wouldn't it be better to say: 'You're the centre of excellence for this, and we are for that.' 

"Whether that would ever happen, politically, I don't know. Agreed centres of excellence are a long way off, but I'm not saying it would never happen."

Andrew Corlett is the managing director of Isle of Man-based law firm Cains.