Labour leader Ed Miliband rattled some sabres this month when he suggested that a new Labour government would demand that UK overseas territories be put on a 'tax havens blacklist' if they failed to cooperate with his drive against tax avoidance. But it's still a good time to be one of the big offshore law firms. The fallout from the financial crisis may still be a live issue, but their strong performance is providing growth levels way ahead of many among the onshore pack: in a bumper year for the offshore big players, 2014 saw double-digit revenue growth and increased headcount. Furthermore, they are upbeat that their good fortune will continue.

Take Carey Olsen. It beefed up its global litigation practice in 2014 and increased the number of Jersey funds it advises – up to 381 from 321 the previous year, thereby securing just over a fifth (21%) of total market share. It also doubled its British Virgin Island (BVI) office by appointing three new lawyers last April, a move that extends the firm's banking, corporate and investment funds client offering.

Mourant Ozannes also saw a "significant uptick" in the volume of transactional work at all of its offices in the second half of 2014, and that trend seems likely to continue "well into 2015″. The firm expects to post a 15% increase in revenue in its global corporate practice for the latest financial year up to January 2015, according to its global managing partner, Jonathan Rigby (pictured, below).

Frances Woo, global chair at Appleby, reports similar good news: that her firm has a very positive outlook for the year ahead. "Last year was good for us. We had an 11% rise in corporate work, and a 14% increase in lawyer numbers as a result. We expect the level of corporate work to increase this year across all of our offices, and for dispute resolution work to remain strong."

Firms also believe that continued growth will come from a range of practice areas. Woo suggests that there will be more demand from clients for structured finance and corporate restructurings, as well as work related to collateralised loan obligations, funds (particularly in Bermuda and Jersey) and insurance in key jurisdictions such as Bermuda and the Cayman Islands.

Private equity and investment funds are coming back into play, according to Maples and Calder's global managing partner, Henry Smith. "Structured financing has also come back into favour – particularly in the US – after slowing down following the financial crisis," he adds. "Commercial aircraft financing is also providing a steady stream of work, particularly for those companies that want to incorporate in Ireland or Cayman."

Peter Tarn, chairman of the executive committee at Harneys, says that "commercial and corporate, investment funds and litigation and insolvency remain important. Tax and regulatory advice is especially sought-after given developments regarding the Foreign Account Tax Compliance Act and tax information exchange agreements. Our sanctions practice has been very much in demand too as we provide advice on the legal aspects of economic sanctions on Russia and Ukraine, and Iran."

London real estate
Rigby believes that, on balance, the strong growth in Mourant's transactional practices – finance, banking, corporate and funds – will continue, with the stellar growth in litigation of recent years starting to level off. One of the firm's most active areas is foreign investment into UK commercial real estate through Jersey and Guernsey vehicles. Deal flow is strong with Malaysian, Chinese, Middle Eastern, Canadian and US institutional investors and sovereign wealth funds leading the way. 

In October Mourant's Jersey office advised on one of the biggest UK real estate financings in recent years, raising £1.4bn from a syndicate of Asian and Middle Eastern banks for London's iconic Battersea Power Station. The financing will fund the development of the power station building itself, together with the construction of a planned high street as part of the wider redevelopment of the 43-acre site.

A welcome surprise is that some practice areas have continued to be very busy. For example, Ingrid Pierce, global managing partner at Walkers (pictured, bottom), says that the group's restructuring practice has defied expectations. "We anticipated that restructuring work would slow down a few years ago, but it still accounts for a significant part of our revenue," she explains. "Private equity and investment fund-related work has also kept us busy."

New companies
One key metric used to judge the fortunes of the offshore legal services sector is the number of new company registrations, and – according to Appleby's figures for the first half of 2014 – the total has increased across offshore jurisdictions.

The BVI continues to dominate offshore activity by volume, reporting 25,533 new companies – a 6% increase on the previous half-year – and easily maintaining its two-fold lead in the number of companies formed ahead of its nearest comparator. Bermuda's growth also remained steady, following a strong second half of 2013.

But Cayman was the standout jurisdiction as measured by percentage increase, according to Appleby's 'On the Register' report, powering through the 5,000 level for the first time in a six-month period since 2008. With 5,390 new companies registered in the first half of last year, Cayman experienced a 17% hike over the previous six months – the largest increase measured in the report. Smith says that such figures are "a good indicator that money is flowing more freely and that corporate activity is on the up".

Chinese money flows
While optimism prevails, there is little doubt about the obvious source of guaranteed growth: Asia. In response, offshore firms have become increasingly active in Singapore, Hong Kong and China. For example, Appleby has been in Asia for 25 years and opened an office in Shanghai in 2012, while Bedell Group opened its Singapore base in 2012 to provide BVI legal services, notably corporate finance, joint ventures, listings, banking and capital markets.

Meanwhile, Harneys opened its seventh office, in Singapore, last April. "We believe that Singapore is a key jurisdiction in terms of cross-border capital flows and private wealth in Southeast Asia," says Tarn, adding that the firm's Singapore team offers the full range of offshore transactional services.

Naturally, China is the biggest regional market – and those offshore firms that have an Asian presence are keen to attract corporate clients that are trying to raise funds, typically through bond issues or initial public offerings (IPO).

Many of China's state-owned enterprises, banks and corporates have looked to the bond market for more efficient funding options, resulting in a significant increase in Asian bond deals. These typically involve the establishment of a Cayman or BVI company to act as bond issuer, with credit enhancement provided in various forms.

These may include guarantees, letters of support, keep-well agreements provided by parent companies or operating subsidiaries and, in some cases, on-demand guarantees or standby letters of credit from third-party financial institutions. Such structures have developed in response to regulatory requirements imposed by the Chinese government, as well as restrictions on Chinese onshore companies issuing debt. Walkers' Hong Kong office has recently advised on a number of such deals, acting as BVI counsel on the $3.5bn (£2.3bn) bond issue for State Grid, and China Cinda Asset Management's $1.5bn (£983.7m) bond offering.

Alibaba and Hong Kong IPOs
IPOs continue to be active in Asia as local companies raise capital – looking to list on a local market often as a step towards a London or New York listing. Asian companies prefer to list and incorporate companies using a BVI, Cayman or Bermuda vehicle because these are more generally accepted by listing authorities and institutional investors than those incorporated in many Asian countries.

"From my perspective in Hong Kong, offshore law firms are heavily involved in IPO work, and this tends to be a bellwether of how the economy is doing in this region" says David Lamb, partner and company chair of Conyers Dill & Pearman. "There is also a lot of M&A activity taking place here, and both of these developments are having a positive knock-on effect for corporate finance and capital markets work."
Last year Maples acted as Cayman legal adviser for the world's largest online and mobile commerce company, Alibaba, on its $25bn (£16bn) listing on the New York Stock Exchange in September (the largest IPO to date). 

Meanwhile, Appleby has had an active start to 2015 in the capital markets sector, advising on three IPOs on the Hong Kong Stock Exchange (HKEx) in January, including the year's first HKEx listing. The firm acted as Cayman counsel to Deson Construction International, Yat Sing and SiS Mobile on their respective listings.

Best of the rest
While Asia is obviously tempting, other markets also afford opportunities. For example, Seychelles and Mauritius are good springboards for clients based in Africa and India. Bedell opened its Mauritius office at the end of 2010. Business has been good, though not on the scale of Cayman or Hong Kong. In context, according to Appleby's figures for the first six months of 2014, 1,278 new companies were incorporated in Mauritius, representing a 12% increase over the previous half.
Walkers' Pierce points to opportunities coming through in Latin America. This is on the back of increased private equity interest relating to a range of infrastructure and energy projects that have been given the thumbs up, as well as growth in high-net-worth individuals and family offices that are looking to invest funds.

Having dipped in and out of the region, Walkers has been involved in some notable deals. It acted as Cayman counsel on more than $13bn (£8.5bn) of aggregate debt issued by Brazilian oil giant Petrobras' finance subsidiary, PifCo, in 2010 and 2011. These represented the largest-ever international corporate bond offerings by a South American company.

"There are some real growth opportunities coming through in Latin America and we are positioning ourselves to offer our services to clients with interests there," explains Pierce.

Ireland is proving to be a magnet for aircraft deals. Last May Maples provided Cayman and Irish law advice and assistance to Amedeo in connection with its order for Airbus A380 wide-body aircraft. The order, worth $8.3bn (£5.4bn), is one of its most significant recent investments.

Tightening offshore legislation 
Yet one market, a traditional provider of work, has begun what may be a lengthy decline. "There has been a bit of a drop off in business from Russia," says Pierce. This is down to the country's economic problems with a falling rouble, and the sanctions placed upon Russian businesses because of the country's involvement in Ukraine. Others speak of "a slowdown in business" coming from Russia, as corporate investment activity has stalled.

In November the Russian government moved to flush its companies and wealthy citizens out of foreign refuges by passing new legislation that tightens reporting requirements for offshore income and subjects it to taxation.

Under the new law – which came into effect in January – Russian citizens and companies will have to pay taxes in Russia on the retained earnings of foreign-registered entities they control. From 2017 concealing offshore assets from the Russian authorities will be illegal. The new law defines a foreign entity as Russian-controlled if a Russian company or individual holds at least 25% of it. For individuals, a two-year grace period applies during which the threshold will be set at 50%.

In cases where several Russian individuals or institutions jointly own more than half of an offshore entity, those that hold more than a 10% stake will be considered controlling shareholders and thus be taxed. No precise data exists on how many Russians have stashed money abroad or how large a percentage of the country's corporate sector is structured around offshore entities, but the practice has enabled massive capital flight.

Firms are reluctant to say what kind of impact the Russian government's move will make, or how detrimental sanctions have been. However, even in adversity, opportunities exist. "It's no secret that the Russian market is experiencing economic and sanctions-related challenges at the moment," comments Harneys' Tarn. "However, we have found that more and more clients are seeking advice on the sanctions regime regarding Russia and Ukraine."

Headcount climb
As offshore firms benefit from greater volumes of work, they are also taking on more people to deal with demand – from partner level downwards. Maples has increased its headcount over the last 12 months, breaking the 100-partner barrier and the 1,000-staff mark for the first time in the firm's history.

Elsewhere, because of the rapid expansion and success of its Irish office, Walkers launched its Ireland Traineeship Programme in October – for graduates seeking a career in law with an international focus. In July the firm promoted 10 of its lawyers to partner, and added another three partners to its Hong Kong base.

Harneys has experienced steady growth, and now has 35 partners across the globe. The firm also says that it has seen continued fee earner headcount growth "in a number of areas", while its Hong Kong office is now the second-largest offshore firm there. "We are constantly recruiting top legal talent, and we seek out commercially minded lawyers who can add to the firm's diversity and breadth of experience," says Tarn.

Bedell enjoyed around 15% revenue growth year-on-year for the past financial year, which has prompted the firm to take on new hires across most of its offices. "We are looking for quality people with cross-border experience to help us capitalise on the upswing in the economy," says managing partner Richard Gerwat. "Private equity and M&A deals are becoming more frequent, and there is a lot more investment fund activity, as well as a pick up in interest around real estate. We are looking for experienced people to help us make the most of these opportunities."

On guard
Yet although the good times are rolling, Gerwat remains cautious. While the global economy has improved, he believes that "it is still too difficult to forecast what might happen over the next few years. The problems raised by the Greek election, the European Central Bank pursuing quantitative easing and the Swiss Central Bank's decision to stop the cap on its currency all go to show that anything can happen. It is too difficult to judge how the market for offshore firms will be in two years' time. We are simply focused on providing the best level of service we can for our clients, and building on that."

Other managing partners agree that economic and political volatility are of concern. However, Mourant's Rigby says: "While the spectre of a Greek exit from the eurozone, the UK election and deteriorating relations between Russia and the west could create economic uncertainty that would adversely affect deal flow, [the threats] may be offset by new work as offshore centres play their traditional role as a safe-harbour for capital in times of geopolitical upheaval and market turmoil."

Offshore law firms are also not immune to the pressures faced by their onshore counterparts. "Clients are requiring lawyers to be more like business partners rather than advisers telling them what the rules permit them to do," comments Woo. "Firms need to provide more value to clients, and this is going to result in greater fee pressure in the longer term, as well as a need to work more efficiently and cut costs. The pressure on fee income will force offshore firms to pick up bigger volumes of work."

Increasing pressure in the marketplace may also spur further consolidation over the next few years. "Offshore firms are not immune from the external pressures facing the onshore legal industry," argues Rigby, whose firm was formed through a merger in 2010. "Increased client pressure on fees, the drive to reduce costs and the complexities and expense of running an international network all point towards consolidation."