Another grey Monday in late January. For Hughie Wong, a partner in the London office of Walkers, it is the morning after the night before. He is not alone. The previous day the Greeks had gone to the polls and voted into government Syriza, the radical-left party whose anti-austerity agenda risks the country exiting the euro, stoking instability throughout the European Union (EU).

Uncertainty hangs in the air. "It is not yet clear what the Greek government will do," comments Wong. He had listened carefully to Yanis Varoufakis, since confirmed as Greek finance minister, on that morning's BBC Today programme. "He was quite frank in that interview, saying that we have a democratic mandate to push back on austerity, but he was careful not to close the door on anything."

Nor is Greece the only question mark for offshore firms – and their clients – when it comes to Europe. The forthcoming UK general election raises the prospect of an in/out referendum on Britain's current EU membership, as promised by the Conservatives should they form a government following the May poll.

Yet while the existence of such European unknowns is clear, their impact on offshore law firms is less so. For a start, offshore jurisdictions are a varied bunch, spanning the globe – from the Seychelles to Bermuda – and offering a range of specialisms, legal frameworks and reputations. Some, including Luxembourg and Gibraltar, are EU members; others are oceans apart from Brussels. To what extent and why, then, does Europe matter to offshore firms – and how might they feel the impact of ongoing European instability?

Regardless of geography, Europe matters in the offshore world. According to Jonathan Rigby, Jersey-based managing partner of Mourant Ozannes: "Offshore vehicles are used extensively to facilitate investment into and out of Europe and the pooling of European investor capital. This means that Europe is an extremely important and sophisticated market for offshore legal services."

Luxembourg lure
Top-tier offshore jurisdictions, along with international financial centres, put "oil in the system" of global financial flows, concurs Francois Pfister, practice partner at Ogier's Luxembourg office. In his view, offshore jurisdictions and the lawyers based in them provide investment structuring that renders them ideal for international clients – predominantly US and Asian – who wish to invest in Europe via a flexible, tax-efficient jurisdiction. "If you have 10 or 15 investors based in different jurisdictions in Asia, they may need to have a common platform that satisfies their needs," Pfister explains.

As an EU member, he argues, Luxembourg "works a bit like a translation system between legal systems". The ability to comply with European regulations nimbly – thanks to relatively small and swift political and economic communities – is part of the sell. For example, says Pfister, "in Luxembourg we implemented the EU's Alternative Investment Fund Managers Directive (AIFMD) very quickly, which was strategic for us as the number two jurisdiction in the world for investment funds".

Indeed, he adds, the AIFMD, enforced in July 2013, is among the reasons Ogier opened its Luxembourg office in 2012. What was initially a team of four is now 20-strong and includes four partners.

However, membership of the Brussels club is not a prerequisite for offshore firms doing business in Europe. For instance, Ogier's Cayman and British Virgin Islands (BVI) offices help funnel US investment to the Old Continent, says Pfister. The Channel Islands (CI) provide another example.

Jersey: ahead of the pack
"Jersey very obviously sits outside the EU," comments Bruce Scott, who practises Jersey law from the London office (see box, below) of CI-headquartered Bedell Cristin. "But a lot of Jersey legislation mirrors or flows out of what the EU does, though largely on a voluntary basis to ensure we're complying with preferred standards of international regulation. Often we're ahead of the curve with things like enforcing money laundering standards or regulating registered corporate service providers, for example, compared to some EU jurisdictions."

Equally, Scott sees situations in which non-EU membership is the prized factor. "We also provide an alternative space," he continues. "If you're [a client] from outside the EU, you may not wish to use an EU country as a staging post, as you may be caught up in what might be seen as unnecessary red tape and hurdles when you don't require the regulatory protection afforded."

Europe, then, matters. So what is the offshore response to Greece weighing its options? Scott is relatively sanguine: "If Grexit occurred and slowed growth it would definitely impact on us as it would on everyone else, but I'm not sure there are currently any specific concerns emerging from clients."

Appleby's group chair, Frances Woo, is among those to express greater concern. "The quantitative easing programme announced by the European Central Bank [in January] appears to have contained the potential negative impact of a Greek exit so far," she says. "Investor 'jitters' will remain a feature of this market for as long as the so-called Grexit is on the horizon, and any concessions on bailout terms (including debt relief and reversal of its reform agenda) granted to Greece with its new leftist, anti-austerity government in place may be worrying.

"There is no guarantee that this won't encourage and prompt other eurozone countries to initiate their own anti-austerity movements, renegotiate debt and plunge Europe into deeper crisis. Very adept steersmanship and manoeuvring will be required to address the Greek risk."

Rigby sees such risk as particularly pertinent to the Channel Islands: "The main challenge [of potential Grexit] for offshore law firms will be dealing with any downturn in business caused by fallout for the eurozone and damage to the wider European economy, including the UK. Offshore finance centres, particularly Jersey and Guernsey, enjoy a particularly strong symbiotic relationship with London so the offshore firms will be taking a particularly keen interest in the implications of Grexit for London."

States of uncertainty 
Wong's instinct to wait and see ("It's not yet clear what the Greek government will be doing") is echoed by Pfister in relation to a possible Brexit. "It's difficult to predict how a UK exit from the EU would go," he suggests. "If the UK were to split from the EU it would become simply another counterparty to Europe. There would be an increased need for some kind of mechanism that puts fluidity into the system between the UK and Europe. Rather than prove detrimental to offshore law firms' business, it would increase the need for the use of third-party jurisdictions, in particular the Channel Islands.

"From a business point of view, the UK leaving the EU wouldn't create long-lasting disruption. In the short term it would be a big hit, politically and economically, but after a while it would create more rather than less work for our firms."

Wong is similarly minded. "In a pure, legal sense Cayman and BVI are regarded as third countries from an EU perspective," he explains. "So you might say that it will be business as usual – they will remain third countries with or without the UK in it. But the more realistic, commercial answer is: I don't think anyone believes that there will be no impact."

This uncertainty creates challenges for offshore firms' management. For instance, Wong says a question mark over whether major investment banks would remain in London following a UK exit threatens their legal advisers' continued presence in the Square Mile. "If things become more dispersed, if other financial centres emerge – if people go to Frankfurt, for example – obviously our presence here [in London] would be looked at," he says. "However, it is much too early to make decisions, even contingent ones. After all, London's preeminence predates the EU."

Rock steady?
For one offshore jurisdiction, however, the prospect of a UK exit is truly troubling. As a British territory, Gibraltar enjoys EU status and has built an offshore economy that trades on this fact. "We're part of the UK member state, but we're outside the UK tax system and that's why we're able to have a slightly more competitive tax system," explains Michael Castiel, a corporate and commercial partner at Hassans in Gibraltar, referring to the territory's 10% corporate tax rate (OECD average: 34.1%).

"A lot of the multinationals in the US and the Far East that want a tax-competitive jurisdiction in which to base their business in Europe come to us and use Gibraltar's corporate structures to put it in place."

Castiel highlights two major industries – online gaming and insurance – whose significant Gibraltar presence relies on the tax regime and the convenience of belonging to the European bloc. By applying for the requisite licences in Gibraltar, such companies are then authorised to operate across the EU, he says. "Otherwise you would need to go to 25-26 other jurisdictions. The standard is exactly the same as you'd need to acquire elsewhere in the EU but it is much quicker in Gibraltar because it's a smaller jurisdiction.

"A UK exit would make things very volatile. Many clients would be thinking carefully about whether Gibraltar was the place to do business. Without EU membership, Gibraltar's tax competitiveness would no longer be enough."

Contingency planning is afoot. "We're trying to keep as focused as possible on business issues," explains Castiel. "If we're out of the EU what do we do? We're developing our links in the Far East, and we're looking at Latin America as another potential growth market."

The firm has identified particular synergies with the Latin American market, he says. For a start, many Gibraltarian lawyers are Spanish-speaking and culturally familiar with Latin American countries. "The growth potentials are there in the private client world," continues Castiel. "We already have several key Latin American clients and feel that's only the beginning. Whether the UK stays or exits, these will still be very much our target market over the next few years.

"We see Brazil as the lead market and we will have a series of meetings in the next few months. Some key partners will travel to Brazil; they'll meet intermediaries and family offices to develop links and find areas of mutual cooperation. We're putting a lot of resources into getting the message across to key people."

The Gibraltar government is also attempting to inject further diversity into the local economy. Last spring it opened its own office in Hong Kong, which, according to officials, serves to "showcase" the territory, provide a "stepping stone into the ever-growing Chinese market" and "encourage Chinese investors to use Gibraltar".

Similarly, since 2011 the Channel Islands have run a Brussels office to promote the interests of Jersey and Guernsey in Europe. Its role would intensify should an EU exit occur. "At present, the offshore centres' diplomatic and political relationship with the EU is managed primarily through the UK," says Rigby. "In the event of a UK exit, offshore centres would need to invest heavily in managing their EU relations directly through Brussels."

But, he adds: "I think it is highly unlikely that there would be a commercial case for an offshore law firm to open an office in Brussels in these circumstances."

Africa is another potential growth area, and already a source of work according to Anne Forbes-Harper, a partner at Walkers, which has sent scouting expeditions to the continent.

Back in Europe, the future may be uncertain. Despite some offshore jurisdictions facing more potential disruption than others though, they are generally no more exposed to the threat of European instability than other members of the international business community. Over to you, Mr Varoufakis.

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London promise
Regardless of their principal overseas locations, whether or not offshore law firms should invest in a London office is a recurring item on partners' agendas. The importance of London as, arguably, the leading global financial centre, and its fortuitous position on the Greenwich meridian, has resulted in many premier offshore firms expanding their presence in the UK capital.

"London's London," says Bruce Scott (pictured), who has been the head of Bedell Cristin's London office for more than four years. In that time headcount has increased from one partner and two associates to six lawyers (Scott remains the only partner) and one paralegal.

A London office is a firm's global shop window, he suggests: "The firm's view is that it's essential. A hell of a lot of things go though here. We work closely with many top US and UK firms and we're next door to those people, who we work with day in, day out, so you have the opportunity to create a better working relationship than if you're in Jersey and come over once a month. We're very conscious that we're the face of the business.

"The fact is that it's cheaper to hire people and pay them and the rent in Jersey. But we find the benefits of being in London certainly outweigh those factors."

Hughie Wong, a partner at Walkers, agrees that there is advantage to be had in a London address close to the offices of the global onshore firms that instruct them. "They want an offshore firm that 'speaks in that location'," he says, acknowledging the importance of understanding the Square Mile's business culture. "A lot of that is about being in the London timezone, immediately available to pick up the phone and deal with things on an emergency basis."

Walkers opened in London in 2001, with two partners and three associates, since joined by three additional partners. "The office locations we've opened over the years have been selected in response to client demand while ensuring that we can provide an offering that maintains and builds on the Walkers brand," explains partner Anne Forbes-Harper. "We are always responsive to change but we certainly expect London to remain a key market for us and our clients."

Appleby has been in town since 2000, now numbering three partners, one associate and two paralegals. "London is obviously one of the principal relationship-building hubs for us and has been for some time," says group chair Frances Woo. "We have a steady stream of Appleby people servicing the UK and wider European markets."
Mourant Ozannes' City base, which opened in 2000, has been boosted by the recent hire of former Farrer & Co joint senior partner Jim Edmondson as head of international trusts and private client. Firm managing partner Jonathan Rigby says: "Historically, the offshore law firms have used their London offices to recruit and retain lawyers and senior managers."

Most, but not all. Ogier vacated its City office in 2014 following the management buyout of its fiduciary services company. Partner Francois Pfister travels to London from Luxembourg once or twice a month, he says, with partners from Jersey, Guernsey and Cayman also making regular visits. "There's a cost in maintaining a London office, which you have to balance with the importance of maintaining a presence in London. As lawyers we spend a lot of time in the City – we fly there a lot. Presently we do not feel the need to have a permanent London presence but we feel the absolute need to be visible in that market."

Meanwhile, Gibraltar-based Hassans is satisfied with using a network of trusted London firms rather than opening up shop in town. "We've always taken the view that it's better to have a close network of firms in those jurisdictions so you know who to turn to if you need [jurisdiction relevant] advice," explains partner Michael Castiel. He adds that a London presence would risk Hassans competing with firms they currently rely on for referrals.