Most Read Contributor in British Virgin Islands, February 2017
More than two months after the United Kingdom's decision
to leave the EU, predictions about what the UK's exit will look
like are still speculative.
What are the legal and constitutional implications of
Brexit for the BVI?
For now, nothing will change for the BVI as the UK has not yet
exercised Article 50. When it does, the separation process is
likely to take at least two years. Once the UK leaves the EU, the
BVI will cease to be one of the EU OCTs. However, the BVI's
relationship with the UK will not change and we expect the
BVI's relationship with those other UK Crown Dependencies and
Overseas Territories that have strong financial services sectors to
EU legislation does not apply to the BVI directly; so there are
unlikely to be any significant legal or constitutional changes to
BVI law. However, once the UK leaves the EU, it is likely that its
foreign policy and the economic and financial sanctions it chooses
to apply will start to differ from that of the EU. This may have a
knock-on effect to the financial and economic sanctions which apply
in the BVI and the countries with which it is able to do business.
Exactly what the differences will be and what impact this will have
is pure speculation at this stage.
The good news for the BVI is that it has carefully drafted
legislation and a very stable legal system, so the consequences of
Brexit will be minor from a legal and constitutional perspective.
It is very much business as usual for us.
How could the Brexit decision impact the financial
services industry in the BVI?
One key concern for the BVI, and particularly its funds
industry, is the loss of the UK's influence in developing EU
regulation and legislation affecting the financial services
One aspect of particular concern stemming from this is the
EU's exercise to create a list by the end of 2017 of what is
being referred to as its "common EU list of problematic tax
jurisdictions". A similar exercise is being conducted by the
OECD but based on objective criteria, including compliance with the
OECD's standards for exchange of tax information – on
which the BVI and other UK Crown Dependencies and Overseas
Territories rank highly. The EU process, in contrast, is highly
political. With the UK absent or marginalised in negotiations,
there is a real risk that this list becomes primarily an attack on
low-tax jurisdictions. This could be problematic for the BVI
despite its full compliance with OECD transparency requirements and
FATF anti-money laundering and terrorist financing standards.
In general, uncertainty is the biggest immediate consequence of
the Brexit decision. On the one hand, this stalls economic activity
as businesses delay investment and expansion decisions and
investors stall or lose confidence and pull out; indeed, a number
of UK real estate funds have had to suspend redemptions due to
liquidity pressures. On the other hand, fund managers and other
businesses who thrive on market volatility may do very well as a
consequence of this period of uncertainty.
While the BVI has strong links, both constitutionally and
economically, to London, its outlook is global and its vehicles are
used extensively throughout the US, Asia, Africa and South America.
Any slowdown in work originating from the UK and the rest of Europe
is unlikely to have a lasting or significant effect on the
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