International Opportunities and Post-Brexit negotiations
"The uncertainty continues...", Senator Ian Gorst's opening statement at Friday 18 January's "Opportunities following Brexit" seminar seems almost comically understated now in light of the events in the UK parliament over the past two weeks, with the largely unchanged plan B presented on Monday 21 January, last night's 'Spelman' amendment seeking to prevent a "no deal" Brexit (although non-binding in a reality) and a vague 'Brady' amendment calling for the PM to return to Brussels to renegotiate the Withdrawal Agreement backstop to be replaced with 'alternative arrangements to avoid a hard border'.
Unhindered, and most probably in light of recent events with extra gusto, Jersey presses on with its preparations, and the States of Jersey have stressed that Day One No Deal (D1ND) continues as the default from which the island is building its preparations. The 18 January seminar centred around the preparatory work that the States of Jersey has undertaken to build on their already established networks outside of Europe, to fully utilise the opportunities that will open up post-Brexit.
Tom Le Feuvre, Head of International Agreements at the Government of Jersey, set out several factors which supports Jersey's positive outlook on post-Brexit opportunities:
- Global wealth is moving West to East, and South;
- Growth is currently fastest in markets outside of the EU; and
- Jersey remains a custodian of €1.7 trillion of wealth in its banks, trust companies, corporate structures and fund vehicles. Around 3/4 of this wealth originates from investors outside the UK and 2/5 outside of Europe.
In addition, it was noted by speakers:
- There has been a growth in the number of funds administered by Jersey based managers in 2018 (the number of Jersey managers marketing into the EU through private placement rose 23% year-on-year - and an increasingly global funds sector, with the number of Jersey funds with US promoters growing 165% over the past five years);
- A huge interest by alternative banks has been noted, especially originating from the China region; and
- Jersey Finance's Hong Kong office has been established for 10 years, an increase in bi-lateral co-operation has been noted with India through agreements such as the tax information exchange agreement, and the States of Jersey are currently planning a Malaysia exploratory trip.
The establishment of the newly launched Binance Jersey fiat-to-cryptocurrency trading platform on the island, a Hong Kong based entity, evidences the continued attractiveness of the jurisdiction to investors outside of Europe, even in the midst of the UK's Brexit uncertainty.
It was remarked that continuity was the key, Jersey has historically always been an export base and outward looking island and will continue to feature as such post-Brexit. In addition it was noted the jurisdiction itself is unique, by being especially accessible to foreign investors -- within 48 hours of being on the island potential investors can meet with the regulators, government representatives and their lawyers and accountants.
The States of Jersey are taking action to ensure this outward-looking future by:
- Strengthening existing relationships with countries such as Rwanda and UAE;
- Promoting developing relationships with growth countries such as Kenya and India;
- Forming excellent government to government relationships with China; and
- Moving to establish a representative office in the US.
The latter two points were stressed to be of particular importance to the States of Jersey with 22% of the World's economy based in East Asia, and 50% of global investment originating in North America.
Entrustments (issued by the UK permitting the island to negotiate international trade deals on its own behalf) were first granted to Jersey by the UK last year to negotiate a trade deal with the UAE. A further entrustment is set to follow to negotiate a similar deal with Rwanda, and it is thought that the island will push for a fast-track, streamlined process of entrustment to accelerate exploiting opportunities in markets beyond the UK post-Brexit.
It was remarked at the seminar that there is no doubt that the UK has weakened its relationship with European Partners. In contrast, Jersey is in a unique position as a crown dependency with especially close relationships with EU partners, as approximately 25% of the Jersey population are European citizens. Jersey's status as a cooperative jurisdiction following the determination by the EU Code of Conduct Group on Business Taxation and its reputation as a leader in anti-money laundering practices will shorten the length of the transition of the jurisdiction to working with the EU during the Brexit transition period.
In addition, upon leaving the EU on 29 March 2019, the UK will become a "third country". Jersey, as an independent jurisdiction currently neither part of the UK nor the EU, is already recognised as a third country for many purposes, not least as an "equivalent jurisdiction" for GDPR purposes. As such a further opportunity for Jersey exists to become a temporary vehicle into Europe for the UK, should D1ND become a reality.
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