In a recent speech, Hope Strachan, minister of financial services, reported that we block the entry of foreign, specialised lawyers needed to kick-start our financial industry. The Bar Association’s president, Elsworth Johnson, retorted that we let foreigners in whenever needed, and our objective should be to hire more Bahamian lawyers anyway.
As the worthy leader of our Legal Aid Society, Mr Johnson is remote from the intensity of international finance, while Ms Strachan’s Ministry puts her in the thick of the competitive battles for high net worth global clients, institutions and transactions. Our Bahamian specialty of handling trust structures for wealthy foreign clients still profitably exists, but has been dwarfed by the hedge funds and complex cross-border transactions that, for tax or regulatory reasons, need to be booked in an offshore financial centre. In handling this business, our law firms have been left far behind by Cayman, Bermuda, and the British Virgin Islands (BVI).
This issue has long been quietly festering, as we have seen the undeniable shrinking of our offshore financial services industry over the last 10 years. Former financial services minister, Ryan Pinder, on his foreign travels like Minister Strachan, was often told that the lack of qualified Bahamian counsel kept business away from our shores. As long ago as 2007 I wrote a column, from which I quote below:
“Compared to their colleagues elsewhere, Bahamian lawyers fall short in presenting heir home country as a dynamic, growing offshore financial centre with a full range of services.
Thanks to the English trade magazine, The Lawyer, we have a record of what other lawyers are doing. A recent issue carried a special survey called ‘The Offshore Hardcore’, listing the 20 largest law firms specialiding in offshore legal services.
Not one of these firms has its head office, or even a branch or affiliate, in the Bahamas. They find themselves in all the other traditional places - Bermuda, Cayman, BVI, Jersey, Guernsey, Isle of Man, Zurich/Geneva – and have been spreading adventurously to London, Dublin, Luxembourg, Gibraltar, Hong Kong, Singapore, Mauritius, Anguilla, Montevideo, and, most notably, Dubai, the latest financial boom-town.
These firms do not show as small, static organisations struggling for a foothold. They have been steadily adding full physical presence branches, sometimes as start-ups, sometimes by mergers with existing firms. The No. 1 firm, Maples & Calder, is headquartered in Cayman but operates in six other centres, with a legal complement of 53 partners and 144 associates, and a total staff of about 550. The No. 4 firm, Walkers, opened in Cayman in 1964 and has now spread to five more jurisdictions. With 37 partners and 125 associates, it is known as a leading specialist in institutional business and hedge funds, of which more than 8,000 are incorporated Cayman.
These firms’ growth has derived mainly from the explosion in global capital markets, and the creation of ever-more sophisticated financial instruments traded in those markets. To service this business, they share one characteristic: The international training and experience of their lawyers. As shown in the personal profiles found on the firms’ web sites, the majority of the partners and associates were not only educated in the UK (or occasionally Canada or Australia), but also undertook years of work in London or other financial centres before going offshore.”
What has happened since that time? The other off-shore centres have continued to grow. Cayman-based Maples & Calder, for example, now shows a total professional staff of 296 partners, associates and counsel, with offices in London, Dublin, Dubai, BVI, Hong Kong and Singapore. Meanwhile, even the largest Bahamas firms have not grown over 20 partners, and have only opened small outpostsin London, Cayman and the BVI.
The website of Bermuda’s Conyers Dill & Pearman reveals it has advised in the following deals, among many others:
- $100 million financing by EBRD for an ore processing plant in Kazakhstan
- £2.6 billion take-over offer by Qatar Investment Authority for a UK business
- $160 million financing by Aderium Energy Capital for solar projects in Jordan.
I query whether any of our local firms have handled similar deals, or have the resources to do so, since they require specialised attorneys with foreign training and contacts in major financial centres.
In Mr Johnson’s response to Mrs Strachan, he pointed out that the parties in the current Baha Mar dispute were promptly allowed to bring in English QCs to appear before our Supreme Court. True, but beside the point. What we need are not articulate court-room barristers who fly in to argue a case and immediately fly home. We need business counsel - ‘solicitors’ in the English term - who are prepared to settle here for the long term, join the Bar with an existing firm or start a new one, and actively promote the Bahamas with their international contacts. It is this type of presence that Bar Association policy actively discourages.
We have more than 900 members admitted to our Bar. As with any large body, it is split into factions with differing objectives. The majority of the membership practice alone, or with one or two colleagues, handling domestic specialties such as conveyancing, company formation or family disputes, with little interest in complex international financial work. Quite different are our half-dozen large corporate firms, already dipping their toe in this business and eager for more of the lucrative engagements. But they have been unable to get support from the Bar Association as a whole for an ‘open-door’ policy.
Mr Johnson expressed concern that admitting foreign attorneys would take work away from local lawyers Nothing could be further from the truth. The younger members of the Bar, only recently graduating from our Eugene Dupuch Law School, lack any exposure to the law and practice of international finance, and certainly cannot expect to attract this business. However, the qualified foreign lawyers will hire these juniors and gradually pass on to them the necessary expertise to become fully-fledged experts.
Thus admitting foreign lawyers would seem to be a ‘win-win’ policy for both factions of the Bar. If, on the other hand, the leaders of the Bar Association choose to continue the present restrictive regime, they will fly directly in the face of Government objectives as expressed in Mrs Strachan’s campaign to attract more - and innovative - financial services to our shores, a campaign actively endorsed by our Financial Services Board. The present regime not only puts a cap on employment in the legal sector but also restricts growth in our banks, trust companies, securities dealers and corporate service providers. In effect, it diminishes our image in the intensely competitive field of world financial centres.
I do hope that Mr Johnson soon meets with Mrs Strachan to resolve his objections to what really should not be an issue.