Bermuda, the Cayman Islands, and the British Virgin Islands offer not just an idyllic lifestyle but increasingly sophisticated legal work too.

Lucy Hickman reports

The Caribbean is usually a region associated with beaches and coconuts.

But in the last two months, lawyers have stopped thinking about it as the place where they can take their holidays and started seeing it as home to some significant law firms.

On 1 February, Cayman Islands firm Boxalls merged with Channel Islands practice Ogier in the first transatlantic merger of offshore law firms.

The new practice, still called Ogier & Le Masurier in Jersey and Guernsey, and Ogier & Boxalls in the Caymans, has more than 370 lawyers and staff, including an office in London.

Then last month, Cayman Islands firm Hunter & Hunter announced plans to merge with Bermuda firm Appleby Spurling & Kempe under the name Appleby Spurling Hunter.

The moves have ignited interest in the Caribbean's offshore centres.

Bermuda, the Cayman Islands and the British Virgin Islands (BVI) are beautiful, exotic, prosperous British colonies, located advantageously close to the US, and offshore tax havens to boot - who would not want to have a base there?

This question is whipping up a storm in the US at present, according to Wendell Hollis, managing partner of the Ernst & Young-affiliated law firm in Bermuda, Hollis & Co.

Controversy is raging, he says, because large multinational US corporations are abandoning their US bases and setting up headquarters in Bermuda instead, relegating their US offices to mere subsidiaries and thus saving themselves a packet in taxes.

'They were very quickly attacked for being unpatriotic, but they will have saved themselves a fortune in taxes,' says Mr Hollis, a native Bermudian who trained as a lawyer in the UK before returning home around 30 years ago.

Although protected under a US defence umbrella, Bermuda's legal system - like that of the BVI and the Cayman Islands - is based on English common law, but modified by local legislation.

The governments are headed by a governor, appointed by the Queen.

Despite the obvious UK links, Mr Hollis says Bermuda is closer in more ways than geography to the US.

'We're very American here - around 60-70% of the people who work in business here are from the US.'

Offshore tax breaks were initially what persuaded many insurance companies to base themselves in Bermuda and the Cayman Islands, making these locations two of the top insurance centres in the world.

Mr Hollis says: 'Tax was a major reason for insurance firms to come to Bermuda to start with, but now they need to be in Bermuda if they want to be major insurance players.'

Kehinde George, a lawyer with Bermuda-based Attride-Stirling & Woloniecki, says: 'There are a wide range of major players in the international reinsurance market, including Bermudian and US insurance and reinsurance companies, Lloyd's syndicates, London and European companies, captives and captive-management companies, brokers and underwriting agents.'

She adds: 'The main type of work of my firm is reinsurance, from a litigation and corporate perspective.' And Ms George says the burgeoning insurance and reinsurance market in Bermuda brings in good-quality legal work.

Andrew Bolton, a partner with Hunter & Hunter, says: 'Bermuda has enjoyed dramatic success in relation to the insurance and the reinsurance industry physically based on the island.'

It is not just insurance law which occupies the lawyers' time in these regions.

Incorporating and managing offshore companies is, not surprisingly, also big business.

Christopher McKenzie, an English solicitor and partner at BVI-based Smith-Hughes Raworth & McKenzie, says: 'Work consists mainly of providing advice on the activities of companies incorporated in the BVI on international and cross-border transactions - incorporating and managing offshore companies, offshore trusts, investment funds and litigation involving BVI companies.'

Mr Bolton says: 'In Cayman, the extension of segregated portfolio companies [which have one core vehicle with many subsidiaries insulated from one another] to companies outside the insurance sector, and the recent introduction of the ability to convert existing companies to that format, has been a further boost to the funds business.

'The main focuses are on corporate and commercial law, and dispute resolution, also mainly commercial in nature.

We also have a significant property practice.

The corporate/commercial work is particularly active in the sectors of investment funds, asset finance, shipping, structured finance, insurance, telecoms and technology.'

He says the attraction of operating a law firm - or indeed any financial services business - in the Cayman Islands lies in the islands' importance as a jurisdiction and also the factors that have helped to make it so important, including 'political stability, business-friendly legislation, high-quality regulation and a taxation system based on indirect taxes only, which favours investment and free movement of capital'.

Bermuda, Cayman and the BVI all have a fused profession and an English solicitor or barrister can be admitted in any of the jurisdictions.

In all three jurisdictions, once a sponsoring firm has been found, the firm must obtain a work permit, which will be granted by the government department of the relevant jurisdiction after a lawyer has been qualified for a varying numbers of years.

However, before you go rushing off to join an offshore island law firm, be warned: Mr McKenzie says working in the Caribbean does have its disadvantages, including dealing with copious local bureaucracy and regulations.

'Lawyers coming out to the BVI must be prepared to work long, unsociable hours and must not view coming to work in the Caribbean as a working holiday,' he says.

But, away from the office, a potentially stunning lifestyle awaits.

Quite apart from the tax-free earnings, there is a host of other personal benefits to lawyers operating in these jurisdictions.

Ms George says: 'One might also be attracted by the very high standard of living, better quality of life - including no commuting - very good environment for young children, proximity to the US (only a two-hour flight from major cities such as New York and Boston) and outdoor pursuits such as golfing and sailing.'

Mr McKenzie says: 'It suits lawyers who can adapt to the demands of the long hours, but who then can wind down by enjoying the simple, unsophisticated life.'

However, Mr Hollis says the work is sophisticated - particularly in Bermuda.

'We are very different here from the Cayman Islands or the BVI.

People would find it very sophisticated here.

'Bermuda has changed a lot in the last 30 years.

I lived in London for a couple of years where it was colder and darker than here, but in those days there was a big sophistication gap.

Now a young lawyer coming to Bermuda would find the work as sophisticated - if not more so - compared to what they do in London.'

Mr McKenzie says that working in an offshore environment provides the best of both worlds - 'sophisticated, high-quality work with an enjoyable lifestyle'.

He adds: 'Working in the Caribbean provides a good, professional and demanding environment dealing with top-quality, knowledgeable clients.

Then outside of work, one can enjoy the climate and environment.'

Ross Webber, marketing chief at Conyers Dill & Pearman in Bermuda, says: 'A lawyer who wants to work hard and then relax would be best suited to life over here.

The money is good and corporate lawyers will get exposed to Fortune 500 clients and sophisticated, complex work that can only help their career.'

All three jurisdictions have seen their economies - and consequently their legal markets - thriving in the past five years or so.

Even the tourist industry, which slowed following al-Qaeda's attacks on the US on 11 September 2001, is showing signs of improvement.

Aleksandra Hirst, development manager at BVI firm Harney Westwood & Riegels, says: 'The economic situation in the BVI has been less affected by the recent downturns than many other jurisdictions, though we still felt it somewhat.

Presently the economy is looking very good.

There has been an increase in the number of law firms establishing a presence in the BVI.'

Mr Bolton agrees: 'The economy in both Bermuda and Cayman tends to follow that of the US.

The main pillars of the economy for Cayman are tourism and financial services.

Tourism has suffered since 11 September 2001, but is beginning to improve.

Financial services experienced less of a downturn in recent years than most onshore countries, and some areas, such as hedge funds, have surged.'

Mr McKenzie says: 'The legal market hasn't really changed that much over the last five years, but because of the various international initiatives - for example, demands to tighten up on anti money-laundering procedures made by the Paris-based Organisation for Economic Co-operation and Development and the Financial Action Task Force - the offshore financial industry has changed.

Work is now frequently turned down that wouldn't be due-diligence compliant.'

The legal profession in Bermuda, says Hunter's Andrew Bolton, continues to grow.

He adds: 'While the downturn in the US had a direct effect on overall growth in Bermuda, there is a substantial existing client base with continuing and increasing needs which has led to sustained demand for legal services.

'In Cayman, the legal profession has grown significantly - by at least 50%.

Much of the growth has been in the largest three or four firms, which have all expanded their staff and practice areas considerably.

With this has come greater sophistication in areas such as marketing, training and knowledge management.

There has also been considerable expansion of Cayman firms' overseas operations.'

Appleby Spurling Hunter will be launched at the start of April.

The combined practice will have around 100 lawyers and a total staff of 430 in offices in Bermuda, Cayman, the BVI, London and Hong Kong, making it one of the largest providers of offshore legal services in the world.

Given the nature of the work undertaken in these jurisdictions, it is no surprise that many have offices in London - three firms from Bermuda and the Caymans respectively, and two from the BVI have UK bases.

But despite this, as well as the islands' thriving legal scene and robust economies, no UK law firms have set up a base in any of these offshore jurisdictions.

Some local restrictions prevent foreign firms setting up there but Mr Hollis maintains that Appleby's marriage to Hunter & Hunter, plus the recent amalgamation of the Bank of Bermuda with a wholly-owned subsidiary of HSBC Holdings, will open the market - and the legal market in particular.

He says: 'Bermudian rules don't allow foreign firms to set up here.

None of the big UK firms are here.

'Appleby's merger with Hunter & Hunter is the first time there has been a representation of a foreign law firm in Bermuda.

They have come up with an acceptable system which gets around the restrictions and a lot of us believe that in the next few years, ways and means will be found for the likes of firms Linklaters and Clifford Chance to have some sort of presence here.'

On the law front, all of the territories have seen a lot of change of late.

The Cayman Islands Monetary Authority (CIMA) became fully independent of the Cayman government during 2003, and all the regulatory laws were amended to reflect the passing of responsibility for issuing and revoking practices licences from the governor in council to CIMA.

A securities investment business law has also come fully into force, regulating investment services.

Immigration law has been completely replaced, introducing a system that places greater emphasis on medium- to long-term planning of work-permit needs.

A new employment law is also expected shortly, Mr Bolton says.

In Bermuda's crucial corporate-restructuring field, Ms George says there has been a recent trend in effecting restructurings of groups of companies that have Bermudian holding companies by way of parallel proceedings in Bermuda (provisional liquidation proceedings) and in the US (chapter 11 proceedings).

'This method has been used in some major restructurings such as Global Crossing,' she says.

So it seems that whether companies are setting up, or coming back down to earth with a bang, they could pick worse places to do it than the Caribbean at the moment.

Lucy Hickman is a freelance journalist