Hands across the sea

IN JERSEY AND GUERNSEY, LAWYERS ARE PULLING TOGETHER TO BECOME MORE INTEGRATED WITH EUROPE AND TO DEAL WITH REGULATORY CONTROLS.

YET, AS CHRIS BAKER REPORTS, DIFFERENCES STILL EXIST

While the likes of Clifford Chance choose to relocate to London's Docklands, many English lawyers choose to set up a more isolated waterside practice.

The Channel Islands like to be seen as independent 'cities in the sea', and as a result their law firms are becoming increasingly flexible in their approach to practice.

The introduction of tighter regulatory controls in the islands has seen local firms working closer with one another - and with firms in London - to maintain their position.

Lawyers in Guernsey and Jersey are reacting to the islands becoming more integrated with Europe and the wider world.

Recently, Olsens in Jersey and Carey Langlois in Guernsey announced they would merge.

With more than 100 lawyers, including 25 partners, based in Guernsey, Jersey and London, the new firm, Carey Olsen, will be the biggest in the Channel Islands.

Both firms deal with a wide range of legal service, and both are proud of their corporate and trust work.

London-based Wedlake Bell is the only English firm with an office in Guernsey, and only practises English law.

Senior partner Quentin Spicer welcomes the merger as a 'positive move'.

He says: 'With international transactions in which the Channel Islands are increasingly involved, clients do not appreciate a fragmented legal profession split between islands.'

Guernsey-based Olsens partner Jason Morgan agrees.

'We fit well together,' he says.

'Our cultures, philosophy and strategic thinking are strikingly similar and our core practice areas are highly complementary.'

But Mr Spicer, while admiring the streamlining of service, says there are still obstacles to tackle.

'The merger may give the client a single firm to deal with, but it still does not overcome the fact that Guernsey advocates and Jersey advocates cannot practise together in a single partnership - nor can English solicitors.'

Olsens and Carey Langlois have merged their offices in the separate Jersey and Guernsey jurisdictions to overcome this problem, but differences between jurisdictions and the bars of each island still need to be addressed.

'My ideal would be to have fusion where the client could truly get all its advice from a single entity,' Mr Spicer adds.

The islands' firms want to keep in touch with the City, as it is one of the best ways of widening the client base.

Jersey firm Ogier Group is the latest to move into London, with a City office opening next month.

The idea is to have lawyers on the ground in London providing advice on Jersey and Guernsey matters.

'The group will also be able to extend its highly successful trust and company administration business into the UK by providing onshore administration services,' says Ogier partner Richard Thomas.

This will include services covering employee benefits, structured finance vehicles, and private equity firms.

Jersey's largest firm, the Mourant Group (also known as Mourant Du Feu & Jeune), was one of the first to open an office in London.

Partner Ben Robins says it was an extremely useful move.

'Relationship management is the big thing,' he says.

'It's a bit of a buzzword in the City as well.

People can come into our office and we can really better our relations with the City firms.'

All agree that keeping up to speed with developments in the City is an essential part of the job - and the fact that it is only a short flight away means a London office is useful but not essential.

Most firms suggest that the market on the islands is buoyant, but referrals from London firms are one of the more lucrative sources of income next to financial work.

Mr Spicer thinks some areas are not so much buoyant as slowly sinking.

For Wedlake Bell, trust fund work has 'dropped off' and local commercial property transactions are also on the wane.

'[These transactions] have probably reached a peak in Guernsey with a decline coming in the next two to three years as major developments are completed,' he says.

'The Guernsey economy is no longer isolated and is subject to the same external influences which the rest of the world suffers.

However, it is expert in wealth management, which attracts a cross-border and increasingly sophisticated clientele.

While I do not see much growth in this area, the business is constant.'

In Jersey, Olsens partner Paul Matthams says changes to UK tax law have seen a reduction in trust work from the UK.

But this has been matched by an increase in trust work for international clients.

'The increasing propensity for individuals and companies to sue means there is a significant amount of litigation work in commercial and other areas,' he adds.

The market remains stable despite - or possibly because of - tighter regulatory controls put in place across the Channel Islands to tackle their image as a tax haven.

Despite previous pressure, the international financial advisory body, the Organisation for Economic Cooperation and Development (OECD), no longer views the islands with suspicion.

The OECD never had the islands on a blacklist, but made threatening noises about sanctions for the islands' failure to implement tight money-laundering regulations.

In recent years, the islands have all introduced legislation which requires lawyers to report clients they suspect of money-laundering.

And in 2000, tighter regulatory controls were introduced in Jersey, including compulsory registration of trust operators, 'know your client' rules and risk management procedures.

The difficulty of obtaining licences through registration and the heavy cost of compliance has made things awkward for smaller companies in Jersey, according to Mr Matthams.

But he notes: 'While some business has doubtless been lost to the island as a result of the regulatory controls, it's probably fair to say in most cases this is business the island would not want to attract in the first place.'

Mr Robins agrees.

'It's harder to open a file now than it was five or six years ago but clients are quite happy to answer our questions - they are coming to Jersey because they know it's so well regulated,' he says.

Continuing political stability also helps, he adds.

Mr Spicer warns: 'The difficulty arises with over-zealous institutions that require repeat information when they already have it in a different context.'

A further thorn in the side for some is the issue of practice rights.

Legislation had been proposed that would make it difficult for English and Welsh solicitors to requalify locally, but lobbying by the Law Society kept it off the statute books.

Mr Robins says that having to take Jersey Bar exams is not a problem.

'I suspect it will always be required - it's impractical to be a partner in a jurisdiction where you are not qualified,' he says.

'But the exams are passable and there's a good success rate.'

In fact, Mourant does not insist its English-qualified lawyers take the exams.

Firms are becoming more flexible and commercial work or non-legal partnerships do not really require the requalification, he says.

'A lot of people are local like me so it's always been in the back of the mind,' he adds.

There are some firms - such as Nigel Harris & Partners - which are made up of English solicitors and only deal with English law, and refer local work to local firms.

While Mr Robins and many of his colleagues grew up on Jersey, qualified in the City and returned, many English and Welsh lawyers make the move to the Channel Islands, although the authorities can be picky about whom they will allow to work and buy property there.

All cite the quality of life.

The islands' small size and resulting lack of a commute to work are attractive, as are the beaches and the short flights to London or Paris.

'It's perfect for bringing up children,' Mr Robins adds.

However, Mr Spicer and Mr Matthams both mention that it can be difficult bringing property lawyers from England and Wales.

Wedlake Bell has set up a local training programme to overcome this problem.

The Channel Islands may have eagerly shed the slightly shadowy reputation as a resort for less-than-fragrant financial deals and moves are afoot to integrate further with Europe.

But they are still a collection of islands with different jurisdictions, practice rights and taxes.

The new regulations seem to be working, at least the lawyers think so, but there is still a long way to go before the islands adopt an identical approach.

And not all are confident.

Mr Spicer strikes a note of caution: 'The islands are looking for a level playing field but I do not believe this will ever be possible.

One jurisdiction's harmful tax is called a subsidy in another country.'

Chris Baker is a freelance journalist