Gibraltar has a fused legal profession so that barristers
and solicitors enjoy the same rights and privileges
as regards appearances in court and direct contact with
clients. The profession is regulated under the Supreme
Court Ordinance (the 'Ordinance'). The Chief Justice
may approve admit and enrol as barristers any persons
who have been admitted as barristers in England or Northern
Ireland or the Republic of Ireland or as advocates in
the Court of Session in Scotland.
Likewise in the case of solicitors any persons who have been admitted as solicitors of the Supreme Court of Judicature in England or any Court of Record in Northern Ireland or the Republic of Ireland or a solicitor in administrative practice in Scotland may also act as barristers.
The Bar Council regulates the profession and is closely associated with its English counterpart.
In August, 2004, the government announced that it had partially transposed into local law a European Union Directive, 2001/19, on mutual recognition of professional qualifications. This was achieved through the Recognition of Professional Qualifications Ordinance (amendment) Ordinance 2003 passed in the House of Assembly on 28 July 2003.
The Ordinance provides that the rules prescribed from time to time by the Bar Council and the Law Society in England in regard to the professional conduct of barristers and solicitors apply in Gibraltar, unless modified by the Chief Justice.
In practice the English barristers' or solicitors' rules apply depending whether a Gibraltarian lawyer is deemed to be acting in a barrister's or solicitor's role.
The Ordinance gives the Chief Justice extensive powers to suspend, reprimand, fine, investigate or strike off barristers or solicitors.
The Barrister and Solicitors Rules provide for the establishment of an Admissions and Disciplinary Committee.
Rule 7 provides that:
Rules 3-4 stipulate that client money (including trust money) must be kept in a separate and designated client account. Rule 7 specifies the circumstances in which money may be withdrawn from a client account and includes payments to and on behalf of a client, payment towards a solicitor's costs and money drawn on the client's authority.
Although most firms have indemnity insurance, this is not mandatory. In particular a client should check that individual lawyers are insured. At the time of writing a new proposal was being envisaged by the Bar Council making individual indemnity insurance compulsory.
There are no hard and fast rules with regard to billing. In general a lawyer's bill of costs should contain sufficient information to identify the matter and the period to which it relates together with disbursements. Contingency fees are not allowed. Normally, individual law firms agree fees based on an hourly rate.
Where there is a dispute as to the fees charged, a client may pursue two mutually exclusive possibilities (see also above):
Company incorporations and associated work had been a staple source of legal work. The downturn in the Spanish property market and the introduction of the Special Annual Tax by Spain, has meant a significant drop in incorporations.
In December 2006, Gibraltarians accepted a new constitution for the jurisdiction, which aimed to give it more autonomy from the United Kingdom over its own internal affairs.
The constitution, agreed in April 2006 by then UK Foreign Secretary Jack Straw and Peter Caruana, and between Gibraltar's two main political parties later in the year, saw the UK retaining international responsibility for Gibraltar.
However, the new constitution ceded certain powers previously in the possession of the British government to Gibraltar, and allowed the jurisdiction to have its own independent judiciary.
This is a non-exhaustive list of the main Gibraltar statutes affecting offshore and non-resident business. The statutes are listed in alphabetical order – click on the statute for a fuller description of the statute, the legal regime it forms part of, or in some cases the text of the law.
Banking (Accounts Directive) Regulations
Banking (Auditors and Information) Ordinance 1997
Banking Ordinance 1992
Companies Ordinance as amended
Companies (Taxation and Concessions) Ordinance
Deposit Guarantee Scheme Ordinance 1997
Development Aid Ordinance
Estate Duties Ordinance
Financial Institutions (Prudential Supervision) Ordinance 1997
Financial Services (Accounting and Financial) Regulations
Financial Services (Collective Investment Schemes) Regulations 1991
Financial Services (Conduct of Business) Regulations 1991
Financial Services (Experienced Investor Funds) Regulations, 2005
Financial Services (Insurance Mediation) (Amendment) Ordinance 2004
Financial Services Ordinance 1998
Immigration Control Ordinance
Income Tax Ordinance 1984 as amended
Income Tax (Allowances, Deductions and Exemptions) Rules 1992
Income Tax (Qualifying Companies) Rules 1992
Insurance Companies Ordinance 1987
Limited Partnership Ordinance as amended
Partnership Act 1890 (UK)
Perpetuities and Accumulations Ordinance 1986
Private Foundation Ordinance 1999
Qualifying (High Net-Worth Individuals) Rules 1992
The Registered Trust Ordinance 1999
Trust Recognition Ordinance
EU Directives having direct effect in Gibraltar:
(The Fourth Directive) as amended
Directive 83/349/EEC (The Seventh Directive) as amended
Directive 83/350/EEC (sharing of confidential banking information)
Second Banking Co-ordination Directive 89/646/EC (passporting)
In addition, the Financial Services Commission Act 2007 (FSCA) repealed and replaced the Financial Services Commission Act of 1989. The 2007 legislation, in addition to other changes, placed some of the powers previously held by the UK in the hands of the local authorities
In January, 2005, Gibraltar’s Financial Services Commission welcomed the publication of a statutory review of Gibraltar's Financial Services Commission, conducted by an HM Treasury review team.
This was the third review commissioned under the Financial Services Commission Ordinance 1989, and was requested by the FSC in view of the rapidly changing regulatory environment in the United Kingdom, as the Commission is obliged by the founding Ordinance to match UK standards of supervision.
According to the FSC, four key areas of its work were considered by the review team, these being: anti-money laundering, banking, insurance and investment services.
The report concluded that the Commission’s supervisory activities, for both insurance and investment services, established and implemented standards that substantially matched UK legislation and practice. Recommendations were made by the review team as to how the FSC could readily make the remaining adjustments necessary to bring it fully into line with recently introduced UK regulatory developments.
The team was also satisfied that the Commission’s approach to banking supervision had succeeded in developing an effective supervisory structure that established standards which met its obligations under the Financial Services Commission Ordinance to match those required by UK legislation and supervisory practice.
Gibraltar’s anti-money laundering regime was judged more robust than that of the UK in a number of areas, “even taking into account the different risks posed by the business”.
In November 2006, the Gibraltar Financial Services Commission announced a comprehensive review of the jurisdiction's anti-money laundering measures.
The review saw the GFSC redraft the anti-money laundering guidance notes for the finance industry from top to bottom, with the proposed changes intended to clarify the existing laws while reducing paperwork and bureaucracy, and also encouraging finance industry participants to take a more active role in combating financial crime and terrorist financing.
Importantly, the revised rules aimed to bring Gibraltar into compliance with the third money laundering directive 2007 and the latest Financial Action Task Force (FATF) recommendations.
The finance industry was asked to contribute to the review process by the regulator, as part of a consultation lasting until January 1, 2007.
Commenting on the review, Marcus Killick, Gibraltar’s Financial Services Commissioner, told the Gibraltar Chronicle that there was a need to move away from a “tick and bash” approach to anti-money laundering towards a more proactive strategy that anticipates new trends, as criminals use ever more sophisticated methods and complex transactions to cover their tracks.
“It’s like a game of chess. We have to think ahead and anticipate what they are going to be doing in two moves' time," he told the paper.
In May 2007, following a review undertaken the previous year, the International Monetary Fund endorsed Gibraltar’s robust regulatory environment, according to the jurisdiction's government.
he report was the result of the visit by a team of nine evaluators from the IMF to Gibraltar in March 2006. The team conducted an extensive review of the Financial Services Commission’s regulatory and supervisory practices in the fields of Banking and Insurance, as well as a jurisdiction-wide review of the Anti-Money Laundering and Terrorist Financing Regime, which also included the FSC, as well a large number of enforcement agencies and Government Departments.
In all three areas Gibraltar was found to be meeting international standards, and was found to be ahead of many onshore - and much larger - finance centres.
However, the report made a number of recommendations for further improvements, which the government said had mostly been identified and were being actioned.
Commenting, Chief Minister Peter Caruana, who is responsible for financial services stated that: “Government is committed to continuing to pursue a policy of proper balance between demanding the highest regulatory standards from the providers of financial services and providing an attractive jurisdiction for the conduct of profitable, safe and competitive financial services."
"In this connection the Government welcomes external assessments such as the IMF Review to maintain an independent view of Gibraltar’s performance and to identify what we need to do to stay at the front of the pack as a leading jurisdiction in this ever changing industry. I congratulate all those in the Finance Centre Department, in the Financial Services Commission and in law enforcement agencies, for this excellent result from which our finance centre will benefit still further.”
Financial services in Gibraltar are regulated by the Financial Services Commission. The Commission introduced important changes to the way it supervises locally incorporated banks and non-EEA branches in 2002.
Within this time the FSC had been rolling out a risk based approach to supervision, where the supervisory team evaluates an institution in terms of the risks posed to an institution in the way it does business or the type of business it is in. This new approach to supervision aims to focus supervisory resources on the areas deemed to be high risk for an institution in order to ensure that the right controls and procedures are in place to mitigate the risks or where corrective action is required by an institution.
Banking regulation is exercised under the Banking Ordinance 1992 (as updated).
Banks with licenses issued by other EU jurisdictions have only to notify the Gibraltar authorities before commencing business there; banks which require Gibraltarian authorisation and licenses must conform to criteria set out below.
Licensed banks must maintain a solvency ratio of 10%. There is an annual fee payable to the Financial Services Commission.
Banks providing local services are taxable on their profits in the same way as ordinary companies.
The Banking Ordinance 1992 (as amended) repealed the previous distinction between 'A' onshore and 'B' offshore licences, and introduced a single banking licence. Thus Gibraltar licensed banks can in theory take advantage of 'passporting' opportunities and branch out across the EU and EEA without the need for further authorisation (except for notification).
The minimum capital required for the issue of a banking license in Gibraltar is (at the time of writing) EUR5m, in line with EU requirements, and the supervisory regime follows EU and Basle Committee guidelines. In considering the issue of a banking license, the Commissioner applies a number of guidelines, including the following:
In 2004 the Financial Services Commission promoted amendments to the Criminal Justice Ordinance 1995 which require auditors, external accountants, tax advisors, real estate agents, notaries, legal professionals, dealers in high value goods and casinos as well as providers of company managerial services, professional trustees, insurance intermediaries and insurance managers to comply with the anti-money laundering systems of control. The FSC seeks to update the Know Your Customer systems of financial institutions with a more risk based approach and to provide more user-friendly guidance for the industry.
Within the general statutory duty of confidentaility, authorised institutions, and their controllers and subsidiaries, and institutions of which authorised institutions are controllers, are permitted to exchange between each other information about their customers necessary to facilitate supervision of institutions on a consolidated basis in accordance with Council Directive 83/350/EEC (as extended, where applicable, by the EEA agreement) or any successor thereto.
In December 2005, it emerged that an agreement had been reached between the governments of Gibraltar and the United Kingdom over the Rock's obligations under the EU Savings Tax Directive, which came into force in July of that year.
The jurisdiction had come under fire from the Channel Islands, as its legal status in relation to the UK and European Union meant that the Directive did not apply to it in quite the same way.
However, under the deal announced by the UK's Paymaster General, Dawn Primarolo and Gibraltar's Chief Minister, Peter Caruana , Gibraltar and the UK exchange information about the returns on savings under the Directive, or, in Gibraltar's case only, if the savers so choose, impose a withholding tax on returns on savings of UK residents with accounts there.
The rate was set at 15% from April 1, 2006 to June 30, 2008, following which it rose to 20% for the next three years, and 35% thereafter.
The Financial Services (Conduct of Business) Regulations
1991 contain a statutory Code of Conduct for Financial
Institutions. Part Two (Statements of Principle) is
laid out under a number of headings, including the following:
Integrity - Skill, care and diligence - Best market practice - Know your customer - Information for customers - Conflicts of interest - Customer assets - Financial resources - Internal organisation - Relations with the Commission
Part 3 (Core Rules) deals with:
Independence - Advertising and Marketing - Customer Relations - Dealing for Customers - Market Integrity - Administration.
Gibraltar has introduced a deposit guarantee scheme to satisfy the requirements of the EC Directive on Deposit Guarantee Schemes (94/19/EC). The Deposit Guarantee Ordinance 1997 was implemented in stages and a Gibraltar Deposit Guarantee Board has been appointed.
The compensation arrangements, are broadly similar to those available to depositors under the United Kingdom's deposit protection arrangements. The scheme covers qualifying deposits in EEA currencies (qualifying deposits are defined in the Ordinance).
Gibraltar insurance companies, including captives, are regulated by the Financial Services Commission under the Insurance Companies Ordinance 1987 (as updated) and the Financial Services Ordinance.
The 2nd and 3rd EU Insurance Directives have been implemented in Gibraltar, and the UK Government has agreed that Gibraltar's insurance regulatory regime matches UK practice; therefore the Single European Passport applies - EU insurers may write direct business into Gibraltar, and Gibraltar insurance companies can write direct business into other EU states.
Insurance companies in Gibraltar, including branches or subsidiaries of foreign insurers, require a license from the Commissioner of Insurance. The Commissioner will take into account the expertise, skill and experience of the proposed management team, the ability of an applicant to conform with prescribed EU guidelines including solvency margins and guarantee fund levels, and the availability of adequate reinsurance.
Initial application and annual fees are payable to the Commissioner. Licensed insurance companies are required to conform to the following ongoing supervisory regime:
There are a number of sets of regulations dealing with the detailed conduct of insurance business in Gibraltar, some of them implementing EU legislation. The seven main sets are as follows:
Insurance companies providing local services are taxable on their profits in the same way as ordinary companies (see Domestic Corporate Taxation); insurers working 'offshore' could traditionally apply for a tax exemption certificate (no tax payable at all) or a 'qualifying' certificate (see Offshore Legal and Tax Regimes) allowing them to pay tax at a rate between nil and 35% as agreed with the authorities.
The Gibraltar parliament, the House of Assembly, passed a bill for a Protected Cell Companies Ordinance on 3 July 2001.
The legislation, which was expected to boost sectors such as captive insurance and funds, in essence provides for a single company with individual parts, known as cells, which are kept separate from each other. Each cell is only liable for its own debts and not for the debts of any other cell within the company.
Part I - Part I of the Ordinance describes the formation and attributes of a protected cell company. A company may be either incorporated as a PCC, or converted, if so authorised by its articles, into a PCC. The new law stipulates that, for the avoidance of doubt, “a protected cell company is a single legal person,” and that “the creation by a PCC of a cell does not create, in respect of that cell, a legal person separate from the company”. The provisions of the Companies Ordinance apply in relation to a protected cell company (subject to the provisions of the PCC Ordinance, and unless the context requires otherwise).
Separation Of Assets - Particularly noteworthy is Section 5 of Part I, which describes the duty to keep the assets of each cell separately identifiable. “It shall be the duty of the directors of a protected cell company – (a) to keep cellular assets separate and separately identifiable from non-cellular assets; and (b) to keep cellular assets attributable to each cell separate and separately identifiable from cellular assets attributable to other cells.” Directors may “cause or permit” cellular and non-cellular assets to be held by or through a nominee, or by a company whose shares and capital interests may be cellular assets, non-cellular assets, or a combination of both. Such assets may be collectively invested, or collectively managed by an investment manager, provided that the assets in question remain separately identifiable. Sections 6 and 7 make it clear that the rights of creditors are limited to the assets of the cell of which they are creditors.
Cell Shares, Cellular Capital And Cellular Dividends - Section 8 provides for a PCC to create and issue shares (“cell shares”) in respect of any of its cells. The proceeds of the issue (“cell share capital”) are comprised in the cellular assets attributable to the cell in respect of which the cell shares are issued. A protected cell company may pay a cellular dividend. Section 9 provides that except in the case of a PCC which is authorised by the Financial Services Commissioner as a collective investment scheme, and which is redeeming units or shares in accordance with its scheme particulars, no reduction of cell share capital may be made without an order of the Court. Section 10 provides that a protected cell company must state that it is one i.e. the name of the PCC must include “Protected Cell”, “PCC”, or any cognate expression approved in writing by the Registrar. The memorandum of a PCC shall state that it is such, and each cell shall have its own distinct name or designation.
Insurance Companies, Collective Investment Schemes And Securitisation - Section 11 states that a company which is a Gibraltar insurer as defined in Section 2 of the Insurance Companies Ordinance, or a collective investment scheme authorised under the Financial Services Ordinance 1989 must obtain the consent of the Financial Services Commissioner before becoming a PCC. In the case of securitisation companies not requiring a licence under the Financial Services Ordinances 1989 or 1998 established principally for the purposes of issuing bonds, notes or other debt securities or instruments, secured or unsecured, in respect of which the repayment of capital and interest is to be funded from the company’s investments, consent must be sought from the Finance Centre Director. Sections 13 to 18 deal with the liability of cellular and non-cellular assets of the company. “The cellular assets attributable to a particular cell shall be primarily used to satisfy a liability, and the non-cellular assets shall be secondarily used, provided that the cellular assets have been exhausted. However, any liability not attributable to a particular cell of a PCC shall be the liability solely of the company’s non-cellular assets.”
Parts II and III deal with the effects of receivership and administration orders on each individual cell and on the company as a whole. Part IV covers offences under the Ordinance.
The passporting of insurance and reinsurance mediation from Gibraltar throughout the EEA came into effect on January 15, 2005.
Passporting rights arise under the single market directives, and grant a person in the designated jurisdiction the right to establish a branch in another EEA state or to do business there on a cross-border basis, subject to the fulfillment of the conditions in the directive in question.
This was the fourth passporting badge awarded to Gibraltar, following insurance in 1997, banking in 1999, and investment services in 2003.
According to the Rock's financial services authorities, the passporting of insurance and reinsurance mediation was enabled by the passing of an amending ordinance, the Financial Services (Insurance Mediation) (Amendment) Ordinance 2004 in the House of Assembly on December 22, 2004. The Ordinance amended the Financial Services Ordinance 1989 in order to transpose into the law of Gibraltar Directive 2002/92/EC of the European Parliament and of the Council of December 9, 2002 on insurance mediation.
The Ordinance provides for the regulation of insurance and reinsurance mediation, including such activities as:
The Financial Services Commission is responsible for the regulation of investment funds in Gibraltar under the Financial Services Ordinance (as updated); the Financial Services (Collective Investment Schemes) Regulations 1991 set up regulatory regimes for different types of fund, and implemented the EU UCITS Directive (85/611/EU).
Investment funds in Gibraltar are usually formed under a trust deed either as unit trusts or mutual funds, or under the Companies Ordinance as private or public companies. A public investment company (PIC) must have a minimum paid-up capital of GIP50,000 (at the time of writing) and if it is not listed on a recognised exchange its head office must be in Gibraltar.
Funds formed to be UCITS (Undertakings for Collective Investment in Transferable Securities) which under EU rules can be freely marketed throughout the Union under the Single European Passport provisions, must be open-ended and are limited to certain types of transferable security:
The authorities do not demand that the administration of a fund must be carried out in Gibraltar, as long as there is a sufficient strength of management in Gibraltar to allow for effective supervision. There is a requirement however that the trustee of a fund and the manager should be in separate organisations and should act independently, even if they have a common parent.
Application and annual license fees are payable. Fund managers have traditionally been able to apply for a tax-exemption certificate (no tax payable) or for a qualifying certificate (tax payable at a rate between nil and 35% as agreed with the authorities (however, for changes to this, see Offshore Tax Regimes).
In 2005 Gibraltar introduced Experienced Investor Funds (EIFs) under the Financial Services (Experienced Investor Funds) Regulations, 2005. See a full description of this and other fund regimes provided by Gibraltar law firm Hassans.
In April 2005 it emerged following the 30th Annual Conference of the International Organisation of Securities Commissions (IOSCO) that the Gibraltar Financial Services Commission’s application to be accepted as an Ordinary Member of the Organisation had been approved.
IOSCO members regulate more than 90% of the world's securities markets, and IOSCO is seen as the world's most important international cooperative forum for securities regulatory agencies.
In December 2005, the Gibraltar Government and the UK Government concluded an agreement relating to the passporting of Investment Services.
The agreement enables investment services firms established in Gibraltar to passport (that is to market and sell) their products and services into the UK market. The investment services passporting agreement came into effect in May 2006 when Gibraltar had passed some necessary legislation.
The basic law of trusts is contained in the Gibraltar Trustee Ordinance, which is virtually a copy of English trust legislation. Gibraltarian legislation affecting trusts also includes the Perpetuities and Accumulations Ordinance 1986, the Trustee Investments Ordinance, the Bankruptcy Ordinance and the Trusts (Recognition) Ordinance which implemented the Hague Convention. Appeal is to the Privy Council.
There are no provisions for the exclusion of foreign inheritance laws or for the non-recognition of foreign judgements. Legislation has not yet been introduced to provide for purpose trusts.
As in the UK, the essential requirements of a trust in Gibraltar are that it is created orally or in writing and that a settlor conveys legal title to real property (land) or personal property (property other than land) into the name of one or more trustees to be administered in accordance with the wishes of the settlor for the benefit of one or more beneficiaries.
Trust documents are in English, and there are no requirements for registration except that Asset Protection Trusts must be registered with the Registrar of Dispositions. There is no stamp duty. The normal perpetuity period of a Gibraltar trust is 100 years. There are no restrictions on the accumulation of income during the perpetuity period.
Gibraltar's asset protection trust legislation falls under the provisions of the Bankruptcy Amendment Ordinance 1992. This is unusual for offshore asset protection , which is dealt with under the law on fraudulent conveyancing laws in most offshore jurisdictions, as for instance in the Cayman Islands and the Bahamas.
Fraudulent conveyancing laws depend for their effect on the statutory definition of 'intent' to defraud. By contrast, under bankruptcy law, which contains no definition of intent, the only direct action which can be commenced is a bankruptcy proceeding, which has a significantly tighter test of intent.
For a bankruptcy proceeding to succeed, it is necessary to show that the target (the settlor) is resident or domiciled in the jurisdiction, and that an 'act of bankruptcy' was committed there. Since most asset protection trusts are settled via exempt companies, whose owner (= the settlor) cannot be resident and a beneficiary, this will be difficult or impossible in many cases.