The Chief Justice of the Cayman Islands, Anthony Smellie, has reaffirmed the legislative integrity and the international value of the islands’ trust industry in a speech at the 28th Annual Transcontinental Trusts Conference in Geneva, Switzerland.
In the speech, he emphasized the commitment of Cayman courts to safeguarding legitimate trust interests, while exercising vigilance against the illegitimate exploitation of the trust concept.
Echoing a similar presentation he gave in October 2012 at the Mourant Ozannes Trust and Private Client Conference at The Ritz-Carlton, Grand Cayman, the chief justice’s message was that the Cayman Islands courts would continue “to strive to maintain the proper balance” between protecting the interests of legitimate business and ensuring that the Cayman Islands does not offer safe haven to would-be exploiters of what he called the “dark side” of the trust concept.
Those who may have such intentions, the chief justice said, “will soon discover that they are most unwelcome and will find no haven in our jurisdiction.”
Chief Justice Smellie said trusts will remain a “legitimate and important estate and succession planning tool … available in the world of international finance.”
He noted that the size and potential of the trust industry in Cayman and other offshore jurisdictions has captured the attention of onshore tax regulators and triggered “the latest G-8 tax initiative calling for creation of registries (both for companies and trusts) and for complete transparency of beneficial interests.”
A large part of the argument for these initiatives, he said, rests on the widely held but mistaken notion that offshore trusts are shams and should be disregarded so as to allow their assets to be treated as still belonging to their grantors and so liable to be taxed as the grantors’ assets.
Ironically, trusts which are established onshore continue to be respected and regarded as owning assets in their own right, he added.
The legitimacy of offshore trusts and their viability as a legitimate tax planning tool are being further undermined because of the notion that they are peculiarly prone to abuse by money launderers and terrorists.
These arguments are contrary to the experience before the Cayman courts, the chief justice said. Trusts arise for consideration by the courts on a regular basis and are found to be legitimate and important instruments for asset protection and estate and succession planning.
“For reasons such as these and others, I have considered it important to write and speak extra-judicially about our work in relation to offshore business. I find that if we don’t speak for ourselves, what we do becomes defined by others, in particular our onshore detractors,” he said. “It therefore becomes a matter of protecting the reputation and integrity of our administration of justice.”
In his speech, which was made in June to the conference in Geneva, but only released to the media this week, the chief justice said that the G-8 initiatives which would seek to compel offshore jurisdictions to abandon the trust concept is not only unfair but would be “contrary to the centuries’ old principle of public international law that no nation is obliged to enforce the tax regime of another nation within its own territory.”
Overall, in his keynote address, titled “Balancing the Requirements of the Trust with Fairness and Probity – A Perspective from the Cayman Islands Courts,” the chief justice assured the 220 senior trust industry professionals that the Cayman Islands’ courts “will continue to strive to maintain the proper balance.” And that means, he said, that legitimate trust business will continue to be accorded all the protection of Cayman Islands law, while those intending unlawfully to exploit local provisions will remain unwelcome.