Complete text of Cayman Finance statement:
In the context of the Private Member’s Motion, Cayman Finance strongly urges the movers of the motion and the other members of the House to remain focused on the need to protect the Cayman Islands Financial Services Industry, which is directly responsible for more than half of the Islands’ economy, more than half of the government’s revenue and employs more Caymanians than any other industry. In light of its significance to the Islands, any damage to this industry could have far reaching implications for the jurisdiction and its people as a whole.
One of the core components of the Cayman Islands Financial Services Industry is the legal profession, which is one of the most important gateways for the flow of business to that industry, including fiduciary, public accounting, investment funds, banking, insurance, reinsurance and capital markets business. Cayman law firms will often be the first point of contact for clients and onshore referrers who have an interest in doing business in the jurisdiction. As such, any unwarranted attack on the legal profession which results in significant damage to that profession could in turn have significant adverse effects on the Cayman Islands Financial Services Industry as a whole.
The foreign offices established by the law firms have been a critical part of the success of the Cayman Islands Financial Services Industry over the last 22 years and rather than having “…a deleterious impact on the economy of these islands…depriving the economy of…economic benefits…” the opposite is true. The positive impact of such practices contributes approximately US$32 million directly to the Cayman Islands Government in annual revenue. Many of the clients who use Cayman structures and services are based in countries that are far away from Cayman and in different zones, such as the UK and Hong Kong. As such, they often want to deal with attorneys in those jurisdictions or time zones. If they were not able to deal with attorneys who practice Cayman law in those jurisdictions, they would simply chose to deal with the attorneys who practice the laws of one of our competing jurisdictions in those countries, which would deprive the Cayman Islands of the economic and employment opportunities and government revenue that would flow from that business. It is our understanding that the practice of Cayman law outside the jurisdiction is not regulated under the current law, and we are not aware of anyone having asserted prior to now that the practice of Cayman law in the foreign offices could result in the partners of Cayman firms committing a crime under Cayman law.
The Private Member’s Motion asserts that the partners of Cayman firms may be guilty of criminal conduct for allowing attorneys who are not admitted under Cayman law to practice Cayman law in the foreign offices of such law firms, and suggests that steps should be taken to investigate their conduct and if necessary bring charges against them for breaching Cayman law in this regard. These are very serious allegations, which as stated above have not been made before (to the best of our knowledge) in the long history of the existence of foreign offices. These allegations bring adverse publicity to the legal profession, which in itself could have an adverse impact on the jurisdiction. If proceedings were actually to be brought against the partners in the law firms which have foreign offices the results would be disastrous for the jurisdiction as a whole.
Cayman Finance would strongly suggest that instead of pursuing a course of action that could have such negative consequences for the jurisdiction, the parties instead focus their efforts on fixing the problems with the current law in the interests of all parties concerned.
Without commenting on the specific provisions in the Legal Practitioners Bill, Cayman Finance believes that in order to protect and promote the financial services industry (which as previously stated is the main driver of the Islands’ economy) and the jurisdiction and its people as a whole, the jurisdiction should bring into effect modern legislation to regulate the legal profession in accordance with international standards, but with appropriate safeguards to protect the legitimate interests of Caymanian attorneys.
The current Legal Practitioners Law was passed in 1969 when there were less than 30 lawyers and the circumstances that now exist differ vastly from those which existed at that time – our financial services industry is much larger and more sophisticated than it was back then, with almost 700 lawyers practicing in the jurisdiction, and the international standards for regulating the financial services industry have also changed drastically over that period. We understand that there are a number of gaps that exist in the current law, such as the lack of a code of conduct that applies to all lawyers and law firms and the lack of provisions to regulate the practice of law outside of Cayman, and those gaps subject the jurisdiction to reputational risks that could ultimately have a significant adverse impact on the Islands’ financial services industry if they are not addressed in the near future.
We understand that the lack of a code of conduct means that Cayman’s anti-money laundering framework is not in compliance with the FATF’s recommendations for AML regimes, which if not addressed could result in us receiving a poor assessment of our AML framework when it is assessed by the CFATF later this year. A poor assessment could have a significant adverse impact on the jurisdiction’s financial services industry.
Given the amount of economic activity and government revenue that the foreign offices generate for Cayman, we believe that under any new law regulating the profession it should remain possible for Cayman law to be practiced in those foreign offices, but the law should seek to regulate those who practice law outside the jurisdiction, whilst placing appropriate limits on those who will be able to be admitted in order to protect the legitimate interests of the jurisdiction and Caymanian lawyers and in order to ensure that the voting and economic control of the firms which practice Cayman law outside of Cayman is firmly rooted in Cayman. The law should also preserve the opportunities for Caymanian lawyers to be seconded to those foreign offices.
We also believe that any new law should attempt to protect the legitimate interests of Caymanians, by encouraging the training and development of Caymanian attorneys and the provision of opportunities for upward mobility within the profession. It should attempt to ensure that Caymanians have an appropriate level of input in the regulation of the profession, by being appropriately represented on the bodies which will be responsible for regulating and monitoring the conduct of attorneys within the profession.
As already stated, we believe that any new law should strike an appropriate balance between preserving the high standards of professional service that have been the hallmark of the jurisdiction’s financial services industry, regulating the legal profession in accordance with international standards and protecting the interests of Caymanians. There is room to argue on either side of the debate as to whether the proposed Legal Practitioners Bill achieves the appropriate balance between those various considerations. We do not intend to insert ourselves in that debate, but would urge all parties to remain focused on the broad objectives that we’ve outlined when formulating their respective positions on the Legal Practitioners Bill.
We would argue that it would be much more constructive and beneficial for the jurisdiction for the parties involved to focus on producing a legal practitioners law that addresses all of those objectives in a balanced way than it would be for them to focus on debating and dealing with the Private Member’s Motion.
For this reason, we would urge the movers of the Private Member’s Motion to withdraw the Motion as soon as possible in order to avoid any additional damage to the Financial Services Industry.