Gibraltar continues to sail more comfortably than many other European jurisdictions through the uncertain and stormy seas of the global economy. So far the Rock remains unscathed by the waves which carry Greece closer to the rocky shores of bankruptcy, and that may still unleash their fury on Spain – despite the new Government’s regime of belt-tightening austerity. And in some sectors of our economy – notably in parts of the finance industry – Gibraltar has benefited from the misfortunes of others.
Against this background, it has yet to be seen whether Gibraltar’s new broom Government not only exploits our strong economic position fully, but also sweeps bureaucratic cobwebs away as cleanly as new brooms supposedly do. Certainly, the decision to appoint a separate Minister for Financial Affairs has made it swifter. With Gilbert Licudi at the helm the first quarter of 2012 has seen the announcement of a new funds regime which will make the Rock’s burgeoning funds industry even more attractive to the international marketplace. And the planned complete revision of our out-dated and clumsy Companies Act (announced in December) has seen the first draft proposals reach Licudi’s desk. The results will lead to a ‘completely new’ Act, he told B2B.
His announcement a month ago of plans to revise the Rock’s fund legislation has given the green light to what is a potentially massive expansion in the industry. And the current location rule – which has limited areas of Gibraltar’s fund industry – was officially scrapped in April. The new system permits funds to be established in Gibraltar even if the administrator is not here and it is expected to attract significant switches from traditional fund industry ‘giants’ such as the Caymans which seek access to the lucrative EU market.
The new rules have been welcomed by the Gibraltar Funds and Investments Association (GFIA) which said the changes would ‘create new opportunities for both local and foreign fund administration firms’… a fairly predictable reaction since the Association was the driving force behind the rules changes.
‘The ability to engage a foreign administrator is a breakthrough for Gibraltar’s fund industry,’ leading funds expert James Lasry told B2B.
‘Larger funds that require established administration houses are already considering Gibraltar as a potential jurisdiction to set-up or to re-domicile, and the revised legislation has also opened gateways for local firms to build relationships with administrators based in other jurisdictions,’ Lasry added.
Some indication of the growing strength of our funds industry is evidenced by the success of the JAR Aviation Fund – established here last year to exploit commercial aviation opportunities in second-hand planes and engines – and which in March completed arrangements to buy its fourth aircraft, an Airbus A320, for approximately $5.9m. The aircraft will be leased for four years to an Asian airline in a deal expected to generate an IRR of approximately 20 per cent for investors, Bob Stevens Chief Operations Officer and Finance Director of Plane Business Leasing tells me. At the end of the four-year lease, the Airbus will be sold.
Other funds are exploiting the slump in some parts of the international property market. Commercial and industrial property in Eastern Europe – many of them once held by Greek banks but sold at bargain-basement prices as the country’s economy collapsed – have been targeted by one Gibraltar-based EIF; but it is in the luxury homes end of the market that the best prospects lie, according to one of the largest of Gibraltar’s 150 funds – the Hideaways Club – which currently plans to expand its investment in luxury properties across the globe and is seeking to raise tens of millions of dollars from existing ‘members’ for further acquisitions. The fund – actually two entities, one of which offers luxury homes in some of the world’s favourite holiday destinations, and the other luxury living in the world’s biggest cities – already owns and lets more than 40 luxury villas in places as near as Sotogrande and as distant as South East Asia, Gemma Arias, a legal adviser to Hideaways told B2B.
The second major new broom move in the finance sector is the long-called for decision to replace Gibraltar’s outmoded and sometimes contradictory Companies Act. An entirely new version ‘fit for purpose’ in the 21st century and which reflects modern practices will be on the statute book by the end of the year, Minister for Financial Services, Gilbert Licudi, hopes. It has long been argued by accountants, lawyers and financial services providers that after 82 years of tweaking and changes, the existing Act is riddled with inconsistencies and anomalies. ‘It needs more than a face-lift to make it user-friendly – or even comprehensible to investors setting up new companies here,’ a member of the Finance Centre Council said recently.
‘The first part of the draft proposals – some 50 to 60 sections – are already on my desk and being considered,’ Licudi told B2B. After consultation and any amendments which are recommended, the Government will push ahead and hope to have it in place by the end of the year.