Legal Business Blogs

Sponsored briefing: After a busy year in offshore litigation, what
lies ahead in 2020?

Christian Hay gives an overview of Collas Crill’s disputes work in 2019 and discusses the challenges and trends that can be expected over the next year

2019 was Collas Crill’s busiest year for dispute resolution. Our litigation teams in the British Virgin Islands (BVI), Cayman Islands, Guernsey and Jersey were firing on all four cylinders.

Indeed, the lion’s share of the firm’s growth over the last few years has been in litigation and dispute resolution. The litigation teams in each of our offices in Guernsey, Jersey, Cayman and BVI have grown by at least 25% in terms of numbers of lawyers in the last 12 months. Some firms are reporting dwindling levels of litigation. Collas Crill, however, has acted for clients in all of the high-profile matters to have recently come before the offshore courts: for example, Carlyle; Crociani; Ocean Rig; Platinum Partners; and Abraaj Holdings.

Otherwise it has been a year of variety – our litigators have been involved in a broad range of large, complex contentious cases, including general commercial litigation, restructuring and insolvency, trusts, regulatory (including proceeds of crime cases) and other financial services-related disputes.

Increasingly, our litigation teams are working with institutional clients in both the non-contentious and semi-contentious advisory space, particularly in matters relating to insolvency, trusts and financial services regulation. This means that in the unfortunate event that litigation does become inevitable, we are well placed to pick up the instructions. As a result, litigation and dispute resolution remains one of the firm’s key strengths.

Instructions on contentious and semi-contentious trust matters continue to rise; significant matters are often based around family disputes. Wealth-creating patriarchs and matriarchs are spinning in their graves as their children and grandchildren squabble with trustees, and between themselves, about how best to administer family wealth. A prime example of this is seen by our Jersey team, which has spent four years defending a trustee in the high-profile case of Crociani v Crociani – a colourful tale of a princess, her sister and their mother at war. The team won a landmark appeal in 2018, successfully halving the potential damages of €52m. A further appeal to the Privy Council is likely in 2020.

These situations can then manifest themselves in contentious applications for removal of a trustee or protector, or in claims for breach of trust against the trustee. Alternatively, the complex arrangements to divide trust interests between family branches can occupy the trustee in either contentious or semi-contentious negotiation and court blessing exercises. These, together with more traditional claims against trustees in respect of investment losses and negligence, form the regular diet of the Collas Crill team.

The firm’s insolvency team is emerging as a market leader. The team, which has close relationships with the leading offshore insolvency practitioners, is often sought out when an innovative approach is required to achieve the client’s goals and is known for its strong, clear advice in pressured situations. We also have good onshore and international connections, which we develop through regular attendance at all relevant industry conferences including the International Bar Association (Insolvency Section) and INSOL International.

As for general corporate litigation, the Guernsey team acts on some of the largest director and shareholder litigation matters, for example, Carlyle Capital Corporation (in liquidation), which is heading towards the Privy Council in 2020. The team often collaborates with the non-contentious corporate team to provide advice to directors on complex pre-litigation issues, such as conflict of interests and obligations of confidentiality, which often arise due to the nature of the offshore financial services industry.

Collas Crill’s Channel Islands’ team is renowned as the leading offshore regulatory team. While the team’s focus is naturally financial services matters, our expertise is broad and deep, spanning non-contentious to highly-contentious matters. This is reflected in the range and quality of the instructions we receive.

However, it is our Cayman office that has dealt with some of its most notable cases over the course of 2019. The dispute resolution team, led by Stephen Leontsinis, has an outstanding reputation, with the team known for dealing with the largest and most complicated offshore cases in Cayman. The growth of the team continues to be sustained by high-value, multi-jurisdictional insolvency, commercial and trust litigation matters. In addition, the arrival of established practitioners who specialise in section 238 proceedings and international trust matters continues to support Collas Crill’s increasing strength in depth in this market.

The Cayman team is at the forefront of the burgeoning area of ‘fair value’ litigation in Cayman. These are major pieces of litigation involving Cayman incorporated companies, usually conducting large businesses in the People’s Republic of China, which have used the statutory merger regime to take the company private. Shareholders who believe the offer price was too low can challenge the price in court. The Cayman team act for a range of private equity funds who are litigating these fair-value proceedings through the Cayman court. The value of the dissenters’ shareholdings is typically between US$50m and US$150m but can be significantly higher. These proceedings involve hard-fought interlocutory applications, extensive documentary discovery, and lengthy trials involving factual and expert witnesses, in valuation and other fields.

One of the standout matters for the Cayman team is the US$500m case of Arif Naqvi, former chairman and chief executive of The Abraaj Group. The team advised him on a wide variety of issues that arose out of the provisional liquidations of Abraaj Holdings and Abraaj Investment Management, including the potential restructuring of the financial obligations of The Abraaj Group. The matter spanned multiple jurisdictions: Cayman, Middle East, Latin America and Africa.

Christian Hay is the managing partner of Collas Crill in Guernsey.

Equally busy, our BVI office has dealt with the £70m standout matter of AFS Trustee v Wilton Trustees. This refers to the ownership of a business held through Liechtenstein or Manx Trust, with the allegation being against the professional trustee company for breach of trust and conspiracy. This is a high-value claim with a complex legal and factual background. Some of the difficult issues relate to which law governs trust, as to alleged defects in trustee appointments and as to estoppels or foreign law equivalents. Acting for the professional trustee to defend the claim, Collas Crill successfully opposed the appointment of the receiver over the BVI company that is a trust asset.

Challenges/trends for offshore litigation in 2020

Aggressive regulation will be at the forefront for 2020. Offshore jurisdictions have been targeted by politicians for being ‘tax havens’ in the last few years and there has been little in the way of a counterargument to highlight the benefits of offshore jurisdictions. The Panama and Paradise Papers served to create a wholly negative perception as to what offshore means. Many offshore jurisdictions have been at the cutting edge of ensuring compliance with all international best practice standards. However, financial regulators and law enforcement agencies are becoming increasingly active and co-operating more closely with other national and global agencies. This is a serious threat for financial services business and individuals within the industry (from a greater focus on individual accountability) and a fertile ground for disputes.

Data – its use, misuse, loss and theft – is also likely to drive an increase in disputes. As more of our day-to-day lives are dealt with electronically, the value of that data to fraudsters increases. Linking in to that is the risk of fraud.

A recent review led by former Deputy Commissioner of the Metropolitan Police, Sir Craig Mackey, found that the force is unable to cope with the rapidly increasing number of cases and fraudsters are effectively operating with impunity. There is no reason to believe that this problem is limited to Britain and every reason to assume that proceeds of crime will end up in various, less well-regulated offshore jurisdictions. Cryptocurrencies are an interesting challenge; the technology is developing at a pace that is not matched by new rules and regulations, and is being exploited by fraudsters.

Finally, trust disputes provide the perfect storm: family dominance passing from the first-generation wealth creators to squabbling siblings. With increased scrutiny of offshore trusts by governments and revenue agencies, there has been a recent spate of fiduciary acquisitions and consolidation leading to ‘new actors’ and consequently a perceived decrease in personal service’. With the close connection between fiduciary and family consequently lost, we can expect a new wave of disputes.


Return to the Disputes Yearbook 2020 menu