Mythical triangles notwithstanding, the island state of Bermuda plays host to the prestigious America’s Cup in June 2017. But while it may be two years before the world’s sailing elite descends on the island state, competition for the local offshore firms has already arrived. In May, Cayman-based Walkers announced it would open in Bermuda later this year. This came just one month after Bennett Jones’ (Bermuda) law practice was launched through an association with Canada-based law firm, Bennett Jones.
These are significant changes for the islands, which have little experience of overseas firms on their territory, save for Sedgwick Chudleigh, which opened in Bermuda in 2006 in conjunction with international firm Sedgwick. Subject to regulatory approval, Walkers’ opening will be the first major offshore firm headquartered outside the islands to open in Bermuda. It wasn’t the only major player to show a keen interest this year either: British Virgin Islands (BVI)-based Harneys at press time announced a combination with Bermudian firm Hurrion & Associates to form a full-service practice, Harneys Bermuda.
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New entrants to Bermuda need to come prepared and will need an appetite for investment, which may be considerable as they face trying to break into a market where key relationships between law firms and major clients are well established. Nonetheless, with significant movements both into and out of Bermuda, and the BVI, Bermuda and Cayman all increasingly competing for similar international business, the historical walls between the Caribbean’s three largest offshore jurisdictions are being chipped away. However, it will take some time before they come down entirely.
Client demand
According to Walkers’ global managing partner, Ingrid Pierce, the firm was receiving requests from clients for some time to expand its service offering to include Bermuda. ‘We believe now is the right time for us to take steps to achieve that; and as is the case with our operations in Cayman, the BVI, Jersey and Ireland, we believe that to offer Bermuda as a jurisdiction, we need to have strong local partners and team members on the ground in Bermuda,’ Pierce says.
Bermuda Business Development Agency (BDA)’s chief executive, Ross Webber, says the island territory has one of the best and most transparent regulatory regimes in the world. ‘In recent years our regulator, the Bermuda Monetary Authority, has fulfilled a leadership role globally on regulatory change and legislative updates: We’re justifiably proud of that,’ he tells Legal Business.
The islands are also highly rated for shipping, aviation and capital markets work, and attract their fair share of private client and trust instructions. Moreover, Bermuda has emerged from the financial crisis with a strong government-backed policy of welcoming new business to the island, and productive co-operation between the government and the business sector.
According to Appleby’s Bermuda managing partner Kiernan Bell, the location is going from strength to strength. It is therefore not surprising that the legal sector – among others – is responding well to this and she welcomes other entrants to Hamilton’s legal market. ‘It remains a distinct market with great growth opportunities, and there is plenty of work for established players and new entrants alike,’ she says.
However, Bermuda has been well served by its incumbent law firms for over a century. BDA’s Webber believes there was a perception that rival offshore law firms felt the expense of entering the market was too high considering the market was already so well catered for. ‘However, in more recent years, the expanding market and the prospect of greater expansion has been sufficient to compel others to re-examine the jurisdiction and set up shop,’ he says.
One traditional stumbling block to setting up a law firm in Bermuda has been an anti-competitive regime put in place to protect local lawyers, believes Ogier partner James Bergstrom, and this has had one noticeable effect: ‘This means that the legal talent pool is not as strong as on Cayman.’
Bergstrom suspects that new entrants might look to take over or merge with existing firms, rather than try to establish new practices from scratch. This could also lead to much of the work being serviced from offices elsewhere rather than within Bermuda itself.
Chudleigh also believes that competition is to be welcomed and will help stave off complacency. ‘We must work harder to deliver a better service and keep Bermuda relevant: new entrants to the market will help ensure that we stay at the top of our game,’ he says.
Big in Japan: offshore expansion in Asia continues
While interest in Bermuda from the international business community – particularly Asia – has continued to grow, Asia also retains a hold on Caribbean firms’ expansion plans. Just one year after its Singapore office launch, in 2015 Harneys broadened its Asia-Pacific operations with the opening of a representative office in Tokyo.
Harneys’ Japan practice was initiated in late 2014 with the hiring of Hong Kong-based counsel Junko Shiokawa – a native Japanese-qualified lawyer (bengoshi) practising offshore law – from Conyers. The firm further strengthened its practice in 2015 with the arrival of consultant Yuji Asano as Japan representative in Tokyo from Sumitomo Mitsui Trust (UK), where he worked on the structuring and launch of offshore funds.
Harneys’ Japan practice’s key area is Cayman funds, a popular offshore offering in Japan. ‘I believe we have put together a really strong team and I’ve been surprised at how quickly the team has picked up traction with numerous institutional level mandates coming in,’ says Asia managing partner Jonathan Culshaw.
Harneys was not the first offshore practice to make the move. Ogier opened a Tokyo office in 2008, which provided it with access to a market traditionally difficult to penetrate. ‘We have been in Japan for over seven years now and we are committed to the Japanese market for the long term,’ says Tokyo managing director, Skip Hashimoto.
Others take the view that the Japanese market is already well served by offshore firms based in Hong Kong. ‘The challenge for foreign lawyers attempting to operate in Japan is that the restriction on practising foreign law means that offices tend to be limited to providing a marketing function or representative office,’ says Walkers’ global managing partner Ingrid Pierce.
After Harneys’ 2014 arrival, Singapore has experienced more new entrants. Offshore law firm Forbes Hare launched a Singapore office in July 2015, led jointly by partner Sam Robertson and director Michael Pringle, both of whom previously practised in Forbes Hare’s BVI office.
The Singapore office is the firm’s first presence in Asia itself, providing both geographical proximity to its Asian clientele and the ability to offer its services in another time zone. ‘Singapore offers something a bit different to Hong Kong in terms of business opportunities throughout South-East Asia; its dynamism and international reach should suit us well,’ says Robertson.
Elsewhere in Asia, many offshore firms continue to focus on building strong on-the-ground litigation expertise.
In June 2015, Mourant Ozannes announced that litigation partner Shaun Folpp would head to the Hong Kong office from the BVI to establish a contentious restructuring and litigation offering to Asia-based clients; and in September 2015, Conyers Dill & Pearman relocated Nigel Meeson QC from the Cayman office to Hong Kong as it has seen a growing need for litigation services in the Far East. ‘The move will bolster our current litigation team in Hong Kong to meet growing client demands,’ says Conyers’ Hamilton-based co-chair Narinder Hargun.
Settling differences
Even before Walkers’ announcement, there were signs that certain traditional distinctions within the Caribbean were being eroded as the three main jurisdictions increased the competition with each other and competed for international business, according to Conyers’ Hamilton-based co-chair Narinder Hargun.
With respect to investment funds, for example, Bermuda has introduced changes to regulation to be more competitive with Cayman. Bergstrom tells Legal Business that Ogier’s contacts onshore, particularly in New York, report that Bermuda is pushing to take some of Cayman’s market share in investment funds work. ‘However, intermediaries report that they have not seen any substantive changes that would make their clients tempted to consider Bermuda over Cayman and its funds industry remains extremely small compared to Cayman,’ he says.
Aside from Cayman funds, other practice areas are also proprietorial, such as insurance in Bermuda and BVI incorporations. ‘Cayman is the second largest jurisdiction in the world for numbers of licensed captive insurers – after Bermuda – but changes would be required to its statutory or regulatory platform for it to look to overtake Bermuda,’ believes Bergstrom.
During the first half of 2015, the significance of Bermuda’s insurance market was evidenced by a frenzied period of deals, following consolidation in its insurance industry. ‘Expected benefits for the merged entities include business synergies, capital efficiencies and greater strategic flexibility, as well as enhanced product and geographic diversification, expanded and more efficient global networks, and improved standing with intermediaries,’ says Hargun.
Examples of significant Bermuda deals include Appleby’s insurance group head Tim Faries acting as Bermuda counsel to PartnerRe, which entered into a merger plan with Exor in August 2015, under which Exor will acquire PartnerRe, with the total transaction valued at $6.9bn. The merger is subject to obtaining shareholder approval from both parties’ shareholders and is expected to close in the second half of 2015.
The deal is particularly interesting because of the public pursuit of PartnerRe by Exor – the investment vehicle of Italy’s Agnelli family – which culminated in the PartnerRe board deciding that the Exor bid constituted a superior offer to that agreed with Axis Capital Holdings (Axis), and because the merger agreement included a go-shop period whereby PartnerRe could solicit higher bids until 14 September 2015. Conyers’ Bermuda partner Graham Collis advised Axis alongside US firm Simpson Thacher & Bartlett, while Italian law firm Pedersoli e Associati, together with UK firm Macfarlanes, acted for Exor.
‘This transaction demonstrates Conyers’ ability to provide Cayman corporate advice on an acquisition and merger through its Cayman office and Bermuda regulatory insurance advice though its Bermuda office,’ says co-chair David Lamb.
It would appear that Mark Twain was right when he said: ‘You go to heaven if you want to, I’d rather stay right here in Bermuda.’ As such, competition in the local legal market is expected to intensify. ‘Yes, it keeps us all on our toes, but if the client benefits as we all respond to changing needs, this has got to be a good thing,’ says Appleby’s Bell. LB
julian.matteucci@legalease.co.uk