In much of my writings I have been particularly interested in the concept of jurisdictional competition and its role in business development. It is underpinned by the notion that jurisdictions are regularly competing for the same business. This was reinforced in my mind by the ideals described by Renaissance thinkers, including Machiavelli, who emphasised the role of individualism and conflict in society. Financial centres around the world were also not unlike Italian city states, in intense competition with one another and all vying for trade.
In my book “A Guide to Insurance: Combining Governance, Compliance and Regulation” (Spiramus Press) I described it as follows:
“Many jurisdictions attempt to position themselves competitively in the global market as a policy objective. They do so mainly through their tax and licensing/regulatory regimes but also through innovation in corporate law (such as Protected Cell Company, Incorporated Cell Company and Redomiciliation laws). The latter requires jurisdictions to constantly know what their competitors are doing and where necessary copy the lead taken by others. All such jurisdictions face competitive pressures.”
As a lawyer I have on many occasions found myself in competition with professionals from other jurisdictions pitching for work. Companies will often look at a number of jurisdictions before deciding on the choice of domicile. When jurisdictions largely compete for the same business with the same offering, it can result in intense rivalry between them, and often too, local firms. The successful pitch will usually boil down to delivery of service and expertise. On other occasions the work might be lost purely for reasons outside the control of the advisers (e.g. not having a piece of legislation in place to facilitate the contemplated transaction). Some pitches are won and others are not. It is a business environment I have thrived in over the years, but often not without the feeling of working in the trenches. It is because of this that the last 18 months have been quiet refreshing.
Brexit presented a serious challenge for a number of financial services and insurance businesses that were established in Gibraltar who relied on EU passporting rights under the European Single Market regime. Suddenly, their ability to continue trading in the EU (non-UK) markets was at risk. The search for a solution to this challenge took me on a journey across Europe – from Gibraltar to London, Luxembourg, Malta, Madrid and back, on numerous occasions. What started as a search for a solution soon evolved into a strategy which has since been the subject of considerable media coverage.
The strategy was to adopt a collaborative approach to the challenge presented by Brexit and try to make the most of any opportunities. What I was seeing elsewhere was the exact opposite; indeed the approach was predatory. The City of London was under pressure and Paris, Frankfurt, Dublin, and other major financial capitals of Europe saw this was an opportunity to fight for the spoils.
I visited Malta a number of times in 2017. Malta was an obvious domicile choice for Gibraltar companies. The system of law and prudential/authorisation regime are similar. I could also see that Malta had companies that undertook UK business and that they would not be able to continue to do so on a hard Brexit. The Gibraltar-UK trading relationship, on the other hand, was expected to continue. So I started to articulate a “two way strategy” for business switch between Malta and Gibraltar. I wanted to make Maltese businesses look at Gibraltar as their post-Brexit solution in the same way as I was looking at Malta. The strategy is now well underway and was first successfully implemented when one Maltese insurer redomiciled to Gibraltar. Over the years I have often found myself in competition for business with Maltese professionals. This is not surprising as Gibraltar and Malta were jurisdictional competitors. Now I was stepping out of the trenches and helping to create shared space for the mutual benefit of both sides. Whilst initially my Maltese optimism was, apparently, not shared by all in the Gibraltar financial sector, the strategy has worked not just in finding a solution to an immediate client problem but also in generating new business for Gibraltar.
The strategy then evolved to include the possibility that Gibraltar companies might look at La Linea as an alternative option to Malta. In so doing I have been at pains to stress that the Maltese and Spanish ‘option’ are not in competition with each other. They simply provide possible solutions for companies with different commercial objectives. But when taken together they can be executed as part of a ‘three-way strategy’ that maximises the Brexit opportunities for all three – Malta, Spain and Gibraltar. I could see that La Linea would be potentially attractive for companies that have an existing infrastructure in Gibraltar but that it also allowed for a level of business co-operation between Gibraltar and Spain, for the mutual benefit of both sides of the frontier, which had never existed previously. Implementation of this part of the strategy (and despite the usual sceptics) is now also underway.
Whereas my writings have often spoken about jurisdictional competition, I now find myself speaking of jurisdictional collaboration. To my mind not only has my Brexit strategy helped to turn a serious challenge for Gibraltar into a business opportunity (business from Malta and not just to Malta) but also an opportunity for commercial co-operation with Gibraltar’s neighbouring town (La Linea), which has never really happened in the past. I believe this collaborative approach adopted to the challenge presented by Brexit is unique. The experience between the UK and the rest of Europe has been to share the spoils by poaching business away from the City of London. I do not know if collaboration is the new competition, but what I can say is that stepping out of the trenches can be made to work.
As a student of history, I cannot but ask the question, what would Machiavelli think? If he were alive today I do not doubt that Niccolò would not only have led the Brexit campaign exhorting the electorate to liberate the UK from the barbarians [The last chapter of his Prince was appropriately titled “Exhortation to liberate Italy from the barbarians”] but probably too would already have become Prime Minister. Yet he also understood the importance of diplomacy and alliances for his beloved Florentine Republic.
– Nigel Feetham, 26 April 2018