Healthy competition

  • Author : David Dorgan
  • Date : April 2012
ABOUT THE AUTHOR: David Dorgan TEP is Senior Associate at Collas Crill in St Helier, Jersey

The Channel Islands, notably Jersey and Guernsey, are often seen as a single pool of service providers by the international financial services community. Their geographical proximity and common time zones, stable constitutions, flexible legal regimes and sophisticated service infrastructures clearly make them sister isles. However, the Channel Islands consist of distinct and separate sibling jurisdictions, each with their own laws, finance industries and characters. These differences are key to the long-standing success of Jersey and Guernsey. They encourage each to be better than the other, to innovate and create products and structures.

Trusts and foundations

A great example of this innovation was the trusts law of Jersey. Historically, Jersey law did not include trusts, as we know them today, and it was doubted whether it recognised the concept of equity as known under English law. The French concept of equité, which was known to Jersey law and which embraces some of the same general principles, does not share the same detail as the law of equity, evolving as it did through a particular historical context in England. Yet, as a testament to the flexibility and willingness of Jersey law to grow and adapt, the Royal Court of Jersey incorporated the English concept of equity into Jersey law. This bold innovation of the Royal Court allowed Jersey to explore the possibility of building a new trust industry, and Jersey introduced the Trusts (Jersey) Law 1984, which formed the template trust statute for many other offshore competitive jurisdictions, including Guernsey, which later introduced its Trusts (Guernsey) Law 1989. Both Jersey and Guernsey have consistently updated and improved their trusts laws to maintain their competitive edge.

The same motivation saw Jersey enforce foundations in 2009. The Island recognised that markets were changing, and that its future clients were further afield and did not necessarily understand or recognise trusts. The foundation idea was not entirely alien to Jersey law, but it was, and is, proving to be an invaluable tool in the financial planning toolbox for the Island. And Guernsey is following suit this year. The result is that, together, the Channel Islands can offer a choice to enable a range of requirements to be met or bespoke structures to be devised in one or other place.

‘Jersey and Guernsey update their trusts laws to maintain their competitive edge’
Cell companies

Another innovative move happened in 1997 when Guernsey introduced the world to the cell company. Originally intended for collective investment funds and insurers, cell companies were soon being used for diverse purposes, including, for example, commercial property developments. Ten years on, Guernsey introduced the incorporated cell company, with the advantage that each cell has separate legal personality, providing a lower cost-base and the ability to ‘spin off’ or convert a cell into a stand-alone company. Jersey, not to be outdone, then introduced both protected and incorporated cell companies, so each Island can now offer similar products.


Jersey also introduced two partnership types. Traditionally, Jersey and Guernsey have both offered, and used for their clients’ benefit, the limited partnership structure, providing limited liability to investors, but remaining unincorporated and tax-transparent. Such partnerships have, for example, been used for private equity and venture capital schemes, and estate planning and asset protection. In 2010, Jersey responded to market demand by bringing in the ‘separate limited partnership’ (where the partnership is regarded as a legal person but is not expressly regarded as a body corporate) and the ‘incorporated limited partnership’ (where the partnership has separate legal personality from its members). The latter has been used, for example, for Shari’a asset-backed certificates as part of a Shari’a-acceptable structure and funding arrangement.

Funds regulation

Developments in the investment funds industry also show the competitive spirit between Jersey and Guernsey. Both have been at the forefront of establishing investment funds, but recently Guernsey has been slightly more successful than Jersey. In response, Jersey launched a private placement funds regime in January. This made it quicker and easier to establish closed-ended funds, including property funds and private equity funds, which are offered to not more than 50 persons, all of which are professional investors or sophisticated investors.

As well as being of general value to clients, the private placement funds regime is expected to provide a useful structure for fund managers marketing into the EU in compliance with the private placement regime under the Alternative Investment Fund Manager Directive.


And there’s e-gaming, notably in Alderney, a smaller Channel Island, which has a long-standing reputation as a centre of excellence in the remote gambling industry. Its robust and innovative regulation and regime has attracted the biggest operators and players in the world. The dedicated Alderney Gambling Control Commission remains commercially pragmatic and keeps step with the ever-changing market. In essence, it strikes the balance that operators and players are looking for.

Jersey is starting to provide Alderney with some strong competition. The Jersey Gambling Commission was established in 2010 and in January, Playtech, one of the world’s leading e-gaming software and content specialists, applied for a remote gambling licence showing that Jersey’s positive reputation for regulation, infrastructure and professional services can develop industry opportunities.

‘The Islands take a responsible approach to cooperation in tax matters’
Financial regulation

In support of their respective finance industries, both the Jersey Financial Services Commission (JFSC) and the Guernsey Financial Services Commission (GFSC) supervise and implement high standards in financial regulation and anti-money laundering and anti-terrorism measures, earning recognition from the Organisation for Economic Cooperation and Development and the International Monetary Fund. The Channel Islands have, for many years, taken a proactive and responsible approach to international cooperation in tax matters and are dedicated to transparency in such matters. Jersey has 27 and Guernsey has 31 tax information exchange arrangements in force with countries including the UK, China and the US.

There’s already substantial cooperation between the JFSC and the GFSC and it may be that in the future Jersey and Guernsey will together establish a Channel Islands Financial Services Commission to take advantage of economies of scale. The Islands are still consulting on introducing a single financial services ombudsman to serve both finance industries.

Team effort

Many professionals have recognised the strength of presenting a Channel Islands offering for the benefit of their clients, while many clients have recognised the benefits of service providers working across the two jurisdictions. Jersey and Guernsey are working closer than ever to present a united front: since 1998, the Channel Islands Stock Exchange has served business in both Jersey and Guernsey; the Channel Islands Brussels Office was opened in 2010 to present a single, coherent message about the advantages of Jersey and Guernsey to Europe as well as emphasise their specialties; and both Islands are looking to develop a clean energy source using the strong tides around them.

Although Jersey and Guernsey remain competitors, there is real potential for the Islands to work even closer together, to promote themselves and increase a joint competitive edge. The Channel Islands’ quality, innovation, exploration of opportunity (many Channel Islands-based professionals have recently established presences in Asia), and depth of skills, experience and commitment, which has provided them with success in the past, should propel them forwards. Consequently, Jersey and Guernsey must, and do, stand side-by-side on the international stage, singing in harmony if not to the same tune.


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