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The Offshore Report: The sandy scenario

The Offshore Report: The sandy scenario

OUT IN THE ocean, away from the smog, traffic and congestion of the big city lifestyle, rest a series of small legal markets offering many of the same perks as London, New York and Sydney, but…

OUT IN THE ocean, away from the smog, traffic and congestion of the big city lifestyle, rest a series of small legal markets offering many of the same perks as London, New York and Sydney, but with some added bonuses - tax breaks, lifestyle and tropical weather.

It's the offshore market, where tiny islands are home to major financial centres and, even in the face of a global economic meltdown, are still running hot - most of the time.

Debate has previously run rife about the legitimacy of offshore financial centres but in recent years a reputation as havens for tax evasion and light regulation has slowly been diminishing. The Economist, a publication typically hostile toward the offshore market, reported in February 2007 that concern over offshore financial centres has been overblown: "Well-run jurisdictions of all sorts, whether nominally on-or offshore, are good for the global financial system."

The tropical reality

The tax break is the obvious perk of the legal offshore lifestyle, but what else can lawyers stepping away from more traditional markets expect to find? First, according to Charles Jennings, joint managing partner at Maples and Calder in the Cayman Islands, salaries in general are strong, often in line with or even higher than London Magic Circle rates.

Meanwhile, warns Jennings, offshore firms differ substantially in how they remunerate their lawyers: there is the "eat what you kill" commission basis or, in the case of Maples, a remuneration of salary and bonuses based on the performance of the lawyer. Jennings says in view of the economic situation, lawyers interested in moving offshore should be particularly considerate of such remuneration structures.

And even with the sand at your doorstep, the chance to enjoy such benefits will be limited. Jennings says working hours are also usually in line with or just below Magic Circle firms, while living costs are higher than Sydney and closer to the realities of London.

The perks of a tax-free lifestyle can also come at a price; given that the governments of offshore destinations simply don't have the tax money coming through, roads, public utilities and other infrastructure can often be at a standard considerably below that available in Australia.

Jayson Wood, a former Gold Coast lawyer and now an associate with Conyers Dill & Pearman in the British Virgin Islands says: "Moving offshore involves a compromise between having a somewhat lower standard of general living, but ending up with more disposable income in your pocket."

But yet, it's a lifestyle that - according to Vicki Hazelden, partner at Walkers in the Cayman Islands - is pretty much unbeatable. "Most lawyers live minutes from the office and drive to work," she says. Hazelden, a mother of three, says she never would have dreamed of combining raising children with working as a corporate lawyer, a balance she has realised working with Walkers in Cayman - for the most part, because it's so easy to structure a day going back and forth to work.

"I really struggle to find a downside to living here," she says. "Of course, I miss seeing my extended family but they turn up here for long patches, so even that isn't bad."

As for the actual legal work, it's likely to be more challenging and complex than Australia. Wood says that although it's narrower in scope, the work he now undertakes in the British Virgin Islands (BVI) is "far more complex and legally challenging".

With his litigation matters revolving around the preservation of assets, Wood says most of their cases are internationally based with the usual scenario seeing them deal with tracing hidden overseas assets into the BVI, "and then obtaining urgent orders to ensure that those assets are adequately protected pending the outcome of the main court proceedings".

Such complexity, says Wood, makes legal practice in the BVI much more interesting than Australia.

Dividing seas in a distressed global economy

The locations are spread far and wide, but little changes in the range of work offered in offshore legal markets. Offshore - in the Cayman Islands, Bermuda, BVI and Jersey - hedge and private equity funds have been established by institutional investment fund managers from all over the world. This means that the work available to lawyers might not be immune to the impact of global market pressures, but the dividing seas do serve as some sort of barrier and, so far, the resistance has stood the test.

"Some types of businesses have suffered a downturn," says Jennings. "However, many hedge funds and private equity funds pursue strategies that can take advantage of the buying opportunities arising from the lower market valuations and are still being formed."

That means fund formation in a location such as the Cayman Islands has stood in defiance of the global backdrop. According to Jennings, fund administrators and other service providers in the Cayman Island are still servicing about 10,000 existing Cayman Islands hedge funds, despite the economic situation.

Hazelden agrees, saying Cayman is generally pretty robust, but that they have noticed a slow-down in some areas of finance, even though their funds and private equity business still remains strong. One thing that has changed, she says, is the types of products being offered. "I am working on a number of distressed loans, mortgages and real estate funds," she says. "On the litigation side, anytime there is a recession our insolvency lawyers and distressed funds lawyers see a big upturn in work."

Wood says that while there was an expectation that the collapse of some onshore institutions would have a domino impact on the offshore legal industry, the level of work in BVI has not yet felt the heat. "Corporations worldwide are continuing to bring their ventures offshore in the same volumes as they have previously," he says. "It remains to be seen whether this trend will continue."

So is there any work available?

The work might be available in offshore markets, but the employment market is tightening up. The opportunities for lawyers offshore have typically always been limited, a reflection of the small legal market available. In the short-term, most candidates with an interest offshore have probably already noticed that the job adverts talking of tax breaks, sunshine and lifestyle are dwindling, but that's not to say the offshore market is dead.

Hazelden, also the Walkers recruitment partner for Cayman, says she is now seeing a flood of CVs coming in from all over the world. But with the fierce competition for positions, the practice is growing, and the firm is still continuing to recruit.

Paul Burges, a local recruiter with Burgess Paluch Legal Recruitment, says the opportunities are not dropping off for Australian lawyers seeking offshore work, but that competition is on the increase. "Australian lawyers are being faced with stiffer competition from US and UK lawyers seeking work in more dynamic markets as their local options diminish."

The lawyers that land the job

In general, offshore markets suit the credentials of a lawyer in hedge funds, finance, private equity, real estate and litigation. Hedge fund or private equity experience is obviously the ultimate drawcard, but Hazelden says that at her firm this isn't necessarily essential. "We will always be looking to see strong academics and excellent corporate law knowledge."

Jennings says that, at Maples, it is high-quality lawyers, usually with a corporate, finance, funds or litigation background from UK and Commonwealth jurisdictions, who are typically successful in filling vacancies at the firm.

According to Burgess, finance, corporate, structuring and trusts are still the hot areas for Australian lawyers working offshore: "although we are starting to see some demand for contentious lawyers, particularly those with strong insolvency or banking experience".

Competition for legal jobs offshore appears as fierce as anything offered onshore, but for a tropical lifestyle and a decent pay package, it's certainly worth the challenge.

- Angela Priestley

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