CILS President's Address
PRESIDENT OF THE CAYMAN ISLANDS LAW SOCIETY ADDRESS
7 January 2009
May it please Your Lordship, Honourable Justices Henderson and Quin I am appearing today on behalf of Mr. Charles Jennings, the President of the Cayman Islands Law Society, which as you know represents the Cayman Islands legal profession as a whole. Mr Jennings is presently in New York on business. He returns to the Cayman Islands next Monday and is very sorry to have missed this occasion. He has prepared this address and asked me to present it on his behalf.
First, it gives me great pleasure to second the motion of the Honourable Attorney General to open the Grand Court for the year 2009.
Your Lordship, it hardly needs saying that 2008 was, to put it in the words of the Weather Channel, an unusually active year in so many respects. Not only did the Cayman Islands, and indeed the legal profession, have to contend with extraordinarily volatile financial market conditions worldwide, but the Islands have been rocked by successive controversies, each with its own implications for the legal profession as a whole - including, in no particular order; the Commission of Inquiry into the actions of the Tourism Minister; a Legal Aid financial crisis; significant changes within the higher ranks of the Royal Cayman Islands Police Service and the investigation by the Metropolitan Police Force officers into purported actions of such higher ranks.
As if that isn't enough, in what can only be described as a "perfect storm" for Cayman, the incoming administration in the United States is threatening to introduce so-called anti tax haven legislation shortly, while at the same time the OECD, always happy to find scapegoats in the offshore jurisdictions, is producing yet another list, this time of cooperative jurisdictions and green rather than black. Cayman needs to try as hard as it can to be on that list, not off it, and indeed the Government has already taken swift legislative steps in that direction only a few weeks or so ago by allowing Cayman to establish a unilateral mechanism for the exchange of tax information with other jurisdictions. That was a bold step, but one I believe in the right direction.
Allow me to turn to the international market difficulties we face. Your Lordship, I am sure you are aware that while you encounter 30 to 40 litigation lawyers on a regular basis, there are several hundred more working in the various law firms around town who rarely see the inside of this Honourable Court, except perhaps on their admission. Indeed, many of those lawyers would consider that an appearance in Court on a work-related matter might even be a sign of failure.
Those lawyers work in different areas of the law, but can be roughly divided into finance lawyers (structured finance, capital markets, banking, etc.); investment fund lawyers (hedge funds, private equity funds and other structured products); general corporate/commercial lawyers; and trusts and equity lawyers.
If the experience of my firm is anything to go by, new structured finance work coming to market started to slow down in the 3rd quarter of 2007. Because of the lack of liquidity in the credit markets, it has become steadily worse over the course of 2008 and this has in turn impacted on both the stock market and on hedge funds in the final quarter of 2008 with a large number of redemptions. It is estimated that the introduction of new structured finance transactions is running at about 35% of mid-2007 levels, although finance lawyers Island-wide have all be kept very busy on re-structures and work-outs.
Corporate commercial work has remained steady throughout the past 18 months, with perhaps a small dip towards the end of 2008 which we need to keep an eye on.
Investment funds lawyers have been extremely busy. There are still a significant number of hedge funds, and even more private equity funds, being established, while at the same time Cayman Islands funds lawyers have been asked to advise on all manner of restructurings, particularly in the areas of restrictions of redemptions, so-called "gates", and the establishment of side pocket arrangements to hold illiquid assets. Indeed this has probably been the busiest last six months for Cayman Islands funds lawyers that they have ever known. It will be interesting to see what the New Year brings, though, since a large number of funds have restructured in anticipation of end of 2008 redemptions. Hopefully we will see an upsurge in fund establishments going into 2009, although in the present climate the chances of any significant increase, particularly in the short-term, remains low.
Finally, litigation, the practice area no doubt closest to Your Lordship's heart, has become busier week by week. This is only to be expected. Issues being litigated range from disputes over redemption terms (producing already at least one important ruling of the Court of Appeal in In Re Strategic Turnaround Master Partnership Limited, a decision that has caused significant debate amongst practicing funds lawyers both within and outside the Cayman Islands) and arising from insolvencies generally, as well as all the other more usual subjects that are heard year on year before Your Lordship and other Honourable Members of the Bench.
What picture does one get from this, and how busy will the financial sector be this year? The answer is that at present it is hard to tell. Some lawyers are very busy as a result of the downturn, others less so. The water in the glass, so violently shaken last year, remains cloudy. I think it is fair to say, though, that the after-shocks of the downturn will keep lawyers and judges busy for a long time to come. But that is finite work; what concerns the industry, and of course Government (if only for reasons of revenue flow) is the level of new business coming to Cayman. As to how that develops, Your Lordship, only time will tell.
Commercial Court. The Law Society welcomes the steps that are being taken toward the establishment of a commercial court. I appreciate that this has been a long and sometimes difficult process, and the Society is particularly grateful to Your Lordship for your constructive participation in the process. In the current market environment with litigation expected in many areas of the financial services world, we strongly believe that the creation of the commercial court will be extremely important for the jurisdiction going forward and note that most significant offshore financial and commercial jurisdictions such as the British Virgin Islands and Bermuda has done likewise.
Court of Appeal. This year saw the retirement from the Court of Appeal of its long-standing President, Judge Edward Zacca, and of Judge Martin Taylor. The Cayman Islands Law Society extends to both of them its sincerest thanks for the huge amount of work they have put in over the years and wishes them well in their retirement.
Further, the Law Society welcomes the appointments of Geoffrey Vos, QC, Sir John Chadwick, QC and Justice Abdulai Conteh to the Court of Appeal. Both Justice Vos and Chadwick bring with them formidable reputations from the United Kingdom and Justice Conteh from Belize, Mr. Vos having been President of the Bar and no stranger to these islands having appeared in the past numerous times before Your Lordship's Court. They are welcome as is. If we can get as many years out of them as we did out of Mr. Zacca, the legal profession will I am sure be well pleased.
The Metropolitan Police Investigation. Your Lordship, it is hard to know where to begin with this subject. It would not be profitable and nor am I qualified to rake over the facts of the past six months or so; in any event, I understand that certain elements of the police investigation are still under way. So I will confine myself to a few broad comments, which I hope represent the views of at least the majority of the legal community here in Cayman.
The first point is that it has become clear over the past few weeks that the arrest of Mr Justice Henderson should never have occurred in the first place. The fact that it did shows that aspects of the investigation were ill-advised and fundamentally misconceived. The positive point I suppose is that the rule of law did at least prevail in time to save the jurisdiction and various individuals any further embarrassment and I hope we can say, in light of the recent apologies of both the visiting Senior Investigating Officer and the Royal Cayman Islands Police Service, that that particular aspect of the investigation is at a close.
Personally, Your Lordship, I am not of the school of thought that this unhappy episode has caused lasting damage to this jurisdiction or this Honourable Court. That said, though, I believe that it would be in the interests of all if His Excellency the Governor was to confirm publicly that, with the possible exception of the upcoming Commission of Enquiry, which clearly he will not wish to prejudice, he has no further issues outstanding with the judiciary, and further that he announces unequivocally that he continues to have every confidence in the Bench and in the administration of justice in the Cayman Islands.
My second point is that we cannot let this matter fester forever. Let's draw a line beneath it as soon as we can, hopefully reinforced by a statement of confidence in the judiciary by the Governor, and move on. We are going to have enough challenges this year not to waste further time and money on distractions like this.
Caymanian Bar Association. The Cayman Islands Law Society says a sad farewell to Mr Wayne Panton and welcomes Mr James Bergstrom as his successor as President of the Caymanian Bar Association, together with his new executive committee. Mr. Bergstrom was formerly Vice-President of the Cayman Islands Law Society before taking up his position. He and I go back a long way and I am glad to report to Your Lordship that, we have seen eye-to-eye on most matters. I think therefore that Your Lordship can expect close cooperation from our two professional associations over the next year.
The Legal Practitioners Law. I have taken the liberty of looking back over my speeches and those of my predecessor Mr Charles Quin, for the past four years. Each one, without exception, states that in the coming year we hope that the Legal Practitioners Bill will be agreed and finalised. As far as I am aware, there is very little else in that bill that now requires agreement except the terms of the Code of Conduct that it will introduce. As Your Lordship may be aware, two Codes have been generated: the first by the Cayman Islands Law Society and the Caymanian Bar Association, which has the support of the vast majority of the profession, and the second by the Law Reform Commission - which, with due respect and put mildly, does not. Indeed Mr Quin mentioned that in his speech last year.
Now is not the time to go into the differences between the two Codes, but suffice it to say that the profession believes that the Code they drafted is infinitely more practical and user-friendly. We urge the Hon. Attorney General and the Government to agree and adopt our Code, and hence the Legal Practitioners Bill as a whole, so that perhaps the President's speech in January 2010, will, for the first time in 5 years, not have to raise the subject yet again.
Relations between the Cayman Islands Law Society and the Government. Relations between the Cayman Islands Law Society and the Government continue to be fruitful and harmonious, as Your Lordship knows but it is always worth repeating. The Law Society represents the profession as a whole, but whatever people may think, and as I think I have said before, it is a lot more than just a "lawyers trade union". While we do look out for the interests of the profession, we do have another role which is to review and help the introduction of new legislation, both domestic and offshore. As regards offshore financial matters, the legal profession contains a higher proportion of specialists in areas such as structured finance, investment funds, insurance, banking, trusts and corporate commercial matters than probably any other jurisdiction in the world, onshore or offshore. The offshore financial industry is never static; new products are constantly evolving onshore and then offshore advice sought as to their viability, enforceability and effect. Because Cayman has such an extraordinarily high reputation as the pre-eminent offshore financial jurisdiction, lawyers here are therefore exposed to the most sophisticated offshore structures imaginable, and many of them tread the frontiers of innovation on a daily basis. As such, Your Lordship, they are uniquely qualified to prepare and introduce (or, in the case of Government draft legislation, review) legislation that allows the Cayman Islands to maintain its pre-eminence. Their expertise should never be ignored, but rather should be harnessed by Government for everyone's good. It was only through close cooperation between the public and private sectors that ground-breaking legislation like the Exempted Limited Partnership Law in 1991 and the Securities Investment Business Law in 2003 were introduced and proved to be of such enormous benefit to the Cayman Islands. Well-timed, well-considered legislation, drafted by those who work daily within the market, produces incalculable benefits for the Cayman Islands. It is no exaggeration to say, for example that as a result of the introduction of the Exempted Limited Partnership Law, the Cayman Islands are now the foremost jurisdiction, onshore or offshore, for the establishment of private equity funds.
All this goes to show that the role of lawyers in drafting legislation of benefit to the Cayman Islands, and that of the Law Society in coordinating their involvement, are crucial to the benefit, medium and long-term, of the Islands. My aim always has been and continues to be for the closest cooperation and friendship to exist between the private and public sectors, including the judiciary, with no mistrust and a common desire to work of the good of the Islands. Misunderstandings may sometimes arise, and sometimes even behaviour on either side which the other finds hard to understand. But we all know each other personally and, I hope, acknowledge the other's desire to work for the good of the Cayman Islands. If that is so, then steps should continue to be taken to ensure that both the legal profession and the Government strive to understand one other better to work out their differences and not take positions that are difficult to back down from.
Admistration of Justice. As to administration of justice, the year has witnessed the usual business of the Courts being conducted in both the criminal and civil lists. Your Lordship, Honourable Justices and Magistrates are all to be commended for so diligently and efficiently disposing of the lists week in and week out and, in particular, for ensuring that the majority of cases were dealt with in a timely manner. This is clearly important both in respect of local litigation which effects the lives of the people in the community and also with regard to the international work which is so vital to maintain Cayman's position as a leading financial centre. Once again there have been key cases to resolve and the continued demonstration of the effectiveness of the jurisdiction as an open forum for dispute resolution is maintained. As always, we are grateful to all those who are responsible for the administration of the Court system. Particular thanks go to the Court Administrator, the Clerk and Deputy Clerks of the Court, the Listing Officer and the Registrar of the Court of Appeal and all those who work with them. Again, the Law Society acknowledges the important work of those who produce the Cayman Islands Law Reports which are in daily use here and are increasingly referred to and cited in other jurisdictions as well. Our thanks again go to Dr. Alan Milner and his team for their continued excellent publishing of our Cayman Islands Law Reports.
Finally, Your Lordship, I would be deeply remiss if I failed to acknowledge the sad passings of several well-known and respected members of the profession last year. Specifically, of course, I refer to Stephen Hall-Jones and Jonathan Tarboton and also to two gentlemen of an earlier generation, Mr Warren Connolly and Mr Bill Walker, both of whom contributed so significantly to the development of the Law Society and to the jurisdiction and to whom we will always therefore be most grateful. 2008 was a hard year, Your Lordship, no less so because it took so many colleagues from us. Let us hope that 2009 will be kinder to us in this and so many other ways.
Now it remains only for me formally to second the Honourable Attorney General's motion to open the Grand Court of the Year 2009 on behalf of the President of the Cayman Islands Law Society, and also on his behalf to take this opportunity to wish Your Lordship, Judges, court staff and fellow members of the legal profession a very happy and prosperous New Year.
Cayman Islands Law Society
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