Vivat Trust director Advocate Christopher Scholefield, a specialist in Trust, Company and Foundations law, recently returned from a visit to Lichenstein – the home of the original foundation and where 55,000 have been established – where he spoke to financial service practitioners about what Jersey’s product offers.
'You could say that it is a tale of two cousins, Wilhelm and Emil Beck. At the end of the First World War Liechtenstein was tied into an economic and monetary union with Austria. As one of the defeated central powers Austria suffered a deep economic depression, which cost the inhabitants of Liechtenstein dear. They decided, whilst retaining their status as a sovereign state, henceforth to realign themselves with neutral Switzerland, entering into a currency and customs union with Berne in 1924. That alone was not felt to be enough to broaden the Principality’s economic base. Wilhelm Beck was a lawyer and politician. He represented Liechtenstein during the negotiation of the Treaty of Versailles.
The two men never met but it would have been interesting to introduce him to the late Ralph Vibert, founder of the Viberts group and the politician who negotiated with great astuteness the 9th Protocol to the Treaty of Rome governing Jersey’s advantageous relationship with the European Union.
Wilhelm’s cousin Emil was a professor of law at the University of Berne. He suggested the drafting of Liechtenstein’s all embracing Personen und Gesellschaftsrecht (law governing the status of persons and companies) introduced on the 26th January 1926. This made possible the creation of companies, partnerships, establishments, foundations, in fact every type of legal person you could possibly think of in the hope that among the wide variety of legal arrangements on offer some would prove attractive enough to draw foreign capital to the Alpine principality. In 1928 even a Trusts law was introduced, a then unheard of development in a civil law system. After a slow start it became clear that the tactic was a success. Amongst Liechtenstein’s earliest customers was Courtaulds, the textile giant then a household name in the UK. It made some of its continental investments through Liechtenstein entities and later consolidated these arrangements by using them to hold its enormously profitable holdings in its US subsidiary, the American Viscose Corporation.
Unlike Jersey, Liechtenstein avoided German occupation in the Second World War and thereafter business grew steadily, particularly for foundations of which there are these days over 55,000 on the register.
Jersey too has established an enviable reputation for political stability, fiscal prudence and legal and financial expertise. Like most small communities government has to be flexible and not afraid to emulate best practice elsewhere. Important parts of the island’s companies law are based upon the Ontario Business Corporations Act. Its Security Interests Law is inspired by the law of the State of New York.
It was only natural then that, despite the runaway success of the Jersey trust, the island should investigate and adopt the foundation that has been so popular in Liechtenstein. It soon emerges that there are several features of the new Law that are unique to Jersey. For example (i) the very clear provisions aiming to protect a Jersey Foundation from any challenge brought by the Founder’s heirs, which Liechtenstein would be more likely to enforce, (ii) Jersey’s very clear regime allowing the Council to withhold information from the beneficiaries and (iii) the Council’s right , where appropriate, to seek the guidance, much as a trustee would, of the Royal Court of Jersey. These refinements, and Jersey’s position on the OECD’s white list of compliant jurisdictions give every reason to expect that the months ahead will be busy ones indeed.
Advocate Christopher Scholefield. 14th Sept 2009