Feature

posted 13 Mar 2006 in Volume 8 Issue 9

Going offshore

As the offshore sector continues to grow, more British lawyers head off abroad to live the dream. But what do they find when they get there – a bed of roses or stagnant backwater? Kieran Flatt reports.

Many of us dream of upping sticks and relocating to a tropical island paradise. We indulge the fantasy of trading in those early morning work-outs in the gym for a swim in a warm coral sea. Instead of ending your day watching re-runs of Taggart on the sofa with a can of Carling, how about winding down after work with your feet in the sand, watching the sunset and sipping on one of those drinks with too many umbrellas?

For most people it can never happen. Such island escapes already have plenty of shopkeepers, service-industry workers, mechanics and secretaries. But many of these islands are centres of offshore banking, where a lawyer with the right credentials can live the dream.

Who gets to go?

The vast majority of lawyers who go offshore are drawn from the capital-markets and investment-funds practices of City law firms. But as the leading offshore firms get larger – witness the recent spate of mergers and office openings around the world – they have begun to broaden the scope of their practices. To extend their service offerings they need staff with a wider range of skills and experience, hence a subtle but notable change in the recruitment policies of offshore firms, which previously staffed their practices almost exclusively with ex magic-circle fee earners. Commercial litigation is currently a major growth area, particularly for the Caribbean firms. Dispute resolution is a rapidly expanding business in Hong Kong. Offshore firms in many exotic jurisdictions (and others far closer to home) have developed highly successful fiduciary service businesses, which also hire plenty of lawyers seeking a change of direction.

The competition for jobs at offshore firms is no stiffer than for equivalent onshore jobs, and the leading firms in Bermuda, Cayman and the Channel Islands offer salary levels comparable to those paid by the magic circle.

Gus Pope, managing partner at Cayman-based Maples & Calder, has been instrumental in his firm’s push into new markets. Like several of its competitors, the firm has begun to sell a broader range of services – notably through its Jersey practice, Pope says, pointing to the opening last month of an office in Dublin as further evidence of the broadening of Maples’ ambitions. “Our clients conduct a wide range of financial transactions,” he says.

“Sometimes they want to use us on transactions where the Cayman jurisdiction is not an option.” There are “technical advantages” to be gained from setting up in Ireland, Pope says – not to mention its location within the EU tax zone and the Celtic Tiger economy, which continues to boom.

As for recruitment, Pope says that Maples is now hiring a few people from regional UK firms alongside the City lawyers who still make up the bulk of its intake. Despite some efforts to recruit from the island’s small local law school, five-sixths of fee earners are still sourced from abroad, primarily from the UK.

The larger offshore firms have what is effectively a rolling recruitment policy when the market is up, which it has been for some years. They are also opportunists – Pope says vacancies are often created to accommodate lawyers who apply with strong City credentials.

The largest offshore firms – Appleby Spurling Hunter, Maples & Calder and their ilk – are striving to forge global brands and to establish themselves in key onshore markets.

To support their expanding networks of offices, they are investing large sums of money in global infrastructure and their business processes have gained in complexity, so vacancies for professional, administrative and technical support staff are also on the up.

So where’s hot?

Bermuda is one of the longest-established offshore financial centres (OFCs) and the world’s third-largest reinsurance centre. It has historically had stronger links with the US-based financial and business community than the Cayman Islands. Bermuda’s capital, Hamilton, is home to about seven commercial law firms, including two of the major international offshore players: Appleby Spurling Hunter and Conyers Dill & Pearman, listed by Chambers’ Guide to the Legal Profession as “the two undisputed leaders” on the island. Lawyers who return to the UK from Bermuda frequently cite the insecurity of tenure and, above all, the lack of partnership prospects, as major downsides of working there. Bermuda does not allow foreign lawyers to be made partners in the territory’s law firms – unlike most other OFCs, it does not encourage long-term migrants. On the other hand, it has far better schools than Grand Cayman, where most expatriates send their offspring to boarding schools back home.

Dominating the global hedge-fund market, the Cayman Islands is the world’s most sophisticated and arguably most successful OFC. It is generally reckoned to offer the best employment prospects and most interesting work for funds practitioners, but also attracts a growing number of commercial-litigation specialists. To practice in the Caymans, lawyers must be three years qualified in a Commonwealth country.

“For funds work, it has got to be the Caymans, by miles,” says one senior lawyer, who has worked in three offshore jurisdictions. “It is easier to stay there long-term than [in] Bermuda – and you can make partner, which is an enormous plus.” Culturally, the downside of living on such a small island was neatly encapsulated by the senior partner of a local firm. To open his speech at a conference in London, he pointed to a pot of yoghurt. “There is more culture in there than in the whole of the Cayman Islands,” he said. Caymanian law firms are staffed principally by UK lawyers but also by lawyers qualified in Australia, New Zealand, South Africa and Canada. Two of the dozen-odd firms based on Grand Cayman are building international practices: Maples & Calder and Walkers.

Bermuda-based Applebys and Conyers have also opened on the island; the former through a recent merger with Cayman-based Hunter& Hunter. Other Cayman-based firms are generally small, specialist practices.

Tortola, in the British Virgin Islands (BVI) is the world’s leading jurisdiction for international business companies (IBCs), which are exempt from local taxes. Tortola is also gaining in popularity as a domicile for hedge funds. Most of the major offshore firms now have BVI practices that compete with the dominant local firm, Harneys. The cost of living in the BVI is significantly lower than that in Cayman; salaries are also commensurately lower.

Closer to home, the Channel Islands of Jersey and Guernsey are highly focused on the financial-services industry. The palm trees may be lacking, but they still support a large emigrant population of lawyers, most hired from the magic circle and similar large, high-billing international firms. Junior recruits will often be slightly poorer than they would in the City – and accommodation costs are at least equivalent to those in London – but associate-level salaries can exceed even those paid by the likes of Linklaters and Slaughters. Across the board, though, working hours and billing targets are significantly less extreme than they are in London. While the Channel Islands’ 20 per cent rate of income tax is far in excess of the levies on earnings in the Caribbean, many resident lawyers still cite tax as a major advantage over working in the UK.

The Isle of Man is a smaller OFC than the Channel Islands, with similar taxation but lower charge-out rates, salaries equivalent to the average UK commercial-firm rate, a lower cost of living and a slower pace of life. Expatriates are also allowed to buy property.

Hong Kong is no longer the foreign lawyers’ playground that it once was. Jobs can still be found in a wide range of legal disciplines; the jurisdiction continues to attract vast amounts of business and the expatriate community is still fairly large, but increasingly firms are looking for people with Chinese-language skills – especially fluent speakers of Mandarin. Some expatriate lawyers staff the practices of the large, international law firms while others take up in-house legal roles in financial-services organisations. Salaries are substantial and the Hong Kong lifestyle is unique, the city’s bustle in sharp contrast to the bucolic countryside; but the six-day working week dulls its appeal for some, while high levels of atmospheric pollution are of concern to many people who stay there long term.

Hottest of all right now is Dubai, whose burgeoning legal industry combines energy, dispute resolution and banking disciplines with a strong trade in Shariah-compliant hedge funds. “To my mind, Dubai is positioning itself as the Hong Kong of the Middle East,” Pope says. “A lot of the major international players are setting up there and we set up the first offshore practice – we have been there for about six months.” Others have followed.

Last month another Cayman-based firm, Walkers, opened in Dubai. Job prospects abound in the emirate and expatriates tend to work alongside local lawyers – some recent migrants cite this as preferable to the near-exclusively Anglo-Saxon environments of the Caribbean firms. Outside the office, though, the expatriate community exists physically and socially at arms’ length from the local population. Dubai is also quite literally the hottest of the offshore jurisdictions. So unpleasant is the climate in high summer that some law firms close their offices for eight weeks and advise their staff to seek more temperate climates abroad.

What’s it really like to live and work there?

All the major OFCs have low or zero tax regimes; the lifestyle and climate are undeniably attractive; with the possible exception of Bermuda, prospects for career advancement are pretty good; and the offshore finance industry is in fine fettle.

Nonetheless, the decision to go offshore is a tough one for any career-minded professional. Sure, the work may be well-paid but is it sufficiently challenging and varied to provide the necessary mental stimulation?

One key difference is in the pace and nature of the work. Offshore lawyers rarely draft documents; they are far more likely to be reviewing material that was drafted onshore. The work may have an international flavour but because they typically deal only with the offshore end of large deals, corporate solicitors working offshore rarely become immersed in a single piece of work for weeks on end. Instead, at any given time they may have to juggle smaller amounts of work on each of several dozen matters.

Offshore lawyers used to work substantially less hours than their City colleagues – some recent returnees still speak wistfully of nine to five with an hour’s break for lunch, a routine that has long ago ceased to exist in the UK, US and much of Europe. Today’s offshore fee earners work harder and longer, typically working from 8am to 8pm in the Cayman Islands, for instance – effectively from dawn to dusk, day in, day out. In contrast, an equivalent job in a UK firm can involve 14-hour-plus days at busy times and more than a few overnight stints at crunch-time, but the pace will then slacken off for a while before the cycle starts anew. “Our lawyers deal with about ten to fifteen transactions a day,” Pope says. “The skill of managing the workload can be difficult to acquire. You have to remember that while you are working on lots of transactions, the person on the other end of the phone is exclusively focused on their own deal. The flip-side of that is… we always work ten to twelve hour days, never eighteen.”

While few offshore lawyers miss the frenetic pace of mainstream practice, some find the pace and the nature of the work monotonous. Others say it is less of a cerebral challenge than City practice.

“There is a kernel of truth in that,” Pope says. “A certain amount of one’s day-to-day practice is commoditised. But for a portion of the day, you might be hitting the books more than you would if you were onshore. Offshore, we are exposed to so many jurisdictions and clients that we are often at the cutting edge, coming up with novel solutions, ideas and structures. It would be wrong to say there is not a mental challenge.”

At associate level, lawyers are also given more responsibility than they are onshore – taking instructions and running their own matters. At partner level, offshore practice can involve some fascinating challenges and opportunities. “There is not just a beauty parade between firms, there is one between jurisdictions too,” Pope says. “There cannot be a cut-throat relationship between law firms; for instance in Cayman we develop products that make the cake bigger for everyone.”

Indeed, partners in most major offshore jurisdictions work very closely with government to shape the very framework of their jurisdiction. They often draft laws, send them to government and then see them implemented.

Red tape and security of tenure

Red tape can become a serious hassle for expatriates. There is a long lead time between getting a job and actually starting it – obtaining the right permits can take months. And it can be very difficult for even seasoned expatriates to win the right to stay indefinitely.

Pope, who has lived on Grand Cayman since 1987, says the local government has made it a lot easier for expatriates to live there long term. “It used to be very hard to get permits and [residential] status was almost unobtainable,” he says. “Then the pendulum swung completely the other way and – I suspect though indirect pressure from the UK – it became much easier for us to get secure tenure. The state ex-gratia granted 3,000 people status.”

Now the pendulum has again reversed its swing, as pendulums are wont to do. “Immigration law is a hot topic now,” Pope says. Key employees will be exempt from any new restrictions on immigration; Pope says lawyers are most likely among the exemptions, but the lack of clarity has caused a little disquiet among the offshore community.

Another lawyer with ten years’ residence in Cayman and Bermuda agrees that things have improved. “But working offshore, you are completely dependent on work permits and you start feeling very insecure,” she says. “Having said that, most people I knew when I worked offshore had managed to stay for a very long time.” The security of tenure for expatriates varies between offshore jurisdictions and, in each location, it varies over time, so would-be emigrants are best advised to check out the current situation before committing.

Is it easy to come back?

It can be difficult to get back into the mainstream after a couple of years working in a tax haven. “The City in particular can be blinkered and unforgiving,” says one funds lawyer who made it back into the mainstream. “There is this perception that if you have been offshore you have been out of the loop, or worse, that there is something wrong with you.” Nonetheless, an offshore lawyer’s exposure to many jurisdictions can make them attractive to onshore firms. Above all, as one lawyer says, whether you are seeking to go offshore or to come back, it all hinges on the number and quality of the clients you can bring with you.

“If you leave a firm in London, you are off the partnership track,” Pope says. “You should not think that after a couple of years, you can go back and slot in as if you haven’t left.” In any case, he adds, most offshore firms are looking for longer commitments. “We tend to look for people who see Maples & Calder – or at least the Cayman Islands – as their long-term future,” he says, pointing to the firm’s extremely low staff turnover rate.

Short-term workers are not worth the expense and effort of training, dealing with red tape and the long lead-time for getting new recruits into position. In most offshore firms, the track to partnership is very similar to the London model. “We have not gone to the New York partnership model, where you eat what you kill,” Pope says.

For most people, then, going offshore is for life. And while paradise is certainly no more than a myth, it can be a prosperous, comfortable existence.

But how do you know if you are the right sort of person to do it? The last word goes to Hiren Patel, head of the corporate department at Crills Advocates in Jersey and a veteran of several other offshore jurisdictions. “Offshore law lends itself to cross-border transactions and structures, so there are layers of legislation, commercial and practical issues to deal with,” he says. “To be successful a good offshore lawyer needs to be a master of these layers and to be willing to understand and think through the issues to achieve the objectives. Being a lateral thinker and having a flexible approach are crucial.”

Case study – a management career abroad

While most lawyers who go offshore do so purely on the strength of their technical legal skills, there are also opportunities for those with a natural flair for management and entrepreneurial acumen. The big international law firms are steadily expanding into new markets, which presents a very different range of opportunities for working abroad than those offered by the offshore firms.

DLA Piper has a substantial presence across Asia with some 200 lawyers, half of whom are based in Hong Kong. While many international and offshore firms staff their Asian offices with British or American lawyers, the overwhelming majority of DLA Piper’s fee earners in the region are locals – only in Tokyo is there a substantial expatriate contingent. The firm’s Asian practices are managed by Nick Seddon, a former buyout specialist and ex-managing partner of the firm’s Birmingham office. He proved his business credentials as chief executive of a large computer games developer, before returning to DLA two years ago to head up the firm’s presence in Asia.

Seddon’s role is far more broad-ranging than the average partnership track, with more focus on management – from his headquarters in Hong Kong he runs offices in mainland China, Japan, Singapore and Thailand. “Culturally, the jurisdictions are very, very different – surprisingly so,” he says. “There are very different economic conditions in the various jurisdictions. Some are remarkably dependent on the direction taken by the government.” Seddon says the Chinese government in particular has generated a lot of work for lawyers – last year it wanted all insurers to be listed; this year it is the banks’ turn. “And who knows what it will be next year,” he says.

Working in Asia, lawyers are inevitably exposed to the volatility of the market. “Things can change dramatically,” Seddon says. “They can go from complete confidence [in the market] one month to a complete lack of confidence the next. The market can change from bull to bear in the blink of an eye.”

Seddon says dispute resolution is a key growth area in the region. “One thing that has started to happen, for the first time in recent years, is that joint ventures are being broken up and disputed,” he says. Previously, people took the view that there could be no satisfactory solution; they just wrote off their losses when things went wrong. “The general approach has become, for want of a better word, more civilised,” Seddon says. “People are starting to get sued and the Chinese government has become much stricter on defrauding joint ventures and state-owned companies.”

Another driver for the world’s major firms is what Seddon calls “the beginnings of a flow of new, entrepreneurial Chinese companies that have started looking to raise capital” – a new wave of business that is expected to generate a healthy crop of IPOs in about two years’ time. He adds that Tokyo is on the up again – business there seems to come in waves – and Dubai, where DLA and many of its large competitors have opened new offices, offers “exceptionally strong prospects” in the medium term.