GLOBAL CENTRE – Looking beyond Europe


Brexit is clearly a game changer for Gibraltar financial services, with the possibility of the European market being less open to it. Finding new business further afield, including the Far East, has become a priority. Can Gibraltar transform itself from being EU focussed to being more of an international centre?

Let’s consider a perspective of Gibraltar selling services into the Far East. We might see Hong Kong as an attractive international hub with a legal and economic system we are familiar with. It has sensible regulation that works without creating unnecessary burdens; a tax system that ensures no double taxation between it and other countries that may be serviced by that hub; it is extremely well connected not only to China  but beyond, and has a considerable number of service providers of the highest quality.

Let’s check the Chinese perspective of looking at Gibraltar. When looking for a place for its international hub, the same considerations will apply. The Chinese business will be asking itself the following:

  1. Familiarity and Confidence: How familiar is the jurisdiction to me? Do I have confidence in the government and in its legal system?
  2. Business Environment: Are there complexities or potential obstructions in setting up and developing business? Is business open and transparent or is protectionism and corruption an issue? How expensive is it to set up and maintain operations in the jurisdiction? Is the jurisdiction one that can adapt quickly to changing circumstances? Are immigration rules such that overseas employees can readily re-locate and be secure in their jobs?
  3. Skills: Does the jurisdiction have an abundance of people highly skilled in my field of business? Are its businesses predominantly local or do they have an international flavour?
  4. Market Access: Does the jurisdiction have accessibility to the markets I intend to serve? It is a suitable location to service other places?
  5. Appropriate Regulation: Is the jurisdiction lacking in regulation, or conversely, is it over-regulated?
  6. Appropriate Tax: Are tax rates competitive without being regarded as a tax haven?
  7. Internationally Connected: Is the jurisdiction well connected politically, economically and physically to other regions? How good are its transportation links? How good are its relations with other countries? Does it have a network of international agreements, such as double-taxation treaties?

No regional hub will have all the above, in part because some are conflicting. For example, accessibility to markets may be possible, as with the EU, but come at the cost of significant regulation.

How does Gibraltar compare? The above is a tough list to satisfy. However, each international business has its own particular needs and therefore different hubs will be attractive to different businesses.

On the positive side, Gibraltar has an excellent governmental system and good reputation generally, and with the considerable efforts being made by its government in particular, the jurisdiction is becoming more familiar to those overseas. The business environment in Gibraltar is recognised as being good, having an open and flexible economy with no perceptible corruption. Gibraltar has quality service providers in many areas including in financial services. The legal system is based on English law which is understood and trusted, and Gibraltar is also recognised as being well-regulated to international standards. It is also a low tax jurisdiction (not a no-tax jurisdiction) and is thus attractive to international business, but is not by objective standards a tax haven.

On the negative side, familiarity is still an issue as Gibraltar is not particularly well known to Chinese businesses. Gibraltar is a comparative newcomer as a finance centre, and there are many large and well established finance centres in our particular region. Gibraltar does have quality service providers in financial services, but its industry is not of the magnitude of its main European rivals. Its competitors are well connected often with offices in multiple jurisdictions.

We then turn to the matter of market access, which inevitably leads us to Brexit. Market access is, without doubt, a key ingredient for any international centre. On the face of it, therefore, Brexit is a significant negative. So what can Gibraltar do? I suggest the following:

  1. Notwithstanding Brexit, retain as much market access rights to the EU as possible.

Brexit may well limit EU market access but it will not end it. For certain sectors within financial services, approved non-EU countries that have laws equivalent to EU standards can use the EU passporting system if conditions are fulfilled. Financial services are hugely important to the UK and a priority for it in the Brexit negotiations. It will aim for passporting rights at least equivalent to those currently existing for approved non-EU countries, or something better. Although Spain is making this a controversial issue, Gibraltar will aim to share the UK position.

  1. Embrace change to exploit the opportunities created by Brexit.

Gibraltar law in respect of financial services is predominantly EU law. It should be recognised that EU law was designed for the benefit of the EU’s largest members. EU law was not enacted with any consideration of the particular needs of Gibraltar.

A hard Brexit will give the UK, and Gibraltar, the opportunity to completely re-visit their laws and re-engineer their financial services, designing them for what actually works for the UK/Gibraltar, its people and its businesses.

The hardest thing to do is to change, and this seems particularly true of governments and regulators. A government or regulator that is too attached to existing practices or too slow to adapt to a changing future will be unhelpful. A risk to Gibraltar is missing the opportunity to completely re-think its financial services regime to ensure it is designed specifically to meet the needs of Gibraltar.

  1. Stay connected to the EU but look beyond it.

The UK considers itself to be something more than simply the EU. The balancing act is to remain closely linked to the EU whilst also exploiting opportunities elsewhere.

Gibraltar may need to take the same approach. That does not mean giving up on the EU, but it does mean recognising the existence of other markets. Gibraltar has already made efforts in the Far East market, establishing connections there and elsewhere. There is also, for example, a Gibraltar-America Chamber of Commerce and a Gibraltar-Israel Chamber of Commerce. Gibraltar can look east and west, and indeed, south.

Gibraltar’s closest connection of influence is the UK, and it is therefore crucial that Gibraltar maintains the highest and closest connections with the UK as possible. Any existing rights that Gibraltar has vis-à-vis the UK as a consequence of their EU membership must be replaced by UK and Gibraltar arrangements following Brexit. A tax treaty between the jurisdictions would also be greatly beneficial to Gibraltar.

The UK is acting quickly to establish new trading arrangements outside the EU. Gibraltar should leverage its UK relationship as much as possible to benefit from those new arrangements. If the UK succumbs even partially to EU pressure in terms of Gibraltar access to the EU market, may compensation lie in Gibraltar gaining access to the UK’s non-EU network? A treaty between UK/Gibraltar and China, for example, could be very interesting and ultimately more rewarding.

words | Alicia Bowry

Previous articleSOLID & STABLE – Property market to stay as is for years to come…
Next articleCOMPANY CULTURE – What environment do you prefer to work in?
The Gibraltar Magazine is your monthly business, entertainment, and lifestyle source. Providing the community with the latest breaking news and quality content since 1995. Every month, 100 pages are packed with gripping features from a cross- section of the Gibraltarian community in business, culture and leisure. We have pledged to support the wealth of local talent, constantly promoting young artists, musicians, authors and entrepreneurs and presenting what’s on around the Rock. In the business section, we focus on finance, property, and gaming industries. Embracing the latest technology and updating our website daily, we’re able to provide increased and up-to-the-minute information. The magazine has been operating for 25 years, which speaks volumes for our forward-thinking team who strive to take a fresh direction each month, as well as our loyal readership and confidence of advertisers.