As jurisdictions across the globe rushed to implement economic substance legislation in order to avoid being put on the EU's blacklist, the financial sector is getting ready for the impact those new rules will have on the offshore industry.
The BVI government has estimated that the substance legislation will lead to a 10% to 20% reduction in financial services business, which accounts for more than half of the territory's public revenue.
"Why do we keep trying to please these people?" opposition member Archibald Christian asked, referring to the European Union, according to local news outlet, The BVI Beacon. "But we have no choice. If our children and their children and their children are to survive, this is the road we have to travel for now."
"Why do we keep trying to please these people?"
The Beacon reported that opposition Leader Ronnie Skelton described the EU and the OECD as bullies.
"You get the feeling that this is another form of slavery - economic slavery, which has been here for a while - but this one is basically one to send you back into the dark ages," Skelton said.
As the Cayman Journal writes, another jurisdiction not eager to give into the EU's demands is Bermuda. That jurisdiction initially tabled its substance legislation on Dec. 7, but reportedly had it rejected by EU officials.
"Three sources have claimed that the European Code of Conduct Group said last week it was not satisfied with the Economic Substance Act 2018 tabled in the House of Assembly on December 7," The Royal Gazette reported. "One source, who declined to be named, told The Royal Gazette: ‘The Code of Conduct Group met on December 11 and they flat out rejected Bermuda's proposals.'"
When Bermuda legislators debated the bill, the territory's opposition leader, Craig Cannonier, made similar statements as those made by BVI legislators, saying that the international community wants Bermudians to "go back to fishing."
"Bermuda, someone's trying to take your lunch and we need to stand up and say, ‘That's not going to happen,'" he said.
The EU wants offshore jurisdictions to implement legislation encouraging brick and mortar institutions, rather than the "shell companies" that comprise a large portion of the jurisdictions' financial industries.
Along with the British Virgin Islands and Bermuda, Cayman, Jersey, Guernsey, and the Isle of Man have also passed such legislation.
Andy Sloan, deputy chief executive of strategy at promotional agency Guernsey Finance, said in October that substance rules were of the kind that "what doesn't kill you, makes you stronger."
He said, in the long term, the requirements could bolster the offshore industry by giving jurisdictions like Guernsey "a clean bill of health," the Guernsey Press reported.
Jersey, which was the first offshore jurisdiction to publish its economic substance legislation, said last month that it was "delighted" to introduce the new law.
"As well as meeting the commitment made in 2017, the lodging of this legislation demonstrates Jersey's well-deserved reputation as a jurisdiction of substance," said Jersey External Relations Minister Ian Gorst when the bill was introduced.
An updated version of the EU's blacklist is expected to be released this February.