Guest contributor: Tom Carey – Partner, Carey Olsen.
When establishing your fund, factors driving the choice of domiciliation are mostly driven by the funds’ investors, regulatory marketing limitations and costs of operating the fund. In the margins of the decision a mostly overlooked consideration is the question of the quality and reliability of the location’s communication systems and IT Infrastructure.
Why is this important? Poor quality or unreliable systems slows things down, makes things inefficient and as Manager you need peace of mind that the jurisdiction you select is on the grid when you’re closing the deal and making decisions – in the moment, data connectivity, data quality and IT infrastructure matter. It’s an overlooked consideration but Guernsey has considerable strength as the connected jurisdiction.
Guernsey one of the most digitally connected places in the world
Guernsey first emerged as a centre of trade in the late 17th century when St Peter Port became an entrepôt for goods being shipped to and from the continent and Britain. Trade has remained an important pillar of the island’s economy ever since, but today we rely on trade in the digital sense, rather than a maritime one. This is nowhere more evident than in our financial services sector.
Thanks to geographical fortune, Guernsey’s position in the English Channel puts it at the heart of subsea fibre-optic cables which links data and digital traffic between the UK, Europe, the Americas, the Middle East and Africa. The scale, resilience and efficiency of these state-of-the-art connections have allowed the financial services industry to flourish and allow it to transact business speedily and securely worldwide. Believe it or not, it makes Guernsey one of the most digitally connected places in the world and has allowed eGaming to become a major success story for the island as internet gambling and gaming businesses choose to locate their data servers or indeed their offices in Guernsey.
In addition, there is a demonstrable enthusiasm amongst local government, industry and the telecommunication providers to enhance Guernsey’s digital infrastructure even further and to capitalise on these opportunities. The digital and telecommunications strategies for the island show that Guernsey is not resting on its laurels – with the promise of fibre links to business districts and even faster broadband connections across the island.
Innovating & global firsts
Guernsey has already gone a long way in positioning itself as a go-to jurisdiction for digital innovation in financial services; so needs a digital infrastructure that matches what it is preaching and delivering to clients.
Take blockchain, a type of distributed ledger or decentralised database of digital transactions, as an example. Our lawyers at Carey Olsen advised Northern Trust on the launch of the first commercial deployment of blockchain for the private equity market in 2017 for a Guernsey-based investment fund managed by Unigestion. This was then followed by us working alongside Northern Trust earlier this year on its pioneering work to deploy legal clauses as smart contracts directly from a digital legal agreement onto its private equity blockchain. Guernsey was also home to the first global use of blockchain technology in the issuing of notes in the insurance-linked securities sector.
Make no mistake, blockchain is a game-changer for financial services. Guernsey has been at the forefront of its emergence into the mainstream, but we would not want our involvement to end there. The island’s finance industry has an appetite to do more of this type of work and to be part of an even broader fintech revolution that goes beyond just blockchain. Great on-island events like Finvention underline the enthusiasm.
In fact, what helps Guernsey is that we already have in place a fantastic Electronic Transactions Law. Introduced in 2000, the law was ahead of its time and has enabled the Government to be fleet of foot in introducing specific legislation to deal with smart contracts and bot-to-bot transactions. Indeed, earlier this year saw the approval of the Electronic Transactions (Electronic Agents) (Guernsey) Ordinance, 2019, under the original 2000 law, and in doing so, demonstrated our global leadership in offering certainty in the use of ‘electronic agents’ in transactions and contract matters, and in creating a smart, secure environment for the exploitation of technology for specialist financial services.
Similarly, the introduction of the Data Protection (Bailiwick of Guernsey) Law, 2017 on the same day that the General Data Protection Regulation came into force across Europe last year, underlines our commitment to remaining at the forefront of international standards safeguarding transmissions of data in a digital setting.
Maintaining these standards is crucial for Guernsey going forward, as will be keeping pace with digital technology and providing the required infrastructure to enable industries, like our finance sector, to flourish while using it.