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Gibraltar
Global Investor’s Guide 2012
Inassociationwith
milestone GRP
Contents
milestone GRP
8
4
EXPERT CONTRIBUTORS
FOREWORDS
12
Fabian Picardo, Chief Minister of Gibraltar
13
Petar Stoyanov, President of the Center for Global Dialogue and Cooperation
52
GFIA - EU Directives Presenting Opportunities: Fund relocation to Gibraltar
Interview with Adrian Hogg, Chairman, Gibraltar Funds & Investments Association
54
Expert Analysis - Regulatory Changes Improving Competitiveness:
Experienced Investor Funds Regulations 2012
by James Lasry, Partner & Funds Team Leader, Hassans International Law Firm
56
Sovereign Trust - Trust and Company Management:
International reach and depth of service
Interview with Ian Le Breton, Managing Director, Sovereign Trust (Gibraltar) Limited
57
STM Group/STM Fidecs - The Rock Reaching Out: The EU and farther abroad
Interview with Alan Kentish, Chief Financial Officer, STM Group/STM Fidecs
GOVERNMENT
58
GBA - A Stable Sector in Rough Seas: Banking supporting Gibraltar’s growth
Interview with Emma Perez, President, Gibraltar Bankers’ Association
18
Chief Minister’s Perspective - Dawn of a New Era:
A fresh vision for Gibraltar’s future
Interview with Fabian Picardo, Chief Minister of Gibraltar
60
RBS International/Natwest - Trends in the Banking Sector:
Consolidation and steady growth
Interview with Marvin Cartwright, Regional Head - Gibraltar & Corporate Banking, RBS International / NatWest
22
Minister’s Perspective - Sustainable Growth and Investment in People:
Business success for social welfare
Interview with Joe Bossano, Minister for Enterprise, Training and Employment
61
Lloyds TSB - Gibraltar as Base: Passporting Private Banking across the EU
Interview with Marina Dominguez Steglich, Head of Private Banking,
Lloyds TSB Private Banking Gibraltar
and Mark Johnson, Country Manager, Lloyds TSB Bank Gibraltar
FINANCIAL SERVICES
28
Minister’s Perspective - A World-Class Reputation and Best Practices:
A small jurisdiction punching above its weight
Interview with Gilbert Licudi, Minister for Education, Financial Services,
Gaming, Telecommunications and Justice
ONLINE GAMING
64
Expert Analysis - Carefully Managed Growth: Quality over quantity
Interview with Peter Montegriffo, Team Leader & Partner, Hassans Law Firm
31
Industry Regulator - Efficiency and Effective Regulation:
Maintaining Gibraltar’s reputation as a stable financial centre
Interview with Marcus Killick, CEO of Gibraltar’s Financial Services Commission and David Parody, Deputy CEO of Gibraltar’s Financial
Services Commission
66
GBGA - Regulation and Transparency to Build Trust:
Online Gaming leaving nothing to chance
Interview with John Anderson, Deputy Chairman, Gibraltar Betting & Gaming Association
34
Finance Centre - Gibraltar - EU Financial Services Centre: Reformed and Transformed
Interview with James Tipping, Director, Gibraltar’s Finance Centre
68
Expert Analysis - New Momentum for a Successful European Online Gambling Market
by Sigrid Ligné, Secretary General, European Gaming and Betting Association
36
Expert Analysis - Gibraltar as an Overall International Finance Centre
by Michael Mainelli, Executive Chairman, Z/Yen Group
and Mark Yeandle, Associate Director, Z/Yen Group
70
Victor Chandler - The Rock’s First Online Gaming Licensee:
Good numbers in the books 15 years on
Interview with Victor Chandler, Chairman, Victor Chandler International
40
Expert Analysis - A Look at Gibraltar’s Neighbours:
Europe’s situation and the Rock’s position within it
by Tim Harris, Chief Investment Officer - UK, Lloyds TSB Private Banking
72
ProSpreads - Straddling Finance and Gambling: A bet that’s paying off
Interview with Simon Brown, Managing Director, ProSpreads
42
Expert Analysis - Boards as Modern Drivers for Change:
The evolution of Gibraltar’s finance sector’s boards
by Marcus Killick, CEO, Gibraltar’s Financial Services Commission
TELECOMMUNICATIONS & IT
44
Expert Analysis - Gibraltar’s Insurance Industry: Yesterday, today and tomorrow
by Chris Johnson, Chairman, Gibraltar Insurance Association & Director, Robus Group
76
Industry Regulator - Ensuring Compliance and Fair Play:
Regulating the Telecoms sector
Interview with Paul Canessa, Chief Executive, Gibraltar Regulatory Authority
48
Expert Analysis - The Use of Protected Cell Companies by Insurance
Companies and Funds
by Nigel Feetham, Partner, Hassans International Law Firm & Visiting
Professor, Nottingham Law School, Nottingham Trent University
79
SES - On the Med and in the Skies: Going up and high-tech
Interview with Harry Pallas, Senior Manager, SES Gibraltar
80
Gibtelecom - Telecoms Growing in Pace with the Economy:
An all-round provider extending its reach
Interview with Tim Bristow, CEO, Gibtelecom
49
Expert Analysis - International Transparency and Cooperation: Gibraltar’s 20 TIEAs
by Ghuozi Foo, Secretariat Administrator, OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes
84
Sapphire Networks - From Back-up to Primary Provider:
Keeping the Online Gaming sector connected
Interview with Lawrence Isola, CEO, Sapphire Networks
50
R&Q Caledonian - On the Rock with Space to Grow:
Based in Gibraltar, Insuring across Europe
Interview with Penny Hudson, Managing Director, R&Q Caledonian Gibraltar
Gibraltar 2012
5
Contents
PORT SERVICES & SHIPPING
90
Minister’s Perspective-ExpandingthePortandIncreasingTouristFlow:
LeveraginginfrastructureandGibraltar‘sattractions
InterviewwithNeil Costa, Minister for Tourism, Public Transport & the
Port
93
Port of Gibraltar -StayingAheadoftheTide:
Aportleveragingitscompetitiveadvantages
InterviewwithRoy Stanbrook, Captain of the Port & CEO of the Gibraltar
Port Authority
98
Expert Analysis-Gibraltar’sKeyPositionasaMaritimeServiceCentre
byTorben C. Skaanild, Secretary General, The Baltic and International
Maritime Council (BIMCO)
101
Bland Group-HomegrownandVenturingOut:
BorninGibraltarbutexpandinginternationally
InterviewwithJames Gaggero, Chairman, Bland Group
102
East Gate Express -Land,AirandSea:Connectingallthefreightshippingdots
InterviewwithColin Davis, Operations Director, East Gate Express
TOURISM
106
Tourist Board-PrimeLocationandTop-notchAttractions:
Atourismsectorreadyforinvestmentandgrowth
InterviewwithNicky Guerrero, CEO, Gibraltar Tourist Board
110
Expert Analysis-GibraltarasaCruisePort:Punchingaboveitsweight
byPeter Wild, Managing Director, G. P. Wild
113
MH Bland-WelcomingTouristsandShips:
AlonghistoryoperatinginGibraltar’sportsofentry
InterviewwithGeorge Gaggero, Deputy Chairman, MH Bland
114
Caleta Hotel-TheCaletaHotel:AGibraltarLandmark
InterviewwithFranco Ostuni, General Manager, The Caleta Hotel
118
Event-led Tourism-HostingtheWorldofChess:
Aglobaltournamentwithahigh-andrising-rank
byAlice Mascarenhas, Features Editor, The Gibraltar Chronicle
120
Tourism Offerings-Gibraltar’sTourismHighlights:Lotstodiscover
byKaren Lawson, Gibraltar Tourism Enthusiast & Author
124
BMI -BuildingonRock-solidFoundations:Agentsontheground,andhigher
InterviewwithLouis Montegriffo, Director, BMI Group
PROFESSIONAL SERVICES
6
128
Hassans-AttheCentreofGibraltar’sLegalEvolution:
GrowinginandbeyondGibraltar
InterviewwithJames Levy QC, Senior Partner, Hassans International Law Firm
130
Baker Tilly-UpholdingInternationalStandards:
Awell-regulatedEuropeanjurisdictionforseriousinvestors
InterviewwithJoe Pisharello, Chairman, Baker Tilly Gibraltar
132
PwC-ServingBusinessesOnandOfftheRock:
Localknowledge,internationalnetwork
InterviewwithColin Vaughan, Territory Senior Partner, PwC Gibraltar
Global Investor’s Guide – Gibraltar 2012
Milestone GRP
Editor:
Country Director & Analyst:
Project Manager:
Design & Production:
Contributing Sub-editor:
Web Editor:
Tim Penketh
Florent Thevenin
Amaliya Abbas
Caspar Macke
Darin Bielecki
Juanjo Dominguez
Published by Milestone GRP (UK) Ltd.
3rd Floor, 207 Regent Street,
London, UK
W1B 3HH
Telephone: +44 20 7099 3790
Fax: +44 20 7043 9064
www.milestonegrp.co.uk
Registered in the UK: #7792839
We would like to thank all those who assisted us throughout
our project and with the production of this publication.
Statistics sources are abbreviated as follows:
GOG: Government of Gibraltar
GRA: Gibraltar Regulatory Authority
GSO: Gibraltar Statistics Office
FSC: Gibraltar Financial Services Commission
Contributors
milestone GRP
Mr Nigel Feetham
Partner, Hassans International Law Firm & Visiting Professor,
Nottingham Law School, Nottingham Trent University.
Nigel Feetham was awarded a Masters degree in law with Distinction from
Manchester’s Victoria University, was called to the Bar in 1993, and became
a partner of Hassans International Law Firm in 1999. He is considered a market leader in Gibraltar on 'insurance passporting', the structuring of insurance
companies, and Protected Cell Companies. He has set up innovative structures
for insurance operations and advised the Government of Gibraltar on ways of
implementing insurance related legislation. Nigel was recently appointed a Visiting Professor at Nottingham Law School, Nottingham Trent University. His
publications include ‘Protected Cell Companies: A Guide to their Implementation and Use’,’A Guide to Insurance: Combining Governance, Compliance and
Regulation’ and ‘Tax Arbitrage: The Trawling of the International Tax System’.
Chairman, Gibraltar Insurance Association & Director, Robus Group
Chris Johnson’s background is initially in the insurance company world, beginning his career in 1979 with Norwich Union in Norwich, and moving with
them to Gibraltar in 1987. He has been a mainstay of the Gibraltar insurance
industry for 25 years. He has been involved in broking (also in Spain) and
insurance management, setting up and running Aon Insurance Managers’
Gibraltar office for four years. Following that he worked as an independent
consultant and recently set up Robus, an insurance management and risk
consultancy firm with offices in Gibraltar and Guernsey. Chris is a Chartered
Insurer and an Associate of the Chartered Insurance Institute.
Mr Guozhi Foo
Mr Markus Killick
Guozhi Foo is a tax consultant at the Global Forum Secretariat based at the
Centre for Tax Policy and Administration in the OECD. During his time with the
Global Forum, he has led and completed the peer reviews of several jurisdictions, including the Phase 1 peer review of Gibraltar in 2011. Prior to joining the
Global Forum, he was the Head of the International Tax Unit at the Singapore
Ministry of Finance. Over the last six years, he has worked on a wide range of
domestic and international tax policy issues, including international tax cooperation and technical assistance. Markus Killick, LLb, Mphil, Fellow of the Securities Institute, took over as
Chairman and Commissioner of Gibraltar’s Financial Services Commission
in April 2003 and became its first Chief Executive following the introduction
of the Financial Services Commission Act 2007. Mr Killick is an English
barrister by training and is also a member of the New York State Bar. From
1998 until 2003 he was a Director in the International Regulatory Services
Team of KPMG, based in the UK. He has also previously held positions as
Deputy Chief Executive of the Isle of Man Financial Supervision Commission, and Head of Banking, Trusts and Investment Services at the Cayman
Islands Monetary Authority.
Secretariat Administrator, OECD’s Global Forum on Transparency and
Exchange of Information for Tax Purposes
Mr Tim Harris
Chief Investment Officer - UK, Lloyds TSB Private Banking
Tim Harris is based in London and works closely with Lloyds TSB’s Gibraltar
team. Tim previously worked at JPMorgan in London, initially as European
equity investment strategist for JPMorgan Securities and latterly as chief investment officer of the EMEA platform of the global private bank. Tim has 30
years experience in the industry and in his early career was an engineering
and conglomerates equity analyst, working for Phillips & Drew, which was
acquired by UBS, and latterly Nomura Research Institute. Tim holds an MA
in Mathematics from Oxford University and an MSc in Finance & Economics
from Queen Mary, University of London. He is a Chartered Fellow of the Chartered Institute of Securities & Investment and a holder of the ASIP, a recognised qualification of the CFA Institute.
8
Mr Chris Johnson ACII
CEO, Gibraltar Financial Services Commission
Mr James Lasry
Partner & Funds Team Leader, Hassans International Law Firm
James Lasry is a highly regarded practitioner who has been instrumental
in setting up the majority of Gibraltar's funds, including the first experienced investor fund and the first protected cell company fund. He served
as Chairman of the Gibraltar Funds & Investments Association for 2 years.
James advised the Government of Gibraltar on its funds legislation and
was involved in the drafting of the Financial Services (Experienced Investor
Funds) Regulations 2005 and their subsequent amendments in 2012. He is
fluent in English, French, Spanish and Hebrew and he read literature, music
and law at John Hopkins and Bar-Ilan Universities. James is a member of
the Israel Bar Association, the Law Society of England & Wales and the
Gibraltar Bar. James also serves as chairman of the Gibraltar Philharmonic
Society.
Gibraltar 2012
9
Contributors
milestone GRP
Professor Michael Mainelli FCCA FCSI
Mr Peter Wild
Managing Director, G P Wild (International) Limited
Executive Chairman, Z/Yen Group
After a career as a research scientist and an accountancy firm partner, Michael
Mainelli co-founded Z/Yen, the City of London’s leading commercial think-tank,
to promote societal advance through better finance and technology. Z/Yen’s clients include numerous global financial institutions, technology firms and policy
makers. Michael created the Global Financial Centres Index and the Global Intellectual Property Index. In 2005 Michael initiated Long Finance, addressing
“when would we know our financial system is working?” Michael is Emeritus
Professor of Commerce, Fellow & Trustee at Gresham College, non-executive
director of AIM-listed Sirius Minerals, and a non-executive Director of the United Kingdom Accreditation Service overseeing UK laboratories and quality standards. In 2011 Nicholas Brealey published his third book, based on his Gresham
College lecture series from 2005 to 2009, “The Price of Fish: A New Approach to
Wicked Economics and Better Decisions”, co-authored with Ian Harris.
Peter Wild holds a BSc degree with honours in Maritime Studies from the
University of Wales. He is also a Fellow of the Chartered Institute of Marketing, a Member of the Chartered Institute of Logistics and Transport, a
Member of the Nautical Institute, a Supporting Member of the London Maritime Arbitrators Association, a Liveryman of the Worshipful Company of
Shipwrights and a Freeman of the City of London. Peter is a specialist in
cruising and has written many papers and reports on the industry. G P Wild
(International) Limited is a management, marketing and economic consultancy practice founded in 1985 to provide independent consultancy advice to
clients in both the national and international market place. G P Wild specialises in marketing, management, business planning and strategic business
development. It typically deals with marketing, management, economic, financial, infra-structural, operational and policy issues.
Ms Sigrid Ligné
Mr Mark Yeandle
Sigrid Ligné started her career working for the Legal Service of the Council of
the EU and the European Commission. She then moved to consultancy. Over
the last fifteen years she has been responsible for several Brussels-based
and pan-European advocacy and communications campaigns, advising a
wide range of corporations and trade associations. She joined the European
Gaming and Betting Association in March 2007 as Secretary General and
spokesperson. The European Gaming and Betting Association is the industry
body representing the leading online gaming and betting operators established, licensed and regulated within the EU. EGBA promotes the implementation of fair and competitive regulations for online gaming operators throughout
Europe in line with EU law. Such regulations should be based on genuine
public order and consumer protection concerns and be adapted to the crossborder nature of the online market.
Mark Yeandle’s early career was in sales and marketing when he held senior marketing positions at companies including Liberty and Mulberry. Before
joining Z/Yen, Mark was an interim manager specialising in company turnarounds. from which he developed strong project management skills. During
his MBA at Cass Business School he specialised in corporate finance and
marketing strategy and has a deep understanding of these areas. He joined
Z/Yen in 2002, initially to run SpecialiZm, Z/Yen’s expert resourcing division.
He has since been involved in several of Z/Yen’s core projects including the
development of a client intelligence business; advising a new business on
financing and human resourcing issues and assisting a training organisation
to develop and deliver training in finance management. Mark has managed
most of the data work and analytics for PropheZy applications.
Secretary General, European Gaming and Betting Association (EGBA)
Associate Director, Z/Yen Group
Mr Torben C. Skaanild
Secretary General, The Baltic and International Maritime Council (BIMCO)
Torben C. Skaanild has had a long and very international career within the
shipping industry, having held executive positions in Canada, The Philippines,
Thailand and Hong Kong before returning to Denmark to join BIMCO in 1981
as Deputy Secretary General. In 1984 he was appointed Secretary General
of BIMCO, and left in 1991 to join Dr. Helmut Sohmen and the World-Wide
Shipping Group (now BW Group), Hong Kong as a Director. His non-executive
positions include member of the IACS Board of Appeal and in 2011 he was
elected as Chairman of the Executive Board of the World Maritime University.
In 2008 Torben returned as Secretary General of BIMCO. BIMCO is the largest
of the international shipping associations representing ship-owners controlling around 65 percent of the world’s tonnage and with members in more than
120 countries.
10
Gibraltar 2012
11
Forewords
Gibraltar:
Open for Business
IamveryproudtointroduceyouasthenewlyelectedGSLP-LiberalChiefMinistertoGibraltar,itseconomyandeverythingithas
toofferforeigninvestorsataveryexcitingtimeintheRock'shistory.Gibraltarhascomealongwayfromthedaysofdependence
onUKdefencespending. Mymission,andthatofmyteam,isto
continuetopushGibraltar’seconomicexpansionforwardthrough
nationalgrowthandinternationalinvestment,whilemaintaininga
keeneyeandearontheneedsanddemandsofallGibraltarians.
Our new Government sets out to distinguish itself in a number
ofways.
Firstly, we will work to ensure economic progress directly translatesintotangiblebenefitsforallresidentsofGibraltar.Thisisthe
bedrock of Gibraltar's long-term development and must ensure
thatthepeopleofGibraltarhavequickandefficientaccesstothe
services they require to give them a better quality of life: health,
education,employmentandcarefortheelderlyallrankinghighly
amongthese.Internationalinvestmentandtheeconomicgrowthit
bringstoGibraltarsecuresthestate’scapabilitytoprovidethose
essential services in an inextricably connected virtuous circle,
whichstrengthensGibraltarasawhole,ensuringnotonlypresent
day development but also the social infrastructure necessary to
keepGibraltargrowingandimprovingforgenerationstocome.
Secondly,ourGovernmentwillcontinuouslyseektoengagethe
variousstakeholdersinGibraltartoensureprogressisundertakeninpartnership.Inthissense,Ihavecommittedmyadministrationtodynamic,collegiatedecision-makinginordertostreamline
and facilitate international investors’ entry into Gibraltar. Once
establishedinoureconomy,thesecompanies–aswellasthose
alreadyhere-canexpectquickreactiontimesinrespectofany
situationsorissuestheymightface,inordertoresolvematters
andprogressthebusinessofdoingbusiness.Thisisnotonlya
promiseIhavemadetoGibraltar’sbusinessworld,butalsotoits
citizensasindividualsinourCitizensCharter.
12
milestone GRP
Last,butcertainlynotleast,wewillproactivelyreachouttofurther integrate Gibraltar within the global economy and position
ourselvesasanaturalgatewayforinvestmentintoandoutofEurope. My attendance, and that of my colleagues, at the Centre
for Global Dialogue and Cooperation’s Annual General Meeting
thisMayinViennaisoneofthemanystepswearetakinginthis
direction,inordertokeepGibraltarpunchingaboveitsweightin
the international arena. We look forward to meeting and workingwithPresidentStoyanov,theCGDC’sfoundersandmembers
ofitshonoraryboard.Wealsovaluethisopportunitytopromote
Gibraltarandallthebenefitsitoffersasawell-regulatedinvestmentdestinationwithinEurope,tothelargenumberofpoliticians
andinternationalbusinesspeoplewhowillbeinattendance.Iam
confident that increased interaction with Gibraltar and its businessesofferseveryoneoftheseindividuals,theircountriesand
their companies considerable advantages and many opportunitiesforcooperationandinvestment.
ItisinthiscontextthatthisMilestoneGRPGlobalInvestor’sGuide
servestoshowcaseGibraltarasthecompliant,well-regulatedand
sophisticatedjurisdictionitis.Oureconomypostedenviablefigures through the recent years of financial turmoil and I am very
optimisticaboutthepotentialitholdsforthefuture,especiallyas
signsofastrengtheningglobalrecoverycontinuetoemerge.
IwelcomeeveryonetotakeacloserlookandfindoutwhatGibraltarreallyisallabout.Whenyouhavedoneso,ifthefitisright,to
maketheRockyournextstrategicmove.
At the very least, come and enjoy our stunning views and the
sunshine!
FabianPicardo
ChiefMinisterofGibraltar
The CGDC and Gibraltar:
Social Development Through Economic Growth
TheCenterforGlobalDialogueandCooperation-CGDCisarelativelyyoungorganizationthatwefoundedwithcolleagueswho
share the same conviction, namely, that ethical values in businessandpoliticsareessentialforsustainableandstableglobal
welfare. Through engagement work, and active participation in
internationalforaandevents,wehavebeenabletodrawtogether a large and impressive number of acting and former heads
ofstate,politicians,internationalbusinessleadersandmembers
of civil society from around the world, including President Bill
Clintonwhohasbecomeanardentsupporterofourvisionand
mission,toanalyzethekeyissuesattheintersectionofbusiness
andpoliticsthataffectglobalwelfaretoday.
We also actively strive to make a change for a better future
through various programmes, such as by enabling further educationforsixty-fivestudentsinwayofanMBAinPublicGovernance through a commitment in collaboration with the Clinton
GlobalInitiative.Wearefullyawarethatthechallengesinvolved
areimmenseandthattheresultsweseekwillrequireconcerted
efforts and dedication on behalf of our many partners and all
stakeholders.However,itisalsoourfirmbeliefthatachallenge
mustberisentoandcultures–betheysocietal,businessorpoliticalones–mustadapt.
I see many similarities between our organization and Gibraltar.
Gibraltar has a new, young government in the form of Chief
MinisterPicardoandhisteamofministers.Theirviewsarevery
stronglyalignedwithoursinthattheystrivetoensureGibraltar’s
social development, prosperity and sustainability. This is done
through the encouragement of well-regulated business across
a variety of established and thriving industries. These co-exist
withinarelativelysmallyetinternationalcommunitywhosepersonalbreadthandoperationalreachstretchfarbeyondtheRock.
Gibraltar has also risen up to challenges through international
cooperation, transparency and a culture change of its own. It
hasgonefrombeingseenasanoffshorefinancecentre,withthe
usualconnotationspopularlyaffixedtosuchareas,topositioning
itselfasanonshore,wellregulatedandinternationallycooperativefinancecentre.Goingbeyondthat,ithasalsoplayedtoits
strengthsandattractednewbusinesstoitsshores,suchasthe
OnlineGamingsector,toincreasetherobustnessanddiversificationofitseconomy.Gibraltar’sRockhaslongbeenahistorical
symbolofsolidityandstability–anditisstillgettingstronger.
IthereforestronglysupportthisMilestoneGRPGlobalInvestor’s
Guide on Gibraltar. It provides in-depth insight into Gibraltar’s
economy and highlights the opportunities Gibraltar offers foreigninvestorsacrossallofitsmainsectors.Iamalsodelighted
to host Chief Minister Picardo and members of his Government at this year’s CGDC Annual General Meeting in Vienna,
whereafocusontopicsrelatingtoEnergyandDemocracywill
bediscussedbyourpanelofleadingexpertsandinternational
delegates. As a vibrant society and thriving economy, with restrictednaturalresourcesandstrongdemocratictraditionsthat
haveseentherecentelectionofthefirstnewChiefMinisterin15
years, I warmly welcome Chief Minister Picardo’s participation
andinputduringtheevent.I,andtheentireCGDCcommunity,
alsolookforwardtoworkingwithhimandhiscabinetmembers
onissuesofimportanceinthefuture.
PetarStoyanov
FounderandPresident,CenterforGlobalDialogueand
Cooperation-CGDC
FormerPresidentofBulgaria(1997-2002)
Gibraltar 2012
13
Gibraltar
Government
Government
milestone GRP
Revenue
400
Expenditure
350
300
250
£ (million)
theirhomeandtomaketheirinvestmentsoverhereviable
too.Muchofwhatwedoinrelationtothemistoprovide
a legal framework where they want to do business; a tax
frameworkwhichtheythinkisadvantageouscomparedto
taxframeworkselsewhereand,mostimportantly,toprovide
thesortofresponsiveGovernmentthatmakesGibraltara
placewheretheyknowtheycandobusiness.
200
150
100
Milestone GRP - If there was one foreign investment
project which you would like to see realized during your
4-year tenure, what would it be?
50
0
2002
2003
2004
Government Revenue & Expenditure
2005
2006
2007
2008
GovernmentRevenue&Expenditure
2009
2010
2011
2012
Source: GOG/GSO
Chief Minister Picardo-Itisdifficulttoanswerthisquestion
Dawn of a New Era
A fresh vision for Gibraltar’s future
Interview with The Honourable Fabian Picardo, Chief Minister of Gibraltar
ChiefMinisterFabianPicardoholdsalawdegreefromOxfordUniversity,iscalledtothebarbothinGibraltarand
theBritishVirginIslands,hasarespectedlegaltrackrecordspanninghumanrights,litigationandcommerciallaw,
and has appeared before the United Nations and other international bodies. His latest achievement was being
elected as the head of Gibraltar’s Government in December, 2011. Milestone GRP sat down with Chief Minister
PicardotodiscusshisvisionforGibraltar’sdevelopmentandhisprioritiesforthenextfewyears.Amongtheseare
streamlining the Government’s decision-making process to facilitate foreign investors’ entry and establishment,
implementinganinvitinglegalandtaxationframework,andincreasingGibraltar’scompetitivenessasabasefor
internationalcorporationstodobusinessin,andwith,Europe.Allthiswithacommitmenttohisbeliefthatsocial
progressandeconomicgrowtharetwotightlyintertwinedandessentialstrandsinthefabricofGibraltariansociety.
Milestone GRP - What major transformations can be expected from your newly elected administration?
Chief Minister Fabian Picardo-Themostimportantchange
willhavetodowithamoredynamicdecision-makingadministration.Duringourcampaignandintherun-uptothe
elections, it became obvious to us that complaints often
camefrominternationaloperatorswantingtodobusinessin
Gibraltarandexperiencingalackofreactionfromthepreviousadministration.Lookingforward,therewillbeapositive
andreactiveadministrationthatwillinteractwithinternationalinvestorswhoneeddecisionsfromGovernmentonany
matterwhichaffectstheirpresenceinGibraltar;whetheritis
regardingtheimmigrationstatusoftheiremployees,thetax
status of the companies, those things will happen quickly
andinfact,wewillstrivetomakeGibraltartheplacewhere
youwillgetdecisionsthequickestinWesternEurope.We
haveveryclearlysetoutcriteriaandwearesmallenough
togetinformationinfrontofaMinister,oranotherdecisionmakerwhowillnotalwaysbeaMinister,veryquicklyandto
getaananswerveryshortlythereafter.Wehavecreateda
citizenscharterwhichentitlespeopletoresponsestocorrespondencewithin21daysofanacknowledgmentwhich
18
theywillreceive14daysaftersendingtheirletter.Hereyou
canseethatwearefixingverytighttimelimitsfortheadministrationtooperatein.Ibelievethatinternationalinvestors
requireandwillappreciatethatsortofspeedofreaction.
Milestone GRP - Your social agenda is very clear in the
GSLP Liberal manifesto; how will you reconcile this with
economic priorities which businesses and investors may
have?
Chief Minister Picardo -Totellyouthetruth,asasocialist
party,thereisonlyonepriority:thesocialissues.Ihavenot
beenelectedtodoanythingotherthantomakesurethat
the people of Gibraltar have the services they require, in
particularinrelationtohealth,education,employmentand
careoftheelderlytonameafew.Theseissuesarealways
goingtobeapriorityforus.Whatweareveryalivetoisthe
factthattheeconomicsthatmakethatpossibledependon
Gibraltar being a place where international operators can
dobusiness.Thereforeweseethosethingsasgoinghand
in hand, together. So although we will prioritize our spending on social projects, we will also pay attention to the
factorsthatallowinternationalinvestorstomakeGibraltar
atthisstagebecauseIbelieveitisimportantthatIfirsttalk
totherelevantplayersintheindustryhere.Idothinkthatwe
canrevolutionizethesocialinfrastructureofGibraltarfrom
theincomethatwecanderivefromadifferentapproachto
the gaming industry, with the existing operators here and
withveryfewchoiceoperatorsthatwemaywanttoattract
toGibraltarinthefuture.Gibraltarwillalwaysbeagaming
jurisdiction of quality, not of quantity; but if things go the
wayIexpectthemtogo,thenaskmein4yearstimewhetherIhaverealizedtheprojectIthinkwecanrealize.
Milestone GRP - So economics as a means to an end to
transform Gibraltar and its infrastructure, and to deliver
quality social services?
Chief Minister Picardo-Absolutely.Economicsasameans
ofdeliveringtothepeopleofGibraltartheservicesthatthey
need; international business in order to deliver for GibraltarianstheGibraltarthattheydeserveandafriendlyhome
forthosethatwanttodothesortsofbusinessthatarein
keepingwiththeGibraltarthatwewanttoseeflourishand
prosper.
Milestone GRP - As the Chief Minister, you obviously
have tools and institutions at your disposal to do so, such
as the Finance Centre for instance. How will you use these tools in the future?
Chief Minister Picardo -Wewillalwayslooktousetheleverswehavewiththekeyplayersinanygivenindustry,to
ensurethatthosewhoarehereareabletoprosperandthat
we attract people who might be interested in coming to
Gibraltar. We will not be using our tools to make the lives
ofthosedoingbusinessinGibraltarharderbutwewilluse
themtomakeiteasierforpeoplewhowanttostayinGibraltarandforthosewhowanttoattractnewbusiness.So
for example in terms of Financial services, whether it is a
licensingregimeandthefeesthatareassociatedwiththat,
oraregulatoryframework,wearealwaysgoingtoworkwith
theindustrytoensurethatwearenotmakingGibraltaran
expensive place to do business. And where regulation is
needed,anditisessentialforittobeprovided,thatregulation should be top-notch, not just in terms of the legal
frameworkbutalsointermsoftheabilityfortheregulator
todeliveritwiththeresourcesnecessarytoprovideworldclassregulation.
Milestone GRP - You have confirmed your attendance at
the CGDC Annual General Meeting in Vienna in May this
year. What is your approach towards international events
and how will you decide which ones to attend?
Chief Minister Picardo-Tobeveryhonest,itisaboutvalue
for money. It must be something that is going to produce
sufficient value for the taxpayer in Gibraltar, that it makes
sensetoincurtheexpenseofmytravelandjustifymyabsencefromtheofficewhileIcouldbedoingsomethingelse.
ThereforeIhaveidentifiedthatthisparticularconferenceis
onethatIthinkwillproducevalueformoneyfortheGibraltartaxpayer,becauseIcanseethatitisthesortofplace
whereGibraltarneedstobetocontinuetopunchaboveits
weightintheinternationalcommunity.
Milestone GRP - In the current global economic context,
are there specific opportunities for Gibraltar, for instance
with the BRICS countries and other rising global players?
Chief Minister Picardo -IthinktherearebecauseGibraltar
isfortunatetobewithintheEuropeanUniontradingblock,
outsidetheCommonCustomstariffandoutsidetheShengen immigration rule but yet within the principle parts of
theEUfreedomsofmovementwhicharefundamentaltodo
businessinthispartoftheworld.WearealsoalowtaxjurisdictionsowhenaBRICScountrywantstosetafoothold
inEurope,whygoanywhereotherthanGibraltar?Interms
of the agility of the legal and administrative processes, in
termsofthefiscalobligationsGibraltarimposescompared
to those of other countries and in terms of the means of
communicationavailablefromGibraltartotheworld,whether electronic communication or physical communication
to London for instance, I think Gibraltar is actually one of
thechoicejurisdictionsfortheworldtobelookingattodo
businessinEurope.Andthesunshinesonmostdays.
Milestone GRP - Please paint us a picture of Gibraltar the
way you imagine it after your tenure.
Chief Minister Picardo - Well, first of all, I don’t take for
granted the fact that we will be re-elected because the
peoplealwayshavetherighttodecide.So,after4yearsof
GSLPLiberalGovernment,IthinkGibraltarwillbeamodern
andvibrantcity.Itwillbemoreopentotheworldanditwill
bemoreopentoitself;inotherwords,ourGovernmentwill
have given back to people the information and the other
aspectsofGovernmentthathavebeenkeptclosedtothem
inamoreconventionalway,forsolong.SoIwouldseea
modern, positive and open Gibraltar doing business with
theworld.
Gibraltar 2012
19
Government
Government Revenue and Expenditure 2010-2012
REVENUE
FORECAST OUTTURN
2010/11
£ (million)
ESTIMATE
2011/12
£ (million)
Income Tax
151.500
152.500
Duties, Taxes and Other Receipts
97.717
98.731
Gambling Fees, Taxes and Lottery
11.820
12.050
Rates and Rents
17.500
24.001
Departmental Fees and Receipts
93.548
96.830
Government Earnings
9.899
9.584
TOTAL RECURRENT REVENUE
381.984
393.696
Consolidated Fund Exceptional
5.755
–
TOTAL REVENUE
387.739
393.696
ConsolidatedFundRevenueEstimates,2010-2012
EXPENDITURE
FORECAST OUTTURN
2010/11
£ (million)
ESTIMATE
2011/12
£ (million)
Education & Training
151.500
152.500
Culture, Heritage, Sport and Leisure
97.717
98.731
Housing
11.820
12.050
Environment & Tourism
17.500
24.001
Family, Youth and Community Affairs
93.548
96.830
Enterprise, Development, Technologyand Transport
9.899
9.584
Health & Civil Protection
381.984
393.696
Administration
5.755
–
Finance
387.739
393.696
Employment, Labour
and Industrial Relations
3.521
1.073
Justice
14.597
14.928
Immigration and Civil Status
3.074
3.085
Parliament
1.309
1.511
Gibraltar Audit Office
0.654
0.777
Supplementary Provision
–
7.000
Consolidated Fund Charges
54.802
55.586
TOTAL RECURRENT EXPENDITURE
353.714
372.185
Consolidated Fund Exceptional
3.119
–
TOTAL EXPENDITURE
356.833
372.185
ConsolidatedFundExpenditureEstimates,2010-2012
20
Source:GOG/GSO
Source:GOG/GSO
Europa Point
Government
milestone GRP
25,000
150
20,000
125
Male
Female
100
15,000
75
10,000
50
5,000
0
2000
25
0
2001
2002
2003
2004
Number of Employee Jobs
NumberofEmployeeJobs
2005
2006
2007
2008
2009
Source:StatisticsOffice
Source:
2010
GSO
funding,asisthecasewithanyotherbankinGibraltar.We
would not be operating a bank without applying the same
standardsthatwerequireofanyotherbank.Butthereareno
otherrequirements.
Sustainable Growth and Investment in People
Business success for social welfare
Milestone GRP - How will the new administration reconcile priorities such as the need to develop the economy
to attract new investors, and the desire to address social
issues such as health, education, or the need for better
infrastructure?
Interview with The Honourable Joe Bossano, Minister for Enterprise, Training and Employment
JosephJohnBossano is the former leader of the Gibraltar Socialist Labour Party. He was Chief Minister of Gibraltar
fromMarch1988toMay1996.HeledtheOppositionintheGibraltarParliamentfromitsfoundingin1978until2011
whenhestooddownasleaderoftheGSLP,replacedbyFabianPicardo.MrBossanohasadegreeinEconomicsfrom
theLondonSchoolofEconomics,aswellasadegreeinItalianfromtheUniversityofBirmingham.Inthe1960’s,he
becamepartoftheUKtradeunionmovementasaseamanandwasamemberoftheLabourPartytheretoo.Following
thevictoryinthe2011generalelections,hewasgivenMinisterialresponsibilityforEnterprise,TrainingandEmployment.
HemetwithMilestoneGRPtodiscussthenewgovernment’sapproachtobusinessandsocialissues,andhowthose
worldsarecloselyinterconnected.
Milestone GRP - Gibraltar’s economy has fared very well
through the recent years of financial difficulty. What
growth figures do you expect going forward?
Minister Joe Bossano - When we were previously in
Governmentweachieved133%growthin8years.Theeconomygrewfrom156millionto356millionpounds,fromthe
years 1987/1988 to 1996/1997. In our Government’s recent
Manifestoweputaconservativetargetof5%growthinGDP.
WeexpecttheGDPthisyeartobearound1.1or1.2billion.
Thelastpublishedfigurewasjustbelowonebillion.Weaim
atreaching1.7to1.8billionin2014/2015.Thisisindependentofwhatishappeningintheglobaleconomy.Ifyoucan
provideasafehavenandareasonablereturnforinvestors,
thenitbecomesaseller’smarket,withmorepeoplelooking
forgrowth,thanpeopleabletoofferit.
22
Bank with all sorts of restrictions, such as a 2,000 pounds
depositlimit.Therewasaneedtomodernisethevehicle,the
products and the way the bank operated. At that time the
bankhad2.5millionpoundsindepositsanditwasmaking
67,000 pounds of profit a year. As a result of those changesandmodernisations,by1996,ithadaround280million
pounds in deposits, and was making 5.5 million pounds in
profit.Thisyear,thedepositbaseisaround300millionand
thetargetistodoublethisfigureevery12months.
Milestone GRP - What areas have you identified as ripe for
providing this growth?
The bank now has a new investment vehicle. It its a tenyeardebentureissuedbythebank.Thedebenturepays2%
interestrateinthefirstyear,andgoesupby1%eachyear
forthefollowing10years.Soitisaten-yearbondissuedby
theGibraltarSavingsBank,andallsavingsandinvestments
areguaranteedbytheGovernmentwithoutanylimit.Soyou
haveavehiclewhereyouhavethepotentialofanaverageof
6.5%interestperannumifyoukeepthemoneyinitforthe
wholelifeofthedebenture.
Minister Bossano-OneoftheareasIwouldliketoexpand,
and I will be directly involved in expanding, is the Gibraltar
SavingsBank.TheSavingsBankisaStateownedBankthat
wassetupin1882,andithasbeentradingsincethen.When
we came in 1988, it had been used as a Colonial Savings
Thebankisabletooperateinothercurrencies,butitisnot
something we are planning to do. The target is mainly the
savingsmarketinGibraltar,butthereisnoresidentialrequirement.Likeanyotherentity,therequirementisthattheinvestormustgiveproofofthelegitimacyofthesourceofthe
Minister Bossano -Theyarenotincompatiblepriorities.The
moreweimprovethequalityandstandardofliving,theeasieritwillbetoattractinvestments,andviceversa,themore
investments we attract, the more resources we will have to
improve our quality of life. They are mutually beneficial objectives that feed on each other. You can create a virtuous
circle.Successbringssuccess.AnexampleofthisisprovidedbytheGamingindustryinGibraltar.WhenthefirstGaming company was set up in Gibraltar, it was offered very
generoustaxterms,alongwithaperiodofseveralyearsof
exclusivity as they were the pioneers and predicted that it
would be a successful sector. The Gaming sector now employsover2000people,almost25%oftheprivatesector.As
Isaid,successbringssuccess.
Milestone GRP - What challenges does Gibraltar’s size
pose in terms of staffing and employment?
2003
2004
2005
2006
2007
2008
2009
2010
Source: Department
of Education
andEducation
Training
Source:
Dep. of
& Training
StudentEnrolmentsatUKuniversities
Student Enrolments at UK Universities
Milestone GRP - What can the business world learn from Gibraltar?
Minister Bossano -Firstofall,thatsmallisbeautiful.The
lesson to be learned is that everything that is big is made
up of many small parts. In Gibraltar there is no big business,thereisaverytinypartofmanydifferentbusinesses.
They are here, though, because Gibraltar is more efficient
andprofitablethanelsewhere.Theeconomyhastobeanalysedintermsofbeingmadeupoflotsoflittleeconomies.
So if I was responsible for a bigger entity than the size of
Gibraltar, I would be using the same philosophy but on a
differentscale.
Minister Bossano - One thing that must be understood is
thatatownofoursizeinSpainorintheUK,wouldformjust
apartofalargerentity,andthistownitselfwouldnoteven
havethepowerorresponsibilitytosolveproblemslikethat
ofemployment.Theonlythingwehavetobecarefulabout
isthatthelevelofskillweproducetosatisfythedemandof
theGamingcompaniesissonarrowthattheybecomenontransferableskills.Thegamingindustry,oranyother,should
neverbecomesolargethatifitgoesweallgodownwithit.
With regards to education, Gibraltar has got a very generous
HigherEducationSystem,whichwasintroducedbytheSocialist
Governmentin1988.Wearenowmakingitevenmoregenerous.
Since1988anyschool-leaverwiththenecessaryqualifications
toobtainanoffertoaplaceinauniversityintheUKorEurope,
willhavehistravelexpenses,tuitionfeesandmaintenancepaid
bytheStateforthewholeundergraduatecourse.Whatisnew
thisyearisthatweareextendingittopost-graduatecourses.
Supportingeducationiskeysinceourgeographicallocationand
theintellectofourpeople,arethetwoonlyresourceswehave.
Local Pride
Gibraltar 2012
23
Introduction
milestone GRP
33% Tourism
1050
950
17% Online gaming
Notes: (i) Provisional Estimate
(ii) Forecast
£(million)
850
750
17% Shipping and
Port Services
650
550
450
350
250
33% Financial Services
2001
2002
GDP
2003
2004
2005
2006
2007
2008
2009
2010
2011
Source: GSO
Economybysector
Source:FSC
Male
Shipbuilding
Other Manufacture
BAY OF
GIBRALTAR
204
Electricity and Water Supply
299
Construction
2722
Wholesale and Retail Trade
2989
Hotels and Restaurants
1121
Transport and Communication
1228
Financial Intermediation
1848
Real Estate and Business Activities
2821
Public Administration and Defence
2031
Education
0
Female
230
896
Health and Social Work
1602
Other Services
2984
500
1000
1500
2000
2500
3000
note: Industry Classification follows the UK’s Standard Industrial Classification
JobsbyIndustry
Source: GSO
80+
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
1,2
1,0
0,8
0,6
0,4
0,2
0,0
0,2
0,4
0,6
0,8
1,0
1,2
Population (in thousands)
PopulationPyramid,2012
Source: U.S. Census Bureau,
International DataBase
TAXATION
CORPORATION TAX
KEY TAX POINTERS
Aflat10%CorporateTaxrate cameintoeffecton1January2011forallcompanies.(Energyandutilityprovidersaresubjectto20%tax.)
•NoInheritanceTaxorEstateDuty
CompaniesaretaxedonprofitsaccruedinorderivedfromGibraltar
(i.e.territorialbasisoftaxation).
Gaming Tax:
1%ofrelevantincome(gamingyieldforremotecasinosandbetsplacedfor
on-linebookmakers),cappedat£425,000withaminimumpayableof£85,000
Land Area
Total: •NoCapitalGainsTax
•NoVAT
•MinimalStampDutyrates
•NotaxonBankinterest
•Notaxonlistedinvestmentincome
INCOME TAX
6.5km²
Individuals Enjoying Special Concession
Choice of Personal Tax systems
TaxpayerscanopttobetaxedunderanAllowanceBasedSystem
orunderaGrossIncomeBasedSystem.
Climate
Mediterranean-
mildwintersandwarmsummers
(A)ALLOWANCEBASEDSYSTEM
Taxable Income Bands
Population
29,034(2012est.)
Birth Rate
14.22births/1,000population
(2012est.)
Rate %
Tax on band
£ 0-£4,000
17 (reduced rate)
£ 680
£ 4,001-£16,000
30 (standard rate)
£ 3,600
Over £16,000
40
A) HighNetWorthIndividuals("Category2Individual")
Onlythefirst£80,000(2010/11-£80,000)ofassessableincomeistaxable
subjecttoaminimumtaxpayableof£22,000(2010/11-£22,000)
andamaximumofapproximately£30,000(2010/11-£30,000).
Conditionsonresidentialaccommodationandpreviousresidence/activitiesin
Gibraltarapply.ACategory2individualcannot,ingeneral,engageinatrade,
businessoremploymentinGibraltar.
*Tax Allowances and Reliefs apply
(B)GROSSINCOMEBASEDSYSTEM
Population growth rate
0.265%(2012est.)
Source: CIA World Factbook
(a) The income bands and tax rates for income up to £25,000 are
First £10,000
£10,001 - £17,000
6%
20%
Balance
29%
(b) The income bands and tax rates for income above £25,000 are
Atlantic
Ocean
•NoWealthorGiftTaxes
EUROPE
ASIA
Gibraltar
Mediterranean Sea
First £17,000
16%
£17,001 - £25,000
19%
£25.001 - £40,000
25%
£40,001 - £105,000
28%
£105,001 - £500,000
25%
£500,001 - £700,000
18%
£700,001 - £1m
10%
Balance at
5%
B)HighExecutivePossessingSpecialistSkills(HEPSS)
ThetaxpayablebyaHEPSSislimitedtothefirst£120,000ofearnedincome.
Therelevantskillsmustbedeemedtobeofexceptionaleconomicvalueto
Gibraltar.
HEPSSaretaxedundertheGrossIncomeBasedSystem.
Conditionsonresidentialaccommodationandpreviousnon-residencyapply.
All taxpayers will pay tax at an effective rate of less than 25%
AFRICA
Map by Eric Gaba
24
Gibraltar 2012
25
Financial Services
Financial Services
milestone GRP
Wewillcontinuetoworkwithothercountriestodevelopagreementsandcooperation.
Wehaveallnecessarymeasuresinplaceinrelationtoanti-moneylaunderingpracticesandlegislation.TheFinancialServices
Commissionplaysacrucialroleinregulationandlicensing,independentlyfromtheGovernment.IthinkGibraltar,asaFinancial Services centre, can be very proud of the framework that
notonlyallowscompaniestodobusinesscomfortablybutthat
alsoprotectstheircustomersandthepeoplewhodobusiness
withthem.
A World-Class Reputation and Best Practices
A small jurisdiction punching above its weight
Interview with The Honourable Gilbert Licudi QC
Minister for Education, Financial Services, Gaming, Telecommunications and Justice
GilbertLicudiQCisabarristerbyprofessionhavingbeingcalledtotheBarinEngland&WalesandinGibraltarin1992.He
haspractisedthroughouthiscareerwithHassansinGibraltar.HewasmadeapartnerofHassansInternationalLawFirmin
1998andwasappointedQueen’sCounselin2012.MrLicudihasbeenamemberoftheGibraltarSocialistLabourPartysince
1984.HefirststoodforelectionstotheGibraltarParliamentin2007winningaseatintheOppositionbenches.Between2007
and2011hewasShadowMinisterforEmployment,TransportandSportaswellasforEducation.Followingthevictoryinthe
2011generalelections,hewasgivenMinisterialresponsibilityforEducation,FinancialServices,Gaming,TelecommunicationsandJustice.HesatdownwithMilestoneGRPtodiscusshisviewsontherelationshipbetweenthepublicandprivate
sectors,newopportunitiesinGibraltar'sFundssectorandtheimportanceofeducation.
Milestone GRP - How was your portfolio brought together?
Minister Gilbert Licudi -Itislargelybasedonmyprofessional
backgroundandonmyroleasShadowMinisterforEducation
whenwewereinOpposition.Inmy19yearsofpracticeasa
lawyer,IgatheredsignificantknowledgeoftheJusticesystem;
IspentmuchtimedealingwiththeFinancialServicessector,
specificallyinrelationtotrustissuesandcompanieslicensed
bytheFinancialServicesCommission;Ialsodealtwithsome
ofthegamingoperators.ThisisaMinistrywithadiverseportfolioincluding5differentareasofresponsibility.Thenextfour
years will certainly bring a number of challenges. I am very
excited about the work we will be doing and the programme
wehaveputtogetherforGibraltaranditspeople.
TheGovernmentwillproduceandsteerpolicyandwewilllet
therelevantofficialsdotheirwork.SoalthoughIhaveawide
rangeofdepartmentsundermyportfolio,Ihaveanoversight
fromapolicypointofviewandanumberofveryableprofessionals to implement the policies that are made at a political
level.
Milestone GRP - What does the private sector bring to its side
of the table?
28
Gibraltar’s reputation is key to our continued development.
Regulationforthepurposeofprotectionofcustomerswhodo
businesswithentitiesinGibraltarisfundamental.WehavearobustregulatoryregimeinplaceandIthinkthisiswhattheIMF
meansaboutthebestpracticesinGibraltar;thisisamodelthat
isvisibletoall.WebelievethatGibraltarcanbeseenasabeaconofgoodpractice,particularlyintheFinancialServicesfield.
Milestone GRP - You have identified the Funds industry as
one where Gibraltar can attract more business. Through
what means will you encourage this development?
Minister Licudi - We have identified substantial potential for
growthintheFundsmarketinGibraltar.Wewanttoworkwith
professionalsintheindustrytomakeGibraltaroneoftheforemostjurisdictionsinEuropefortheestablishmentofFunds.
TheExperiencedInvestorFundsRegulationswhichwerein
place when we took office required that administrators of
Gibraltar Funds had to be based in Gibraltar. We felt that
this was an inhibiting factor which limited the number of
fundadministratorsonecouldchoosefrom,inparticularfor
very large funds requiring substantial organizations to administerthem.
Minister Licudi - We have a wealth of talent in Gibraltar. We
seethedevelopmentofGibraltarasapartnershipbetweenthe
Governmentandtheprivatesector.Thepublicsectorprovides
theinfrastructureandthelegislativeframeworkneededwhilst
theprivatesectordrivestheeconomybyprovidingtheexpertise and the necessary investment for Gibraltar to thrive. We
haveencouragedandwillcontinuetoencourageinitiativesand
ideas which the private sector can bring to the Government.
Whetheritisacaseofamendinglegislationorbringinginnew
provisions, we want to hear what it is that the private sector
believetheyneed.Clearly,therewillbepolicyinitiativeswhich
willbedrivenbyGovernmentbutitisvitalthatwelistentothe
professionalsintheprivatesector.
Followingdiscussionswithprofessionalsintheindustry,we
agreed that it was necessary to relax the rules so that largefundscouldusereputableandsubstantialadministrators
based in jurisdictions of equivalent standing to Gibraltar.
The new regulations will also allow Funds to re-domicile to
Gibraltar yet continue to use their existing reputable administrator. This represents a significant advantage for Funds
moving to the EU, particularly with the advent of the AlternativeInvestmentFundsManagersDirectivewhichisdueto
be implemented by July 2013. The introduction of the new
regulationsisanexampleoftheoperationofthepartnership
between the public and private sectors which we want to
promoteandencourage.
Milestone GRP - The International Monetary Fund (IMF) has
recently stated that Gibraltar is “at the forefront of best
practices”. What does this mean in the Financial Services
sector, for instance?
Milestone GRP - What changes are planned for the Pension
Schemes sub-sector?
Minister Licudi -Gibraltarisalowtaxjurisdictionfullycompliantwithallinternationalstandardsoftransparencyandcooperation.WhenwecameintoofficeinDecember2011,Gibraltar
hadsigned18TaxInformationExchangeAgreements,thefirst
one with the United States in 2009. I have since signed two
moreTIEAswithMaltaandSouthAfricabringingthetotalto20.
Milestone GRP - Do you identify a particular challenge with
promoting the development of the Online Gaming sector
alongside the Financial Services industry, for instance in
terms of reputational risk?
Minister Licudi -Therearealwaysreputationalchallenges.That
iswhyweneedtocontinuetobevigilantandadheretoand,if
necessary,improveonourregulatorystandardswhetherinthe
OnlineGamingIndustryoranyothersectorofGibraltar’seconomy.Wemustalwayskeepaneyeonreputationalriskandthe
issues that could have an impact on our reputation. Over the
years,GibraltarhasbuiltagoodreputationintheFinancialServicessectorandintheOnlineGamingsector.Thefactthatwe
haveattractedmajoroperatorsandwehavebecomealeading
jurisdictionintheworldsuggeststhatthereisaregimeinplace
whichpeoplecanfeelcomfortablewith.
ReputationalriskinOnlineGamingcanbemanagedbycontinuingaselectiveandcautiousapproachtolicensingwithapproval
giventoonlyhighqualityoperators.Wehavebuiltanexcellent
reputationasoneoftheworld’sforemostjurisdictionsinOnline
Gaming.Gibraltarisabrandnamewhichisrecognisedthroughouttheworldandweexpecttokeepattractingleadingoperatorswhowanttobenefitfromthenumerousadvantageswhich
Gibraltarhastooffer.
Milestone GRP - What do you forecast for 2012 and 2013 in
terms of Gibraltar’s GDP and other key indicators?
Minister Licudi -Therehasbeenafinancialcrisisthathashit
manycountries,butGibraltarhasbeenabletocopeverywell
andmaintainpositiveeconomicgrowthasaresultofGibraltar's
sizeandourabilitytoadapt.Wehavenodoubtthattheresilience of the Gibraltar economy and the new measures we are
implementingtoattractnewbusinessforGibraltarwillcontinue
to create economic growth and generate the kind of revenue
thatGibraltarneedsinordertomeetitssocialprogrammesand
objectives, in particular in education, housing, social services
andemployment.
Milestone GRP - Is inflation a concern in Gibraltar?
Minister Licudi -Thereisalwaystheneedtokeepaneyeon
inflationbutwedonotseethisbeingaproblemforthefuture.
Milestone GRP - What approach are you implementing for Gibraltar in terms of Education?
Minister Licudi -Thereareanumberofinitiativesthatweare
taking with regards to Education. We have always recognized
4,0
3,5
3,0
Minister Licudi -WebelievethatwecanattracttoGibraltara
numberofQROPS(QualifyingRecognizedOverseasPension
Schemes). We are looking at amendments to legislation in
ordertobeabletoattractpensionschemesthatareestablishedoutsideGibraltar.Thisshouldgeneratenewbusiness
for Gibraltar. We believe that we can create a competitive
frameworkwhichwillmakeGibraltaranattractivejurisdiction
forQROPStransfers.
%
2,5
2,0
1,5
1,0
0,5
2001
Inflation
2002
Inflation 2003
2004
2005
2006
2007
2008
2009
2010
2011
Source: GSO
Source:StatisticsOffice
Gibraltar 2012
29
Financial Services
that Gibraltar enjoys a very high standard of Education but it
couldbefurtherimproved.Thereisaneedtoengagemoreprofessionalswithinthe Education system and we are embarking
onaprogrammewherethenumberofteacherswillbeincreased
by14%bythenextacademicyear.Thiswillprovidenewskills
forpupilstobenefitfrom.Itwillalsoprovideemploymentfora
significantnumberofqualifiedteachers.
We are also embarking on a wider educational programme
throughtheestablishmentofdegree-basedcoursesthatwillbe
offered in Gibraltar both for local students and with a view to
attracting international students. We are working towards the
establishmentofaUniversityofGibraltar.Wearealreadyindiscussionswithinternationallyrecognisedinstitutionswithwhich
weexpecttobeabletodevelopapartnershipforourUniversity
project.
Wealsobelievethatitisfundamentaltoencourageourstudents
to pursue further education beyond the curriculum offered by
ourschools.WealreadyofferGovernmentscholarshipswhich
paytuitionfeesandprovidemaintenancegrantsforallstudents
whoenrolonanundergraduatedegreeprogramme.Wewillbe
extending the scholarships this year on a mandatory basis to
all students who wish to pursue postgraduate studies as well
asthosewhowanttostayinGibraltarbutundertakeacourse
milestone GRP
throughdistancelearning.TheGovernmentattachesmuchimportancetoinvestinginthefutureofouryoungsters.
Milestone GRP - You have confirmed your attendance at the
Centre for Global Dialogue and Cooperation’s (CGDC) AGM
in May 2012. What would be your message to the audience of
the CGDC meeting in Vienna this year, which includes Heads
of State, leading international business people and opinionshapers in a variety of fields?
Minister Licudi - Our message is simple; Gibraltar is a small
jurisdiction but one which is an important player in the world
market. It is a jurisdiction that punches much higher than its
weightintheFinancialServicesandOnlineGamingsectorsand
wearerecognizedassuch.
WewillbeexpandingGibraltar’sbusinessbaseandwilldevelopnewproductswhichwillproducegrowthforthosecurrently
operatinginGibraltarandwillalsoattractnewoperators.
Gibraltar benefits from being part of the EU with access to a
marketofover500millionpeople.Itslocation,accesstotheEU
market,statutoryandregulatoryregime,communicationsinfrastructureandprofessionalresourcesavailablemakeGibraltara
veryattractivejurisdictionfromwhichtodobusiness.
Efficiency and Effective Regulation
Maintaining Gibraltar’s reputation as a stable financial centre
Interview with Mr Marcus Killick, Chief Executive Officer of Gibraltar’s Financial Services Commission
and Mr David Parody, Deputy Chief Executive Officer of Gibraltar’s Financial Services Commission
PriortohiscurrentappointmentasthefirstCEOofGibraltar’sFinancialServicesCommission,MarcusKillickhasheldpositionssuchasDirectorintheInternationalRegulatoryServicesTeamofKPMGUK,theHeadofBanking,TrustsandInvestment
ServicesattheCaymanIslandsMonetaryAuthority,andtheDeputyChiefExecutiveoftheIsleofManFinancialSupervision
Commission.HeistrainedasanEnglishbarristerandisalsocalledtotheBaroftheStateofNewYork.FSCDeputyChief
ExecutiveOfficerDavidParodyhasover17yearsexperienceasaregulatorandhaspreviouslyservedastheCommission’s
HeadofBankingSupervision.HisexpertiseinITwasinstrumentalindesigningtheFSC’srisk-basedmethodologyusedto
supervisealltypesoffinancialservicesprovidersinGibraltar.MilestoneGRPmetwiththepairtodiscussGibraltar’sresilience
throughthefinancialturmoilaffectingEurope,theFSC’sroleinmaintainingGibraltar’sreputationandstrongpositionasafinancecenter,andareasofopportunityfornewproductsandinternationalsynergieswithGibraltar’sfinancialservicesindustry.
Milestone GRP - In light of the current events unfolding in
the Eurozone, please tell us about Gibraltar’s unique position
within the EU and the impact this has had on the development of the financial sector?
Mr Marcus Killick -Gibraltarhasauniquepositionwithinthe
EuropeanUnion,andindeedithassufferedfarlessthanmany
otherjurisdictionswithintheEU.Infact,wehavecontinuedto
growasajurisdiction,theFinanceCentrehascontinuedtodevelopandnewbusinesseshavebeencomingdownhere.The
absence of social problems, unemployment and other issues
thatexistinmanyotherEUcountrieshasprovedattractive.We
have been mindful of the problems being suffered by Greece,
Spain,PortugalandIreland.AstheEuropeanUnionisoneeconomiccommunity,whataffectsonejurisdiction,inevitablyhas
animpactonotherstoagreaterorlesserextent.Nonetheless,
because of our position we have a broadly spread economy,
covering not only financial services, but also online gaming,
tourismandshipping.Wehavecertainelementsthatarefairly
robustagainsteconomicdownturns.
Looking at our area, the Financial Services environment, we
have only recently developed a Funds industry. There was no
industryofanyrealsubstanceuntil2007whennewlegislation
30
andregulationwasbroughtintoencourageexperiencedinvestorfunds.Sincethattimewehaveseenagrowthinthenumber
ofadministratorsandfunds.That,inturn,isrepresentingagood
basisfromwhichwecanbuildontheintroductionoftheAlternativeInvestmentFundManagersDirective.AlsootherEuropean
directivesmakeitmoreattractivebeingwithintheEUthanbeing
externalfromitbuttryingtosellservicesinsidetheEU.Wehave
alreadyseeninterestfromfundsre-domicilingfromplaceslike
theCaymanIslandstoGibraltar.
Wealsohavedevelopedsectorssuchasinsuranceforinstance.
Theattractionforbusinessescominghereisnotonlyduetothe
lowertaxregimebutalsobecauseofthepooloftalentavailable.
Wedofeelthatourstrengthisamixtureofabenignclimateboth
intermsofeconomicenvironmentandweatheritself.Gibraltar
has always been seen as an entrepreneurial jurisdiction wherepeopleareinterestedindoingbusiness,withamuchlower
level of bureaucracy than in other EU countries. At the same
timeboththisGovernmentandthepreviousonehavebeenvery
firminprotectingGibraltar’sreputation.Thisisajurisdictionof
30,000people.Wecannotphysicallytakeonlargevolumesof
employment in financial services businesses. We always find
thattherearebusinessesthatmaywishtocomeherebutthey
arenotattractivetousbecausewearenotpreparedtoputour
Gibraltar 2012
31
Financial Services
milestone GRP
reputation at risk. Occasionally problems occur obviously. But
theGovernment,theRegulatorandtheIndustryarekeentodefendwhathastakenyearsforthisjurisdictiontoattain;thatis,
goodqualityfinancialservicesdelivery.
Milestone GRP - Is there an example to be taken from
Gibraltar’s performance through the global financial crisis?
Mr Killick -Insearchingforsolutionstothecurrentcrisesone
shouldnotoverlookthesimplesolutions.Itisadangerthatall
onedoesistoplaceanewregulationovertheexistingone.This
strategymaynotprovetobesuccessful.Ibelievethatthereare
somesimplefundamentalsolutionsthatifacceptedandimplementedwouldnotonlyassistwiththecurrentissuesbutalsogo
alongwaytopreventthefutureones.
Theirsimplicitymakesthemunattractivetosome,butactually
theirsimplicityofconceptdoesnotmeanitissimpletoimplement.Alotwentwrongattheboardlevelofmanyorganizations
becausetheydidnotunderstandwhattheywererunning,and
the risks of running it in the way they were doing it. A board
leadsanorganizationgivingstrategicdirections.Ifitcannotunderstandthestrategiesofitsownorganization,itcannotleadit.
Iftheboardsdidtheirjobproperly,manyissuescouldberesolved.Iftheboardledthecultureandbehaviourtherewouldnot
bebadsellingbehaviourlowerdown.
Iftheboardpreachesandpractisesgoodethicalbehaviourthat
translatesintotheorganization’sactions.Ifitisonlyinterested
intheprofitinanindividualdivision,thatdivisionwilltrytomaximizeitsprofitswhetherintheshorttermornot.Inturn,itwill
takerisksthattheboardisnotawareof.Therefore,anethically
well-runboardwillsolvemanyofthecurrentproblemsandpreventfutureones.
Milestone GRP - In terms of the sheer size involved and resources required, is there a challenge for Gibraltar to adapt
350
to the volume of international regulation that is being implemented at the EU level?
Milestone GRP - How autonomous is the Financial Services
Commission?
Mr Killick -EveryjurisdictionintheEUischallengedwiththe
sheer volume of directives and regulations emanating from
Brussels.Therearealsointernationalinitiativescomingfromthe
International Organization of Securities Commissions and the
International Association of Insurance Supervisors as well for
instance;thesearehittingnotonlytheindustrybutalsoregulatorsthemselves.
Mr Killick -TheCommissionisawhollyindependentorganization.Wearenotonlyindependentofthegovernment;weareindependentoftheIndustryitself.Wearenotconnectedwithany
other regulatory body; we are not subservient. We are a competentauthorityintheEUinourownright.Beingindependent
doesnotmeanwedonothavestakeholders.Ourstakeholders
includetheGovernment,theindustry,theregulatorycommunity
worldwide,andwearealsoaccountable.
AttheFSC,weareanumberinthemid40’sintermsofmanpower.Thisimpliesthatourteamhastobemorebroadlyspreadin
termsoftheircompetencies.Wecannothaveanindividualora
teamexclusivelydedicatedtoapplyingthecapitalrequirements
directivestotheinsuranceside,forexample.Nevertheless,we
dohaveasystembywhichwehavethecapabilitytomakesure
thatthenecessarydirectivesandregulationsareimplemented
appropriatelyandinthecorrecttimescale.Weobviouslywork
verycloselywiththenewgovernmentandtheFinanceCentre
itself.Wehaveaprocesstomakesuredirectivesaretransposed
in time. We have also developed Centres of Excellence within
thisorganization,whereanindividualdevelopsaparticularspecialism.
Weworkandcollaboratewithourfellowregulators,suchastheFinancialServicesAuthorityintheUK,tomakesurethatourresourcesareplacedwheretheyaremosteffective.Itisnotourroleto
reinventthewheel,thereforesomeworkcanbedonebytheFinancialServicesAuthorityorbyothersandthenwecanadaptthings
tosuittheparticularcontextofGibraltar.Wedonothavethesame
levelofinputintheformationofdirectives;wesimplydonothave
theresourceswithregardstothat.However,wheretherearethings
thatsignificantlyimpactGibraltar,wedomakeourrepresentation.
EverycountrywithintheEUstruggleswithwhatBrusselsisproducing.Oursizeasaregulatormaybeslightlydifferentifcompared
withotherjurisdictions,whichjustmeanswehavetofightsmarter.
Auditors
Banks
Insurance Companies
Insurance
Inter-mediaries
Investment
Firms
Insurance
Managers
Money Services
Business
Company Managers /
Professional Trustees
Occupational
Retirement Schemes
Indeedwehaveastatutethatrequiresthatweareindependently
reviewedeveryfewyears;wealso,asmembersofanumberof
internationalorganizations,aresubjecttoreviewsbythem.We
arealsosubjecttoreviewsbytheInternationalMonetaryFund
(IMF)onanoccasionalbasisaswell,themostrecentonebeing
4 or 5 years ago, from which Gibraltar got a very high rating
intermsofitscompliancewithinternationalregulatoryrequirements. So we are wholly independent but we are accountable
bothnationallyandinternationally,andweareveryawareofthe
needsofourstakeholders.
Milestone GRP - What new financial products are being developed in Gibraltar?
Mr Killick -TheCommissionasaregulatordoesnotgenerally
takeaprimeroleinthedevelopmentofnewservices.Wearein
aprivilegedpositionfromwherewecanseewhatdevelopments
aregoingoninotherjurisdictions.Wearekeenlyconcernedto
ensurethatGibraltarcontinuestodevelopaneffectivefinancial
servicessectorthatmeetstheneedsoftheinternationalcommunity.Aswellasthefunds,thereisaprojectrelatingtoShariah-compliant products. There is also the possibility of developingmultilateraltradingplatforms;therearedevelopmentsin
termsoftheinsuranceindustry,andtheAlternativeInvestments
FundManagersDirective.Wearealsolookingatotherpotential
marketingorconsumer-ledopportunities.
To date, Gibraltar has been very EU and predominantly UKfocused.Butthereisnoreasonthatthesetofskillsandbusinessesthathavebeendevelopedcannotbepushedintoother
jurisdictions.WefacilitateallthefinancialservicesindustryplayersthatwishtotaketheirproductsandservicesintootherEU
jurisdictions or in jurisdictions outside the EU. We do this not
by marketing it, but by playing an assistance role, by making
surethatthereputationofGibraltarissuchthatthosecountries
welcomeGibraltar’sserviceproviders.Wealsodoitbytalking
directlytotheregulatorsoftheotherjurisdictionthemselvesso
thattheycanbereassuredthatwhattheyareallowingintheir
jurisdictioniswellregulatedandsupervised,hencethatthereis
propercooperationbetweenourselvesandtheotherregulators.
300
250
200
150
50
2001
2002
FSCRegulatedEntries
2003
FSC Regulated Entries
32
Ontheotherhand,weareawareoftheroleoftheIndustry.We
needthemtoensurethatwearenotbureaucraticwhereitisnot
needed,donotinhibitthesenseofgrowthandqualitygrowthof
thesector.IftheregulatordoesnotknowtheIndustryandvice
versa, there is simply conflict. This is what we mean by partnership:collaborationratherthanconfrontation.Sometimesyou
needtotakeenforcementactionandwehaveneverhesitatedto
doso.Lastyear,forexample,wetookactioningettingaGBP
6.5millionorderagainstafirmanditsdirectors.Wealsodida
number of enforcement operations together with the Gibraltar
Policeinrespectofunlicensedbureauxdechange.Wearereadytotakeactionwhenitisnecessary,butweregarditasalast
resource.
Milestone GRP - What are the strengths and weaknesses, the
opportunities and threats of the Gibraltar financial services
sector at the moment?
Mr David Parody - Our first strength is the entrepreneurship
shownbyourIndustry,theabilitytohitnichemarketswithniche
products very quickly. Our second strength is the ability to reactveryquicklytomarketforcesasregulatorsorgovernmentin
termsofimplementinglegislation.
Withregardstoopportunities,Gibraltarhashugeopportunities
to tap into the European market; there are many opportunities
thatwehavetoexploitmore.Moreover,givenoursmallsize,it
does not take much to make an impact on our economy. Our
size can present a weakness too, in the sense that we are a
smalljurisdictionwhosemembershipwithintheEUisdrivenby
theUK‘smembership.Thismeansthatoccasionallyourability
to raise our interests independently is restrained. This is not a
faultofthegovernmentoranyoneelsebutratherareflectionof
thefactthatweareajurisdictionofjust30,000people.Thisis
whythegovernmentisdoingthisoutreachatmakingsurethat
we are communicating with our colleagues within Europe and
elsewhere.Whatwecannotdobystampingourfeet,wedoitby
quietpersuasion.
Withregardstothreats,thebehaviourofSpainalwayspresents
a threat to Gibraltar, but it also presents opportunities. Spain
shouldseeGibraltarasthenaturalinternationalFinanceCentre
oftheIberianPeninsula.WhattheChannelIslandsdoforLondon,forinstanceintermsofmaterialbenefitsofplacingfunds,
wecoulddoitforMadridiftheSpanishrealizedtheopportunitieswecouldpresentthemandnotjusttheotherwayaround.
Milestone GRP - How do you see the role of the FSC as a partner of the industry rather than simply as a regulator?
100
0
provedmoresuccessful.Thisdoesnotmeanthattheregulator
has a soft touch. There is a lot of confusion as regards to the
waystoenterintoapartnershipwhereyouhavethesameobjectivesandthatofbeingsubservienttotheindustry.Thepartnershipisoneofequals.TheIndustryknowswhatourroleis,thatis
tokeepthegamecleanandcompetent.
2004
2005
2006
2007
2008
2009
2010
2011
Source: FSC
Mr Killick -Webelievethatherehasbeentoomuchofa‘them
andus’attitudebetweenregulatorsandtheindustry.Thatisa
global phenomenon, particularly at times of economic stress,
whereregulatorshavecomedownveryharshlyontheindustry.
Ratherthanconflict,amorecollaborativeapproachwouldhave
Gibraltar 2012
33
Financial Services
milestone GRP
like Gibraltar to become a centre for the establishment of the
hedge funds operations themselves, which is of course licensableunderEUregulations.Wewouldliketoseethealternative
investment management side emulate the path we saw in the
insurancesectorintermsofgrowthandcriticalmass.
Milestone GRP - What features does Gibraltar offer investors
from the financial sector looking for a European base for their
operations?
Gibraltar - EU Financial Services Centre
Reformed and Transformed
Interview with Mr James Tipping, Finance Centre Director, Government of Gibraltar
James Tipping has been the Director of Gibraltar’s Finance Centre since September 1999. He is responsible for strategic
planningincludinginputintotheGovernment’sresponsetothevariousinternationalinitiatives,productdevelopment,andliaisonwiththeprivatesectorandtheregulatoronbehalfofGovernment.Jamespreviouslyworkedfor14yearsininternational
investmentbankinginLondon,NewYorkandLatinAmerica.HecommencedhiscareeratSamuelMontagu,laterbecoming
aDirectoroftheGlobalEmergingMarketsDivisionatWestMerchant,theinvestment-bankingarmofWestDeutscheLandesBank.HesatdownwithMilestoneGRPtodiscussthereformandtransitionGibraltar’sfinanceindustryhasbeenthrough,and
theopportunitiesforinvestmentarisingfromthem.
Milestone GRP - What impact have the reforms of the last
15 years and increased global integration in general had on
Gibraltar’s economic growth and diversification?
from predominantly low added value private client work to
muchmoresophisticatedcorporateactivity.Theprivateclient
sidealsoevolvedtomuchhighervaluebusiness.
Mr James Tipping -Ithinkthatourtransitionfromaso-called
‘tax-haven’toalow-taxinternationalfinancecentrereallybegantowardstheendofthe1990’s.Atthetime,therewasan
international consensus, especially amongst large countries,
thatwhatwasperceivedasthepredatorynatureoftaxhavens
had to change. This went far beyond the small jurisdictions
andinvolvedgreaterinternationalcooperationandamassive
stepintermsofexchangeofinformationfortaxpurposesfor
example.Itwasthensignalledthatthemodel,whichhadbeen
appliedtomanycountriesfordecades,wherebyacountryin
whichaperson’sassetsweredepositedhadnointerestinknowingifthesepeopleowedtaxesintheirhomestates,hadto
change.
To take a concrete example on the corporate side, the insurancebusinesshasevolvedtremendouslysince2001orso.At
thetime,Gibraltarwasfairlyinsignificantinthesectorandwe
hadabout15companiesoperatinghere.Today,wehavemore
than100,ifyouincludetheonesthatareincellstructures,and
of course all are licensed by the regulator, whether they are
retailorcaptiveinsurancebusinesses.Onthemotorinsurance
side,about10%oftheUK’svehiclesareinsuredbyGibraltar
insurance companies. This gives you an idea of the size and
strengthofasub-sectorthatisnottax-sensitiveanddoesnot
relyonsecrecy,eventhoughwehaveneverhadsecrecyhere.
Gibraltarrecognizedthisearlyonandembracedamassivediversificationstrategy,notjustwithintheeconomyasawhole,
butalsowithinfinancialservicesaswell.Soifwelookback15
yearsorso,thesectorwasnotverysophisticatedandinvolved
fairlylowvalue-addedwork.Withtherealizationthatthebusinessmodelwasgoingtobeforcedtochangeduetoincreased
international cooperation and the signing of Tax Information
Exchange Agreements (TIEA) for instance, there was a move
34
Thiswholeprocessofreform,includingGibraltar’swhitelisting
by the G-20, culminated in the implementation of the uniform
taxregimeinJanuarylastyear.Thegoodthingisthatwehave
had a reasonably long period of time to adapt from the longheldbusinessmodelthatwasaroundpreviously.Ofcourse,this
createsalotofopportunities;indeedmanycountriesfindithard
tomoveformthemodeltheyappliedinthepast.ButGibraltar’s
transformation has encouraged diversification, particularly in
theFinancialServicessector.Fundsandassetmanagementare
areasthatwewouldliketoseedevelopquiteheavily.Wewould
Mr Tipping - I think Gibraltar has the right set of characteristics to attract more investment management; in fact, Gibraltar
ismarketedintermsofitspackageratherthanaparticularaspect.Taxissetatalevelthatismeanttobereasonableforboth
the tax-payer and the Government; indeed, we are within the
EU single market and regulate accordingly which comes at a
costofcourse.ButbecausewearepartoftheEU,companies
operatingfromGibraltarhaveaccesstoamarketof500million
people.
Asforhedgefundsandinvestmentmanagement,ourreputation
iskeybecauseinvestorswilllooknofurtheriftheycannotdo
theirduediligenceandtickthatboxfirst.Thenregulationisthe
secondmostimportantaspect.Infact,itisasinequanonprerequisiteasthetypeofinvestorsGibraltarwantstoattractare
big-ticketinvestorswhoarelookingforhighlevelsofregulation,
ratherthaneasyorquickopportunities.Thisisthemodernway
anditillustratesGibraltar’stransitionquitewell,especiallyifyou
considerthatprivateinvestors15yearsagowerelookingforthe
opposite,astheywouldhaveelsewheretoo.Otherfactorsplay
aroletooofcourse;forinstancethelevelofpersonaltaxation
whichisbenignhere,especiallyifyoucompareitwiththeUK.
LifestylealsoplaysanimportantroleandGibraltaroffersalot;
our climate is very pleasant and the hinterland gives easy accesstoSpainandMorocco.
TheseareimportantadvantagesinanindustrysuchasHedge
Fundsthatdoesnotrelyonlocation;andofcourse,ourdirect
connectiontoLondonisagreatadvantagetoo.Frankly,ifyou
putallofthistogether,Ithinkitisveryhardtofindsomewhere
else within Europe that ticks all of those boxes, especially for
anindustrysuchasfundsandinvestmentmanagement.Andto
berealistic,givenGibraltar’sownrestrictionintermsofspace,
thisisagoodindustrytodevelop,asitisnothumanresourceintensive.Itmakesmorepracticalsensetoattractbusinesses,
which will bring their intellectual capital, spending power and
develop organically. Of course, being inside the EU is a great
advantage too when it starts to build walls for these types of
activities;peoplewillwanttobeinsidethesewallsandGibraltar
isverywellpositionedtocapitalizeonitsassets.
Milestone GRP - What does the Finance Centre have to offer BRICS countries and other emerging economies in this
context?
Mr Tipping - We offer a gateway to the European Union. The
regulation hurdle is tough, as we want to ensure applicants
knowwhattheyaredoingandareofthehighestquality.Buta
Gibraltarlicensedentity,suchasabankoraninsurancecompanyforexample,hasaccesstotheentireEUmarketautomatically;bypassportingitsserviceswithasimplenotification,a
company can access this market or even set up branches in
differentcountries.Forinstance, aGibraltar-licensed bankhas
establisheda branchinLondon, passportedfromGibraltarundertheCommonMarketframework.Soifafirmislookingtodo
businesswithintheEUanddoesnotalreadyhaveabase,then
Gibraltarisaveryrealalternativefromwhichtospringboardinto
Europe. In the Insurance sector for example, I think this makessense.Moreover,we recently signeda TIEAwithoneofthe
BRICScountries(TIEAsignedwithSouthAfricaon 2 February
2012)andseveralmoreareonthecards.
Milestone GRP - To what extent would you say the Gibraltar
model could inspire other nations around the world?
Mr Tipping -Gibraltarcametotherealizationthattheworldhad
changed quite early. This was true across the board, from the
Government to the regulator and private sector. That realization
andtheresultingneedforactionwerecleartothevastmajority
oftheindustryinGibraltar.Thereareothercountriesaroundthe
world that have only woken up to that realization after years of
denialandthisisaterribleshockforthem.Gibraltarsignedupto
the OECD principles of information exchange and transparency
in February 2002. Even though we did not do anything about it
foranumberofyears,changewasonitswayandtherewasno
reversingtheprocess.Ideallysmallplacesareabletoadjustvery
quicklyandbeflexible.
Moreover,manyfinancialservicesfirmsarelivinginarelativelyhostileenvironment,andanenvironmentwherethepoliticsofenvy
rule,whichisverytryingforthem.Here,theGovernmentis100%
behindthedevelopmentofFinancialServicesandwantsrealinvestmentinthesector.GibraltarianswanttheirchildrentostudyfinanceandbeinvolvedinthesectorwhichisaverypositiveframeworkemanatingfromthepopulationaswellastheGovernment.
Thisisnotsomethingyouwillfindeverywhereatthemoment.
From Gibraltar Throughout Europe: Passporting Explained
PassportingoffinancialservicesisaEuropeanUnionmechanismwhichallowsforfirmsauthorisedtoprovidefinancialservicesinonejurisdictiontoprovidetheminanotherwithouttheneedforauthorisationinthissecondjurisdiction.Thisitcando
byestablishingabranchorprovidingcross-borderservices.Inordertodothisthefirmisrequiredtonotifyitshomemember
statesupervisoryauthoritythatitwishestoprovidetheseservicesinanamedjurisdiction.
FirmswhoareauthorisedbytheFinancialServicesCommissionhavetherighttopassporttheir,banking,investmentsand
insuranceservicesthroughouttheEuropeanUnion&EuropeanEconomicArea.GibraltarisincorporatedintotheEuropean
UnionbyvirtueoftheUnitedKingdom’smembership.UnderArticle299(4)oftheTreatyofRome–whichestablishedtheEuropeanCommunity–theprovisionsoftheTreatyofRomeareappliedthroughouttheEuropeanTerritoriesforwhoseexternal
relationsaMemberStateisresponsible.
Source:GibraltarFinancialServicesCommission
Gibraltar 2012
35
Financial Services
milestone GRP
Gibraltar as an Overall International Finance Centre
by Professor Michael Mainelli FCCA FCSI, Executive Chairman, Z/Yen Group
Global
and Mr Mark Yeandle, Associate Director, Z/Yen Group
Z/Yen Group conducts considerable research into the competitiveness of financial centres. The output of this research
is the Global Financial Centres Index (GFCI). The GFCI rates
and ranks 77 financial centres in various categories, drawing on
instrumental factors and financial centre assessments from an
online questionnaire survey.
Broad & deep
Relatively broad
Relatively deep
Emerging
Global leaders
Global diversified
Global specialists
Global contenders
Chicago
Amstersam
Beijing
Luxembourg
Frankfurt
Dublin
Hong Kong
Seoul
London
Shanghai
New York
Singapore
Moscow
Paris
Tokyo
Toronto
Zurich
Transnational
The GFCI Method
Instrumental factors: Many factors combine to make a financial centre competitive. These factors can be grouped into five
over-arching ‘areas of competitiveness’: People, Business Environment, Infrastructure, Market Access and General Competitiveness. Evidence of a centre’s performance in these areas is drawn from a range of external measures. For example, evidence
about a fair and just business environment is drawn from a corruption perception index and an opacity index. 80 factors have
been used in GFCI 11.
Financial centre assessments: GFCI uses responses to an ongoing online questionnaire completed by international financial
services professionals. Respondents are asked to rate those centres with which they are familiar and to answer a number of
questions relating to their perceptions of competitiveness. Overall, 26,853 financial centre assessments from 1,778 financial
services professionals were used to compute GFCI 11, with older assessments discounted according to age.
Established
Transnational
Transnational
Diversified
Transnational
Specialists
Copenhagen
Boston
Athens
Bahain
Geneva
Istanbul
Dubai
British Virgin Islands
Madrid
Kuala Lumpur
Edinburgh
Cayman Islands
Montreal
Washington DC
Glasgow
Gibraltar
Mumbai
Guernsey
Sydney
Qatar
Isle of Man
Vancouver
Shenzhen
Jersey
Munich
Local
What distinguishes the GFCI methodology is that, rather than being based on the research team weighting instrumental factors
or just taking respondents’ raw assessments, GFCI uses a statistical approach where the financial centre assessments have
been used to produce the instrumental factor weightings.
The Global Financial Centres Index 2011
The top ten financial centres in GFCI 11 are:
Transnational
Contenders
Established Players
Local Diversified
Local Specialists
Evolving Centres
Brussels
Bangkok
Abu Dhabi
Buenos Aires
Calgary
Warsaw
Bahamas
Jakarta
Helsinki
Budapest
Johannesburg
Lisbon
Hamilton
Manila
Melbourne
Malta
Mauritius
Mexico City
Monaco
Osaka
Milan
Oslo
Taipei
Prague
Reykjavik
Wellington
Rome
Rio de Janeiro
San Francisco
Riyadh
Sao Paulo
St Petersburg
Stockholm
Tallinn
Vienna
Centre
GFCI 11 Rank
GFCI 11 Rating
GFCI 10 Rank
GFCI 10 Rating
CHANGES Rank
CHANGES Rating
London
1
781
1
774
–
7
New York
2
772
2
773
–
-1
Hong Kong
3
754
3
770
–
-16
Singapore
4
729
4
735
–
-6
Tokyo
5
693
6
695
1
-2
Zurich
6
689
8
686
2
3
Chicago
7
688
7
692
–
-4
Shanghai
8
687
5
724
-3
-37
Seoul
9
686
11
679
2
7
Toronto
10
685
10
680
–
5
Global Financial Centres’ Profiles and Ratings (GFCI, 2011)
With increased information over time, the GFCI profiles centres in terms of their links with other centres, as well as the extent and
quality of the services that they offer. The 77 global financial centres are each assigned a profile on the basis of a set of rules for
three measures or ‘axes’:
‘Connectivity’
this represents how well known a centre is around the world and how connected it is to other financial centres;
‘Diversity’
the breadth of industry sectors that flourish in a financial centre;
‘Speciality’
the quality and depth of certain industry sectors in a centre.
36
Global Financial Centres’ Profiles and Ratings (GFCI, 2011)
The nine ‘Global Leaders’ (in the top left of the table above) have
both broad and deep financial services activities and are connected with many other financial centres. Amsterdam, Dublin,
Seoul, Shanghai and Singapore are ‘Global Diversified’ centres
as they are equally well connected but do not exhibit sufficient
depth in different activities to be considered ‘Global Leaders’.
Similarly, Beijing is a ‘Global Specialist’, it does not have a sufficiently broad range of financial services activities to be a ‘Global
Leader’.
Gibraltar
In the table above, Gibraltar, along with other offshore centres, is
profiled as a ‘Transnational Contender’ – well known internationally but with insufficient depth and breadth of financial services to
be a world leader.
Offshore? Onshore?
What is ‘offshore’? Many of the world’s smaller states or territories
have sought to become successful financial centres by using their
constitutional independence to develop legislation, regulation and
tax vehicles that attract non-resident business. Many have used
their comparative advantage to create world-class expertise in international financial services.
There are also a number of states that are relatively small, independent and although not geographically ‘offshore’, exhibit
several of the key competitive advantages of island states. For
example, Geneva, Zurich, Luxembourg and even places such as
Hong Kong are viewed as ‘offshore’ centres by many who deal
with them. Whatever the definition, the most enduring offshore
centres offer ways of transacting essential but complex wholesale
finance transactions.
Arguably, there are about 15 financial centres that fall into GFCI’s
‘offshore’ category, seven of which are within the ‘Transnational
Contenders’ profile. These centres often specialise in wealth management, asset management, fund management and specialist
insurance. The top ten of these in GFCI 11 are:
GFCI 11 rank
GFCI 11 rating
GFCI 10 rank
GFCI 10 rating
Change in rank
Change in rating
Jersey
21
652
21
650
–
2
Guernsey
31
639
31
635
–
4
Cayman Islands
40
628
46
610
7
18
9
Hamliton
43
625
41
616
-2
Isle of Man
44
624
40
617
-4
7
British Virgin Islands
45
623
45
611
–
12
10
Monaco
60
593
59
583
-1
Gibraltar
63
587
58
584
-5
3
Mauritius
66
578
68
571
2
7
Malta
72
568
70
568
-2
–
Bahamas
75
550
72
545
-3
5
Gibraltar 2012
37
Financial Services
milestone GRP
Offshore centres have suffered significant reputational damage in
the past four years. In GFCI 10 several of these centres were beginning to recover and this trend has continued in GFCI 11. Gibraltar, along with Jersey, Guernsey, the Cayman Islands, the British
Virgin Islands, the Isle of Man and Mauritius, has made gains in
the ratings. This recovery in relative popularity has increased as
more financial professionals come to appreciate the utility of the
offshore centres.
Global popularity has risen but how do offshore centres see themselves? Top offshore centres achieve higher than average assessments from other offshore centres, but inter-offshore trade is
hardly a way to grow business:
Offshore centres need to extend both breadth and depth, which in
turn will move them towards a GFCI profile of ‘Established Transnational’. Paradoxically, the best way to be an offshore centre may
be to behave like a better onshore centre, promoting long-term finance and regulatory simplicity.
Attacks on the offshore centres will not disappear, particularly with
the protests sweeping the world complaining about the perceived
excesses of global finance. One of the offshore centres’ persistent
problems is the inability to promote the positive messages of their
work to the general population. Knowledgeable and sophisticated
clients are happy to continue using these centres but few ordinary
people understand their value.
External Assessments of Jersey
External Assessments of Jersey
It is argued that financial flows through offshore centres increase
the rate of GDP growth and employment in larger economies. However, the offshore world is linked to the state of the global markets,
so transactional work will slow down as international markets slow.
There are other challenges on the horizon too:
Middle East / Africa (1,3%)
Latin America (0,2%)
North America (4,2%)
• international regulators are sometimes accused in some quarters of bullying the offshore centres and international regulators
are still focused on the activities of offshore centres – can these
centres be over-regulated?
Asia / Pacific (6,2%)
Offshore (57,7%)
Europe (30,3%)
-150
-100
-50
0
50
100
150
External Assessments of Gibraltar
External Assessments of Gibraltar
The GFCI questionnaire asks respondents to name the single regulatory change that would improve a financial centre’s competitiveness. Although a large number of possible changes were named,
the two mentioned most often were a reduction in personal taxation and increased predictability of the regulatory environment. The
GFCI questionnaire also asks respondents how financial centres
can best signal their long-term commitment to financial services.
Again, stability of regulation and taxation are seen as the best signals although lack of corruption is also seen as crucial.
Similarly, a centre with a lower average assessment than the GFCI
11 rating indicates that respondents’ perceptions of that centre are
less favourable than the quantitative measures alone would suggest – a reputational disadvantage. The centres with the highest
reputational advantage include Singapore (+34), Shanghai (+34)
and Toronto (+27). The centres with the largest reputational disadvantages are Athens (-115) and Tallinn (-110).
It is clear that Gibraltar performs well in many of the areas that
financial professionals think are important. Tax rates are competitive, regulation is stable and of a good standard and infrastructure
is as good as, or better than, most other centres in its category.
What must Gibraltar do to boost its position in the GFCI?
Gibraltar has a reputational disadvantage of -54. Therefore, reputation is clearly a big issue for Gibraltar as it suffers from a stronger reputational disadvantage than other centres in its class. To
be precise, Gibraltar’s low reputational score does not necessarily
mean that the quality of its services and infrastructure are any less
than a center with similar ratings, but that it is perceived as such
by respondents.
In the GFCI model, one way to look at reputation is to examine the
difference between the average assessment given to a centre and
its overall rating (the average assessment adjusted to reflect the
instrumental factors). If a centre has a higher average assessment
than the GFCI 11 rating this indicates that respondents’ perceptions of a centre are more favourable than the quantitative measures alone would suggest. This may be due to strong marketing
or general awareness. Policy makers in financial centres have to decide whether to prioritise the fundamental development of a centre’s competitiveness or to bolster the reputation of the centre. This prioritization
will change over time. Our research suggests that Gibraltar offers
a stable regulatory environment, respectable infrastructure and a
skilled professional base, but that currently Gibraltar needs to address the issue of reputation as a priority in order to be seen as a
more competitive financial centre.
• the World Bank is showing increased scrutiny of the use of corporate vehicles to conceal misuse of funds – will this impact on
offshore business?
• the EU crisis – will investors start a flight to safety and use offshore funds more and if so which centres will they choose?
Middle East / Africa (1,6%)
Latin America (0,3%)
Gibraltar
Gibraltar is a British Overseas Territory and a self-governing and
self-financing parliamentary democracy within the European
Union. Gibraltar is a separate legal jurisdiction and its Parliament
is solely responsible for the enactment of all domestic laws and for
the transposition of European Union directives.
North America (1,9%)
Asia / Pacific (4,3%)
Offshore (65,4%)
Europe (26,6%)
-150
-50
50
150
250
350
450
Top offshore centres have tried to attract long-term finance and
regulatory simplicity, rather than competing solely on tax mitigation and secrecy. Clever offshore centres that enable longer-term
financial planning with ‘Long Finance’ structures (structures that
can endure for a generation or two) benefit from avoiding the capriciousness of larger nations’ domestic agendas. A large nation can
change tax rules at short notice. Well-regarded offshore centres
have achieved a reputation for stability in their tax rules and remember that financial professionals hate surprises.
Z/Yen’s offshore work indicates that the leading centres have identified several sub-strategies to support ‘long finance’ strategies:
• stronger promotion and showing that larger nations do have
shortcomings with long-term planning and capricious regulatory
change;
• tackling long-term skills shortages with better training of indigenous populations rather than relying on imported skills; improving
power, transportation and communications infrastructure;
• subsidizing and hosting high profile conferences and events,
simplifying visa and work permit processes;
• increasing service levels both for those entering the centre and
long-term residents;
38
As a British Overseas Territory, Gibraltar matches UK standards in
financial services regulation. Most of the banks established in Gibraltar are branches of major UK, European or US banks. Much of
the banking activity in Gibraltar is directed to asset management
for high-net-worth individuals, partially because Gibraltar has actively tried to attract such people with special tax regimes. Gibraltar’s financial services sector contributes approximately 30% to the
GDP of Gibraltar.
Gibraltar’s financial services are showing growth in several different sectors - insurance, reinsurance, fund management and investment services. There is no stock exchange in Gibraltar and it has
not been as widely used for corporate financial holding purposes
as some other jurisdictions, so that corporate financial services are
not as well developed as private services. The Gibraltar Financial
Services Commission regulates investment business in Gibraltar
and is organized by industry groups, with separate divisions for
insurance, fiduciary services, banking and investment services. What must Gibraltar do to become more competitive?
GFCI respondents are financial services professionals from all over
the globe. They say that the most important areas of competitiveness are now (in order) personal and corporate tax levels, the stability and predictability of regulation, the quality and availability of
staff and general economic conditions.
Gibraltar 2012
39
Financial Services
milestone GRP
A Look at Gibraltar’s Neighbours
Europe’s situation and the Rock’s position within it
by Mr Tim Harris, Chief Investment Officer for the UK, Lloyds TSB Private Banking
Policysolutionstothefinancialcrisisof2008-9includedanexplosioninpublicsectordebtacrossmanycountries,asgovernments
across the world bailed out their respective banking systems to
differingdegrees.Unencumberedbythelegacyofhighlocaldebt
levels,manylessdamagedeconomieswithinthedevelopingworld
areexpandingatattractiverates.However,thedevelopedworldin
generalmustmanagegrowthinitiativesalongsidehighpublicdebt
burdens,whichmustbeseentobemanageabletoretaintheconfidence of markets. For example, we have already seen both the
USandFrancelosetheirAAAdebtratings,accordingtothemajor
creditratingagencies.
GibraltarfindsherselfsittingclosetoamostheterogeneousEuropeaneconomy.ThecontrastbetweenGibraltar’sstronggrowth
andexternalaccountbalancesandhernearneighboursisquite
stark. Despite the commonality of monetary policy across the
currency union that is the Euro Area, the financial crisis of 20089hasleftverydifferentlegaciesfromnorthtosouth,andeastto
west. While we expect Germany and the UK to avoid recession
in 2012-13, such a call is looking a close run in France and we
expectSpain,PortugalandItalytoseetheirrespectiveeconomies
contractthroughthecurrentyear.Inextremis,weexpectthecrisisriddenGreekeconomytocontractby5%thisyear,whichwould
effectivelyreduceitsGDPto20%belowpre-crisislevels.Withan
austerity programme underway to lower budget deficits, it is difficulttoargueforgrowthonanyreasonabletimehorizonthere.
The more challenged countries in the Euro Area (Greece, Portugal, Ireland, Spain and Italy) face two challenges. They need to
regain competitiveness and correct large public-sector deficits
anddebts.Addressingthese‘twinimbalances’withinamonetary
unionconfrontsa‘Catch22’scenario:dealingwithoneimbalance
islikelytoexacerbatetheother.Withinasinglecurrencyuniona
countrydoesnothavetheoptionofdevaluingitslocalcurrencyin
ordertoreflateitswayoutoftrouble.Regainingcompetitiveness
relies largely on running lower inflation than the Euro Area averagetoadjusttherealinternalexchangerate.Butstrongernominal
GDP growth is also needed to address fiscal problems and put
public debt on a sustainable path. The low inflation required to
regaincompetitivenesswillexacerbatefiscaldifficulties.Thus,we
donotexpecttoseelowerthanaverageinflationandhigherthan
averagegrowthinanyoftheabovecountriesthisyear.
Impactondept-to-GDPin2020
Impact on dept-to-GDP in 2020 from
fromweaker-than-base-casegrowth
weaker-than-basee-case growth
12
Weaker* potential growth raises debt-toGDP by 5-10 percentage points by 2020
10
8
%
6
4
2
0
POR
ITA
IRE
GRC
FRA
ESP
GER
Source:
Goldman Sachs
Source:
Goldman
Sachs. * weaker is relative to the IMF base-case for Portugal, Ireland,
Greece, Italy, France and Spain (1% pa for Portugal, 0.5% pa for the other countries)
40
The point of balancing debt reduction against GDP growth is
made within the chart below. An econometric analysis by GoldmanSachsmodelstheimpactthata1%perannumreductionin
GDP growth in Portugal and 0.5% per annum reduction across
other European countries might have on public debt levels by
2020. This highlights how governments have to balance fiscal
prudenceagainstthelossofgrowth.Manydevelopedcountries
have yet to regain the level of economic output of 2007, which
wouldimplyapermanentlossofgrowthpotentialacrossthedevelopedworldeconomies.
These issues resonate with Gibraltar’s closest neighbours. The
Spanish government has recently defined its own austerity budget,whichaimstoreducetheannualdeficitfrom11.2%ofGDP
in2009to5.3%thisyearand3.5%by2015.Thatshoulddeliver
stabilityintheeyesofthemoneymarkets,whichisthecriticalobjective,givenSpain‘sneedtorefinancepublicsectordebtatless
thanpenalrates.10-yearSpanishbondyieldsof5.8%compare
with similar maturity debt yields of 1.8% in Germany and 2.9%
in France. Without the confidence of public markets, the burden
ofdebtservicingbecomeseverheavierinaself-fulfillingfashion.
Austerityshowsmarketsthatacountrycanmanageitstotaldebt
requirements,buttheconsequenceofapublicsectorsqueezeon
investmentintandemwithprobablehighertaxandexciseincome
meanthataneconomyisdrivingbelowitsgrowthpotential.Thus,
we expect Spain to remain in recession through the middle of
2012,withacontractionof1.5%forthefullyearlikely.Theprospectsforrecoveryin2013dependnotonlyuponastrongimplementationoftheausterityplan,providingastablebaseforfuture
investment, but also upon the world economy picking up. Given
that a mature economy, such as Spain, relies heavily upon consumption and hence consumer confidence for growth, we must
lookforanupturninbusinessbehaviourtomanifestitselfinlabour
markets, where official rates of unemployment are at Euro Area
highsofmorethan23%.
FearsofdebtcontagionplacePortugalunderclosemarketscrutiny.Ithasoneofthehigheststocksofpublicdebtintheregionat
wellover90%ofGDP.Lackofgrowthandunresolvedmacroeconomicimbalancescastdoubtsoverthissovereign’ssolvencyand
theviabilityofitsadjustmentprogramme.Regainingcompetitivenessisadauntingtask,especiallyasboththepublicandprivate
sectorsaredeleveraging.WhilethePortuguesegovernmenthas
agoodtrackrecordofimplementationtodateundertheEU-IMF
supportprogramme,webelievethatlowproductivityanddeeprootedstructuralproblemsareunlikelytoberesolvedby2013-14.
PublicdebtthuslooksunlikelytoustostabilizebythetimePortugalisduetoreturntothemarketsforrefinancinginthesecond
halfof2013.SinceIMFinvolvementrequires12-monthahead-of-
fundingassurances,EuroAreacountriesmayneedtodecideby
mid-2012 whether to commit additional financial resources. The
EuroAreahasissuedstrongrhetoricinsupportofPortugaland
concern about potential contagion to other peripherals reduces
the likelihood of Portuguese private sector write-offs in 2012.
However,Portugalretainsapropensitytoupsetglobalinvestors
throughthisyear.
Gibraltar’s largest trading partner, the UK, also continues on its
course of managed austerity. The government has been unable to
reducethepublicsectornetborrowingrequirementinrealtermsover
thelasttwoyears.With£200billionbudgetedforsocialprotection
spendingoutofatotalbudgetof£683billionin2012-13,itisclear
thatreducingthisnumberiscriticaltobalancingthebooks.Thatdependsupongrowthandthegovernment’staxandinvestmentpoliciesremainpragmaticallyfocussedonattractinginwardinvestment.
For example, following the latest cuts in headline corporation tax
ratesto22%by2014,theUKsupportsoneofthelowestsuchrates
inthedevelopedworld.Nonetheless,weexpecttheUKeconomyto
stagger along at a 1% growth rate for some time. The good news
hereisthat,alongsideGermany,theUKhasoneofthemostopen
economiesinEurope.TheUSisrunningata2%growthrateinan
election year, when we would not expect too many austerity measures,andAsianeconomiesareaveraging5-6%growthrates.These
factorsshouldhelpbothofthesekeyEuropeaneconomies.
In summary, the nationalisation of private sector debts has bestowedalegacyuponEuropethatwilltakeaneconomicgeneration
toresolve.Somecountriesareadjustingbetterthanothers.However,thefactthattheEuroArearetainsjustfourAAAratedcountries
tellsitsownstory.Weforeseemuchgraftaheadfromhere.
Howdoesthisaffectlocaleconomicperformance?Spainandthe
UKarebyadistancethetwolargesttradingpartnersofGibraltar,
representing 89.4% of imports of all non petroleum goods from
EuropeanUnioncountriesin2010.Onabroaderscale,theUKand
Spainrepresented41.3%ofsuchimportsfromallcountries.However, Gibraltar imported nearly 2.9 times more than it physically
exportedin2010byvalue.Thus,itisprotectedtoadegreefrom
thedirectimpactofsoftdemandacrosskeytradingpartners.As
theeconomiccrisishasengulfedEurope,Gibraltarisbroadening
its trading ties; while European trading partners exported 16.7%
lessbyvaluetoGibraltarin2010,ontheotherhandimportsfrom
allothercountriesroseby25.1%.
Gibraltarachievedanestimated6%GDPgrowthin2011andthe
government expects to increase economic growth in 2012 and
throughoutitsfour-yeartermofoffice.ThekeydrivertoGibraltar’s
economyistheservicesector,whichhasbeengrowingatarapid
rate,evenasexportactivityhasflattened.Thereseemslittlesignof
aslowdownintourismandotherservicesectorsarefindingGibraltar an attractive place to do business. Financial services already
accountfor30%ofGibraltar’sGDP,andaccordingtotheMinister
incharge,Hon.Licudi,“whilstthisfigureisnotsettorise,thecake
can get bigger and Gibraltar can have a bigger slice”. The currentdevelopmentoftheglobalOnlineGamingmarketcouldalso
benefitGibraltar’sownindustry,whichalreadyhoststheindustry’s
leadingoperatorsandrepresentsabout20%oftheeconomy.Such
specialisationhasprovedaprotectionfromthecoldwindsblowing
acrossEuropeandwebelievethatGibraltarremainswellplacedto
attract foreign direct investment, which is the basis of continued
domesticgrowth.
The Rock of Gibraltar with Spain in the background.
Gibraltar 2012
41
Financial Services
milestone GRP
Boards as Modern Drivers for Change
The evolution of Gibraltar’s finance sector’s boards
by Mr Marcus Killick, CEO, Gibraltar Financial Services Commission
One of the most difficult jobs as a regulator is dealing with the
volume of hate letters every day. However, I have got a routine and
have normally finished writing them by lunchtime.
Indeed, over the past few years, regulators have moved from quiet
anonymity into the spotlight of public anger, alongside politicians,
bankers and anyone in the financial world with the temerity to earn
a bonus. Individual blame is irrelevant; we are collectively accountable.
This is not the first financial crisis, “Fat cat” bankers have been
blamed in the past, and the edifice of modern regulation is built
upon the shattered ruins of previous regulatory structures. So we
stop banks from lending, pile on more rules and restrictions, and
epitomise Einstein’s definition of insanity: “doing the same thing
time and time again, and expecting different results”.
Let me put to you a different model. It is based on the beliefs that
more regulation is not necessarily better, that more complicated
financial products are not made less risky by more complicated
regulation, that consumers are entitled to make bad investment
decisions if they do so in knowledge of the risks they are taking,
that light touch regulation is not inferior to heavy handed regulations. Let me call it the Gibraltar approach.
Firstly, let me be clear, as part of the EU we are constrained in
what we can do. We cannot choose to ignore the plethora of directives and regulations emanating from Brussels. We must, and do,
comply with international standards. We hold the reputation of our
jurisdiction dearly. Our approach is not some fundamentalist libertarian experiment. It is based upon the basic premise that, where
possible, the simpler we keep things, the less likely they are to fail.
Let me take as an example corporate governance. Corporate governance is, in essence, the way in which a company is directed,
administered and controlled. All companies have a form of governance, whether they recognise it or not. It may not be very good
but it does exist. It was the failure of such governance that, to
me, represented the primal cause of our recent crises. Not the
regulatory structure and not the appalling lending decisions by
some banks. These were merely visible symptoms of the underlying malaise. Financial institutions, regulators and governments
simply failed to properly understand and mitigate the risks they
were faced with. To be exact, in the case of financial institutions,
their boards failed.
I have never met Fred Goodwin or the others, but I suspect they
would still have preferred to have been in control of their empires. I
am sure Fred liked being a knight and took pride in being Scottish
Businessman of the Year so many times. I am convinced Chuck
Prince (former CEO of Citigroup) regrets his, “as long as the music
is playing, you’ve got to get up and dance” comment regarding
subprime lending. These were not evil masterminds set out to destroy western capitalism. They were not criminals, despite a desire
by some to make them such. Their failure was in the way they ran
their companies, a failure that had catastrophic consequences.
42
Yet this failure occurred at a time when the importance of corporate governance was already well known. Requirements, whether
rule based (Sarbanes-Oxley) or principle based (The UK Combined
Code), were already well established. Listed companies had Audit
Committee, Risk Committees, Nomination Committees, etc. The
separation of the roles of Chairman and Chief Executive had been
accepted as the norm. The importance of the role of Non Executive Directors (NEDs) was understood. Yet, for all this, governance
still failed. Why?
What was not understood by the industry or its regulators was
that these were merely structures; their effectiveness wholly dependent upon the behavior of the board itself. If the board did
not behave correctly then the protection the structures could have
provided became a veneer. What use is a risk committee if those
on it don’t understand the risks being taken? What good is separating the Chairman and Chief Executive when one is weaker than
the other and does not properly fulfill its separate role? What good
are NEDs that do not constructively challenge the Executive?
My belief is that our regulatory approach should be to regard
boardroom behavior as one of the keys to our assessment of those
we license. It is not a difficult concept, does not require reams
of regulations (indeed, behavior cannot be dictated by regulation)
and it does not need a heavy hand. However, it is cultural in nature
and is, initially, uncomfortable for many.
is merely one of the factors; nationality and industry background
are others. Yet it must be based upon skill and what the individual
brings as a person, not because they will make up the numbers.
In Gibraltar we have that capability. Whilst small in size we have
a highly diverse culture. Similarly we are not solely reliant on one
economic sector so we can cross-fertilise talent between areas so
giving us diversity. By way of example, the former Government Financial and Development Secretary has become a highly successful CEO of the leading local telecommunications company and a
NED of one of the large gaming companies. Similarly, the number
of senior females in the finance sector continues to grow. Within the
Financial Services Commission itself approximately half the senior
employees are female. Such diversity is based on talent, not quotas.
Another area we are working with the industry on is the transition
process of small owner-managed businesses as they grow and
have to change their corporate governance structures to ensure
they remain fit for purpose. Some successful small firms struggle,
as it requires the existing management to accept the limitations of
its present structure. Sometimes it is our presence and focus on
this that helps difficult but beneficial changes to be made. We do
not believe it is our role to run the businesses we license but rather
to understand the business and ensure it is run well. Some regulators blur the two; this is dangerous and presents risks for the future.
In respect of the role of NEDs, the importance given in the Gibraltar supervisory structure to “authorised directors” of Expe-
rienced Investor Funds, has helped raised the profile of this role
generally. Given the importance we place on board behaviour, the
NED plays a key role. We wholly endorse the Institute of Directors’ view of an NED; namely that their role is to provide a creative
contribution to the board by providing objective criticism and are
appointed to bring the following to the board:
• Independence
• Impartiality
• Special knowledge
• Wide experience
• Personal qualities
Someone once said that NEDs should be treated like fridges; “fill
them with food and drink and hope they keep quiet”. To me this
role, so long undervalued and under utilised, has come of age.
They have become the eyes and ears of the stakeholders’ interests and, as regulator; we are one of those stakeholders.
Financial services do not operate in a vacuum. There have to be
regulations and supervision. The public expects the institutions in
which they place their trust to be safe. To date, the history of regulation has been patchy. Having been involved in regulation for 25
years and a regulator in a number of jurisdictions for over 15 of
those, I accept my share of the blame. Yet I do believe there is a
way we can avoid Einstein’s definition. Get the organisation culture
right, get the boardroom behaviour right and the rest will follow.
However, I may be being too simple for the current trend.
Anyway, back to my hate mail.
The process has to be one of changing the culture of organisations
so that bad board behaviour is regarded as unacceptable. Bullying
on the board is no more acceptable than in the workplace. NEDs
who fail to properly fulfill their role should be no more immune
than employees who fail to do their job. Boards should assess
themselves and be assessed just as members of staff are. Board
meetings should not be comfortable places for the Executive but
they should be constructive places.
Historically regulators have given inadequate consideration to
board behaviour in corporate governance. It is, however, now rising in profile. For example, Sir David Walker’s report on the governance of banks and other financial institutions, published in November 2009, states:
“Boards and board behaviour cannot be regulated or managed through organisational structures and controls alone; rather behaviour is developed
over time as a result of responding to existing and anticipated situations”
There is also the issue of boardroom diversity. There has been
much written on the small percentage of female directors. There
have been targets set and some have proposed minimum quotas. I find the last proposal patronising and repellent, but the need
for boardroom diversity (and not just along gender lines) compelling. This is not because I see the boardroom as a battleground
for social justice but rather many board failures stem from “group
think”, where too many people from too similar backgrounds share
a common world view and therefore wholly fail to think outside the
box. Diversity of talent and approach helps prevent this. Gender
Gibraltar 2012
43
Financial Services
milestone GRP
Insurance Companies by Type
Gibraltar’s Insurance Industry
Yesterday, today and tomorrow
by Mr Chris Johnson, Chairman, Gibraltar Insurance Association & Director, Robus Group
Gibraltar has been a home to insurance companies for over
40 years, however it is only in the last ten years or so that the
impact of becoming part of the European Single Market has
been felt.
At the beginning of 2012, Gibraltar boasted 65 insurance entities, the main component being non-life insurers.
9% Life
68% Non-Life
23% Captives
those relating to insurance were no exception, giving rise to a
great opportunity for the insurance sector.
By 1998, Gibraltar had enacted all the necessary European Directives and had put in place a regulatory framework that had
allowed the UK Foreign and Commonwealth Office to declare
that Gibraltar’s regulatory body was a “competent authority”
within Europe, and therefore able to license insurance operators to passport into the rest of the European Economic Area.
This means that an insurance company which has its head office in Gibraltar, and is licensed by the Gibraltar Financial Services Commission, can insure risks in another EEA territory (the
“host state”), without the need to apply for a licence in that
territory.
Hidden in these figures are some 40 cells active in Protected
Cell Companies, meaning Gibraltar has well over 100 insurance
company clients, in addition to 28 insurance intermediaries and
7 insurance managers.
Gibraltar now accounts for some 10% of the UK motor insurance market, a bigger percentage than Lloyd’s of London, traditionally a major player in that area.
So how has Gibraltar grown over the years, and what has driven this success story?
In the very early part of the 21st century, Gibraltar had not yet
established itself on the European scene, and insurance companies numbered only around a dozen. However, the hardening
market in 2001 and the passing of Gibraltar’s own Protected
Cell Companies Act in the same year sparked off interest in
Gibraltar, which the practitioners on the Rock at the time, who
had been working hard to gain name awareness for Gibraltar,
were able to convert into hard business.
But why would the investors in an insurance company want to
set up in Gibraltar, as opposed to elsewhere? There are a few
reasons.
Gibraltar is therefore now a “low tax rate” environment, as opposed to a tax-free zone, which is in keeping with its positioning as a mainstream, reputable onshore domicile.
The Regulatory Advantage
Gibraltar’s Financial Services Commission (FSC) was established on 16 January 1991, in response to an ever more demanding supervisory world. Since then it has played a substantial and vital part in the development of the Rock’s insurance
industry.
We’re here to help
One of the things most visitors first notice on coming to Gibraltar (apart from the fact that a road crosses the airport runway)
is the can-do attitude espoused by the business classes here.
Over the next few years, the rate of entry of insurers into Gibraltar was rapid and, whilst the initial flood has slowed to a
steady trickle, the domicile is still growing, driven by a number
of factors.
The European Key
The key to Gibraltar’s success has undoubtedly been opening
the doorway to the European Single Market for Insurance. Gibraltar is part of the EU by dint of being a dependent territory
of the United Kingdom, with derogations only from the common customs tariff, VAT rules and the Common Agricultural
Policy (there being no agriculture on the Rock). In everything
else Gibraltar is obliged to transpose all EU Directives, and
44
In other EU territories, regulatory bodies are faced with a large
number of regulated entities and have to consider carefully how
to apply their resources to supervise those entities in the most
efficient way possible. This often leads to a formulaic approach
to the regulatory process, especially the assessment of capital
levels and the application of rules.
Gibraltar’s FSC is no exception in that it has to ensure its regulatory processes are efficient and that levels of capital within
insurers are sufficient to meet EU minima at the very least, and
usually higher to reflect the risk presented by each enterprise.
However, working in a much smaller market enables the FSC’s
Non-life
Captives
60
13
13
40
30
14
30
14
33
17
16
15
40
41
42
6
6
6
2010
2011
18
16
50
37
37
4
24
10
20
10
10
6
16
10
0
1
2
2
2
3
3
3
2001
2002
2003
2004
2005
2006
2007
Insurance Companies by Type
2008
2009
Source: FSC
Gibraltar has been a finance centre for over 40 years, has repositioned itself to fit in with an ever-changing regulatory and
compliance world, and is home to a number of business professionals who are ideally suited to provide services to insurance entities.
The new regulatory regime of Solvency II will have a frictional
cost impact on Gibraltar insurers, as in all European territories.
However, the FSC is in the process of boosting its resources
to handle the increased complexity of regulation and the principles of regulatory dialogue and accessibility will remain one
of Gibraltar’s differentiating features.
Under Services, the insurer simply underwrites the risk crossborder, either dealing directly with the customer or via an intermediary in the host state. He may employ third-party firms
for administration and claims handling, especially if volumes of
individual customers are expected to be high, and he will be
taxed in the home state i.e. Gibraltar.
Establishment provides that an insurer may establish a branch
in the host state where it wishes to write business. The branch
is fully responsible for transacting the business which the insurer underwrites, would have sufficient infrastructure of its
own to do so and would pay taxes on the profits derived from
that business.
Life
70
Gibraltar insurers find that it is much easier for them to have a
dialogue with the FSC than it would be with their counterpart
in one of the main European territories, and the FSC is keen to
maintain contact at a practical level with its licensees, with application of risk measurement techniques and a planned programme of onsite visits. This accessibility and availability to
discuss matters rather than the formulaic application of rules
have meant Gibraltar is perceived as a business-friendly domicile, without diluting the consumer protection embodied in a
firm regulatory regime.
The T Word
For the first few years of its growth as an insurance domicile,
Gibraltar had the benefit of (potentially) a zero tax rate. This
was surprisingly not that much of a driver for a number of
corporate investors, who would in any case be taxed under
increasingly sophisticated Controlled Foreign Corporation tax
nets, but there were some who were able to derive a tax advantage. In recent years, EU and OECD tax philosophy has
focused on the “harmful tax competition” supposedly represented by territories having zero-rate schemes, and Gibraltar
consequently passed in 2010 an all-new Income Tax Act, under
which the headline rate of tax is now 10%. This is still competitive with a number of European domiciles and the effective rate
can be even lower with the application of tax breaks, such as
exemption of investment income, which are available specifically to insurance companies.
The insurer can do this under the EU concept of either Freedom
of Establishment or Freedom of Services.
According to the most recent financial information available
(2010), Gibraltar’s insurers were writing £2.5bn of Gross Premiums, with assets held of some £6.4bn.
approach to be much more accessible and its application of
the same rules more tailor-made for the circumstances of each
licensee.
As the insurance sector has grown, insurance managers and
companies have built up a pool of trained and experienced
staff, and the industry organisations, such as the Gibraltar
Insurance Association and latterly the Gibraltar Insurance Institute, have played a significant role in educating the wider
infrastructure of lawyers, accountants and other professionals about what is needed to nurture and grow the industry in
Gibraltar.
Telecommunications have benefited from the demands of the
gaming sector, and insurance reaps the benefit, along with
other technology support and support services.
What Else?
Gibraltar has its own statutes and legal system, based on the
familiar system of English law. It is a Sterling territory (currency
is GBP); the official language is English, though many employees are bi-lingual in English and Spanish. It has easy access
from the UK and other European centres, with a recently built
airport signalling its Government’s intention to attract flights
from all around Europe, and a land border with the European
mainland.
And after school?
When the working day is done, it’s nice to know relaxation is at
hand, and with premier golf courses, excellent restaurants and
five star hotels all within easy reach, plus 300 days of sunshine
a year, could there be a better place to domicile an insurance
operation than Gibraltar?
Companies by type
No of authorisations
Gross Premiums
(£ million)
Net Premiums
(£ million)
Total Assets
(£ million)
Life
6
216
205
1,010
Non-Life
41
1,824
1,100
3,473
Captives
16
498
336
1,933
Reinsurers
0
0
0
0
Total
63
2,539
1,642
6,416
Insurance Companies, 2010
Source: FSC
Gibraltar 2012
45
Financial Services
milestone GRP
The Use of Protected Cell Companies by
Insurance Companies and Funds
by Nigel Feetham, Partner, Hassans International Law Firm & Visiting Professor, Nottingham Law School, Nottingham Trent University
The PCC Evolution
The proliferation of protected cell company (PCC) legislation – a
fairly recent creation in offshore jurisdictions including Gibraltar,
Bermuda, the Cayman Islands, Guernsey and in the ‘onshore
jurisdictions’ of various US States – has been vital to the international recognition of the protected cell regime. Although most
commonly utilised as a captive insurance company, the legal
structure has also been used for collective investment schemes,
and in other areas such as ‘repackaging’ (and structured finance
transactions).
The idea of one corporate entity representing a number of different economic interests is nothing new, and it is not the case that
such companies can only operate under a legislative regime for
protected cell companies. While the concept of a statutory regime
for such companies may be relatively new, the basic mechanics
by which they perform their function have been widely used by
the banking, insurance and fund sectors for many years.
In the insurance and umbrella funds sector, cell-type structures
were a feature in the market long before PCC legislation was ever
introduced. Such structures rely on contractual arrangements
between the various participants. It is therefore common to refer
to them as contractual cell companies. In truth, contractual cell
companies and PCCs within the statutory regime can (and do) coexist side by side. The objective of cell-segregation can, therefore,
be achieved through common law contractual principles without
the need for legislation, as it had for many years before the PCC
came onto the scene. Despite the common ignorance today of
what a PCC is, it is no different in its intended effect from the tools
already widely used in markets of all kinds.
What is a PCC and how does it perform its function?
The intended effect of the PCC statutory regime is to restrict the
ability of a cell participant to enforce his claim against all the assets of the PCC. When PCC legislation was first introduced, it was
sometimes customary to speak of cells as if they were separate
legal entities; in fact, they were not. More recently, Guernsey has
introduced legislation to do precisely that – as seen with the socalled incorporated cell company (ICC). But, typically, PCC legislation, while recognising that there is only one legal person, legislates the effect of a contract between the parties by providing for
the segregation of cell assets and liabilities and restricting creditor
enforcement to what are known as cell assets. This applies to
both voluntary and involuntary creditors. The economic (but not
the legal) effect of a cell is, therefore, broadly similar for the counterparty to the taking of a security interest over particular assets.
Due to the nature of these companies, they do attract special
consideration. There can be no doubt that the critical test of a
PCC will come where there is a cross-frontier element (including insolvency) and the company has assets abroad. It is clearly
impossible to give a complete global picture of the integrity of
46
such structures. While contract law, driven by the needs of international commerce, tends to harmonise over time, insolvency
laws do not easily do so. A distinction needs to be drawn between
the application of PCC legislation by a local court, and the likely
interpretation of the legislation under rules of private international
law by a foreign court, for example, if proceedings were instituted
against the PCC in such a forum. In any action instituted in the
courts of the jurisdiction of incorporation of the PCC, there cannot be any doubt that PCC legislation would be given effect. Such
a court would naturally apply local law. The concern is that the
protection afforded to cell assets may be lost where an action is
instituted in a foreign court and these assets are situated within
that jurisdiction.
This, however, is not a new concern: even before Guernsey introduced PCC legislation in 1996, those involved in the discussion
around the concept of the PCC identified this as an issue – but it
was not felt by the Guernsey Financial Services Commission as a
good enough reason for not implementing such legislation. Regulators in other jurisdictions (initially at least) took a more cautionary approach. The Isle of Man government, for example, at first
decided against introducing PCC legislation and did not do so
until 2004; even so, the use of the PCC was restricted initially to
the carrying on of insurance business. This prevarication resulted
in Guernsey having a head start over all its offshore competitors,
although this was not without its challenges. Twelve months into
its legislative life, PCC legislation in Guernsey came under the
scrutiny of leading UK counsel, instructed by a potential PCC
user, regarding the likely interpretation of the legislation by the
English courts.
Guernsey cannot write insurance business direct into the EU (via
the EU passport), while it is only recently that Gibraltar (as the
then only European PCC domicile) began to actively engage the
market, with Malta following closely behind after it joined the EU.
There seems little doubt that the PCC is now an established part
of the international insurance market and will continue to be so.
PCC-type structures have proliferated in recent years in many jurisdictions. They have received acceptance in many international
transactions, and the market for these structures is no longer the
exclusive domain of captive insurers or the large banks. Instead,
we are seeing an increase in the numbers of PCCs being set up
for high net worth individuals (HNWIs).
The PCC and the investment fund
The use of investment funds as a tool for raising and investing
capital, is now widely used in the international markets the world
over. The large majority of such vehicles are established in zero
tax jurisdictions, guaranteeing a tax-free return on its investments. Over recent years, investment funds have been the catalyst for the growth of many PCCs. They include hedge funds and
property investment companies. While larger funds will invariably
be set up as single vehicles (in the same way as multinationals
would set up their own insurance captives), there are undoubtedly gains to be made by smaller funds pooling together under
a PCC. Such structures are also fairly easy to establish. As in
multi-issue Note Programmes, which were previously adopted by
banks over many years for repackaging deals for institutional and
very wealthy individuals, the documentation has become very
standardised and easy to produce.
In the EU, Luxembourg and Dublin have both made provision for
segregated cell-type structures for use by investment funds. A
number of jurisdictions have also implemented ‘experienced investor’ (otherwise also known in some jurisdictions as ‘qualified
The PCC structure can clearly be a very useful tool in international transactions where investing in a single corporate entity,
via separate classes of shares with differing investment objectives and to which specific assets are attributed, is essential.
Fund managers in particular have set up PCCs to introduce the
platform to their clients. For each separate investment a new protected cell is set up. The promoters can in fact use the PCC for
any business transaction based on the investment objectives of
its investors. The investment management role can be delegated
and performed by the fund manager. The investors have the economic rights over the cell and are also exposed to the risk of loss
in respect of the activities of the cell. The promoters, on the other
hand, retain the ownership risk related to the PCC and its core
assets in order to obtain the benefits of the PCC’s management.
There is a significant case in favour of the PCC as a means of
raising and segregating funds within a single vehicle.
The PCC life company
The PCC is also an efficient vehicle through which to execute life
policies for the account of separate cells supported by segre-
A simplified illustration of a Protected Cell Company
In the context of an EU insolvency of a PCC insurance company
domiciled and incorporated in the EU (in Gibraltar, for example),
cross-frontier applications to or from other EU countries would
now be governed by the EU Insurance Insolvency Directive. As a
general rule, therefore, an EU-based PCC insolvency should be
recognised throughout the EU and, accordingly, PCC legislation
would have to be respected.
In the context of a non-EU insolvency, the House of Lords’ unanimous decision in McGrath v Riddell [2008] UKHL 21 came to the
aid of the PCC. The House of Lords considered whether an English court should remit assets, when faced with a request to do so
by a foreign court, when that foreign court could arrive at a radically different distribution of the assets (to the UK) of the insolvent
entity. The House of Lords ruled that the English assets of the HIH
Group must be remitted to the Australian liquidators to be distributed in accordance with Australian insurance insolvency law. The
request from the Supreme Court of New South Wales had been
declined by the court at all instances (including the Court of Appeal) on the basis that creditors would not be treated according to
the statutory pari passu principle then applying in England.
investor’) funds legislation, aimed at streamlining and relaxing the
burden of regulation in funds sold only to experienced investors.
Such investors are not deemed to require the same protection
as retail investors who invest in such funds, informed as to the
risks that they take. In general, this relies on a system of selfcertification by relevant industry professionals, with local lawyers
and fund administrators in particular assuming the central role
of ensuring statutory requirements are satisfied (via a process of
registration with the local regulatory body). Within the EU, Gibraltar has been at the forefront of the development of a regulatory
framework for experienced investor funds (EIFs). The typical fund
is established as a bespoke PCC to raise money for specified
investments.
Umbrella
Fund
Cell D
Cell A
High Risk
Strategy
Cell B
Medium Risk
Strategy
Cell C
Low Risk
Strategy
Low Risk
Strategy
Unsurprisingly, the PCC structure has not been widely marketed
in Europe. This is because the existing companies established in
Gibraltar 2012
47
Financial Services
gatedcellassets.ThePCCstructureissufficientlyflexibletoalso
permitcellassetstobemanagedbyseparateinvestmentmanagersselectedbyindividualpolicyholders(mainlyHNWIs).Thereare
somelifepolicieswhicharestructuredwiththeunderlyingportfoliobeingunitsinafundoffunds,orevenafundlinked‘Note’or
portfoliobond.Inthisstructure,inessence,theHNWIobtainsexposuretotheunderlyingportfoliothroughalifeassurancepolicy.
Thistypeofcompanylookssimilarandperformsasimilarfunctiontoan‘investmentfund’.Thebigdifferenceisthattheproduct
offering for regulatory purposes constitutes insurance, even if it
has some of the characteristics of an investment ‘wrapper’. To
qualifyaslifeassurance,itisordinarilysufficientifthereisaright
to benefit which is related to life or death. As a consequence,
investment products that include provision to pay out a benefit
ondeathorsurvivaltoacertainageshouldqualifyasassurance.
Such a structure (which is essentially a hybrid between an umbrella fund and a life company) allow HNWIs to organise their
personal, tax and financial affairs through the medium of a bespokelifeassurancecompany.Thebespokecompanywouldbe
establishedasaPCCwhere,inreturnforthepaymentofpremium
(forexample,handingoverinvestments),an‘insurancepolicy’replacestheinvestmentportfoliowhichinturnsitsinasegregated
cell.Eachsegregated life sub-fund is then invested using asset
managers arranged for and approved by the PCC. Through the
useofseparateprotectedcells,theassetsarelinkedortailored
milestone GRP
tothecashflowsofeachindividualpolicy.Analternativetoa‘life
wrapper’intheUKistouseaSIPPasa‘pensionswrapper’.
Linkedlifepolicies,inparticular,lendthemselveswelltotheconceptofthePCC,giventhatpolicybenefitsarehighlycorrelatedto
thevalueofadefinedpoolofassets.Forlinkedpolicies,generally,thereisnoneedtoencouragediversification.Ifassetvalues
decrease,thenthepolicyvaluesdecrease.Thiscorrelationeliminatesanimportantsourceofriskforaninsurancecompany.
Inessence,aPCClifecompanyallowsaninvestmentwrapperfor
investors to transfer existing funds, bonds and equities with an
insuranceproduct.
Thegeneralfeaturesofsuchastructurewithinthejurisdictionof
incorporationare:
•notaxoninvestmentsheldwithinthewrapper;
•notaxonsalesorpurchaseswithinthewrapper;and
•notaxondepositinterest.
Somejurisdictionsinturnprovidetaxbenefitsforpolicyholders,
namely no tax on dealing within the wrapper and tax-free withdrawals.
Interestingly,anumberofjurisdictionswhodonotcurrentlyhave
PCClegislationareintheprocessofconsultationwithaviewto
implementation.
International Transparency and Cooperation
Gibraltar’s 20 TIEAs
by Mr Ghuozi Foo, Secretariat Administrator, OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes.
GibraltarisamemberoftheGlobalForum,a108-memberorganisationresponsibleforpromotingtheimplementationoftheinternationalstandardfortransparencyandexchangeofinformation
fortaxpurposes.Thisstandardwasdevelopedundertheoriginal
GlobalForum,whichwasestablishedin2001.In2009,theGlobal
Forumwasrestructuredtobecomeaconsensus-basedorganisationwhereallmembersareonequalfootingservicedbyaselfstanding secretariat based in the OECD’s Centre for Tax Policy
andAdministration.
The Global Forum monitors jurisdictions’ implementation of the
standardthrougharobustandcomprehensivepeerreviewprocessinvolvinganexaminationofajurisdictions’legalandregulatoryframework(Phase1)andpracticalimplementation(Phase2)
ofthestandard.TheGlobalForum’smainoutputsarethereviews
of its members and non-member jurisdictions. To date, it has
completed70reviewsandmanymoreareinprogress.
GibraltarhasparticipatedintheworkoftheGlobalForumsince
its inception. It committed to the international standard for exchangeofinformationfortaxpurposesin2002andhasparticipatedinalloftheGlobalForum’sannualassessments.In2009it
becameafullmemberoftherestructuredGlobalForum.
Gibraltar’s Phase 1 peer review took place in 2011. This was a
comprehensiveandthoroughprocessinvolvingtheparticipation
of the Gibraltar authorities, the secretariat, peer assessors and
theGlobalForummembers.ThepeerreviewreportwasadoptedbytheGlobalForuminOctober2011andisnowavailableat
http://eoi-tax.org/jurisdictions/GI.
Overall,thepeerreviewresultsshowedthatmostoftheelements
necessaryforeffectiveexchangeofinformationwereinplacefor
Gibraltar.Theseincludetheavailabilityofownershipinformation
onlegalentitiesandarrangements,bankinformation,accessto
information and a relevant network of exchange of information
partners.However,thelegalobligationsforrelevantentitiesand
arrangements to maintain accounting records were deemed to
JURISDICTION
DATE
SIGNED
Indeed,thisisthenewinternationaltaxenvironmentandGibraltar
haskeptupwiththesedevelopmentsthroughitscloseengagementwiththeGlobalForum.Buthavingarobustexchangeofinformationregimeismorethanjustaboutajurisdiction’sabilitymeet
itsinternationalobligations–theelementsthatarekeytoeffective
exchangeofinformationarealsoessentialforajurisdiction’sadministrationandenforcementofitsowndomestictaxlaws.Such
elements include the availability of ownership, accounting and
bank information, as well as ensuring the tax authority’s access
tothisinformationforitsowntaxadministrationpurposes.Tothis
end, we believe that building up strong systems that ensure the
availabilityandaccessibilityofinformationhasakeyroletoplayin
effectivetaxadministrationanditisourhopethatthepeerreview
processwashelpfultoGibraltarinindentifyingaspectsofitslegal
andregulatoryframeworkthatcouldbeimproved.
Gibraltar’s progress in implementing the international standard
demonstrates its commitment to tax transparency and being a
responsiblememberoftheglobalfinancialcommunity.Gibraltar’s
Phase2review,whichexaminesthepracticalaspectsofitsexchangeofinformationregime,isscheduledtocommenceinthe
secondhalfof2014.ItwillalsoassessGibraltar’simplementation
oftherecommendationsmadeinitsPhase1review.WelookforwardtocontinuedcooperationandworkingwithGibraltarontax
transparencyandexchangeofinformationmatters.
DATE ENTERED
INTO FORCE
Australia
26Aug2009
26Jul2010
Austria
17Sep2009
1May2010
Belgium
16Dec2009
notyetinforce
Denmark
2Sep2009
13Feb2010
FaroeIslands
20Oct2009
8Jun2011
Finland
20Oct2009
6May2010
France
22Sep2009
9Dec2010
Germany
13Aug2009
4Nov2010
Greenland
20Oct2009
24Dec2009
Iceland
16Dec2009
notyetinforce
Ireland
24Jun2009
25May2010
Malta
24Jan2012
1Apr2012
Netherlands
23Apr2010
1Dec2011
NewZealand
13Aug2009
13May2011
Norway
16Dec2009
8Sep2010
Portugal
14Oct2009
24Apr2011
SouthAfrica
2Feb2012
notyetinforce
Sweden
16Dec2009
3Jul2010
UnitedKingdom
27Aug2009
15Dec2010
UnitedStates
31Mar2009
22Dec2009
CountrieswithwhichGibraltarhassigned
TaxInformationExchangeAgreements 48
be insufficiently comprehensive and it was recommended that
Gibraltartakestepstoaddressthisdeficiency.Gibraltar’sactive
participationintheworkoftheGlobalForumandthepeerreview
processisimportantbecauseGibraltarisanimportantfinancial
centre, both in Europe and globally, and provides the platform
for a large volume of financial transactions. Effective exchange
of information for tax purposes is necessary to ensure that the
lawsinGibraltararenotmisusedtofacilitatetaxevasion.Under
the Global Forum’s peer review process, all jurisdictions are on
a level playing field, subject to the same rules and obligations
underaclearlydefinedstandard,andnojurisdictionmayseekan
advantageoveranotherbynotfullyimplementingthestandard.
GlobalForummember
agreementmeetsinternationalstandard
agreementnotyetreviewed
Source: OECD‘s Global Forum on Transparency and Exchange of Information for Tax Purposes
Gibraltar 2012
49
Financial Services
milestone GRP
On the Rock with Space to Grow
Based in Gibraltar, insuring across Europe
Interview with Ms Penny Hudson FCII, Managing Director, R&Q Caledonian Gibraltar
Penny Hudson has worked in the insurance industry since 1987 for both insurance companies and brokers, dealing with
life and general insurance. She has licensed and managed a variety of insurance vehicles including European direct writers,
captives, life and general protected cell companies. Ms Hudson is a Chartered Insurer who completed her Fellowship of the
Insurance Institute in 1996 when she set up Caledonian Insurance Management Services Ltd (now R&Q Caledonian). She
served as Chairman of the Gibraltar Insurance Association from 2007 to 2010 and was actively involved in the launching of
the Gibraltar Insurance Institute in 2009. She has also been involved with Financial Action Task Force and IMF evaluations of
Gibraltar and has worked with Gibraltar’s FSC and Government on numerous occasions. Milestone GRP met with Ms Hudson
to discuss the evolution of Gibraltar’s insurance sector, R&Q Caledonian’s growth within it, and the effects and opportunities
coming out of new directives regulating the sector.
Milestone GRP - What factors have contributed to the success of Gibraltar’s Insurance sector in terms of the size of the
market and its profitability?
Ms Penny Hudson - In the beginning Gibraltar was the new
place to be. When the 2nd and 3rd Life and Non-Life Directives were brought in by the European Union, Gibraltar became
a new place, with a new flexible system, and a tax efficient
jurisdiction from where it was possible to do business all over
Europe. Gibraltar grew its capabilities along side the changing
legislation in order to create the professional infrastructure it
has now.
At the same time the Financial Services Commission was
being founded and insurance was a significant area of growth
for the private sector and the Government. We all had a common focus to bring that specific business into Gibraltar and
those same people are here today. So, back in the 90s, it was
the right people in the right place and at the right time. We were
using new legislation, flexibility, tax efficiency and lower costs
compared to other member states. One of the main reasons
for the great success of the sector here is the fact that people
come here to run their own business and are therefore very
focused on the bottom line.
Milestone GRP - What trends have emerged in the Insurance
sector since Gibraltar became part of the European Single
Market (ESM) for Insurance, and how do you see Solvency II
affecting this?
[Editor’s Note: Solvency II is an EU Directive concerning the amount of capital
EU insurance companies must hold to reduce the risk of insolvency. Once
approved, it is scheduled to enter into effect on January 2014.]
Ms Hudson - With the ESM for Insurance, Gibraltar presented
a new possibility. Gibraltar is one of the few places where you
can have a European life insurance company with a cell base.
So I am also, at present, Managing Director of London & Colonial, which writes a cell-by-contract product. In the mid 90s,
UK legislation allowed a package product where you had to buy
an annuity from your pension and it had to be in the EU. This
meant that a company like London & Colonial could come up
with a specific product that was extremely popular, that was
nowhere near a tax avoidance product, but gave more flexibility.
50
Therefore, more product innovation was created in Gibraltar. In
addition, many motor underwriters moved to Gibraltar to benefit
from their knowledge and the ability to grow smaller portfolios
in a competitive arena. Since the new European legislation, any
insurance company within the EU can write anywhere in the EU.
Now, because of Solvency II, there is quite a strong possibility
that you will need a higher capitalisation. Therefore, the bigger
companies that were not necessarily in Europe could represent a
bigger market for us, if they have access to relevant capitalisation. A lot of people come to me who do not have the capitalisation to set up in Europe, but they want to write business in Europe.
Milestone GRP - What categories of clientele do you deal
with, and which countries are represented within it?
service providers throughout Europe, and a network of people doing business in Europe.
Ms Hudson - In the beginning, our biggest market was the UK.
Our flexibility and efficiency encouraged people to move their
business here whilst writing it in the UK. It was not very long
after that though that we started building up an international
clientele including North and South America, Eastern Europe,
Spain, Italy, France and other areas of Western Europe.
Milestone GRP - Are you seeing new opportunities emerge
from new areas and markets around the world?
Examples of the types of clients we have include London &
Colonial, which was set up in 2001. They write life annuity
business, with just under half a billion dollars in assets under
administration. We also have one of the largest motor insurers, which writes business under the Freedom of Establishment basis. We also have an American client, with its own risk
management team, which was using a major insurer in Europe. However, they felt that what they were being charged for
the services they were being offered was not as good as they
would have liked.
They write their own Group risks throughout Europe, and for us this
has been invaluable in gaining a huge body of knowledge on doing business all over Europe. We have dealt with the DGS (Spanish
regulatory body) in Spain and with the Tax Office in Germany, just
to mention a few. We have gained this huge amount of knowledge
whether it is about paying premium tax or sorting out claims. Over
the last ten years, we have built up close relationships with other
Ms Hudson - At first I was on my own and then with local shareholders, but from 2010 we became part of a much larger group,
Randall & Quilter (“R&Q”) who are based in the UK, are listed
on AIM, and do business globally. They are extremely focused
and entrepreneurial, and they have four main divisions: insurance investments, insurance services, underwriting management and the captive insurance/company management division
that covers, at present, the US, Norway, Jersey and Gibraltar.
The Group also deals with a variety of run-off businesses, which
R&Q would also like to bring to Gibraltar. Being part of the Group
gives us a much bigger infrastructure to work with and a great
potential for expansion.
We see potential opportunities arising from Latin American markets; from companies there that feel they may have exhausted
their local markets and are looking for new ones in Europe. They
may already do business with London but they are looking at
basing themselves in Europe to expand their market in order to
deal with both sides of the Atlantic. Gibraltar is a perfect location for South American companies as all companies here have
bilingual staff. We also tend to be less bureaucratic and this is
one of Gibraltar’s many great strengths.
Then, I have other clients coming, saying that they are big
enough and want to do business with those smaller clients in
Europe. So it is the same market but with different people at
different levels because of Solvency II and the cost of corporate governance. Matching partners is part of the interest. These
are the two main trends: either clients who know their business
very well and want to control it themselves, they have their own
managed business and they set up on their own; or companies
that have done very well in their own country and want to replicate this by writing a new product through Europe. Gibraltar,
moreover, offers the benefits of flexibility, access to the Financial
Services Commission and tax efficiency.
In terms of the effects Solvency II will have on the market, I usually tend to be conservative, but I have been pleasantly surprised
by recent new enquiries coming into Gibraltar. Entrepreneurs always appear to rise to challenges. Like in all economic cycles,
there are people who are able to take advantage of downward
cycles. Right now there are companies taking advantage of setting up insurance companies with higher levels of capital. So,
if Solvency II comes in, and depending at what level, there is a
certain amount of consolidation to be expected together with a
number of new players. Many countries will have to cope with
this new legislation and its requirements, and newcomers can
benefit from having a head start. They will already have done
the research, and they will come in knowing and providing for it.
While in the past we would get smaller clients that were looking
at doing business only in the member state they came from, and
maybe expanding later, we are now starting to get bigger clients
looking to do business all over Europe right from the start. It is
not a huge change but rather a subtle one.
Gibraltar 2012
51
Financial Services
milestone GRP
Banks
Milestone GRP - So, EU directives and legislation do present
opportunities…
EU Directives Presenting Opportunities
Fund Relocation to Gibraltar
Mr Hogg - Yes, very much so. Due to AIFMD managers, advisors
and investors need to consider where they manage their assets
and where they invest their assets. Before AIFMD using the Caribbean model was the norm and many managers and advisors
would not have been so enthused to recommend EU finance centres. Gibraltar, being a member of the EU through its status as a
British overseas territory, has to adopt changes in the EU legislation and directives as they become. Gibraltar is fully compliant in
respect of EU investment business and funds legislation.
Investment Firms
12
10.2
10.3
£ (billion)
8
6
4
10.7
10.3
2.9
1.9
9.8
10
£ (billion)
We anticipate that there will be a change in the global investment
and funds industry whereby EU managers and investors will wish
to manage and invest in EU structures as opposed to the Caribbean structures that were used during the 1980s, 1990s and the
early part of this century. Gibraltar is a viable option in the EU
for such investment and fund business. Gibraltar cannot be all
things to all men. However, it is a very well regulated, credible EU
finance centre. Gibraltar will not be the largest finance centre in
the EU, however, we aspire to be the best EU finance centre and
we, GFIA, believe that we are well on the road to being the best.
3.7
3.6
2.8
9.2
2.2
7.1
6.9
1.2
1.4
6.2
1
6.2
1
5.9
5.5
5.2
5.2
5.2
6.5
6.7
7
7.8
8.4
7
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
6.6
1.4
2
0
Funds, Assets Under Management
Gibraltar Financial Services Commission
Funds – Assets Under Management, 2010
Source: FSC
Insurance companies have been using the PCC in Gibraltar
for many years and funds have been using the PCC since the
enactment of the original experienced investor funds regulations
during 2005. It is a very versatile structure since it allows a manager to create a singe investment house within which there can
be several different cells (funds) with different investment and
risk parameters. The said manager could trading equity long
and bonds in one such cell, and equities short and derivatives
in another cell. As such, the manager can provide investment
products for clients with differing risk and return appetites within
one structure. It is a very powerful piece of legislation.
Interview with Mr Adrian Hogg, Chairman, Gibraltar Funds & Investments Association
Adrian Hogg is a Director of Grant Thornton Fund Administration Limited. He has been involved in the accountancy profession
since his graduation in 1994 with a Bachelor of Arts Honours Degree in European Finance and Accounting where he majored
in Accountancy, Finance and Economics. Adrian is a Fellow of the Institute of Chartered Accountants in England and Wales.
Prior to joining Grant Thornton Gibraltar, he worked for five years in the British Virgin Islands. He sits on the Finance Faculty of
the Gibraltar Society of Accountants and GFIA's Funds Sub-Committee. He is a Statutory Auditor and holds a Company Manager license issued by Gibraltar's Financial Services Commission in relation to the provision of directorships to Experienced
Investor Funds. Milestone GRP met with him to discuss the current state and potential of Gibraltar’s Funds sector.
Milestone GRP - Could you introduce us to GFIA and its role in
Gibraltar’s Funds sector?
Mr Adrian Hogg - The GFIA has in the region of 100 members and represents investment managers, investment dealers, banks, brokers, funds, and all those associated with
the funds - from the administrators to the directors. GFIA’s
objectives are to encourage the exchange of information
between members and the relevant authorities in order to
achieve common goals, to establish a recognized medium
of communication between GFIA and the Government, the
Finance Centre and the Financial Services Commission, as
well as to encourage and promote the continuing education of its members and finally, to promote adherence by its
members of the principals of investor protection, corporate
governance, compliance and professionalism in investment
and fund activities.
We are constantly in dialogue with the Government and the Regulator to improve conditions for investment and funds business. We present workable, marketable initiatives to both the
Government and the Regulator as we, the practitioners, are
aware of what will serve to improve the competitiveness and
relevance of Gibraltar’s investment and funds business. An example as such is the recent significant change to Gibraltar’s
experienced investor funds regulations that was largely a GFIA
initiative that after lobbying the Regulator, Finance Centre and
the Government, came into force on 12 April 2012.
52
Milestone GRP - How do you envision the EU’s Alternative Investment Fund Managers Directive (AIFMD) affecting
Gibraltar’s Investment Fund sector?
Mr Hogg - The AIFMD is expected to come into force in 2013
and it represents a very significant piece of legislation to be
passed for investment business and funds in the EU. AIFMD
contains new rules on the marketing of alternative investment
funds in the EU by both European and non-European managers, and also lays down rules for the marketing of those
funds to professional investors within the EU. For those that
market funds in the EU AIFMD provides the quandary of whether or not to keep the fund in a domicile outside of the EU,
re-domicile existing funds to the EU or to create funds afresh
in the EU. Re-domicilation is often the method of choice as it
should be a seamless transition without triggering a taxable
event and it allows established managers to maintain their
track record.
Changes to the experienced investor fund rules in Gibraltar could
trigger interest in the state as a location for hedge fund managers
and companies, attracting re-domiciles and start-up funds. Under the Financial Services (Experienced Investor Fund) Regulations 2012, various improvements to the original 2005 regulations
have been made, including the opportunity for large funds to use
fund administrators based outside Gibraltar as long as where
they are based has oversight equivalent to that in Gibraltar. The
regulations also allow funds to re-domicile to Gibraltar.
From an opportunity point of view from Gibraltar’s and Europe’s
standpoint (as Europe will gain the marco economic benefit of
increased investment and fund business being undertaken in the
EU as opposed to the Caribbean), AIFMD is making managers,
advisors and investors alike pause for thought when setting up
an investment structure and consider setting up in the EU and
specifically in Gibraltar. The effect of this is that more wealth is
going to be held, managed and controlled by European citizens
in the EU. From the point of view of structures that are already in
existence, the quandary is whether or not to keep the fund in a
domicile outside of the EU, re-domicile existing funds to the EU
or to create funds afresh in the EU. Re-domiciliation is often the
method of choice as it should be a seamless transition without
triggering a taxable event and it allows established managers to
maintain their track record The new 2012 experienced investor
funds regulations are re-domiciliation friendly.
Milestone GRP - Is there a limit on how much Gibraltar can
grow and how much investment it can absorb in the coming
years? Is that a concern?
Mr Hogg - I do not think so if we look at other successful small
jurisdictions such as Singapore and Hong Kong and consider
the size of the City of London. The size of a jurisdiction does not
need to be its limiting factor.
Milestone GRP - Do you think Gibraltar’s success through the
last few years holds a message for the international business
and investment community?
Milestone GRP - What would you highlight as key legislations
and directives that have been passed here, such as those
governing Protected Cell Companies (PCC)?
Mr Hogg - Gibraltar made the decision many years ago to undertake its business in a very controlled and regulated environment. When the decision was made to do so it was not a
view held by all. The cautious, controlled, regulated approach
and environment that has been fostered has been excellent for
Gibraltar. Corporate governance and regulatory control have
become ever more relevant and desired in the EU and elsewhere. Gibraltar got it right many years ago when it decided to
go down that path. For manager, advisors and investors alike,
visiting Gibraltar is easy and the investment business participants are professional, knowledgeable and approachable.
When visiting Gibraltar the investment business service providers and the regulator can be visited all in one day. It is this kind
of closely controlled environment that is key to Gibraltar’s business model. All participants in Gibraltar’s investment business
work to protect the reputation and integrity of their business,
and by doing so are creating an environment that allows for
controlled growth. It is the kind of self-regulation that all investment business participants foster for the benefit of all.
Mr Hogg - The Protected Cell Company structure is multijurisdictional. It can be found in the Channel Islands, the
Caribbean, and under different names: Segregated Portfolio Company, Incorporated Cell Company, or PCC. We have
had this system in place in Gibraltar since 2001.
In the EU there are many choices and much competition,
which creates strong investment business and products. Gibraltar has investment products that are relevant, that work
and that are applicable. Gibraltar is an EU finance centre ready for the future.
The changes are all positive from Europe’s point of view. AIFMD
will result in more managers managing more within EU structures
and investors investing more of their wealth within the EU with
the increased corporate governance and regulatory control of EU
regulators. It’s a good thing for investors, who ultimately are the
benefactors of investment business, who are able to invest in
greater controlled regimes within the EU. It is widely expected
that AIFMD will create a fundamental change in the international
funds industry whereby funds that are marketed in the EU are
domiciled in the EU. Gibraltar, with the modernisation of its experienced investor funds regime, is ready for the change.
Gibraltar 2012
53
Financial Services
Regulatory Changes Improving Competitiveness
Experienced Investor Funds Regulations 2012
by Mr James Lasry, Partner & Funds Team Leader, Hassans International Law Firm
After nearly seven years, Gibraltar’s Experienced Investor Fund
regime has been updated and modernised in a continuation of the
partnership between the industry, the Financial Services Commission (the “FSC” and/or Regulator) and the Government of Gibraltar. Prior to 2005, Gibraltar’s Fund industry comprised a handful
of funds regulated under the, then, Financial Services Ordinance
1989 and a few dozen private funds.
Whilst the regime of the former worked in practice, it relied heavily on obtaining derogations from the Regulator. This made the
process of authorising a fund somewhat cumbersome. On the
other hand, the private funds industry grew fairly rapidly. Private
funds in Gibraltar are not regulated and can only be offered to
an identifiable category of persons whose number is fifty or less.
Although there are no actual statutory requirements for the production of audited accounts, a prospectus nor the engagement of
a fund administrator, the industry practitioners very much insisted
on these as a matter of professional investment protection and
proper corporate governance.
Then, to meet the demand of certain funds that had grown and
wished to market themselves to external investors, the industry
proposed to Government the enactment of the Financial Services (Experienced Investor Funds) Regulations 2005 (the “Regulations”). These regulations ultimately codified what had become
the practice with private funds and added a few elements to
allow the funds to be marketed more extensively. Generally, investors into Experienced Investor Funds (“EIFs”) were limited
to experienced investors which were defined as investment
professionals, investors who had €1million besides the value of
their residential home, or investors who invested €100,000 or
equivalent.
It is important to note that these conditions are not cumulative
so it is sufficient for an investor to comply with just one of them
in order to be able to invest in a Gibraltar EIF. The Regulations
also required the engagement of two Gibraltar based directors who are authorised by the local Regulator to act as fund
directors. They also required the appointment of a local fund
administrator. The authorisation process was particularly attractive as a fund was allowed to begin trading on the basis of a
legal opinion issued by local counsel stating that the fund was
properly established in accordance with the Regulations. A fund
would have to notify the Regulator within fourteen days of its
commencement of trading. The notification would be accompanied by the company’s constitutional documents and Private
Placement Memorandum and a regulatory fee of £2,500. The
regime worked very well and is probably one of the most flexible
regimes within Europe.
After almost seven years of practice the industry requested certain amendments to the regime to increase its competitiveness
and ease of use. The main areas of change are the permission
to use foreign fund administrators in certain circumstances, the
expansion of the definition of experienced investors and the addition of an optional pre-launch authorisation scheme.
54
In April 2012, the Financial Services (Experienced Investor Funds)
Regulations 2012 were signed into law by Gilbert Licudi QC, Minister with responsibility for Financial Services.
The principle amendment of these new regulations is that under
certain circumstances, foreign fund administrators are eligible to
act for Gibraltar EIFs. In an attempt to enable funds, especially
some of the larger and more institutional funds, to use brandname administrators, the regulations established a process
whereby a foreign fund administrator can be authorised by the
Regulator, with approval of the Minister, to service EIFs. There
will be an actual list of authorised fund administrators produced
which will be approved by the Minister.
It was also proposed to expand the definition of experienced investors such that in addition to the existing classes of experienced investors, funds would be able to admit investors who are;
• A participant who has invested an aggregate of €100,000 in one or more Experienced Investor Funds;
• Professional clients under MiFID as defined under the Financial
Services (Markets in Financial Instruments) Act 2006;
• Investors who invest €50,000 and who have been advised by
a professional adviser to invest in the fund, and the fund’s administrator has received confirmation of such advice. The adviser
needs to be regulated to provide advice in the jurisdiction they
are based in; and
• Investors who are investors in funds which were established
outside of Gibraltar and were aimed at professional or sophisticated investors and which funds are subsequently re-domiciled to
Gibraltar. This is seen as an important addition because, in light
of the Alternative Investment Fund Managers Directive (“AIFMD”)
which is scheduled to come into force in 2013, there is the expectation that a significant number of Caribbean funds will consider
re-domiciling into an EU jurisdiction such as Gibraltar, in order to
avail themselves of the marketing advantages of European domiciled funds.
The amendments to the Experienced Investor Fund regime in Gibraltar are anticipated to improve the competitiveness of the Gibraltar Fund regime while keeping the interests and objectives of
investors and the Regulator intact. It is also anticipated that the new
regime will be more user friendly for the more institutional funds.
The funds industry in Gibraltar has matured over the last decade
and has drawn on experience from clients and staff from other
jurisdictions as well as developing significant home-grown expertise. Funds are now seen as one of the pillars of the Finance Centre in Gibraltar along with insurance, banking and private client
work. Gibraltar’s size and the efficient communication between
the industry regulator and Government have allowed it to develop
into what is arguably the best experienced / expert fund regime
in Europe and certainly the one with the greatest flexibility and
quickest time to market.
Financial Services
milestone GRP
Trust and Company Management
The Rock Reaching Out
Interview with Mr Ian Le Breton, Managing Director, Sovereign Trust (Gibraltar) Limited
Interview with Mr Alan Kentish, Chief Financial Officer, STM Group/STM Fidecs
Milestone GRP - The main trend over the last decade has
been global integration and compliance. How has this impacted Gibraltar's economy and how has it impacted the
Trust and Company Management industry in particular?
Milestone GRP - Financial markets have been erratic. People are concerned with where to put their money and risk is
a big concern. Is this impacting Gibraltar given that many of
the companies that are based here sell their products elsewhere?
International reach and depth of service
Mr Ian Le Breton - Looking at compliance, we are regulated
by the Financial Services Commission (FSC) with a strong but,
at the same time, cooperative hand. They have turned what
could otherwise have been extremely onerous, difficult to implement policies, into something that remains costly and time
consuming, but is done with a cooperative spirit with them.
From time to time we have discussions with them, and the
relationship is good. I describe it as a hand in hand approach,
not a hand in glove one. It is a partnership type of approach.
There is lot of new regulation to take on, and other international groups, the OECD, IMF, the EU, are going to impact us.
You need to have a pragmatic view and simply live with this,
and even the Government cannot do anything about it. We
work with this, whether we like it or not, we have to move with
the times and we do it fairly successfully. That means that
Gibraltar can look to the world and say that we comply with all
these groups; we are signing all these TIEAs, we might soon
have double tax agreements, and we’ve moved from being
considered an offshore financial centre to what it is now an
international specialised financial centre.
Milestone GRP - Gibraltar and the Government are often
described as agile and nimble. Do you agree with that characterization?
Mr Le Breton - It is very true. Agile and nimble, but also positively reactive is the type of word to describe it. Proactive
too, as we tend, in Gibraltar, to identify trends and adapt to
them. That is what we do in Sovereign and a number of firms
with whom we share the space in Gibraltar, too. We need to
reinvent ourselves as we go along, and any firm like us that
does not have this approach is going to find themselves falling
behind because legislation and rules are changing all over the
world at all times. So if you cannot be agile and nimble then
you are lost. That takes us back to our small but perfectly
formed nature.
It is not difficult to talk to the Government's departments, even
to members of the Government themselves, if we need to,
quickly. Obviously legislation changes take time but we certainly have a good rapport with these people and that means
that we can be agile and nimble.
Milestone GRP - How has the global downturn affected the
growth of the company? What areas are you are developing?
Mr Le Breton - We have certainly seen growth despite the
economic downturn. In the last 4 years our staffing has grown
by 10% or more. As for our product here, it is certain that
56
there is an increasing depth to our services. We do a certain
amount of work on the personal pension side, particularly the
UK transfers, the Qualifying Recognised Overseas Pension
Schemes (QROPS), and Qualifying Non-UK Pension Schemes
(QNUPS), which is a different model altogether but has similarities. We are expending our marine division that is based
in Gibraltar, looking at yachts, and last year we established
an aviation division. Again looking at clients with big jets, big
yachts; these are the types of clients we need to approach
anywhere. So our strategy is to use these subsidiary groups
to look at markets in a slightly different way.
Milestone GRP - How have Gibraltar’s infrastructure developments contributed to these specific opportunities, such
as the registration of yachts or aircraft?
Mr Le Breton - The growth of Gibraltar's infrastructure is extremely useful to us. For Sovereign it is important that the infrastructure continues to develop in Gibraltar, not just for the
business itself, but also for our staff. It is important that they
continue to find this an attractive place to live and work. From
Sovereign's point of view, we are one of 25 offices but we
were established here in 1987. So here is where everything
started and it continues to be our largest base.
Milestone GRP - Are there any limitations to operating here?
Mr Le Breton - There are limitations. We are never going to
land a jumbo jet at the airport, so are we going to set up direct
links with New York with 300 people on board a plane? No, we
will not. But, using this as an example, we have infrastructure
that is not right here but just a short drive up the road in Malaga where we have a full international airport, so that is not
a real limitation.
We have a wonderful time zone advantage, the climate is
great, and this is important since people are attracted to Gibraltar for its climate and lifestyle. A lot of people like our firm
are doing what they can to build it up. We have a lot of competition out there, but generally overall we are doing a good job.
I encourage executives from wherever they are in the world to
come and have a look.
Milestone GRP - As a well established foreigner in Gibraltar,
what do you see as existing misconceptions about the place?
Mr Le Breton - One area I want to work on is the impression
that Gibraltar is just open for the British. That is not the case.
Brits make up a percentage of the client base, but just a percentage of it, and that is a message I want to get across. We
are ready to build our market from around the world. Europe
is obviously a main area of course, but there are advantages
for other parts of the world, too. Gibraltar is a good place to
headquarter a company and maybe the CEOs from around the
world may want to start considering that, and then come to
talk with us when they do.
The EU and farther abroad
Mr Alan Kentish - A lot of Gibraltar has grown up through the
traditional Trust and Company Management business, usually
in offshore structuring and looking after high net worth individuals, who are typically internationally mobile. Moreover, it is
not necessarily the money that it is actually held in Gibraltar
that is incredibly pertinent. You often have a structure that has
a family trust but the banking is done in the City of London.
What Gibraltar has managed to achieve pretty well is to provide the facility, the vehicle, the wrap-up and the infrastructure,
and then tap into the experts out of the jurisdiction, or locally,
that will do things such as investment management. The average Trust and Company Management individual will not do investment management. Gibraltar is reasonably short on banks
in that banks that are here are typically branches, rather than
separate stand alone subsidiaries.
Milestone GRP - What are Gibraltar’s major strengths and
its weaknesses at this stage?
Mr Kentish - At this stage, one of its biggest strengths is being
part of the EU. It is very clear that around the world, there is that
concept that the age of the tax havens is over. It has become
a dirty word, it does not work, and has not for a number of
years. Therefore, being part of the EU, Gibraltar is a legitimate
jurisdiction for tax planning and structuring. With such things
as passporting, well-written insurance companies, insurance
intermediaries, it becomes a powerful ability to base in Gibraltar and passport out. I see that as one of the key benefits. We
need to make sure, nevertheless, that if we are passporting,
into Poland for example, they recognize our passporting right.
To date the ability to tap into the Regulator is a key criteria
of moving forward. In the UK, if you try to get a ruling from
the FSC, chances are that it is going to take you from 6 to 9
months.
On the negative side, because of the regulations and because
the UK can look over our shoulder, there is a slight paranoia
that we must double tick all the boxes to ensure that if the UK
comes to investigate, the firewall will stand up. It is a difficult
thing to say, but I think the regulation here is more user friendly
than in the UK, although I think it is getting more and more
difficult now. As Gibraltar has progressed and has moved itself
up in terms of credibility, it becomes more difficult to have an
answer, as the more you have to protect, the more careful you
are first. It is just that there is a concern that the UK can look
over your shoulder, whereas in any other EU country, no one
has the right to do that.
of tax structuring and the lack of any double tax agreements.
More and more international clients require the certainty of having double tax agreements in place. Double tax treaties would
help us to ensure certainty in terms of structuring. This goes
to the extent that there is an argument on the insurance side,
that if you have a branch in the UK, you have to pay taxes in
the UK and potentially you might not get tax relief in Gibraltar.
So, there are some challenges and agreements that need to
be ironed out.
Milestone GRP - How do Trust, Company Management and
Tax Planning firms fit in the Gibraltar economy today? and
what are the factors that have contributed to this mini boom
we are experiencing right now?
Mr Kentish - There are two things that have to be considered. First of all, Gibraltar has done very well to reinvent itself
since the days when the Ministry of Defense (MoD) employed
most people. It went through the usual phase of tax planning
wherein you set up an offshore company and you did not tell
anybody about it; those days are long gone. I think Gibraltar
has picked up a certain amount of business just because of
our PLC. We have a honey pot of clients down the coast, and
those are the people who exactly fit our profile. They are looking to retire overseas, they may have concerns and may need
an Anglo-Saxon way of dropping off their assets, as well as a
common law to protect their structures to do what they want
with their assets, even just as part of their will. So that is the
start of the typical Trust and Company Management business.
What Gibraltar needs to do now is to see itself as a finance
centre for the EU and to do this Gibraltar has to be very strong
in demonstrating it is part of the EU. That is pretty straightforward, in terms of dealing with the UK, Ireland or any EU
jurisdiction that has a sizable English-speaking population. But
if you try to explain to a Frenchman that Gibraltar is part of
the EU, the first thing he will do is to take the list of European
countries and say that Gibraltar is not on it. You then have to
explain that it is because of its association through the UK. So
we have to strengthen that communication. And we have to
not only target the UK but even beyond, even South America. It
is a natural progression to look at those markets that Jersey or
Guernsey would not be involved in, because they do not have
the Spanish-speaking individuals.
I think the weakness is not knowing where we really sit in terms
Gibraltar 2012
57
Financial Services
milestone GRP
A Stable Sector in Rough Seas
Banking supporting Gibraltar’s Growth
Interview with Ms Emma Perez, President, Gibraltar Bankers’ Association
Emma Perez trained as a certified accountant with KPMG, qualifying in 1996 and working in both the audit and fiduciary
departments. She later joined the finance department of Credit Suisse (Gibraltar) Limited in 1997. Emma joined SG Hambros
Bank (Gibraltar) Limited in May 2001 as the local accountant and was promoted to director in November 2002, then to Managing Director in May 2006 and Chief Executive Officer in 2011. She played a key role in the acquisition of the ABN Amro
private banking business in Gibraltar, doubling the size of the local SG presence. Emma has been president of the Gibraltar
Bankers’ Association since January 2011 and is also a member of the Gibraltar Finance Centre Council. Milestone GRP met
with Ms Perez to get her insight into Gibraltar’s banking sector, it’s development and the advantages it derives from Gibraltar
being within the EU.
Milestone GRP - How would you describe the Gibraltarian
Banking sector?
Ms Emma Perez - Gibraltar has seventeen licensed banks locally,
two retail banks along with a number of private banks that provide
standard private and retail banking services. There are a couple of
Swiss private banks and a French bank, which mainly deal with the
international sector; then we have the other players who generally
act in the local market. We have one locally incorporated bank and
all others are multinational corporations, so we work very closely in
line with the relative procedures and requirements. t
Milestone GRP - Are opportunities such as Islamic Banking
or Green Banking available in Gibraltar as we have seen them
evolving in other countries?
The Gibraltarian Banking sector works in accordance to all EU
directives and we are fully transparent. We follow the EU directives in relation to anti-money laundering and in relation to all
the requirements that are needed to take the Financial Centre
forward. For example, we have just signed our 20th Tax Information Exchange Agreement (TIEA) with South Africa, showing our
flexibility and our willingness to move forward and rid ourselves
of the stigmas of the past.
Ms Perez - Islamic Banking has been on the radar for a while
now especially due to our proximity to Morocco. The Financial Services Commission and various lawyers have been talking
about it for some time, in terms of the legislation, for instance.
There are certainly interesting opportunities for Gibraltar in
terms of funds, another big sector we need to move into. Shariacompliant funds, for example, will be something interesting to
look at in the future.
Milestone GRP - How are international trends and EU directives such as Basel III or MiFID (Markets in Financial Instruments Directive) shaping Gibraltar’s Banking sector? Do any
challenges or opportunities arise from these directives?
Milestone GRP - Asset Management and Funds have been
highlighted as areas that present opportunities for growth.
How do you see them evolving and what role do you see
banks playing?
Ms Perez - Being onshore and part of the EU is a benefit for us,
as this will reassure the client that we follow the EU directives.
Some of the directives that have come up now have changed
the way in which business is done. MiFID introduced new ways
of communication with the client, and the way all fees are divulged to the client. While these directives make things fully transparent for the client, they imply a lot of changes for the business
and rises in terms of the costs, but it all means reassurance for
the investor.
Ms Perez - The Finance Centre has just announced that the jurisdiction will not be restricting the administrators of funds to be
solely registered in Gibraltar. It will be done on a selective basis,
but global players will be able to come to the market. Banks
will be taking on custody services for the Fund industry. Some
banks have taken on more of these funds than other banks. This
segment is very beneficial for the jurisdiction and we need to
play on that more and to be able to assist the funds. If we want
funds to grow we need to provide all the necessary services.
Banks need to take on the more complex types of scenarios,
which are becoming more commonplace.
Milestone GRP - What impact has the financial crisis had on
the banking sector? Have any opportunities emerged from it?
Ms Perez - There is definitely an interest in Gibraltar for organizations structuring through Gibraltar, especially with the new tax
regime. Being onshore and in Europe does create opportunities
that other jurisdictions may not have. Nonetheless, our banks
have all have been suffering from the mitigation and diversifi-
58
cation of risk. In particular, a number of institutions, being part
of multinational groups, have been suffering to a certain extent
from cost cutting and redundancies. However, overall, Gibraltar
has been sheltered from the rest of the world’s economic woes,
as we are a small economy and it is therefore easier to manage.
Moreover, we can count on strong sectors such as Online Gaming and Shipping to contribute to the economy.
On the Asset Management side, we are ideally set up to support the Asset Management sector here, but more on a custodian basis. There are some banks that have specific platforms
to cater for Asset Managers coming in, and external Asset
Management is a key type of business that a lot of banks are
looking at.
Milestone GRP - Why do you think certain stigmas remain
attached to Gibraltar despite the transformations on the
ground?
would also represent a great channel for investments in the
rest of Europe. Some local companies in Gibraltar are already dealing with Russia, so there is already a good channel
created with some of our intermediaries locally. With regards
to the Banking sector, emerging markets may be synonymous with high-risk business. As a matter of fact, it is more
challenging for the private sector to attract that sort of business because of the extra background work required in these circumstances. So while we appreciate it and support it,
when it comes into practice it becomes a challenging task
for banks.
Ms Perez - It takes a long time for people's perception and trust
to evolve, but we have seen some good business coming to Gibraltar. I think we do not publicize that enough and promote the
abilities we have here. International marketing is a key area that
needs to be developed, and this is already a topic of discussion in
the Finance Centre. By improving the marketing we can make sure
that people become aware of what we can do for the clients here.
We are recruiting people to take on the marketing side more
specifically and in order to streamline what we market. They
will certainly be charged with marketing a set part of the Financial Services sector, going to the UK, trying to raise interest
there but also from the BRICS countries, for instance.
Milestone GRP - What would be your message to international bankers about what Gibraltar has to offer?
Milestone GRP - Is there a specific type of bank you could
attract from emerging markets?
Ms Perez - Obviously, it would be good to have banks coming from some of these emerging markets. We will support
anything that the Government is trying to push through. It
Ms Perez - With regards to opportunities, there is the need
to make Europe aware of our capabilities and the benefits of
passporting; making Europe aware that Gibraltar is an EU jurisdiction, onshore and fully transparent with OECD and EU
directives, regulations and requirements. The challenge is to
raise the profile of Gibraltar and its reputation to ensure that
it is a player within the global Financial Centre world. There is
such a high concentration of professionalism in Gibraltar that
we only need to show what we are capable of.
Year
Cash
Balances with
& Loans and Advances to Banks
Loans and
Advances
Investments
Other
Assets
Total
Assets
2001
6,635
3,854,945
1,198,768
16,961
126,829
5,204,138
2002
7,788
4,113,943
1,300,700
18,464
115,126
5,556,021
2003
8,495
3,046,822
1,629,648
201,992
22,459
4,909,416
2004
10,679
2,763,150
1,772,733
187,224
31,740
4,765,526
2005
38,025
3,390,693
1,974,226
198,316
50,816
5,652,076
2006
9,868
4,536,277
2,080,912
266,375
44,795
6,938,227
2007
8,746
5,219,535
2,429,145
410,799
132,287
8,200,512
2008
9,890
8,877,377
2,861,493
297,747
273,262
12,319,769
2009
16,824
9,278,820
3,023,263
1,486,056
363,547
14,207,358
2010
19,350
3,851,397
3,033,018
1,944,146
55,978
9,387,126
2011
33,140
3,159,210
3,159,210
1,205,594
61,340
9,020,574
Credit Institutions – Assets, £ (000’s)
Source: FSC
Year
Current
Accounts
Deposit
Accounts
Total
Deposits
Balances
from banks
Other
Liabilities
Total
Liabilities
2001
874,694
1,606,541
2,481,235
1,746,770
976,133
5,204,138
2002
657,984
1,807,877
2,465,861
2,349,582
740,578
5,556,021
2003
729,876
1,923,320
2,653,196
1,700,347
555,873
4,909,416
2004
965,327
1,691,179
2,656,506
1,700,298
408,722
4,765,526
2005
1,018,750
1,896,837
2,915,587
2,235,103
501,386
5,652,076
2006
1,193,855
2,428,179
3,622,034
2,783,640
532,553
6,938,227
2007
1,372,428
3,014,320
4,386,748
3,288,329
525,435
8,200,512
2008
1,355,175
2,833,547
4,956,716
7,145,466
123,199
12,319,769
2009
2,012,157
2,730,249
5,194,245
8,044,041
62,083
14,207,358
2010
2,281,654
1,841,621
4,512,829
3,712,338
31,544
9,387,126
2011
2,420,667
1,950,481
4,786,976
3,266,478
47,140
9,020,574
Credit Institutions – Liabilities, £ (000’s)
Source: FSC
Gibraltar 2012
59
Financial Services
milestone GRP
Trends in the Banking Sector
Gibraltar as Base
Interview with Mr Marvin Cartwright, Regional Head - Gibraltar and Corporate Banking, RBS International / NatWest
Interview with Mrs Marina Dominguez Steglich, PHD, CEFA,
Interview with Mr Mark Johnson, Country Manager,
Head of Private Banking, Lloyds TSB Private Banking Gibraltar
Lloyds TSB Bank Gibraltar
Milestone GRP - What trends have marked Gibraltar’s Banking sector in recent years? Where do you see the Industry
now?
Mr Marvin Cartwright -Overthelast20yearsGibraltarhas
seen consolidation of the Banking market, especially around
theretailenvironment,wheretheretailcaptivemarketremains
relatively small. So whilst it is a pretty stable and secure environment for banks to lend and carry out activity, the reality is that for the returns that banks seek in their markets of
operation,Gibraltarisasmallmarket.Thereareonlytwovery
dominantplayersintheretailspace,whichareourselvesand
Barclays. The main banking environment therefore is private
banking.Privatebankinghasseensomesuccessovertheyears.InGibraltartherearesomemajorplayerswhosefocusis
onprivatewealth,discretionportfoliomanagementandinvestmentmanagement.
Milestone GRP - Many in Gibraltar identify being part of the
European Union as one of the jurisdiction‘s key assets. This
comes with many requirements in terms of regulation and
compliance. How has this affected the Banking sector and
has it presented new challenges or opportunities?
Mr Cartwright - The challenges are constant. The pace of
change accompanied by the sheer volume of activity that is
happeningwithintheregulatorylandscapeisimmense.Along
withthemanybenefitsofbeingintheEU,oneofthechallengeswefaceisthesheerscaleofoperationsrequiredtoadapt
tothatlevelofregulatoryactivity,andforasmalljurisdictionit
willalwaysbeachallenge.
Ontheotherhand,GibraltaroverthelastdecadehasbenefitedsignificantlyfrombeingintheEU.Asthewholelandscape
isevolvingintermsofregulationoversights,beingpartofthe
EUwillbemorethanbeneficial.Indeed,Gibraltaroverthelast
decade,notasaresultofthecrisis,haspositioneditselfas
anonshorefinancialcentreandthathaslaidthegroundfor
agoodsolidfutureinasmuchaswecanpickupbusiness
looking to go into Europe. We can also give our customers
andinvestorsthepeaceofmindthatwefollowEUstandards
andregulations.Atthesametime,wearenimbleenoughin
termsofoursizetoquicklyadapttochanginglegislation.We
arestillkeentobringcustomersin,whilesomeoftheother
majormaturecentresarequitefull.ProbablyintermsofvalueformoneyGibraltarwillremaincompetitiveoverthenext
yearstocome.
Milestone GRP - In line with this process of compliance and
global integration, Gibraltar has signed 20 TIEAs (Tax Information Exchange Agreements) so far. Do you see these impacting the Banking sector?
Mr Cartwright -Fromabankingperspectiveitisstillearlyto
talkabouttheimpactofTIEAsonoureconomicactivity.Nevertheless,asallourfinancialservicescollegues,webenefitindi-
60
rectlyfromthem.Itisallpartoftheprocessofmakingourselves
whitelisted;deemedtobeacountrythatundertakesitsfinancial
servicesactivityinaresponsibleandprogressivemanner.Itis
allaboutreputationandthesigningofTIEAswillbringpractical
benefitsinduecourse.AtpresentitisaboutbuildingthatinternationalrecognitionthatGibraltarisanonshoreplayerwithhigh
standardsofregulationandtransparency.
Milestone GRP - North to South migration from Upper Spain
to the Gibraltar and Costa del Sol areas is on the rise. Do you
see this trend continuing in the future?
Mr Cartwright -Yes.AlthoughSpainiscurrentlygoingthrough
difficulttimes,weexpectthatassoonasnormalityreturnstraditionalexpatriateareaswillcontinuetogrow.SpainandPortugalhavebeengrowthareasforthelast25years,soasthe
FinancialServicessectorontheRockhasevolved,theyhave
been a natural hunting ground for some of the private banks
here and will continue to be so. However, there may now be
moredrivefortheprivatebankstolookfurtherafield.Someof
themnowgointoWesternEurope,presentingmoreopportunitiesinthefuture.
Passporting Private Banking across the EU
Milestone GRP - How would you describe Gibraltar’s Finance
sector?
Milestone GRP - What section of the market has Lloyds TSB
Bank (Gibraltar) focused on?
Mrs Marina Dominguez Steglich -Gibraltarisasmallplace,
intermsofitssizeandpopulation,andhasmaintainedagood
level of diversity in terms of the Finance sector’s offerings. It
hasthereforenotbeenreliantononeparticulartypeofbusiness
andthathasgivenGibraltarahugeadvantage.Therehasbeen
a move away from an antiquated system of offshore banking,
transformingGibraltarintoamodernandtransparentEuropean
financecentre.
Mr Mark Johnson -LloydsTSBBank(Gibraltar)Limitedhasfocusedonexpatriates.Wehavegrownthatbusinesseffectivelyin
line with our business prognostics since 2008, so from that perspectivethingshavegoneverywell.WhilstthenumberofexpatriatesleavingtheUKmayhavedeclinedoverthelasttwoyears,
thebaseofpotentialcustomersandtheexistingonesacrossthe
EuropeanEconomicAreaisstillverysubstantial,somethinginthe
rangeofamillionEnglishspeakerswithinthatarea.Therefore,from
thatpointofview,wehaveabigmarkettogoafter.Westartedout
on this journey but we still have got a long way to go. We have
foundthebusinesshasgrownandGibraltaritselfseemstohave
handledthedislocationsofthelast3or4yearsbetterthanother
jurisdictions.
BankingisimportanttotheFinanceindustry,butcertainlyitis
not the sole support of the sector. Banking, Insurance, Funds
-thesearethethreemainpillarsoftheFinancesector,perse.
Also,theplayersinGibraltarareallbignames.Theyhaveproper
officesinGibraltar,arewellstaffed,wellresourcedandconnectedwiththeirglobalnetworks.ThatgivesGibraltarabigedge.
Therearealsomanylocalfirmsthathavemanagedtocreatea
greatnameforthemselvesintheinternationalarena.
Milestone GRP - What is Lloyds’ structure in Gibraltar?
Milestone GRP - The Banking sector has experienced tremendous growth, and so has the economy beyond the Financial Services sector. What are you expectations for the
coming years?
Mr Cartwright -ItisnicetobelievethatGibraltarwillcontinue
to grow, and given the exponential growth and success we
haveseenasanorganizationinGibraltaroverthelast5years,
we hope the trend will persist. A degree of reality is required
and,notwithstandingthat,thereisareasonabledegreeofoptimism,becausewecontinuetogrowatsteadynumbersand
weseethatgoingonforthenextfewyears.
Wealsohavereceiveda‘newness’oflifewiththenewgovernment and its fresh ideas. With regards to the UK, there is a
greaterdesiretomarketthejurisdiction,sohopefullywiththe
newtaxregime,aswellasthegreatstrengthofbeingonshore
inEurope,Gibraltar’sfuturewillremainbright.
Thewaytheeconomyworkshereisincredible.Evenifithas
a small economy, one of the things Gibraltar is admired for,
when we are benchmarked against our peer group, is our
greatdiversity.IntheChannelIslands,forexample,theconcentrationofriskintermsofrelianceonfinancialservicesis
farmorepredominantthanwhatwehavehere.Withregardsto
theGamingsector,forexample,theGovernmenthasencouragedbluechipplayersandrealgrowthintermsofemployment.Nevertheless,theyarequitekeentomakesurethatwe
balancethebooksandmakesurethatnosinglesectorbecomesoverlydominantbecauseotherwisethedominoeffectof
anything going wrong would be more severe. The economic
noveltymusthaveworked.Forajurisdictionwithnoagriculture,ithasdoneverywell.
Mrs Dominguez Steglich-ThereareactuallytwoLloydsTSB
banksinGibraltar.MybankisafullbranchofLloydsTSBBank
Plc.intheUK,focusedonthePrivateBankingsector.Theother
Lloyds TSB presence in Gibraltar is actually a Gibraltar incorporated subsidiary, Lloyds TSB Bank (Gibraltar) Limited. Their
focusisonofferingmulti-currencyinternationalaccountstoexpatriatesbasedanywhereintheEU,withaclearfocusonthe
BritishexpatriatecommunityandtheAnglophiles.
Milestone GRP - What were the reasons for your focus on
Private Banking?
Mrs Dominguez Steglich -Thereareperhapstwoaspectsthat
makePrivateBankinginterestinginGibraltar.Oneisthelocally
basedhighnetworthindividualswhodecidetorelocatetoGibraltar,andhavepropertyandlivehereinordertotakeadvantage
of the Category 2 Individual status. Private Banking is key to
themsincepartoftheirmoveisoftenassociatedwithrelocating
theirbankingarrangementstoGibraltar.Thisisaveryimportant
clientgroup,butitisnotthesolemarketthatwearerelyingon.
ThathasgottodowithGibraltarbeingpartoftheEU.
AsanEUjurisdiction,wehavetheentitlementtogointoEurope
andpassportourservicesandproducts.SoforPrivateBanking
thetargetisthecoreofwealthyindividualswhophysicallyresideinGibraltar,andthecloseperiphery,suchassouthernSpain,
Sotogrande,Marbella,andthewholeCostadelSolarea.There
aremanywealthyBritishexpatslivinginPortugalaswell.The
majority of the expatriates living in these areas are Brits. As a
BritishbankofferingPrivateBankingservicesforhighnetworth
individuals,thisisabigopportunity.
Milestone GRP - What role do Gibraltar’s passporting rights play
in your business model?
Mr Johnson -Theyarefundamentaltoourdecisiontocreatea
businesshereinthefirstplace.WewereconsciousthattheopportunityofbeingwithintheEUwouldallowustomakeuseofEU
directives,particularlytheBankingConsolidationdirectiveandthe
associatedinvestmentdirectives.Sothewholepassportingconceptwasfundamentaltowhatwedo.
Milestone GRP - How have consumer demands changed over
the last 2 years?
Mr Johnson -WeareseeingcontinuedappetiteforSterlingproductsfromcustomers,whichisnotsurprisinggiventhevariations
intheEurozone.So,Sterlingcontinuestobeareferencecurrency
for the majority of our customer base. This benefits Gibraltar as
well,havingthesamecurrencyhere.WeprovidefacilitiesinEuro
as well but Sterling is the key driving currency for our customer
segments.Wearealsoseeingadesirefromcustomersforsafety
andsecurityintermsofsavingsaccounts.Thereisawillingness
toexploreinvestmentswithalowriskprofile.So,acautiousapproachfromtheinvestor,andawillingness,whereproductsmake
sense,toconsidersavingandinvesting.Weexpect,astheeconomyimprovesoveraperiodoftime,toseegreaterappetitefor
moreinvestmentswithamoreassertiveriskprofile,butnotinthe
immediatefuture.
6,000
5,000
£ (million)
Consolidation and steady growth
4,000
3,000
2,000
1,000
0
2000
2001
2002
2003
2004
Total Bank Deposits
Gibraltar–TotalBankDeposits
2005
2006
2007
2008
2009
2010
Source:FinancialServicesCommission
Source: FSC
Gibraltar 2012
61
Online Gaming
Online Gaming
milestone GRP
Mr Montegriffo - Most of the e-gaming companies based in
Gibraltar are in fact the largest and some are publicly quoted
companiesinthesector.Inthisrespect,(althoughtheoperation
ofonlinegamingcompaniesissimilarinmanyjurisdictions),it
isprobablytruetosaythatthosebasedinGibraltarincludethe
bestresourcedintermsofthedifferentelementsofthebusiness
thatconstituteanonlinegamingactivity.
Carefully Managed Growth
Quality over quantity
OnefeatureoftheGibraltarlicensingmodelhasalwaysbeenthat
GibraltaroperatorsarerequiredtohaveaphysicalandsubstantivepresenceinGibraltar.Gibraltarhasneveradoptedamodelthat
allowsmostortheentiretyoftheoperationtobeoutsourcedto
thirdcountries.Whilst,therefore,thenumberofoperatorsinGibraltarisrelativelylow(currentlyjustover20)comparedtoother
jurisdictions,theemploymentbaserepresentedbythissectoris
reasonablylargebothasanempiricalfigure(over2,000individuals)andasapercentageofGibraltar’soverallemploymentbase.
ItshouldbenotedthatGibraltarhasverylowunemploymentand
infactprovidesemploymentformanyEUandnon-EUnationals
thatareattractedtoGibraltarforwork.ThereasonGibraltar’slicensingmodelrequiresasubstantivepresenceistoensurethat
thereisregulatoryaccountabilitytotheauthoritiesinthisjurisdictioninrelationtoactivitiesundertakenfromGibraltar.
Interview with Mr Peter Montegriffo, Team Leader & Partner, Hassans International Law Firm
PeterMontegriffo’sareaofexpertiseisincommercialandprivateclientmatters,andhehasalsoadvisedonnumerousfinancialservices,regulatoryandtrustrelatedmatters.HewascloselyinvolvedintheIPOsofvariousGamingcompaniesestablished
inGibraltar,whichhavebeenlistedontheLondonStockExchange.Peterhasalsobeencloselyinvolvedindraftingnumerous
changestoGibraltar'slegislationintrusts,financialservicesandgamingareas.MrMontegriffowasalsoGibraltar'sMinister
forTradeandIndustry,withresponsibilityforeconomicdevelopmentandfinancialservices,betweenMay1996andFebruary
2000.HemetwithMilestoneGRPtogoovertheevolutionofGibraltar’sOnlineGamingsectorandthejurisdiction’sapproach
toitssteadyandstablegrowth.
Milestone GRP - What brought about the development of the
Online Gaming industry in Gibraltar? What are the main highlights in the history of this still relatively young industry?
Mr Peter Montegriffo -ThehistoryofremotegamblinginGibraltargoesbacktotheearlytomid-ninetieswheninitiallya
numberofbettingoperationsrelocatedtoGibraltarinorder
to take advantage of Gibraltar’s competitive taxation rates
andalsoourpositionwithintheEU.Thisinitialactivitywas
effectivelyoneundertakenviabetsplacedtelephonicallybut
it is probably true to say that it provided the springboard
forwhatwasthenthemuchmoreextensivedevelopmentof
onlinegaminginthelateninetiesandespeciallyintheearly
2000’s.
Thehistoryofthissectorisonethathasbeenmarkedbya
prudentandconservativeapproachtoitsgrowth.Respective
Governments have not sought to grow this sector beyond
what is appropriate at any given time. The authorities have
needed to carefully consider reputational risk and also the
factthatsuchagrowingandstrongsectorinevitablyfocuses
resources,suchasmanpower,telecommunicationsandprofessionalservices,awayfromotherimportantsectorsofthe
economy,suchasfinancialservices.
Milestone GRP - What legislation governs the industry in
Gibraltar?
64
Mr Montegriffo-ThelegalsysteminGibraltarisentirelybased
onthatofEnglandandWales.Whilstweareaseparatejurisdiction,ourstatutesandthecommonlawareverysimilartothat
whichappliesinEnglandandWales.Gibraltarlegislationinthe
areas of gaming, taxation and company matters therefore followsinmanyrespectsaspectsoftherelevantlegislationacross
theUnitedKingdom.
In the area of gaming specifically, the Gibraltar Gambling Act
2005closelymirrorstheprovisionsoftheUnitedKingdomAct
on which it is modelled. The Gibraltar regulator also imposes
standards of conduct and regulation that are among the very
bestintheworldandwhichareconstantlyevolvinghavingregardtothefastdevelopmentoftheindustry.TheActsetsout
the requirements in relation to licensing. A full business plan,
details of the promoters, management arrangements andproposed technical infrastructure are all necessary ingredients of
anapplication.
Milestone GRP - What distinguishes Gibraltar in terms of
legislation of protections and guarantees available for gamers on issues such as gains, anonymity and addiction, for
instance?
Mr Montegriffo -Gibraltar’slegislationmakesprovisionfor
detailedrulesandcodesofconduct.TheGibraltarregulator
haspublishedaseriesofcodesrelatingtoonlinegambling.
These can be requested from the Licensing Authority. Gibraltar, in line with the other leading international regulators,
constantly reviews its codes of conduct and regulatory requirements.Itsoperatorsarealsorequiredtoadheretobest
practice and to ensure the highest levels of consumer protection in every respect. In this regard, both Gibraltar and
manyofitsoperatorsareatthecuttingedgeofbestpractice
andindustrydevelopments.
Milestone GRP - What impact has the online gaming industry
made in Gibraltar and on its economy in general?
Mr Montegriffo -ThereisnodoubtthattheonlinegamingsectornowrepresentsamajorsectorofGibraltar’seconomy.Itis
probablytruetosaytheindustryaccountstodayforabout20%
ofGibraltar’sGDPandasignificantamountofdirectrevenueto
Governmentand,asnotedearlier,agoodportionofGibraltar’s
employmentbase.Justassignificantly,theemploymentbasein
questionisonethatishighlydiversifiedandhasbroughtskills
toGibraltarintheareaofe-commerce,paymentprocessingand
technology,whichdidnotexist10yearsago.Thisprovidesan
excellentbaseforthedevelopmentofane-commerceeconomy
giventhatmanyoftheskillsaretransferrableacrossanumber
ofdifferentsectorsusinginteractivemeansofcommunication.
Asnotedearlier,Gibraltarhasadoptedaselectiveapproachin
determiningwhotograntalicenceto.Inordertoavoidunnecessaryexpenditureandtime,itisusuallypossibletoobtaina
fairlyearlyindicationfromtheregulatorastowhetheralicence
applicationislikelytosucceed.
Milestone GRP - How is Gibraltar looking to expand its e-gaming industry?
Milestone GRP - What distinguishes Gibraltar’s Gaming companies from others in terms of their operations?
Mr Montegriffo -Gibraltaralreadyhasareasonablydiversified
e-gaming industry although it is true to say that most of our
operatorshaveaEuropeanclientbase,intheUnitedKingdom,
inparticular.Asyouknow,thereareanumberofveryinteresting and potentially huge opportunities opening up in various
jurisdictionsincludingtheUnitedStatesandalsomorebroadly
inEurope,asEurope’sfragmentedregulatoryregimebecomes
morecohesive.OtheropportunitiesinAsiaandLatinAmerica
arealsonoteworthy.IunderstandtherecentlyelectedGibraltar
Government is keen to explore further how Gibraltar’s industry will be diversified but very much within the framework of
theconservativeandprudentapproachwhichhashistorically
beenadopted.Thereisnodoubtthattheextensionofgaming
servicesintobroaderentertainmentandsocialgamingwillalso
provideahugeboosttotheindustryinGibraltarandtooperatorsbasedhere.
Milestone GRP - How does the gaming sector contribute to
Gibraltar’s international image?
Mr Montegriffo -There is no doubt that historically gaming
hasbeenregardedasasensitivearearaisingparticularpublicpolicyconsiderationsinvariouscountries.Thishasalso
beenthecaseinGibraltarandthecaretakenisreflectedin
theapproachadoptedinlicensingandthemeasuredgrowth
ofthesector.Itistrue,however,thatgamingasasocialphenomenonischangingdramatically.Theproliferationofchannels of availability, and also the explosion in social games
morebroadly,ismakingthegamingexperiencemuchmore
partofmainstreamentertainmentthanmighthavebeenthe
case,otherthanforsoftgamingsuchaslotteriesorbingo,
twoorthreedecadesago.
Intermsofinternationalimage,therefore,aproperlylicensed
andregulatedgamingsectorshouldenhanceandinnoway
detract from the credibility and reputation of a jurisdiction.
In any activity, excess and exuberance will lead to difficulties and reputational damage. One of the safeguards of an
e-gamingoperationisthefactthatalltransactionsarerecordedandthereforeopentoconstantmonitoringandverification.Gibraltar’sassociationwithsomeoftheleadingpublicly
quotedonlineentertainmentgroupshasalsobeenextremely
important in enhancing the jurisdiction’s reputation as one
opentoserious,wellregulatedbusinessenterprise.
Milestone GRP - How much work needs to be put in to defend the right of Online Gaming companies established in
Gibraltar in the context of EU threats and access to new
markets?
Mr Montegriffo -Theindustryhasalwaysworkedveryclosely with the authorities in defending the rights that exist under
European law and more broadly to provide services to clients
aroundtheworld.Thisisanuncertainandevolvingareaanduntillegislationinvariouscountries,andindeedatabroaderEuropeanlevel,becomesclearer,agreatdealofcautionisrequired.
Gibraltar’sattitudeistofullycooperatewithallotherreputable
internationalregulators.Ithas,however,alwaysbeentheview
oftheGibraltarauthoritiesthatitisvitaltodefendthelegitimate
interestsofGibraltarandanyeconomicoperatorbasedinour
jurisdiction.Tothisend,theGibraltarGovernmentandindustry
haveworkedovertheyearsinvariousareas,includingfinancialservicesandgaming,toproperlydefendGibraltar’sEUand
broaderrightsofaccesstointernationalclients.
Gibraltar 2012
65
Online Gaming
milestone GRP
Global Online Gaming Revenue
Milestone GRP - How does Gibraltar specifically add value
compared to other jurisdictions, for instance, in terms of regulation, the agility of its key institutions and its infrastructure?
35
30
US$ (billion)
Mr Anderson - The Government of Gibraltar understands the
onlinegamingindustryanditsprofessionalism.Theinfrastructurerequiredtoruntheindustryhasbeenimprovedenormously.
Thisimprovementhasonlytranspiredduetotheempathythe
Governmenthaswiththeindustry.
40
Online Gaming leaving nothing to chance
Interview with Mr John Anderson, Deputy Chairman, Gibraltar Betting & Gaming Association
JohnAndersonistheDeputyChairmanoftheGibraltarBetting&GamingAssociation(GBGA).HeisalsoNon-executiveDirector
of888Holdingsplc;wherehewasCEOfrom2000until2006.Duringthattimehetook888Holdingstobecomeamemberof
theLondonStockExchange.Priortojoiningthegroupin2000,JohnhadbeenCEOofBurfordHoldingsplc–aLondonStock
Exchangelistedcompany.HehadtakenBurfordHoldingsprivateviaanMBOandstillholdsthepostofChairman.Johnhad
joinedBurfordin1996fromLadbrokeGroupplc,wherehehadbeenamainBoardDirector.LadbrokeGroupisaFTSE100
London-listedcompanywherehehadspent26years.JohnisNon-executiveDirectorofseveralothergamingandproperty
companies,andalsoholdsthepostofChairmanoftheIGC,aninternationalindustrybodyforbettingandgaming.
Milestone GRP - Why was the GBGA created and what role
does it play in the Online Gaming industry?
Mr John Anderson -TheGBGAwasformedin2004toactasan
industrybodywhoseinterestswerealignedwithbestpractice.It
representsitsmembersonlyasanindustryspokesmanandwe
haveverycarefullyavoidedrepresentinganindividualcompany
onitsown.WefeelthatthismaintainstheintegrityoftheGBGA,
whichisfundamentalwhenitistalkingtoGovernmentbodiesor
anyotherbodieswhohaveaninterestintheindustry.
Forinstance,weasabodypushedforaregulatorysystemtobe
broughtinandallourmemberswereinagreement.Thisactually
costsusverylittleasaby-product.WeattheGBGAconsider
thatthemoreregulatedandtransparentweare,themoreprofitablewewillbe.Afterall,transparencyandregulationremove
thecloudofmistrustinanever-changingindustry.
TheGBGA’sremithasgrownfromtimetotimedependentupon
whetherornotthereareindustryissuestoaddress.Onaconstantlychangingcanvasitcontinuestocarryoutitsrolesand
maintainitspositionasahighlyrespectedbodyintheworldof
business.
Milestone GRP - How does GBGA work to promote a level
playing field for the operators and access to appropriate entertainment for consumers?
66
Mr Anderson-TheGBGAisanindustrybodyinthatitworksfor
thebenefitofallitsmembers.Itdoeshaveasmallnumberof
behaviorallyimportantmembershiprequirementsbuttheseare
precipitousandnottoxic.Inthiswayourmembersallsharethe
samegoalsoftheGBGA,whichare,forinstance,toagreeupon
methodsandproceduresgivingusbestpracticeoperationally.
Thisgivesthemarketplacealevelplayingfieldonwhicheach
operatorcanbuild.
Milestone GRP - How do you compare the operators in Gibraltar to other operators elsewhere with regards to best
practices, innovation and technological development?
Mr Anderson -IhavealwayssaidthatGibraltarhasthe“crème
delacrème”oftheindustryoperators.Thelineupofoperators
isawho’swhooftheindustry,includingmanywhoareLondon
StockExchangemembers.ThissituationisduetotheGovernmentbeingveryselectiveaboutwhotheygrantalicenseto.
Thatbeingthestandardwhichexists,itwillbeofnosurprise
toknowthatregulationhasbeenwelcomedandthebusiness
systemshavebeencontinuallyupgradedbyall,inordertogive
bestpracticetoallsolutionsfromatechnologicaldevelopment
pointofviewandaconsumerprotectionposition.Ihaveoften
made the point that our systems are probably amongst the
bestintheworldandanyonewhovisitsourfacilitieswillsoon
seethis.
15
5
0
2002
2003
2004
2005
2006
2007
GlobalOnlineGamingRevenue
Source: H2 Gambling Capital
2008
2009P
2010E
2011E
2012E
Source:H2GamblingCapital,2009
Mr Anderson-Thefutureoftheindustryisaninterestingtopic.
Regulatedmarketsarenowthefutureifnotthenorm.Lookingat
tenyearsago,regulationhardlyexisted.Thisregulatorymarket
situationwillcontinueintothefuture.
Mr Anderson - I have often said that the two most important
wordsinourindustryare‘trustme’.Trustisvitalforbrandbuildingandcustomernumbers.Onceyouhavetrustyourmembershipnumbersgoupandpeoplecomeforalonglifetimevalue
withtheoperators.Itisclearintheindustrythatfirst-moveradvantagesticksandlastsforsometime.
Oncecustomerscome,basedonthetrustfactor,theywillstay
forsometime.WeinGibraltarsellanentertainmentexperience
andifnecessaryweeventeachpeoplehowtoplayenjoyably
andresponsiblyandhowtoappreciatethegamesoveralong
periodoftime.AsIstatedearlier,thisispartofourtransparency
andregulation.
20
10
Milestone GRP - What impact does Gibraltar’s Online Gaming
sector have on consumers in terms of service & entertainment, responsible gaming and trust? How does this contribute to the ‘acceptability’ of Online Gaming as a legitimate and
successful business?
Regulation and Transparency to Build Trust
25
Licensingwillbemoreandmoredifficultforoperatorswithfewer start-ups due to the high entry cost barrier. This will leaveonlythebestoperatorsleftstandingandthiscanonlyhelp
Gibraltar’soperators.
Milestone GRP - What can be learnt from Gibraltar’s success? Do you see opportunities for other jurisdictions to replicate it?
Milestone GRP - What is the future for the industry globally, in
terms of diversification, licensing, regulation and the opening
of new markets?
Mr Anderson-WehaveprovedinGibraltarthatthecasefor
online gaming is sound. The model we see in Gibraltar is a
good one and is likely to be copied, especially in the world
environment of financial crisis in which we find ourselves. In
fact,thecaseisextremelycompellingandEuropeandtheUSA
areadaptingtotakeonboardtheindustrywithallthebenefits
ithas.
Global Market for Online Gaming
Geographical Distribution 2010 / Expected Growth 2011
Online Gaming Global Market
MarketShare2010&ProjectedGrowth2011
North America
Share:
Growth:
20,7%
0,0%
Europe
Share:
Growth:
Africa
Share:
Growth:
44,2%
15,2%
Share:
Growth:
1,2%
12,2%
Central & South America
Share:
Growth:
Asia & The Middleeast
3,2%
10,3%
25,9%
5,6%
Oceania
Share:
Growth:
4,8%
6,9%
Source: H2 Gambling Capital, January 2011
Source: H2Gambling Capital, January 2011
Gibraltar 2012
67
Online Gaming
New Momentum for a Successful European
Online Gambling Market
by Ms Sigrid Ligné, Secretary General, European Gaming and Betting Association
The European online gaming and betting industry is at the forefront of eCommerce. The sector grows at a steady pace and is
expected to reach €13 billion in Gross Gaming Revenue in 2015,
up from €8.5 billion in 2010. It is also a new market, coming on
top of the traditional offline gambling market, which is predicted
to grow by more than 10% to €79 billion over the same period.
Last but not least, with 45% of the global online gambling market,
Europe has developed a unique leadership position in the online
economy. For the first time, Europe has produced a number of
global Internet champions, something which has up to now been
the preserve of US-based corporations.
Against this backdrop, it is even more surprising that policymakers in the EU have been so slow in reacting, especially as European consumers have been voting with each ‘click’ of their mice.
Gibraltar has been one of the very few jurisdictions in the EU that
has recognized these developments early on and now has the
considerable advantage of being an early mover and an experienced regulator.
Today we see a flux of Member States regulating, or planning to
regulate, the sector. But most regulate from a purely national perspective, without taking into account the inherent cross-border
nature of the sector. Whilst gambling is an activity that is, and
should be, subject to strict statutory regulation, the piecemeal
European Gaming
fashion in which the national legal frameworks are developing is
not sustainable.
Many of these frameworks are contrary to the fundamental principles laid down in the EU Treaties, but many also fail to provide a
2012P
competitive regulated offer to the consumers. With the costs for a
single EU operator to obtain and maintain just one French license
being €8.7 million, even if the operator is already licensed in other
Member States, it is unrealistic to assume that such an operator
can compete with unlicensed operators that do not have to meet
this burden. If the offer isn’t attractive enough, the consumer will
easily find his way to the better odds on the internet.
134 concrete standards for, inter alia, the prevention of underage gambling, fraud and to protect consumers in general. EGBA
strongly supports the political involvement of the European legislator and the development of a European framework for online
gambling. Consumers in the EU should have access to an attractive and competitive offer and rely on properly regulated services
that provide all consumers in the EU with a high level of consumer
protection. EU-licensed operators should be able to have access
to the internal Market without having to acquire 27 licenses and
fulfill similar requirements in every jurisdiction. Not just as a matter of principle, but also to be able to compete with unregulated
offers and thus keep the consumer off the black market.
A European framework will not appear overnight. In the meantime, operators will have to deal on a daily basis with the national
regulations that directly affect their operations. Even though the
announced Commission Communication is much welcomed, the
European Commission does need to take its responsibility as
Guardian of the Treaties seriously and actively pursue infringement proceedings against those Member States that cross obvious “red lines” of non-compliance with EU law.
Building trust and confidence between European regulators is essential. The European Commission is currently setting up a regulatory cooperation mechanism that will facilitate communication
Market
and regular information exchange amongst national regulators.
EGBA welcomes the efforts of the Gibraltar Gaming Commission
in bringing its considerable experience and knowledge to these
European Gaming Market
meetings, helping to build an EU framework for online gambling.
Online
Market share 11,9%
Gross Revenue: €11 billion
2012P
Online 7,65%
€6,5 billion
2008
Offline 88,1%
€82 billion
A European regulatory approach is inevitable; carving up the Internal Market into 27 mini internet markets is simply no option.
The EU is the only effective and realistic level at which to regulate
Offline 92,35%
an internet industry. The recent report of the European Parliament
€78,5 billion
on online gambling in the Internal Market and the Commission
Source: H2 Gambling Capital January 2009
European
Gaming
Market
European
Online Gaming
Market Outlook
Communication on online gambling that has been announced for
June 2012 show that European policymakers are starting to take
20
ownership as discussions on the direction of the policy are getting underway.
H2 Gambling Capital, January 2009
The discussion doesn’t start completely without a basis. Gambling is covered by a number of European laws, including the 3rd
anti-money laundering, the data-protection and the unfair commercial practices directives that apply to all EU-regulated operators, including those licensed by Gibraltar. The European Committee on Standardization (CEN) published a workshop agreement
on Responsible Remote Gambling Measures in 2011, providing
68
US$ (billion)
15
10
Source: H2 Gambling Capital January 2009
5
0
2003
2004
2005
2006
2007
European Online Gaming
Market Outlook 2008
2009
2010P 2011E 2012E 2013E 2014E
Source: H2 Gambling Capital, January 2011
Source: H2 Gambling Capital, January 2011
2008
Online Gaming
milestone GRP
That company has been very successful in taking clients not
onlyintheGamingindustrybutelsewhere,anditisaverysuccessfulstand-alonecompany.Ithasitsownmanagementand
finance.
GlobalOnlineGamingasPercentage
ofallGlobalGamingRevenue
10
9
8
7
Weareinnovatingallthetime,wearelookingatwhatchanges,
and things are changing very quickly. Smart phones changed
thebusinessyetagain,andweexpect60%ofourbusinessin
two years time to be on smart phones and pads. So it is somethingwewillhavetoworkon.ButIthinkwehavethebest
applicationformobileintheworldnow,andwehavedeveloped
itourselves.
Milestone GRP - In times of economic downturn, is there a
stronger case to be made for the Online Gaming sector to be
legitimized and properly regulated?
The Rock’s First Online Gaming Licensee
Good numbers in the books 15 years on
Mr Chandler -Weareindialoguewith3countriesthathavenot
regulated,licensedortaxedthatmuchatthemoment,andnone
ofthemareEuropean.Soitisaninterestingperiodofdevelopmentatthemoment.Weareintheentertainmentbusinessand
strongly believe governments should regulate, tax and license
thisindustry.
Interview with Mr Victor Chandler, Chairman, Victor Chandler International
VictorChandleristheChairmanandfounderofBetVictor.Establishedin1946,BetVictorhasoverhalfamillioncustomers in 160 different countries. Mr Chandler recognized the growth in international markets at an early stage and
relocatedtoGibraltarin1999tobeabletooffersportsbettingfreefromthe9%taxleviedintheUK.In2006,theRacingPostwrotethatChandleris“arguablythemostfamousbookmakerintheworld”.MilestoneGRPsatdownwithMr
Chandlertogethisperspectiveonhiscompany’sdevelopment,itstransitiontoGibraltarandhowheseestheOnline
Gamingindustrytakingshape.
Milestone GRP - What are the milestones and the key decisions that have been taken since the 1920s and have contributed to making Victor Chandler International what it is today?
Mr Victor Chandler -Thebigmilestonehasbeenmovinghere
toGibraltar,andthemostimportantthingforourbusinessis
technology.Thathaschangedallbusinessesbutinparticular
ours,becausenowwecanbeavailableoneverydevice,whereas before we had only the telephone. So the internet and
nowtheiPad,theiPhoneandallthedevicesthatareavailable
topeoplechangedourbusiness.Themostsignificantthingfor
usisthatitallowsustocrossbordersaslongaswehavegot
thelanguagesandtheabilitytotakemoney.Infact,oneofthe
dependenciesisalwaysyourabilitytogetthepayments,probablyoneofthemostimportantthings.Gibraltarhasallowed
ustodothisbecauseitisregulated;thisenablesustohavea
platformtoengagewithclientsallovertheworld.
Milestone GRP - You were the first licensee in Gibraltar about
15 years ago. What prompted you to come to Gibraltar at the
time, instead of setting up elsewhere?
Mr Chandler - I looked at six or seven locations, from South
AmericatoAntiguatotheChannelIslands,andherethelicense
wasalreadyavailablebecauseitbelongedtotheownerofthe
casinothathadcleverlygotabettinglicensewhenitgotthelicenseforthecasino.Itwasimpossibletohavelicensesinsome
places and others had bad telephony. Moreover, the fact that
70
thiswasanEnglishspeakingcountrymadeiteasierforus.So
wewenttolookatmanyjurisdictions:GrandBahamas,Antigua,
Puerto Rico, Jersey, Guernsey, the Isle of Man and Malta. We
gotaverygoodreceptionhere.IdonotthinktheChiefMinister
had any idea of how the industry would grow at the time and
neitherdidwe.Nooneenvisagedwhatwouldhappenwiththe
internetandhowquicklythingswouldchange.But12yearsisa
shortperiodoftimeinabusinesslife.
Milestone GRP - Is innovation something that has always
been part of Victor Chandler or is this something that has
come about more as an obligation? What has been your approach to staying ahead technologically?
Mr Chandler -ItwasfairlylateinlifethatIcamehereandIhave
alonghistoryintheUK,myfatherandmygrandfatherbefore
me.MybusinessintheUKwasverysimilartotheirbusinesses:
telephoneandbettingjobs.Therearetwoindustriesthathave
pushedtheinternetforward,thatisPornandBetting.Pornhas
nothingtodowithGibraltar,butthisindustry’sevolutiononthe
internetwastheonewefollowedandwatchedwhatitwasdoingasfaraspaymentswereconcerned.Theydevelopedcloning
software before anyone else, so even though this was not an
industrywewantedtogointo,wewatchedthempushforward.
I now own a separate company called Intelligence Payments
Group(IPG),whichdevelopedapaymentssystemthatisworldwideandPaymentCardIndustry(PCI)compliant,linkedupto
everybanksystemandcreditcardpaymentsystemintheworld.
Milestone GRP - Where would you like to see markets opening up to this industry and to which would you orient your
expansion?
Mr Chandler -ThereisalotoflobbyingtobedonewiththeUK,
therearealotofterritoriesthereareopentous.TheUSisgoing
toworkgraduallybutIdonotseethemopeningupforsports
bettingforawhile.Theyareopeningupforpokerbuttheirlobby
againstsportsbettingisverystrong.
WearelookingmoreEast.Historicallywewerethefirstoneto
breakintotheChinesemarket,whichisamarketthathasexpanded.Butminorplayersinthemarket,liketheonesfromTaiwanorPhilippines,havealsoreactedtothat.Thereisbusiness
for lots of players out there. Just have a look at the size and
populationofthetwomajorplayers,whichareChinaandIndia.
Eventhoughthereisahugegapbetweenthewealthyandthe
poor,thereisbusinesstobedonethere,asthereisinEurope.
Francewouldnotbeoneofthecountriestoconsiderbecause
oftheirtaxregime,andifSpainwentdownasimilarpathitcould
not be considered either. In the gaming world, sometimes the
smallerthetax,themoretherevenuethecountrygets.Butalot
ofthegovernmentshavenotbeeneducatedtothatfact.
Milestone GRP - What is key to the future of the Online Gaming industry?
Mr Chandler -Certainlymoregame diversity.If you canfind
meanewpoker,Iwillbeveryinterestedbecausesomeonewill
6
%
5
4
3
2
1
0
2002
2003
2004
2005
2006
2007
2008
2009P
2010E
2012E
hit upon something. Poker had a huge growth and it is now
tailedoffandthemarketiscontractingnoticeably.Althoughit
stillhaspotentialintheUS,asfarastheUKandEuropeare
concernedthemarketiscontractingby60%.Soyouhaveto
findanewone.Thisiswhattheindustryislookingfor.
Milestone GRP - How would you judge the market in terms of
barriers of entry?
Mr Chandler -Itwouldbeveryhardforanybodytobreakinto
the industry from scratch now. The barriers to entry are very
highandtheinvestmenthasgoneintothehundredsofmillions
ineachindividualcompany.Youcannotgetanywherewithout
beingprettybig.Youcannotsupplytheproductwithoutahuge
investment,frominfrastructuretohardware,software,andthe
biggest investment you make is in staff. Putting a group togethertobuildabusinessnowwouldbeverydifficult.
Milestone GRP - You’ve been operating successfully in Gibraltar for quite a while. What would you tell other businesspeople across different sectors about Gibraltar?
Mr Chandler - Gibraltar is a small place so you have to fit
in. Historically, I have had a very good relationship with the
Government. I cannot say I have got as close a relationship
withthenewGovernmentasIhadwiththepreviousone,butit
isonlybecausewehavenotknowneachotherfortheamount
of time I spent with the other one, but I am sure that it will
change.Thebestrelationshipiswhentheyneedyouandyou
need them. We have a good record of employment of local
people,andbringingintalent,andtheyhavebeenveryflexible.
Wetrytobringinasmanylocalpeopletoworkwithusaswe
can,buthistoricallyithasbeenacceptedthat,forexample,if
youneedaChinesespeakingdeveloper,youarenotgoingto
finditinGibraltar.Therefore,theyhavestretchedthingsforus
inallowingustogetworkpermitsveryquickly,understanding
our problems. The previous Chief Minister said to me I had
nineliveswhenIhadproblemsandthatIhadonlyusedone
ofthemup.IamsureIwillhaveasimilarrelationshipwiththis
newGovernment.
Internet
Mobilephones/Other
InternetProtocolTelevision
2003
€4.8bn
€0.78bn
€0.32bn
2008
€5.9bn
€na
€na
2012
€7.32bn
€3.51bn
€1.33bn
ProjectedIncrease
152.5%
450.0%
415.6%
ShareofOnlineGamingMarketbyDevice
2011E
Source: H2 Gambling Capital, 2009
Source:EUPublicConsultationonOnlineGamblingintheSingleMarket,2010
Gibraltar 2012
71
Online Gaming
milestone GRP
Milestone GRP - What advantages does Gibraltar offer the
Spread Betting industry?
Mr Brown -Agreatthingofbeinghereisthefinancialregulation.Itoffersourcustomerstheprotectionofknowingthatthe
business is regulated while also legitimising the business. In
ProSpreads’case,wearesubjecttodualregulation,fromboth
theFinancialServicesCommissionandtheGamblingCommissionerattheGovernment.Youcouldactuallyarguethatweare
subjecttotriregulation,inthatourparentcompany,LondonCapitalGroup,alsohasoversightofourbusiness.
Straddling Finance and Gambling
A bet that’s paying off
IntheUK,financialspreadbettingcompaniesarejustregulated
bytheFinancialServicesAuthorityandnottheGamblingCommission, as spread bets are recognised as a financial product
andregulatedaccordingly.AsProSpreadswasthefirstfinancial
spread betting company to set up in Gibraltar, it was deemed
necessaryforbothregulatorstomonitorthebusiness;however
itwouldmakesenseinthefuturefortheFinancialServicesCommissiontotakeoverasthesoleregulator.
Milestone GRP - You have a unique trading platform. What
does that deliver for the high net worth individuals you serve?
Interview with Mr Simon Brown, Managing Director, ProSpreads
SimonBrownhasover25yearsexperienceinthefinancialtradingindustry.HestartedontheLondonStockExchangeand
thenmovedovertotheLondonInternationalFinancialFuturesExchange(LIFFE)markettotradederivatives.Simon’sexperienceinthetradingworldresultedinhimrunningtheproprietarytradingarmofoneofthebiggestfuturesandoptionsbrokers
globally.Followinghiscareerintrading,Simonmovedtosettingupandrunningtradingbusinesses.Hefoundedoneofthe
firstinstitutionalelectronicbrokeringbusinessesinLondon,followedbylaunchingthefirstwhitelabelfinancialspreadbetting
business,whichSimonsoldin2007.Followingthedisposalofhisspreadbettingbusiness,Simontookovertherunningof
ProSpreads,hiscurrentposition,withthebusinessbeingacquiredbyLondonCapitalGroupin2008.MilestoneGRPmetwith
himtogethisinsider’sperspectiveonthepotentialforspreadbettingandProSpreads’approachtotheindustry.
Milestone GRP - Spread betting sits at the crossroad of the
financial world and the betting world, two industries with very
strong presences in Gibraltar. How would you define ‘spread
betting’?
Mr Simon Brown -Spreadbettingstartedinthe70sbyagentlemancalledStuartWheeler,whostartedmakingmarketsonthe
priceofgoldtoothercitytraders,viahiscompanyIGIndex.Over
thenext30yearsthespreadbettingindustrystartedintroducing
betsonotherproducts,includingindices,commoditiescurrenciesandsingleshares.
Thetraditionalinvestor’smodusoperandiwastobuyandhold
stocksandshares;howeverwhenthestockmarkettechbubble
burstin2000thehugecollapseinsharepricesmadeinvestors
lookforwaystocapitalizeonfallingprices,asopposedtojustrisingprices.Sotheyfellonthisproductcalledspreadbettingand
thatwasreallythelaunchofspreadbettingforthemainstream
investorandtrader.Itisnowthenumberoneproductforpeople
whowanttospeculateonfinancialmarketsintheUK.
Now,ifyouwanttobuyVodafoneorAppleshares,youcaneither
buythesharesthemselves,oryoucanbuyabetontheshares.
Thesefinancialbetsaredefinedasderivatives,andthecompanies
whoofferthemareregulatedbytheFinancialServicesAuthority
intheUKandtheFinancialServicesCommissioninGibraltar.In
additiontothesederivativeproductsbeingtradedonmarginand
72
Mr Brown -Speedandtransparency.Wehavesomeclientswho
trade a thousand times in a month. So when the markets are
moving in a very volatile fashion, as they have been over the
last couple of years, speed of execution can be the difference
between a profitable trade and a losing trade. To give you an
example,aclientwillpressabuybuttonontheplatform,which
willinstructustosendamessagetotheexchangetohedge,and
onceexecutedinformtheclientthathehashisbet.Allthistakes
placeinamatterofmilliseconds.
Sowhenthemarketismovingrapidly,aoneseconddelaycould
meanabigdifferenceinpriceofexecution.Goldisaperfectexampleasitcanmove50-100pointsinaminuteandthereforea
delayinexecutingtheclient’sbetcouldresultinanunfavourable
pricebeingachieved.Soforactivetraders,especiallytheones
who like volatility, speed is everything. Because our prices are
directlyreferencedfromtheactualfinancialmarketplace,ourclientshavecomfortinthetransparencyofknowingthatourprice
isthemarketprice.
Milestone GRP - What is your development strategy?
Mr Brown -Innovationandinternationalexpansionisourfocus
overthenexttwoyears,asourclientbaseatthemomentispredominantlyUKbased.Wearelaunchingotherproductsthatare
verysimilartospreadbettingbutmoreappropriatefortheinternationalclientbase.ContinentalEurope,theMiddleEastandFar
Eastaretargetareasforourphaseoneinternationalexpansion
program and I expect our advanced technology and quality of
servicetocreateahealthyinternationalclientbase.
beingbets,thereisnocapitalgainstaxonanywinningsforUK
taxpayers.SoyoucanseewhyutilisingspreadbetstogainexposuretothefinancialmarketsisverypopularintheUK.
Milestone GRP - How did ProSpreads come to be based in
Gibraltar?
Mr Brown -ThefoundersofProSpreads(andmyself)usedto
trade futures and options on the open outcry markets in Londonforabout20years.Followingthedemiseoftheopenoutcry
marketsinLondonandtheintroductionofelectronictradingin
1999,thefoundersmovedoverseas,anddecidedtosetabusinessupinGibraltar.
Giventhattechnologyhadfirmlytakenoverthefinancialmarkets,
theythoughttheywouldprovideaserviceforindividualtraderswho
used to trade on the futures market, allowing them to utilise the
besttradingtechnologytonowtradefromthescreen.Theywanted
toprovideanenvironmentdowninGibraltarwherethelifestylewas
brilliant,thetaxwasefficientanditwasregulated.Sotheybrought
UKtradersdowntoGibraltartoworkinatradingroomwithbestof
breedtechnologyandsupport,tositthereandtrade.Thefounders
soonrealisedthatnotalltraderswouldnecessarilywanttowork
andliveoutsidetheUKandthereforethoughtofofferingaservice
fortradersbackintheUKwiththesametechnologyandtaxefficiencywouldbeextremelypopular.Andasthetradewouldbeabet,
theywouldbenefitfromtheprospectoftax-freegains.
Gibraltar 2012
73
Telecoms & IT
Telecoms & IT
milestone GRP
TheGRAcarriesoutmarketreviewsontheIndustry,whichare
required by EU law. We regulate the industry and we licensetheradiospectrum.Iregulatealimitedamountofentities
since Gibraltar only has 3 network operators, and 5 service
providers.
Milestone GRP - Is Gibraltar’s Online Gaming sector regulated under the Communications Act in any way?
Ensuring Compliance and Fair Play
Regulating the Telecoms sector
Interview with Mr Paul Canessa, Chief Executive, Gibraltar Regulatory Authority
PaulCanessaistheChiefExecutiveOfficeroftheGibraltarRegulatoryAuthority. HehasheldthepostsinceOctober
2000. MrCanessaisresponsibleforregulatingtheelectroniccommunicationssectorinGibraltar,whichincludesthe
licensing of the radio spectrum, satellite communications and broadcasting. Mr Canessa is also the Data Protection
Commissioner.PaulCanessa’sbackgroundisinbroadcasting,havingbeenatelevisionproducer/journalist,andthen
HeadofNewsandCurrentAffairswiththeGibraltarBroadcastingCorporation.
Milestone GRP - What are the Gibraltar Regulatory Authority’s
(GRA) main areas of responsibility?
Mr Paul Canessa - The GRA is the National Regulatory Authority (NRA) for Gibraltar, which follows the pattern of all EU
MemberStateswhereNRA’shavebeensetuptoregulatethe
electroniccommunicationssectortoconformwiththeprovisionssetoutbytheEUinthewayofDirectives,Regulationsand
Recommendations.TheseEUdirectives,togetherwithnational
law, were enacted to carry out these obligations, regulate the
Gibraltarmarketandestablishalevelplayingfieldforthosenew
entrantswishingtocompeteinofferingcustomersexistingservices or new services and products. The intrinsic purpose of
the GRA is thus to regulate the market and effect fair, reasonableandnon-discriminatorytermsforotherserviceproviders
wishingtoofferserviceswhilstmaintainingcompetition.
The GRA is an independent body; it advises the Minister for
Communications.TheGRAhasthepowerstoregulatetheelectroniccommunicationssectorbyvirtueoftheCommunications
Act 2006 and accompanying Regulations. Its role is that of a
supervisory body which regulates and enforces compliance in
areassuchascompetitionandthegrantingandmonitoringof
radio spectrum licences. Not all market players will behave in
theappropriatemanner,some,likeinallbusinesssettings,will
trytousetheirmusclepowertocompeteinwhatisnowconsideredanunfairmannerinordertogetmorecustomersoreven
keepexistingones.Thiskindofbehaviourwillnotallowcompe-
76
titioninthemarkettodevelopinitstruesense,sotheGRAhas
thepowertoputanendtobehaviourthatisnotallowedbythe
legislationanddetrimentaltothecompetitiveethosoftheEU.
In this and all its duties, the GRA is always impartial, fair and
reasonable.
TheGRAcananddoesissueDirectionsthatrequireactionby
operatorsandserviceproviderstocomplywiththelaw.Apersonwhodoesnot,orrefusesto,doanythingrequiredofhimby
aDirectionisguiltyofanoffenceandliabletobefined.
The GRA has many regulatory powers, from a role in monitoringexistingandnewserviceproviders,tointerveningininterconnection agreements between network providers. Very importantly,theGRAalsoactsasarbitratorindisputesbetween
customersandtheirserviceprovideroroperator,anddisputes
between operators themselves. Procedures have been establishedwhichaimtoresolvethesedisputeseffectivelyforallthe
partiesinvolved.
Milestone GRP - Which of Gibraltar’s specific industries and
sub-sectors do you oversee?
Mr Canessa - We have two main areas of responsibility: telecommunicationsinallofitsfields,whichincludetheregulation
oftheIndustryinGibraltar,SatelliteCommunication,RadioCommunication,includingthegrantingoffrequenciesandlicenses.I
amalsotheDataProtectionCommissioner,soitisadualrole.
Mr Canessa -TheGamingIndustrydoesnotcomeunderthe
GRA.Itusedto,butithasnowmovedandcomesundertheMinistryforFinancialServices.Partofthereasonforthischangeis
thatfortheindustriesweregulate,theEUdirectivesrequirethat
our regulatory function be independent of the Government. In
theGamingsectoritisdifferent;thereisnorequirementtohave
independentregulation.
SotherewasadualregimewherebytheMinistrydidthelicensingandtheRegulatoronlyregulatedpost-licensing,ensuring
compliancewiththelicensing.SoIwasinvolvedintheGaming
regulationupuntilearlylastyear.
Milestone GRP - Does the telecommunications legislation in
Gibraltar comply with the EU’s requirements?
Mr Canessa -Yes,thenewtelecomsreformpackagebecame
lawinGibraltaron26thMay2011.TherulesgoverningtheTelecomssectorintheEUwereagreedin2002.Inthisfast-developingsector,theregulatoryframeworkneededtoberevised,to
ensureitcontinuestoservethebestinterestsofconsumersand
industry in today’s marketplace. The EU formally adopted the
TelecomsReformpackageon20thNovember2009anditenteredintoforceon18thDecember2009.Thesenewruleshavean
importantimpact,amongstotherthings,oncompetition,consumerrights,datasecurityandspectrumuseacrossEurope.The
newtelecomsrulesreinforcenationaltelecomsregulators’independencebyeliminatingpoliticalinterferenceintheirday-to-day
dutiesandbyaddingprotectionagainstarbitrarydismissalfor
theheadsofnationalregulators.
Milestone GRP - How do you assess the quality of telecommunication infrastructure in Gibraltar?
Mr Canessa - Gibraltar has excellent telecommunications
infrastructure. The reach of the network is 100% and there
are robust fibre networks which provide full resilience. Both
GibtelecomandSapphire,thetwolargestoperators,haveinternational cable links from Gibraltar with enough capacity
tomeetthecurrentandfuturedemandsofcompaniesusing
Gibraltar.
Milestone GRP - Gibraltar currently hosts one satellite services company. Do you see room for the growth of this industry
in Gibraltar?
ADSL
Dialup
Metro
WiMAX
12000
Individual Connections
InaplacethesizeofGibraltar,itiseasiertohaveonlyoneRegulatory Authority with common administrative infrastructure,
anditkeepscostsdown.Moreover,therequirementsforboth
telecommunicationsanddataprotectionallderivefromtheEU
directive requirements. The EU Directives require an independentregulatorandthisindependenceisassuredbyestablishing
theregulatoryauthority.
9600
7200
4800
2400
0
2003
2004
2005
2006
2007
InternetConnectionsbyType
Internet Connections by Type
2008
2009
2010
2011
Source: GRA, 2010/11
Source: Gibraltar Regulatory Authority
Mr Canessa -Themarketforsatellite-deliveredservicescontinuestogrowandevenintheaftermathofthe2008recession
itbecameapparentthattheglobalsatelliteindustrywasquite
resilienttotheeffectsofeconomicchange.Thedemandforsatellitespectrum,whichisafiniteresource,ishighlysoughtafter
as the world’s geostationary orbit becomes increasingly congestedwithsatellitesprovidingservicessuchasbroadcasting,
telephonyandinternetconnectivity.
In order to consolidate the UK space industry and encourage
growthofbothscientificandcommercialsatelliteservices,the
UKGovernmentformedtheUKSpaceAgency(UKSA)in2010.
TheUKisaleaderinsmallsatellitetechnology,andhasworld
class expertise in space science and engineering but had never fully embraced the commercial side and most of the UK’s
satellite operators are in fact US companies who have found
theUSrequirementsforfilingandtheassociatedbondsfartoo
stringentandexpensive,andhaveestablishedcompaniesinthe
UKanditsOverseasTerritoriesasameanstofilefororbitallocationsovertheUSAatafractionofthecosts.
Theinternationalsatelliteoperator,SES,hasestablishedacompany in Gibraltar to file for orbital slots across the globe, but
primarilyforbroadcastingovertheUSA.Wecurrentlyhavefiled
forover20orbitallocationsinthegeostationaryorbitandSES
have6satellitesoperatingfromUK/Gibraltarslots.ThesatellitecontrolcentreinGibraltarisfullyintegratedintoSES’global
controlnetworkandemploys8highlyskilledstaffwhocontrol
andmonitor5satellitesandprovideback-upcontrolforanother
5satellitesandtheEarthstationlocatedonWindmillHillprovidesdirecttelemetryandcontrolofaUSsatellitewhichispart
oftheSESfleet.Takingintoaccountthattheaveragelifespan
ofbroadcastingsatellitesisabout15years,andthatGibraltar’s
controlcentreisfullyintegratedintotheSESglobalnetworkwe
are confident that SES will remain in Gibraltar for many more
yearstocome.
Lookingintothefuture,thereispotentialtodeveloptheuseof
GibraltarforsatellitehostingandwehavereceivedseveralinquiriesfromsatellitecompanieswhoareconsideringusingGibraltar.
Milestone GRP - How do you stay abreast of these new developments in the EU and globally?
Mr Canessa -Byreadingalotandtryingtobeawareofup-andcoming changes. We were asked to join the International Institute of Communications’ (IIC) International Regulators Forum
(IRF) several years ago. We attend their annual events, which
Gibraltar 2012
77
Telecoms & IT
milestone GRP
Distribution of Registered Data Controllers
Distribution of Registered Data Controllers
5% Gaming & Betting
9% Government Department
largest market share are always much more heavily regulated
than a new entrant is.
Milestone GRP - How do you see the future of the GRA?
49% Financial Services,
Insurance & Legal
18% Service
2% Education
11% Retail
Source: GRA, 2010/11
deal with topical issues for regulators on telecommunications
and broadcasting matters. The IRF is extremely useful because
it is held over a weekend, and it is a closed session for regulators and totally unattributable, so there is no public involvement,
which is very useful.
That is one of the main events with which we keep abreast.
We also follow what happens in the EU with any changes that
are coming up, because those will affect Gibraltar. We have to
implement all the relevant directives and it is a huge challenge
to transpose directives and ensure that they will work for a
market the size of Gibraltar. But we always achieve it. We still
have to implement directives and adapt them and do market
reviews periodically. We have got to impose obligations on the
companies with significant market power and the ones with the
Going up and high-tech
Interview with Mr Harry Pallas, Senior Manager, SES Gibraltar
3% Health
3% Bank
On the Med and in the Skies
Mr Canessa - We have recently been given responsibility for
the regulation of broadcasting. The new Audio-visual Media
Services Directive, was implemented here last year and gave
the GRA new responsibilities in the regulation of broadcasting
content. Our role will increase once Gibraltar converts to digital broadcasting at the end of 2012. This will also permit the
Government to license new broadcasters.
Milestone GRP - What change would you like to see in the
coming years?
Mr Canessa - I would like the regulation to be simpler and
certainly less onerous for Gibraltar, where we have to implement an EU regulatory regime, which was never designed for
a place the size of Gibraltar. But we are part of the EU family,
we have to comply with the rules, and Gibraltar wants to be
part of Europe.
Also, to its credit and benefit, Gibraltar has a superb knack for
surviving and making the best of things. As such, it has not been
affected very badly by the recession. There have been reports of
some effects, but Gibraltar always survives and adapts.
Milestone GRP - What does SES do in Gibraltar?
Mr Harry Pallas - The business plan for SES is that we buy
satellites, we have the expertise to operate them and we then
rent out TV channels on those satellites to TV companies,
thereby getting profit and repayment of the capital invested.
To operate those satellites you need satellite control centres
as well as a whole host of other activities. Gibraltar provides
one of a total of 4 control centres that SES operates. We
have a control centre in Luxembourg, one in New Jersey, one
in Maryland, and this one in Gibraltar. So we are a control
centre for the physical operation of the satellites, and this
is because of the Gibraltar Government‘s requirement that
when they licence a satellite, the control centre has to be in
Gibraltar.
Milestone GRP - Why did SES choose Gibraltar as a jurisdiction to licence its satellites through?
Mr Pallas - Gibraltar was able to assist SES in obtaining
slots for satellites in the correct orbit that are useful for TV
communications. Without Gibraltar, you would be perhaps
be looking at a one or two-year period in order to obtain
clearance to place satellites in particular places in orbit. Gibraltar has been able in the past to do this generally within
a six-month time frame. In a very recent case, we have
done it in a two-month time frame. We do all the due diligence that companies require, and we have the expertise,
the money and the previous experience of placing satellites
in orbit.
You have to obtain the licence from the International Telecommunications Union, which is a branch of the United Nations in Geneva. We use the office of communications in the
UK, Ofcom, to assist in this but it is all an effort through the
Gibraltar Regulatory Authority. Therefore, once you obtain
the licence to operate a satellite in a particular slot, then that
satellite has to be operated technically and controlled from
Gibraltar.
Milestone GRP - Why does Gibraltar have this capacity
that others do not have?
Mr Pallas - Gibraltar has a small and very fast Administration and Government, so that we can actually get things to
market and we can assist companies very quickly to get their
business plans on track. Unlike some other administrations
like the USA, once you come to Gibraltar with the business
plan, the Government can get it to happen, but you are the
ones that have to do it. Whereas in the USA you come with
an interesting business plan and you submit the proposal
and the government says it is a good idea and two years
down the line they publish a request for tenders and proposals. Therefore your competitors get to do it or get to compete with you for this brilliant business prospect that you
78
devised. So companies feel that Gibraltar is a great place
to do business. Once you come in with a business plan, it is
yours, it is not opened up to the competitors to come and do
the same thing. If you demonstrate that you have the money,
the expertise and a good idea, you can go for it. We have
been very successful in this since we have got 6 satellites
that are now licensed through Gibraltar.
Milestone GRP - How do you see Gibraltar positioning itself as a knowledge-based economy?
Mr Pallas - In many cases small can be beautiful. You can
exploit niche markets by providing a good, quick service to
customers, I do not know a lot about other industries, but I
know we can get things to market very quickly within what
we do. An example is the satellite called SES3. It was at 80
degrees west somewhere over the USA, we decided to move
it 180 degrees east, somewhere at the level of Japan, serving the Indian and Chinese market. This was a relatively new
satellite, had lots of fuel and we had to move it more than
half way around the world, over the Atlantic and Middle East
because there was more accessibility of ground stations to
control it on the way there. It took us two months to move
the satellite because it was three diameters away from the
earth, it was a huge long journey, and we moved it as fast
as we dared.
The main thing about that was that Gibraltar managed to
get the permissions for the slot during that 2-month period when we moved from one place to another. This would
have never happened with any other administration, and
Gibraltar was very agile in obtaining that and it is now the
primary control satellite we fly that and it is serving the Asian market. It is a value-add for Gibraltar. What we do here
brings direct cash input into the Gibraltar economy externally since we are not selling and moving money around
inside here, we are receiving a net influx of money for the
operations from our head company. We are not a profit centre but a cost centre for the company, and we get paid for
what we do for them.
In the context of a small economy like ours it is important it runs into the millions of pounds a year. We are providing
that direct input into Gibraltar‘s economy. So if you are small
and have good infrastructure, good telecommunications and
a responsive agile administration, and also have an environment where you can do business, where there is hopefully
little corruption, and you can get things done officially without having to wait until somebody agrees, things happen
and results come in good benefits. Gibraltar being a very
small economy, gives the opportunity to just focus on a few
niche markets and exploits them to good effect, and does
a better job than other administrations in that area. That is
what we do with satellites. There is no reason why another
industry could not do it; we just got here first.
Gibraltar 2012
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Online Gaming
Telecoms
& IT & IT
milestone GRP
What has been good for Gibraltar and the company, is that ecommercehashelpedGibtelecomtoraiseitsgameastheinternet
businesseswedealwithareverydemandingorganizationssince
everysecondcountsfortheminaveryimmediateandcompetitive
environment.Thishashelpedusadvancenotjustthecommunicationstechnology,butmanyotheraspectsofourbusiness.Theegamingcompaniescouldnothavecomehereifthetelecommunicationshadnotbeenthere,butsincetheycametheinfrastructure
hasbeenfurtherdeveloped.Asanexample,thereusedtobejust
one fibre optic ring going out of Gibraltar so, if anything happenedtothatonelinkeverythingcouldbeout.Itneverhappened,
butnowwehaveseveralindependentroutesacrosstheborderto
Spain-fromwherewedropontodifferentcarriers.Wealsonow
haveasubmarinecablelandinginGibraltar.Soallofthisdiversity
andresiliencehaspartlycomeaboutbecauseofthee-gamingindustryanditsneeds.Butitwouldhavecomeaboutanywayintime
asbusinessesareincreasinglydependentoncommunications.
Telecoms Growing in Pace with the Economy
An all-round provider extending its reach
Interview with Mr Tim Bristow, CEO, Gibtelecom
TimBristowhasbeentheChiefExecutiveOfficerofGibtelecomsince2002,whenGibraltarNynexCommunicationsmerged
withGibtel.HeisalsoanindependentNon-ExecutiveDirectorofbwin.partydigitalentertainmentplcandChairmanoftheir
EthicsCommittee.HispreviousdirectorshipsincludesubsidiariesoftheNorthumbrianWaterGroupplc,BritishTelecomplc
andVerizonCommunicationsInc.MrBristowisaformerFinancialandDevelopmentSecretaryofGibraltarandbeforethat
wasaDirectorattheUKNationalAuditOfficeinLondon,wherehetrainedasanaccountantaftergraduating.Hemetwith
MilestoneGRPtodiscussthedevelopmentofGibraltar’stelecommunicationssector,Gibtelecom’spositionwithinitandthe
howGibraltarisbecominganinternationaltelecommunicationshub.
Milestone GRP - How has Gibraltar evolved as an IT hub?
Mr Tim Bristow -Gibtelecomhasalwaysbeenattheforefront
oftechnologicaldevelopments.Thecompanyoriginatesfrom
two sources: one was always a private sector company, first
Cable and Wireless and subsequently British Telecom. The
othercamefromtheprivatisationofaGovernmentdepartment,
GibraltarNynexCommunications(GNC),whichbecamepartof
theVerizongroupoftheUS.Gibtelecomemergedfromthefusionofthesebusinesses,andisnowjointlyownedbyTelekom
SlovenijeandtheGovernmentofGibraltar.Theprivatisationin
May1990wasthereforeaheadofthecurveforprivatizations
ofincumbenttelephonebusinesses.BritishTelecomhadbeen
privatizednotlongbefore.Aspartofthatprivatizationcontract
GNC, built a fibre optics network throughout Gibraltar. That
was also ahead of the curve, and the fact that Gibraltar was
able to advance the way it has, is partly because that fibre
networkwasbuilt.Wecouldnothavehadthefinancialservices
and e-gaming industries here unless Gibraltar had this telecommunicationsbackbone.Sointhatsense,IthinkGibraltar
hasalwaysbeenattheforefrontoftelecomstechnology.
Milestone GRP - How would you describe the current legislation regulating the telecoms industry in Gibraltar?
Mr Bristow -GibraltarfollowstheEUlegislativeframework,and
thereareawholerangeofdirectivesontelecommunicationsand
80
communications.Itdoesnothaveanychoice.Whenthesedirectivesfirstcommencedinthe1990sonecouldarguethatderogationsshouldhavebeensoughtforGibraltarduetoitssize.
ButthatdidnothappenandsoGibraltarappliestheentirerange
ofdirectives.ThisEUlegislationtoencourageliberalizationand
competition,designedforcountrieswithmillionsofpeople,are
actuallytransposedintoGibraltarlaw,andforabusinessofour
sizeitcreatesquiteachallengeandcarriesacost.Gibtelecom
haveaturnoverofabout44millionEuros.Thecostofrunning
thebusiness–andofregulatingittoEUstandardsandallthat
thatrequires-isquiteonerous.WearespendingwelloveramillionEurosayearonlicencesandbeingaregulatedentity,which
isasignificantproportionofourturnover.
Milestone GRP - What are the specific requirements of the
specialized industries in Gibraltar and maybe even the sheer
location that Gibraltar is to a telecommunications company?
Mr Bristow -Gibraltarisamicrocosmofalargerstate,andallthe
servicespeoplehaveinlargerplacesarewantedhere.Gibtelecom
are just a micro-version of former incumbents elsewhere, but of
coursethebusinessvolumesaremuchsmaller.Whatisperhaps
differenthere,comparedtobiggercountries,isthehigherproportion of international traffic that requires good communications
networks. I think for Gibtelecom the challenge with some of the
e-commerce businesses is that the internet is a very immediate
andunforgivingactivity.
Milestone GRP - How have your three brands evolved?
Which areas offer growth opportunities and what trends do
you see emerging?
Mr Bristow -Ourfixed-linevoice,likeeverywhere,isindecline.
We have just as many customers because Gibraltar has been
growing,butwearecarryinglessminutes.Sotherehasbeena
growthinthenumberoflinesbutusagelocallyandtoabroadis
reducinggenerally,partlyduetointernettechnologiessuchas
conferencingtypecallingandemail.
Mobilecontinuestogrowandwehavehada3G+networkfor
quiteafewyears.Theinternetisalsoagrowingbusiness.ComparedtoEuropeanstandards,Gibraltarhasasubstantiallyhigh
penetrationrateforbroadband.Itiscurrentlyreachingover80%
ofhouseholdsandpercapitawehit35%.Becauseofthesmall
geographicalareawecover,wedonotfacethebroadbandproblemsthatlargerplacesexperience.Wedonothaveverylong
copperrunsandthereislotsoffibre,sothereisnodeterioration
duetodistance.Peoplecanhavereasonablebroadbandspeed
everywhereinGibraltar.
Another growth area is providing international connectivity for
businesses. We do point-to-point international private leased
circuits,wherewetakeabusinessdirectlyfromheretosayMadridorLondon.Theegamingcompanieshirededicatedinternet
bandwidththattakesthemtowheretheyneedtooperate,and
thishasbeenasubstantialgrowthareatoo.
Wehavealsomovedintodatacentresandarenowthebiggest
providersontheRock.Wearealsoalandingstationforthenew
Europe-IndiaGatewaysubmarinecableproject.
Itisthisconsiderablebusinessdiversificationthathasfacilitated
uscontinuingtogrow.Ourgrowthlastyear,inatimeofworldwideeconomicdownturn,wasapproaching10%.Wehavebeen
reaching-orgettingcloseto-doubledigitgrowthforanumber
ofyearsnow,andpartofthatisbecausewearediversifying.
Milestone GRP - What are you developing right now in terms
of data centres?
Mr Bristow -Wehavethreedatacentres.Witheverynewone
we’vebuiltwethoughtatthetimetherewasariskofsupply
outrunningdemand.Wearecurrentlybuildingtwomoreina
facility,locatedwellabovesealevelandawayfromthemain
businesscentres,whichmovesourcapacityuptonearly300
racks.Butthesedatacentresfillup,evenbeforewelaythelast
brick,andthathashappenedeverytime.Theyusethelatest
industrystandardtechnologies,includingefficientcoolingand
standbypower,andarePaymentCardIndustry(PCI)accreditedfordatasecurity.
Milestone GRP - What is the Europe-India Gateway project
and how is Gibtelecom involved?
Mr Bristow - For many years, Gibraltar has wanted a submarine cable link, and for different reasons this did not happentillrecently.In2006,wegotinvolvedwithaprojectcalled
SEA-ME-WE5, which was a submarine cable that was going
to be built from India to London but the consortium eventuallyfellapart.Asmallgroup,Gibtelecomincluded,becamethe
founder-shareholdersofwhatisnowtheEuropeIndiaGateway
system. It is a consortium of 16 companies, and Gibtelecom
arereallypunchingaboveourweightintermsofthepartners
wehave–VerizonBusiness,BritishTelecom,C&WCommunications, South Africa Telecom and Bharti, just to mention
a few. Put simply, the Europe-India Gateway is a 15,000 km
submarine cable system utilising next generation fibre optic
technology.Forusitrepresentsasubstantialinvestmentcosting about 30 million dollars. Most of these worldwide cable
projectstodaytendtobebuiltbyaconsortium,becausethey
are expensive and also because they involve many different
places.Forexample,youhavetobelicensedtolandacable,
soitworkstohaveapartnerwhoislocatedinthecountries
or territories concerned. Within this 15,000 km system there
are13landings:fromLondontoPortugal,thenintoGibraltar,
toMonacoFrance,Libya,Egypt,thenthroughtheMiddleEast
anddowntoIndia.
ItisanexcitingprojectforGibtelecomfortworeasons.First,it
isthefirsttimeacommercialfibreopticsubmarinecablehas
landedhere.Itmeanswehaveevenmoreroutediversitybecauseseacablestendtobelesssusceptibletodamagethan
land cables. The other exciting factor is that Gibtelecom are
actuallynowaglobalcarrier.Becauseoftheamountofcapacityweown,wearenowaglobalcarrierandbandwidthwholesaler.AllofGibraltar’strafficwouldcurrentlyequatetomuch
lessthan10%ofthetotalcurrentcapacityGibtelecomhaveon
thecableworldwide,sowehavetosellquitealotelsewhere.
Forthisreasonweappointedaninternationaldirectorlastyear.
Hespendssomeofhistimehere,andasubstantialamountdoingGibtelecom’sbusinessaroundtheworld.Iwaswithhimin
thesouthernhemispherelastweekandinEuropetheweekbeforelookingtodevelopourinternationalbusiness.Inthelong
run,ifwearesuccessful,thisoffshorebusinesscouldprovide
moregrowthopportunities.Iwouldliketothinkwecouldjoin
other submarine cable projects. There could be the prospect
for us to connect Africa and Europe via Gibraltar, which is a
projectwehavebeenlookingatforsometime.Therefore,ifthis
internationalbusinessgrows,itmayovertimebecomeasbig
asourdomesticone.AswegoforwardGibtelecomwillbecome
moreandmorediversified,becausehereastheformerincumbentwearehighlyregulatedwithpricecontrols,wefaceincreasingcompetition,andsoitbecomesaharderlocalmarket.
Gibraltar 2012
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Telecoms & IT
Milestone GRP - Who are the clients? Who are you marketing to?
Mr Bristow - We have to see what happens. I was in South
Africarecently,partlyforanEIGconsortiummeeting,butalso
using the opportunity of being there to build some relationshipswithsomelocalcarriers.Therearecablesthathavebeen
built around Africa, but eventually they have to connect to
othercablesystems.Itisahighlycompetitivebusiness,andof
coursetheconsortiummembersareallcompetitorswitheach
other.Sowhilstweworktogether,wearealsoincompetition.
Milestone GRP - When we met Mr Isola of Sapphire, he stated
that there are areas where the two companies could work
together. What is Gibtelecom’s position on the possibility of
such synergies existing?
Mr Bristow - It is good for a former incumbent telco to face
competitionandforconsumerstohavemorechoice.OurcompetitorshereinGibraltartendtofocusonanichemarket-Sapphire,apartfromofferingbroadbandservicesforwhichinpart
theyareusingourtechnology,Iunderstandfocusonproviding
dedicated bandwidth and other services to the egaming and
business community. Of course there could be synergies, but
the reality is that these online customers like to have different
suppliers.Agamingcompanylookstohavediverseroutes,and
havingdifferentcarriersensuresthis.Soobviousareaslikethat,
wheretherecouldbesynergiesthatwouldbegoodforthewholeeconomyandjurisdiction,wouldprobablynotworkforsome
consumers.Neversaynever,buttherealityisthatinaregulated
marketsuchasthisone,Gibtelecomneedstohavecompetition
andifitwasnotSapphire,itwouldbesomeoneelse.
Milestone GRP - You have been with the company for 10 years. At which stage of its life cycle is Gibtelecom and how do
you see it evolving over the next couple of years?
Mr Bristow -Adecadeisalongtime,buttelecomisagreat
businesstobeinhere-itisaconstantlydevelopingandchangingindustry.Wehavebeenthroughajourney,wherealotof
synergieswereinvolvedtomergecompaniestogethertocreate Gibtelecom. Although the workforce was initially reduced,
onthebackofthebusinessbeingmodernisedandreshaped
backthenwenowdomanymorethingsthan10yearsago.We
areagenuineone-stopshopforallfixedline,internet,mobile
Europe India Gateway Project
Bude
andenterpriseservicesandproducts,withagroundbreaking
singlebill.GoingforwardIcanonlyseeuscontinuingtomove
inthisdirection.Thereisanothermobilecompanyherealready
andanotheronesettostartup.Inthissmallplacethismeans
there will be three local mobile competitors! We are just now
at the stage where our broadband speeds are getting faster.
Generally,ifwesellfourmegabytesofbandwidth,itwillrunat
four megabytes. Later this year, we are completing putting in
the technology that will enable us to ramp up our broadband
speeds.Weenvisage40-50uncontendedmegabyteconnectionswithoutaproblem.Thissametechnologywillenableusto
putmultimediaservices,likeTV,downthetelephonelines.That
couldbeanopportunityifwedecidetogothatwayandifthe
localauthoritiesarepreparedtograntGibtelecomalicence,or
perhapswegetintoapartnershipwithanexistingbroadcasting
provider.Therearealotofexcitingopportunities.Icannotsee
thetelecommunicationssectorgettinganylesschallenging.
However,aswellasopportunitiestherearethreats,theonline
gamingsectorbeinganexampleofboth.Somethingislikelyto
happenintheEuropeanegamingspace.Atthemomentcountriesareindividuallychoosinghowtolicenseandregulatethis
industry, like the UK, Italy, France and Spain. Then you have
othercountriessuchasGermany,whichhavemorerestrictive
laws. The technology tends to be ahead of the politics, and I
think in areas like online gaming something is surely likely to
happenEuropeanwideoverthenextdecade.Itcouldbeboth
anopportunityforGibraltarorathreat,butoverallIbelievethis
industrywillcontinuetogrowhere.
IthinkGibraltarisagreatplacetohavedatacentresandthis
isanotherbusinesswecanbuildon.Beingawayfromthemajor centres of Europe provides companies with diversification
andGibraltarenjoysverygoodtelecommunicationsconnectivitywiththewiderworld.Weprobablyneedtomaketelecoms
morepricecompetitive,althoughtheoverallGibraltarpackage
availabletobusinessisveryattractive.Ourdatacentresbusiness focuses on companies that have their head quarters or
operationshereatthemoment,butwecouldalsolooktoattract clients operating from outside the jurisdiction. With the
submarinecable,Gibtelecomhasnowbecomeaglobalcarrier
and business. We are pretty unique and that provides an opportunity, because if we do the right things and carefully, we
canbuildabiggerinternationalbusinessandcontributemore
toGibraltarontheway.
London
London
• 16 consortium members
• $700m fibre optic cable, UK to India
Marseille
• c$30m Gibtelecom investment
Sesimbra
• 15,000 kilometres
• Partial activation in February 2011
Monaco
Gibraltar
Tripoli
Suez
Alexandria
Cairo
Jeddah
• Complements fibre land routes
• Capacity of 3,84 terabits/second
Djibouti
82
Fujairah
Muscat
Mumbai
Telecoms & IT
milestone GRP
From Back-up to Primary Provider
Keeping the Online Gaming sector connected
Interview with Mr Lawrence Isola, CEO of Sapphire Networks
LawrenceIsolaisafoundingmemberoftheFiduciaryGroupofCompanies,oneofthelargestcorporateandtrustserviceentitiesinGibraltar.HeisaDirectorofFiduciaryPropertyServicesLimitedandBMIPropertyMattersLimited.Mr
IsolaisalsoinvolvedinthemanagementanddevelopmentofpropertyincludingEuroport,Gibraltar’slargestcommercial
propertydevelopment,aswellasAtlanticSuitesandKingsWharf-twoofGibraltar’smostprestigiouspropertydevelopments.HeisafoundingmemberandManagingDirectorofBroadbandGibraltarLtdtradingasSapphireNetworks. Milestone GRP met with Mr Isola to get his views on the importance of telecommunications for Gibraltar’s economic
growthanddiversification,aswellashiscompany’spioneeringroleinthesector’sdevelopment.
Milestone GRP - How has Gibraltar’s Telecom sector evolved
in the last ten years, and where does it stand today?
Mr Lawrence Isola -The Telecom sector has evolved enormously.Intheearly2000swealreadyhadaninterestinasmall
internetproviderbythenameofGibnet,whichoriginallyintroducedtheinternetinGibraltarwhenpeoplestilldidnotknow
anythingaboutit.Themarketswerenotproperlyliberalisedin
Gibraltarandtherewasamonopolyinplace.
As landlords of Europort, the biggest commercial business
centreinGibraltar,wehadoneofthefirstbiggamingcompaniesthatsetuphere,888.JohnAndersonwastheirchairman.
He used to visit me often to release his frustrations because
theywouldhaveanaverageoftwohoursoutageeveryweek.
Forabusinessdependentontheinternet,thatrepresenteda
majorissue.Thisinfluencedourdecisiontoinvestinamuch
neededtelecommunicationscompanynamedSapphire.Back
thenGibraltardesperatelyneededanalternative.Notonlyfor
competitivereasonsbutalsobecauseatthatearlystageofthe
gaming industries growth in Gibraltar it became self evident
thatthequalityandresilienceofconnectivitywascrucialifGibraltarwantedtocontinuetoattractthebusiness.Intheearly
stagesofthegaminggrowtheventheRegulatorstruggledto
imposefullcompliancewiththeirlicenses,whichmeantbringing all their services to Gibraltar because the quality of the
84
connectivitywassimplynotgoodenough.SapphiresoonenabledtheGovernmentandtheRegulatortodojustthat.Asaresult,whenwewereready,functioningandhadtherightservice
quality,morebusinesscametoGibraltar.Gibtelecomsawreal
competition and in fairness their services also began to improve.MyargumentwiththoseIknewinGibtelecomwasthat
wewereallgoingtoshareinthatgrowthbecausewewereall
contributingtoit.Todayeverybodyacceptsthathavingseveral
providersinajurisdictionisnotjustimportant,itisnecessary
anditgivesmorecredibility.Therehavebeenmanyadvantages from Sapphire coming in. We have taken many risks but
nowwearepickingupsomeoftherewards.
Milestone GRP - Do you work with the incumbent?
Mr Isola-Wedo,weprovideanADSLserviceviatheirADSL
linestosomehomes,butwecannotcompetewiththem.Whatevertheydo,wecanfollow,butwecannotdictateprice.This
goesbacktotheReferenceUnbundlingOffer,whichinmyview
doesnotwork.Whenmarketswereliberalisedtheincumbents
weresupposedtoopenuptheirnetworksandletcompetitors
in.ThisdidnotworkintheUKandithasnotworkedinGibraltareither.IntheearlystagesofSapphire,weweresupposed
tobeallowedtousetheductsoftheincumbentfortherollout
ofournetworkbutitbecameatotalnonsense.Ittookmethree
monthstodecidethatwehadtoforgettheincumbentanddo
it ourselves otherwise we would not have got anywhere. We
wouldhavejustspentfiveyearsfightingit.Weendedupinvestinginourownnetworkandthatwasprobablythebestthing
thathappened.SoweownourfibrenetworkaroundtheRock
and we also have our own 10–12km fibre network in La Linea,Spain.Then,werentfibresthattakeustoMadridthrough
diverse circuits. There are huge advantages that come from
beingabletocontrolandrunourownnetwork.WehavesolutionsforDDoS(DistributedDenialofServiceAttacks),whichis
veryimportantforthegamingindustry.
cerned,Iwouldlovethefinancialsectortogrow,asmuchas
thegamingsector.Withinthegamingsector,thereisnotthe
same level of certainty that there is in other sectors such as
insuranceandfinance,thesekeepgrowingslowlybutsteadily.
GaminghasprimarilycomeinoverthelastdecadeandIthink
there are still elements of uncertainty for its long term future
largely due to the fragmenting tax structures forming within
Europe.Eventhegamingcompaniesthemselvessaythatthey
cannotseemorethan5yearsaheadastherearechangestakingplaceallthetime.
Milestone GRP - At what stage of its life cycle do you see
Sapphire now?
Fromwherewearesittingwehopetohelptosetthestandard
and maybe encourage other IT-orientated businesses to look
atGibraltarmoreseriouslythaninthepastnowthatweenjoya
newandcrediblelowtaxregime.IseeafutureofDataCentres
housingcompaniesfrommanydifferentfinancialbackgrounds
thatcouldpotentiallycontributetoGibraltar’sgrowthandwhat
we provide in Gibraltar on the IP front is as good or indeed
betterthaninanyotherpartoftheworld.Youcouldsaythat
wehavethegamingindustrytothankforthequalityofconnectivitythatweenjoytoday,butthishasplaceduswelltoattract
amorediverserangeofbusinesseswhichwillrequireequally
highstandards.ThereforeGibraltarisalsowellplacedtonow
attractmorediverseITorientedbusinesses.
Mr Isola-IwouldliketothinkSapphireisnowestablishingitself
asacredibleprimaryprovider.Westartedoffbeingthebackupto
theincumbentandinmostcaseshavenowbecometheprimary
providerwiththeincumbentservingasthebackup.Sapphireis
wellknowninITcirclesandtothosethatarelinkedtothiskind
ofbusinesssowedonottendtohavelargemarketingbudgets.
Milestone GRP - How have you invested in technology and
the consumer experience in order for Sapphire to reach that
level of maturity?
Mr Isola -Weareaboutiqueprovider,veryfocusedintheserviceweprovideprimarilytogamingcompaniesandtospecialisedbusinessesthatneedaparticularqualityofconnectivity.
We are continuously interacting with the gaming community
andwiththeirITdepartments,sowegetalotofusefulinformationthathelpsushelpthem.Ayearandahalfago,wejoined
LINX in London and AMS-IX in Amsterdam, the two biggest
Internet peering infrastructures. Therefore, we can peer with
otherbigbandwidthprovidersinplaceswhereourclientsare
based. For example, people that are playing in Manchester
withBwin.PartywillbeahopfromManchester,toLondon,to
MadridtoSapphire.Thisincreasestheefficiencyofthecommunication, the efficiency of the latency, without any packet
loss-thelesshops,thequickerandcleanerthepassage.Althoughitwasexpensivetoset-up,thiswasverywelcomedby
thegamingindustry.
Wehavenowupgradedourequipmenttocarriergrade.Even
thoughwearejustasmallcompanyinGibraltar,weareusing
equipmentthatisusedbybigcarrierswithnetworksthattravel
acrosstheglobe.TheedgeofournetworksitsinMadrid,not
atthefrontier,andwehaveourownfibrenetworkinSpain.We
sourceourownIPinMadridandhavefiveIPproviders-CogentspecialisesinnetworksthatgototheFarEastandLevel
3specialisesincrossingtheAtlantictoAmerica.Wetherefore
haveplentyofredundancy.IfthereisacompanyinGibraltar
that is doing more business with the Far East we direct their
trafficthroughCogent,whichimprovesthelatencyandismore
efficient.Thisisoneoftheadvantagesournetworkgivesus.
Milestone GRP - The Financial sector is poised for continued growth but the Government is carefully managing the
Online Gaming sector’s growth. How do you see the future
along this line? Are you going to target new markets?
Mr Isola -Itisnotforustodecidewhatmarketstoencourage,
we do not really bring them here. As far as Sapphire is con-
Milestone GRP - What factor do you see influencing investment into Gibraltar and which areas do you identify as ripe
for growth?
Mr Isola-Thetaxreformwillplayanimportantpart,evenifit
willtakesometimetoseeitseffects.InthepasttheGovernmenthavebeenveryselectiveintheirchoiceofgamingcompanies and this is important but I do not think there is any
harm in allowing a few more so long as they have the right
qualificationsandstandards.AlthoughavailablespaceispresentlyaproblemforGibraltarIbelievethedatacentreareaof
business is likely to continue to grow as more IT orientated
businesseschoosetobasethemselvesinthisjurisdiction.We
arenowabouttoacquireadatacentreandarealsodesigning
anotherone.Iseethisasagrowtharea.Goingintodatacentre
businessisalmostaformofdiversificationwithintheTelecom
business.WearewellplacedhereinEuroportasweenjoyinfrastructurethatisunequalledinGibraltarwithwell-maintained
back-uppowerstationswhichalsoback-upoursizeablecoolingplant.Gibraltarneedstobecomealittlemoreaggressivein
themarketingofitsnewlowtaxregimewithitsexcellentcommunicationsfacilitiesforITbasedbusinessesthatcanbenefit
fromtheseadvantages.ThisiswhereIseethemostobvious
growthpotential,whichwillinfluenceinvestmentintoGibraltar.
Milestone GRP - Will Sapphire become a full-blown complete Telecom service provider?
Mr Isola -Thatwasalwaystheplananditwillbethecaseina
fewyears,withoutanydoubt.Iamnotsureaboutwhetherwewill
gointotheMobilesector.Ifwedo,itwillprobablybeontheback
ofanothercarrier.Wearecomingupwithalocallynovelideafor
VoIP[VoiceoverInternetProtocol]withcloudandDR,thingsthat
are not available in Gibraltar, and wont be until we do it. I think
Sapphirewillbealeaderinthatfieldaswearewiththeinternet.
Butitdoestaketimetodothingsproperlyandrollingoutnetworks
isnoteasyatthebestoftimes.Howeverwearegettingthere!
Gibraltar 2012
85
Telecoms & IT
Milestone GRP - You are one of the important entrepreneurs
in Gibraltar, with interests in very different businesses. How
do you create synergies between your different companies?
Mr Isola - Gibraltar being a small place makes it more manageable to handle different interests. When you are dealing,
as a landlord, with companies, in particular gaming companies
that require telco and property services of one sort or another
then obviously there are synergies and relationships inevitably develop in several ways. One example is the cooling plant
which services the Europort complex, as well as the Hospital
and Atlantic Suites. It is a huge asset for us, because it provides
chilled water, which for the purposes of data centres is very
important. Sapphire in partnership with the landlord developed
this resilient facility to service tenants. This is an obvious synergy and has put Europort in the front line when it comes to infrastructure, which is a very important aspect of keeping business
going through its redundant power and cooling facilities.
Milestone GRP - Would you have a message for international
86
readers and the CGDC audience? Is there an example to be
taken form Gibraltar?
Mr Isola - Gibraltar is pretty unique. It is a very good example
of a small city with different religious and cultural backgrounds
mixing together and forming a Gibraltarian identity. It is a small
economy but rather well run and diversified. It has the weather, the English judicial system, which is probably one of its
greatest assets and it has been here for 300 years. As a Gibraltarian, my views are going to be a bit biased. I think the
level of honesty in the management of Gibraltar as a country
is probably exemplary. Gibraltar is a small community where
nobody can get away with much. Gibraltarians are generally
very entrepreneurial. There is a Latin element from Italy mixed
with the English education. It is unique because it is in the
southern tip of Europe. Gibraltar is open for business, and I am
cautiously optimistic. Despite the uncertainties of the world,
Gibraltar is very well placed to continue to grow it seems to be
less influenced by the ups and downs of the wider world and I
am confident about its future.
Port Services & Shipping
Port Services & Shipping
milestone GRP
that benefits the entire community and, as such, we would
certainly not have spent €75 million on the new terminal. The
Government maintains this position on the, in our view, entirely
reasonable premise that the number of passengers arriving at
Gibraltar by air is about 180,000 a year whilst the new terminal enjoys an annual passenger capacity of 1 million. A new
or upgraded terminal could have been constructed at a more
modest amount and in keeping with growth based on current
figures. The people of Gibraltar have already spent the money
on the terminal, however, and they have entrusted us with their
public affairs, so that we will make sure that the new terminal
works. In that regard, we must strive at all times to achieve two
goals - the first is to maintain a solid commercial relationship
based on mutual trust and direct communication with the current air carriers and local operators.
Increasing Tourist Flow and the Port’s Growth
Leveraging infrastructure and Gibraltar’s attractions
Interview with The Honourable Neil Costa, Minister of Tourism, Public Transport & the Port
Minister Neil Costa first joined the executive of the Liberal Party in 1999 and has been a Member of Parliament since 2007. On being
awarded a Gibraltar Scholarship, he studied Law & Spanish at the University of Wales, Cardiff. Minister Costa was called to the UK
Bar in November 2002 and to the Gibraltar Bar in January 2003. Before being appointed Minister of Tourism, Public Transport & the
Port, he was a partner of a Gibraltar law firm practising litigation. Minister Costa is also responsible for Commercial Affairs, namely
Small and Medium sized Businesses. Milestone GRP spoke with Minister Costa about his strategy for developing the peninsula’s
burgeoning tourism sector by establishing a strategic balance between attracting tourists into Gibraltar by land, air and sea and
accommodating their stay and movements once in Gibraltar. He also discussed his Ministry’s plans for the development of the Gibraltar Port and the new Government’s vision to realise the potential presented by the controversial new air terminal.
Milestone GRP - How was your portfolio brought together?
Minister Neil Costa - As an Opposition engaged in intense
stakeholder engagement, we formed the view that tourism in
general and the Upper Rock, in particular, had suffered from
chronic underinvestment and a lack of attention for many years. By listening to the various experts and private entities, it
was also clear that the tried and tested tourist product in Gibraltar, whilst sound, required a qualitative leap consistent with
new trends in tourism worldwide, as well as looking toward attracting tourists from emerging markets. In Government we are
more convinced than ever of the need for targeted investment,
developing the existing tourist experience and a rebranding of
our image as a leisure and business destination.
Since being elected into office we have intensified our efforts
in meeting with virtually all the relevant stakeholders in tourism
to obtain their views with a very clear vision: which is to make
sure that all visitors to Gibraltar, whether a business or leisure
visitor, wishes to return to Gibraltar, again and again. In other
words, to make Gibraltar their destination of choice. And the
truth is that in Gibraltar we are very fortunate in respect of the
innate and inspiring marvel of the Rock, with its network of
natural and human engineered caves, tunnels, renowned historical sites, the panoramic views to North Africa and the Iberian
Peninsula, as well as our links to ancient myths as one of the
Pillar of Hercules. Gibraltar also constitutes a time capsule,
90
where, for instance, the tourist can find a Castle built by the
Moors after their invasion in 711 next to tunnels drilled during
the Second World War. The new Government can work on the
high number of annual visitors to Gibraltar, always endeavouring to attract more as we capitalise on the Rock’s splendour,
natural beauty and as we develop tourist and heritage sites –
always in an environmentally sensitive and heritage conscious
manner. Tourism, to our mind, is linked to the Port, as the Gibraltar Port is one of the main drivers of the economy, not least
by reason of the vital importance of the cruise industry. One
of our commitments is to ensure excellent services and facilities for cruise visitors. The Gibraltar Port provides, in addition,
a one-stop shop for services including crew changes. When
cruise passengers arrive in Gibraltar they constitute important
tourists whom we hope will become regular visitors to Gibraltar. Ultimately, when tourists come to Gibraltar, whether by
land, sea or air they will generate important economic activity,
as well as raising challenges to our transport infrastructure.
Milestone GRP - A new airport terminal was built under the
previous Government. Whilst we understand this remains a
controversial issue, how will the new Administration work to
capitalise on this asset?
Minister Costa - The airport terminal has and continues to be
a controversial topic of discussion. As a centre-left Government we are concerned to spend taxpayers money in a way
lue for money criterion. As such, we are currently working with
private stakeholders and the Gibraltar Tourist Board in investigating marketing initiatives that are more effective and that are
linked directly to results.
Milestone GRP - Do you see a potential marriage between
the development of the gaming industry and tourism, for instance in terms of MICE activity?
Minister Costa - Absolutely – the reality is that tourism is married to several sectors such as sports, culture, heritage and
events. In fact event-led and sports-led tourism constitute vital manifesto commitments. In order to substantively progress
this concept, the new Government has established an interministerial committee comprising the ministries for the environment, sports, heritage, culture and tourism. By way of example, Gibraltar now rightly boasts of a very successful annual
Chess Festival, which has been going from strength to strength
and which has achieved international recognition. The event
annually attracts a large number of people and thereby generates economic activity for, among others, hoteliers, shops and
restaurants.
The Government, through the Gibraltar Tourist Board, supports
the existing air operators by way of marketing and advertising
– these entities also know that we are keen to facilitate and assist wherever possible and know that we are open to meet with
them at any time. Secondly, we will labour tirelessly to increase
the services provided by the existing operators, on the one
hand and attract new operators, on the other, not only from the
United Kingdom but also from other countries both within and
outside of Europe. The Gibraltar Tourist Board is fully seized
of the new Government’s ambitious, but, in our view, entirely
attainable business agenda in respect of the airline industry
and are implementing effective systems to ensure fluid communication with the airline industry, so that we can react timely
to evolving circumstances and a fluctuating industry. We also
intend to target Nordic countries and Germany, which in some
important respects, have weathered better the worldwide credit and financial crisis and have, on average, higher spending
power per capita compared to other European countries. In
addition, Gibraltar has the uniquely advantageous position of
being based in the warm climate of the south of Europe.
Whilst recognising the value of annual events like the Chess
Festival, the Government is committed to investigating and establishing annual events that will not only mean money spent
in the shops, but which will also increase the diversity and
therefore dynamism of Gibraltar’s cultural calendar. We will,
where possible, also endeavour to attract events that coincide with the seasonal economic downturn in activity, such as
during the months immediately after Christmas. In connection
specifically with your question on the gaming industry, there is
absolutely no reason why a business visitor to Gibraltar cannot become a leisure tourist. The key is to effectively market
the business visitor to Gibraltar that attends to gaming or any
other business.
Related to capitalising on the new air terminal is the question
of marketing. As a new Government, we are firmly of the view
that expenditure on tourism marketing must be driven by a va-
Milestone GRP - How do you envision the development of
the cruise industry alongside projects such as the development of the port infrastructure?
Year
Different Ships
Number of calls
Passengers
2002
46
149
116,918
2003
58
167
143,508
2004
61
168
164,883
2005
60
166
188,810
2006
65
202
210,799
2007
78
227
275,993
2008
74
222
308,989
2009
73
238
348,199
2010
59
175
305,161
2011
71
187
328,636
2012
n/a
178
303,842
Cruise Ships Calling at Port of Gibraltar Source: Port of Gibraltar
Gibraltar 2012
91
Port Services & Shipping
Minister Costa -Wearelookingattheportverycloselyand
wefeelthatalotmorecanbedone.TheGovernmentiscommittedtoensuringthatthePortremainsasourceofrevenue
forGibraltar,aswellasexploringnewbusinessandcommercialopportunitiesastheyarise.Asaresult,wearecommitted to invest in the Port. In fact, we consider investment in
the Port and related services as one of the main gateways
to develop an international business hub in order to further
diversifyoureconomy.Thisthereforedoesnotjustmeaninvestment in areas related to cruise operators, although this
is a central plank of our manifesto commitments, but also
to develop a purpose built office and commercial facility at
thePort.Wearecurrentlyintheprocessofinvestigatinghow
to effectively invest in the Port’s infrastructure to maximise
business potential and opportunities and provide excellent
servicetothecruiseindustry.
Milestone GRP - How do you assess the position of the Gibraltar Port compared to that of its main competitors?
Minister Costa - It is true that Gibraltar faces competition
from emerging and existing ports. As a result it is critical,
aswiththeairlineindustry,toestablisheffectivesystemsof
fluidcommunicationandanabilitytoreactquicklytounfoldingandchangingcircumstances.Theheavyinvestmentin
othercompetingportsbyothercountriesmakesourcommitmenttoinvestallthemorevital.Again,Icansaythatweare
fortunatethatGibraltarhasasoundbasisonwhichwecan
build and that there is nothing stopping Gibraltar, with the
right investment in the existing infrastructure, in becoming
oneofthemostsuccessfultransitportintheMediterranean.
At the same time, we will actively engage with local stakeholders and cruise operators to determine the feasibility of
smallervesselsmakinguseofGibraltarasaportforpartialor
fullturnaroundcruises.FurthertothecommentsthatImade
beforeonthenewairterminal,giventhatitenjoysanexistingcapacityof1millionpassengersayear,ifwesucceedin
attractingroutesfromnewEuropeandestinations,theremay
beanoptionforpeopletodisembarkinGibraltarandtostay
foracoupleofnightsbeforeflyingbackhome.Asaresult
milestone GRP
acertaindegreeofturnaroundmaybefeasibleifthevarious
strandsoftheGovernment’stourismpolicyareproperlynurturedanddeveloped.
Milestone GRP - Much is being done in terms of beautification of the city and cleaning up of the Upper Rock. What
would you like to tell tourists about these developments?
Minister Costa-TheUpperRockNatureReservecomprises
anembarrassmentofrichesintermsofbiodiversityandflaura;
itisalsothelungofGibraltar.Asaresult,wearecommittedto
commence a programme to refurbish the Upper Rock Nature
Reservetopreserveandenhancethisvitalpartofourenvironmentalheritage.InthatendeavourthenewGovernmentisluckyintheextremetocountwithinitsranksthenewMinisterfor
theEnvironmentDrJohnCortes.DrCorteswastheDirectorfor
theGibraltarBotanicalGardens,whichisnotonlyamagnificent
verdantsanctuarytorelaxandescapebutwhichisyetanother
exampleofourhistoricallinkstoBritain.AsaGovernmentit
isourcommitmenttoreinvestthemoneygeneratedbytheUpper Rock in the Upper Rock. The Inter-Ministerial Committee
that I mentioned earlier is currently working on various ways
toenhancethetouristexperienceontheUpperRockwhether
byinvestingonexistingsitesandbyconsideringnewheritage
sitesthatarenotcurrentlybeingofferedtothepublicasatouristexperience.
Milestone GRP - What is your approach to Gibraltar’s traditional markets and to new, rising markets such as the BRICS?
Minister Costa -TheUnitedKingdomis,ofcourse,ourtraditionalpartner,notjustconstitutionally,butalsobecauseofimportant trade relations. In terms of tourism, as I have already
indicated,itisalsomywishtostartcommercialrelationswith
Germany and other Nordic countries by, for instance, encouragingflightstoandfromGibraltarandmarketingGibraltaras
a modern, vibrant and dynamic tourist destination in the sun.
ThenewGovernmenthasalreadycommencedfeasibilitywork
toconsidertappingnewemergingmarketstoattracttourismto
Gibraltar.
Staying Ahead of the Tide
A port leveraging its competitive advantages
Interview with Mr Roy Stanbrook, Captain of the Port & CEO of the Gibraltar Port Authority
AfteranearlycareerwiththeRoyalFleetAuxiliaryServiceduringwhichhegainedhisqualificationasMasterMariner,aswell
as serving in a number of conflict areas, Captain Stanbrook moved to the world of cable ships and sub-sea engineering.
Becominginvolvedintraininginthisfieldofwork,itwasashortmovetobecomingaSeniorLectureronshortcoursesata
UKmaritimetrainingestablishment.SubsequentcareerchangessawhimworkingforP&IClubandafamily-ownedshipping
companyasOperationsDirector.CaptainStanbrookjoinedthePortofLondonAuthorityin2001becomingHarbourMasterfor
theLowerDistrictoftheportin2007.HejoinedthePortofGibraltarinFebruary2012.HeisaFellowoftheNauticalInstitute
andaYoungerBrotherofTrinityHouse.
Milestone GRP - How would you describe Gibraltar‘s Maritime sector? What challenges and opportunities does it
present?
Mr Roy Stanbrook -BecauseGibraltaroccupiesakeystrategicpositionattheentranceoftheMediterraneanandithas
agooddeepwateraccess,itisideallypositionedtoprovidea
verybroadspectrumofmarineservicestoaverywidecross
section of the Marine industry, and that is a unique selling
point.
Havingsaidthat,therearelimitstotheavailabilityoflandfor
expansion and that provides its own challenges in serving
thisMarineindustryforwhichGibraltarhasquiterightlybecomefamous.Intermsofservices,thePortoffersunderwaterrepairs,shipbuildingandrepairfacilities,andbunkering,
which is probably the most obvious. A lot of crew changes
occurhere,andtheyareveryusefultoshipowners,because
ofGibraltar‘spositionanditsexcellentlinesofcommunicationtotheoutsideworld,includingtherefurbishedairport.
Wedohavesomechallengesofcourse,apartfromtheshortage of land. They mainly come from neighbouring ports
where the land resources are not quite as constrained as
theyarehere.ThethreatsfromtheglobaldownturninShippinghavenotreallybeenfelttoobadlyhere.Nevertheless,
wearegettingsomeindicationsthatthismightbebeginning
92
to bite in some particular sectors where payments are becomingslower,andthetimesbetweeninvoiceandpayment
are getting naturally stretched. But as long as everybody
staysfocused,Ithinkwehavegotaveryrosyfutureahead
ofus.
Milestone GRP - What role do the Port Authority and the
Gibraltar Maritime Authority (GMA) play within the industry?
Mr Stanbrook -Gibraltarhasashipregisteronwhichthere
arealargenumberofships.TheGMAistheorganizationthat
runstheregistryofshipping.Italsorunsthesurveyactivities
fortheadministrationtoensurethat,first,allshipsthatare
ontheGibraltarregisteraremaintainedtostandard,second,
that a proportion of ships visiting Gibraltar are surveyed in
accordance with the Paris Memorandum of Understanding
toensurethatshippingqualityisconsistentthroughoutthe
world.Theyalsodealwiththeyachtregisterbecausethere
areavastnumberoflargeyachts,anditwillbeadvantageoustohavethemontheGibraltarregister.
In the Maritime sector, the Gibraltar Maritime Authority and
PortAuthorityaretheRegulatorsforthePort.Wecontrolthe
shipping and we ensure navigation safety within the Port,
whichincludesthesurroundingwatersoffGibraltaraswell,
whichalsofallundermyjurisdiction.
Gibraltar 2012
93
Port Services & Shipping
milestone GRP
Port Activity, Main Purpose of Call
Cruise
Cargo
Bunkers
Repairs
Off Limits
Other
7000
6000
5000
4000
3000
2000
1000
0
2005
2007
PortActivity,MainPurposeofCall
http://www.gibraltarport.com/
2009
2011
Source:PortofGibraltar
Milestone GRP - What place does the Port play in
Gibraltar’s economy?
Mr Stanbrook - A very large one. I think we have to look
back at the history of the Port to get a better idea of that.
Upto2009,thePortwasaGovernmentdepartmentanddid
not return a profit at all; in fact it was a cost. A lot of work
putinbymypredecessorshasbroughtthePortformbeinga
GovernmentdepartmenttoastandalonePortAuthoritywith
amuchgreaterdegreeofauthority,albeitstillunderthepurviewoftheMinisterofthePort.Butitisnowaprofitcentre.
ItbringsahealthyreturntotheGovernment’scoffer:over2
million pounds a year. That is a very significant return on a
turnoverofabout6.5millionpounds.SothePortrepresents
quiteamajorcontributortothewealthofGibraltar,whenyou
considerthatthepopulationisjustlessthan30,000.Thatis
somethingthatweareparticularlyproudof.
Milestone GRP - In Gibraltar, bunkering activities are booming and the cruise ship segment is one that has seen
some growth, but that the Government is focused on expanding. How do you see these two of the Port’s activities
evolving?
Mr Stanbrook - Cruise ships are limited by the number of
berthsthatwehave.Wecouldalwaystryandattractmorein
thewinterseason,butnotmanypeoplewanttogocruising
duringthewinter.Sothecruiseseasonstartsaroundabout
theEasterperiodandcontinuesthroughthesummer,andwe
have quite healthy berth occupancy during that period. We
are not saturated by any means, but it will naturally cause
thenumberstoplateau.Sothatiswhycruiseshipshavenot
necessarily grown. We are currently looking at options for
provision of additional berthing facilities for cruise ships to
enableustobuildonthatbusiness.
Because we provide a quality, cost-effective solution with
minimum deviation from shipping range, our port is very
popularforbunkeringactivity.SometimesIfeelthatmaybe
someoftheproblemswehavewithbunkeringarebecause
wearevictimsofourownsuccess,asweendupwithships
queuing for bunkers for longer than we would like. But, of
course, there are threats to that with increased storage facilitiesinAlgecirasBayandwearelookingathowwecould
mitigate that risk by installing some form of storage within
Gibraltar, which complies with future legislation that could
potentiallystopusfromusingfloatingmotherships.
Milestone GRP - What can the Port’s clients expect in
terms of investment into the Port’s infrastructure?
now,andifIdidIwouldnotbesittinghere;Iwouldbegoing
offtoinvestorsandaskingformoney!
Mr Stanbrook -Itisdifficulttopredict.Wehavetodosomething
tooffsetthechallengesthatarepresentedbycompanieswho
are building bunker fuel storage facilities in Algeciras. Finding
ashoresomewhereinGibraltaristheonlywaytoachievethat,
andthereareanumberofoptionsbeingconsideredatthemoment.Havingsaidthat,theoperationthatisofferedbyGibraltar
atthemomentwillremaincosteffectiveanditwillremainwithin
thelawforsomeconsiderableperiod.Sointheshortterm,we
willprovideourusualqualitybunkeringservice,relyingonthe
customerloyaltywehavebuilt.Weareveryfortunatethatthe
WesternAnchorageisaverygoodshelteranchoragewithgood
holdingground,butclosertotheGibraltarsidethantheAlgecirasone.Sowestillhavetheattractionofcomingforbunkers
andstayingontheGibraltarside,ratherthanacrossthebay.
Milestone GRP - You have identified the risk posed by competing ports in the region, such as Algeciras, Ceuta and
Tangier. How have you sought to distinguish Gibraltar’s
Port from others in the area?
Mr Stanbrook -Theporthasspentalotoftimeandeffort
in making bunkering operations safe. Therefore, we can
provide a much better service to the ship owner, with reducedclaims,andmuchsmootheroperationsthroughout.
Asfarascruiseshipsareconcerned,Ibelievethereisno
competitionbecauseGibraltarisGibraltar.Itiscompletely
uniqueandithasalottooffer.Therearewaysinwhichthe
touristexperiencecouldbeimproved,buttheseareworks
inprogress.Butrightnowitisgood,anditisgoingtobe
better.
Milestone GRP - What opportunities do you identify for
investors?
Gibraltarisalsoaportofchoicetohaveshipsarrested.This
isduetocosteffectivenessandbecausewehavegoodtransportlinksheresothatwecangetcrewsfromaroundtheworld
quite easily. The Admiralty Marshall has a very streamlined
system that enables the arrest of a ship, the sale and funds
tobedistributedrelativelyquickly.Anditisreallyacasethat
every cloud has a silver lining because the global downturn
actuallyhasincreasedthenumberofshipsunderarrest.
Mr Stanbrook - Anyone investing in marine infrastructure
willprobablybewellrewarded.Therehasnotbeenalotof
physical investment over the years, so anyone that could
come up with innovative ways of developing and providing
needed infrastructure would be welcomed. It is all really
based on the clever use of space. I don’t know quite how
Registered Vessels & New Registrations
12,000
No. of Vessels
New Registrations
400
10,000
EASTERN ANCHORAGE
350
300
8,000
50
250
Vessels
6,000
4,000
0
2001
Europa
Point
2002
2003
2004
2005
ShipsCallingatPort
2006
Ships Calling at Port
2007
2008
2009
2010
0
2011
http://www.gibraltarport.com/
Source:
Port of Gibraltar
51
150
50
11
309
312
2009
2010
45
47
200
100
2,000
48
51
28
138
26
170
175
187
2003
2004
2005
217
249
271
2007
2008
93
65
2000
37
25
2001
2002
2006
RegisteredVessels&NewRegistrationsSource: Port of Gibraltar
Gibraltar
Airport
Little Bay
Camp Bay
Ocean Village
Dock 1
Dock 2
Dock 3
Main Wharf
M.O.D.
Gibdock
Gun Wharf
Queensway Quay
Marina
Coaling Island
South Mole
Extention Jetty
Container Berth
Bunker Volume
300
Rosia Bay
200
150
100
N
50
B Head
A Head
D Head
WESTERN ARM
5
250
(million)
Ship Registry
Tonnage Volume(milion)
North Mole
Marina
Bay
0
2001
Detached Mole
2002
2003
2004
2005
Total Tonnage
TotalTonnageCallingatPort
C Head
2006
2007
2008
2009
2010
2011
Source:
Port of Gibraltar
http://www.gibraltarport.com/
4
3
2
1
0
2001
2002
2003
2004
BunkerVolume
http://www.gibraltarport.com
2005
2006
2007
2008
2009
2010
2011
Source: Port of Gibraltar
WESTERN ANCHORAGE
Source: Port of Gibraltar
94
Gibraltar 2012
95
Port Services & Shipping
milestone GRP
Gibraltar’s key position as a Maritime Service Centre
Freight rate developments, 2010 - 2012
by Mr Torben C. Skaanild, Secretary General, The Baltic and International Maritime Council (BIMCO)
Containerships - SCFI
Bulk carriers - BDI
Crude oil tankers- BDTI
Product tankers- BCTI
European shipping banks are undecided regarding their future
exposure to the industry, alternative sources of finance from
all over the world and in many disguises have stepped in. We
certainly see this trend continuing throughout the coming year.
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The Port of Gibraltar
Today, Gibraltar’s unique geographical features have allowed
it to become a maritime centre with great potential. Located
at the crossroads of the Mediterranean and Atlantic shipping
lanes, Gibraltar is ideally placed to provide a wide range of
services to vessels of all sizes and types. Its location adjacent
to the Gibraltar Straits - the western entrance to the Mediterranean - means there is negligible diversion time allowing ships
to be able to berth in about an hour after leaving the shipping
lanes. There are no tidal restrictions or locks to negotiate. With
its large area of anchorage waters, the exceptionally weathersheltered port facilities and deep water have made the port an
ideal location for all types of bunkering and related operations.
This combined with its status of being outside the European
Customs Union has made Gibraltar a focal point for passing
ships to call in for bunkers, provisions and crew changes. The
port is open 24 hours daily.
The local airport is just a few minutes from the harbour, adding an advantage when effecting crew changes with frequent
scheduled flights connecting it with Heathrow, Gatwick, Luton and Manchester airports along with proximity to Spanish
regional airports at Malaga, Seville and Jerez. There are also
regular flights to Morocco.
Gibraltar is a well-placed as a bunkering hub and has for many
years been a fuel-supplying port holding a strong position in
the Mediterranean. A huge number of ships call at the Rock
every year for different purposes. The supply of Bunkers and
Luboils or water can be carried out either alongside or at the
anchorage, day or night. All grades can be supplied by barge,
pipeline or road tanker. Luboils are available in barrels or in
bulk. Recent developments on the regulatory side, with an increased focus on exhaust gas emissions from shipping and
stricter requirements coming into play, could support and develop Gibraltar’s position in a positive direction. Today ships
need to carry fuel with a maximum sulphur content of 1.0%
before entering into the Emission Control Area (ECA) in the
North of Europe.
This limit will be lowered to 0.1% sulphur by 2015. All the
ships heading for Northern Europe and coming via the Suez
Canal and Mediterranean will at some point need to bunker
suitable fuel to be in compliance with the IMO rules in the ECA.
The same could also be the case for ships heading towards
the US and Canada, where similar rules will apply from 1 August 2012. This regulatory development combined with the
wide range of bunkering related services available at Gibraltar
and the perfect geographical location right next to one of the
busiest shipping routes in the world seems to ensure a bright
future for the bunkering industry in Gibraltar.
98
Dry docks, slipways and repair facilities are available for carrying out all types of hull and engine repairs. Underwater Repairs
can also be carried out at Gibraltar. Vessels calling for lay-up
or repairs can be berthed at the Detached Mole. There are also
two berths of 100m in length available to vessels discharging
general cargoes.
Even on the recreational front, Gibraltar is well represented
where berths for yachts are provided by three marinas capable
of accepting vessels with drafts of up to 4.5 metres
Gibraltar has all the essential peripheral services needed in
connection with Marine activities - banks, hospitals, dentists,
police and consuls are all available. The Spanish border is
open 24 hours a day for both vehicles and pedestrians enabling easy movement of ships’ stores and provisions. A fast
sea crossing connects Gibraltar with Tangier.
Gibraltar is a profit-oriented capital base with low levels of
corporate tax, with few restrictions in moving capital or repatriating dividends. The legal system modelled on the English
structure contributes to making Gibraltar the highly regulated,
globally acclaimed jurisdiction it is today.
With a stable political and economic environment already appreciated by established investors and customers, Gibraltar
also benefits from its membership of the EU including access
to the EU financial services market.
The harmonious, multicultural and English-speaking environment, (preferred by many international businesses), provides
access to regional markets in Mediterranean Europe and North
Africa. The majority of people in Gibraltar are at least bilingual.
Global economy: A cautiously optimistic outlook supports
the road towards higher growth and reinstates stronger
business confidence
With a 4% World GDP growth in 2011 and the prospects of a
similar level for 2012, shipping will continue to be impacted
by significant oversupply of tonnage in all segments, but shipowners have traded in harsh market conditions before – not
an unusual scenario in a cyclical business environment – and
there are of course remedies in the form of idling and recycling
of tonnage to bring better balance between supply and demand, a condition for improvements in freight rates.
When addressing the effects of the weak global economy on
individual shipping market segments, it is first and foremost
the container and tanker sectors that have taken the beating,
whereas the dry bulk markets appear to have suffered less
with considerably lower but, toward the end of the year, rela-
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Index Value
Gibraltar’s strategic location at the southern end of the Iberian
Peninsula explains why it has been used as a naval fortress for
centuries and why so many battles have been fought over this
relatively small enclave at the entrance to the Mediterranean
Sea.
Vessels calling at Gibraltar can take advantage of a well-established chandlery network which can provide all other requirements for vessels. An increase in vessel calls will lead to
increased ship chandlery requirements.
Dry Bulk shipping: Will this be the year where India takes
off?
100
80
60
40
20
2010
2011
2012
Source: BIMCO, Baltic Exchange, Shanghai Shipping Exchange
The year 2011 had barely started before a series of unforeseen
events took place across the Globe. Most of them affected
dry bulk shipping negatively and the large Capesize vessels
particularly were under pressure. Amongst the events were
the flooding in Australia and South Africa, the triple disaster
in Japan and the “Arab Spring” that also affected the supply
of oil into Europe.
tively better rates.
The good news is that the wheels of the world are still turning
and trade is growing albeit at a slower pace; if the political will
returns to the US and EU, perhaps confidence can be restored
in the financial sector, a necessary condition for investments,
consumption and overall economic growth.
The continued high oil prices are not supportive for global
GDP growth, neither are the still struggling housing markets in
the US, some European countries and some Asian countries.
Shipping demand will definitely benefit from a more calm and
positive macroeconomic environment. So the challenges for
politicians across the Globe, and especially in the EU, are still
very tangible and they must focus on establishing the right
economic framework. This is necessary to make growth stay
around and to stimulate consumer confidence and pull private
consumption to a higher level.
Half a year down the road, during which many Capesize vessels had earned less than any other dry bulk vessel size, the
unexpected happened again. Strong demand for iron ore and
coal from China and the recovering Japan, sourced from Brazil and Australia, ignited freight rates for Capesize vessels.
A tight tonnage situation in the Atlantic basin combined with
increased congestion in loading and discharging ports pushed
average rates above USD 30,000 per day. A far cry from the
peaks of the super cycle but surely an indication of the peak
levels we have in sight for the near- to mid-term future as the
supply side remains a considerable burden for the industry.
The demand side is set to be relatively stable in 2012, although
it’s likely to grow somewhat slower than in 2011 – at least in
volume terms. Overall iron ore demand is likely to slow. Still, a
lower world market price, as compared to the domestic costs
of mining it within China, holds the key to provide positive
demand shocks for this valuable steel ingredient. Growing demand for thermal coal from large Asian consumers is set to be
a steady demand driver.
Overall ship supply: edging down from all-time high
Newbuilding deliveries in 2011 surpassed an only one year old
record. The dry bulk fleet topped the ranks growing by almost 75
million DWT (deadweight tonnage). Had it not been for a recordhigh level of large vessels being recycled, the glut of tonnage
would have created even greater challenges to the owners.
Looking forward, our crystal ball tells us that the dry bulk fleet
will grow by not less than 11% in 2012, while the containership fleet is set for another year of growth close to 8%. As
regards the oil tankers; crude oil tankers are facing one more
very challenging year as the fleet is set to grow by 6%. Whereas the product tankers have left previous years with high inflow of new tonnage behind, to see only 3% increase of the
fleet in 2012.
Taking all of the three main shipping segments into consideration, none of them are able to deliver comforting sounds
from a large-scale recycling potential to counterbalance the
amplified pace of newly built vessels about to enter the world
fleet. A potential positive surprise would come from the dry
bulk segment as it did in 2011.
Financing of business as well as of the order book will be
key issues on every owner’s agenda. As the traditional large
Looking forward; expect the unexpected, as has been the lesson learned. The start of 2012 has been quite devastating with
freight rates dragging on below the USD 10,000 per day mark
for all vessel sizes; the large Capesize vessels being hardest
hit. Recent very tough times in the dry bulk markets are likely
to improve gradually, as the downward over-shooting of rates
is corrected.
Speaking about the unexpected, maybe even India will begin
to influence the market as a significant importer. This would
fulfil the prophecy and release a vast potential that has been
simmering for a very long time and provide a much needed
second major demand driver. Supplementing China as the
dominant factor in the market would create a more sustainable freight market going forward. An optimist would for sure
name India the best thing that could happen to the dry bulk
shipping industry. In the meantime volatile iron ore export and
strong demand for thermal coal is likely to characterize India’s
contribution to the dry bulk markets.
Tankers: Slow economic growth also affects oil demand
The positive demand picture that was firming freight rates on
benchmark routes in all crude tanker segments towards the end
of 2011 and the first two months of 2012 is still hanging around.
Gibraltar 2012
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Currently, the growing demand for oil is coming from countries closer to the large oil producers than previously. That
in turn provides fewer tonnes-miles as compared to demand
originating from the Western Hemisphere. As a rule of thumb,
volume demand in the East must grow by factor two to offset
the decline in volumes that used to go to the West. On the oil
products side, refineries in the Far East or the Middle East are
coming on stream later than expected. This provides lower
oil product volumes for exports than previously expected. But
before the Western demand for oil in general gets back on
track the potential support to the product tanker market coming from that front will not materialize.
The product tanker sector holds optimistic prospects for the
near-future, but its complex business and ever changing business conditions and opportunities can be difficult to forecast.
But as the “demand stories” of Atlantic gasoline arbitrage, winter markets and refinery dislocation are struggling to perform
to expectations, the focus has turned towards a wider range
of products. Moreover, demand for oil products with a lower
sulphur-content than the local refinery is capable of producing
provides trading of the same product with different sulphurcontent between nations. An evidence of growing demand for
oil product transports despite overall lower oil demand.
Amongst the swing factors that could improve earnings in
both tanker segments are slow steaming, virtual arrival, longer hauls for example to avoid the growing threat from pirates
and off course a faster than expected recovery in the large oil
consuming nations.
World trade volume of imports of goods, %-change year-on-year
15
10
5
%
…and liner companies know the most effective medicine that
will make the pain disappear, but not cure the decease. Idling
of tonnage has recently proved its point once again as extensive cut backs of deployed tonnage on Far East to Europe/
Mediterranean trading lanes was instrumental behind the
recent historical high hikes in container freight rates. Focus
will now be on limiting the expected weekly drops in rates as
weeks go by, bringing the market closer to the traditional high
season in the third quarter. As the macro and micro economic
elements recently have boosted confidence in container shipping, demand will hopefully follow up soon.
For 2012 as a whole, the sector is battling on two fronts from
the trenches. A bad global economic weather forecast is the
main demand threat while the oversupply issue is an internal
job to handle.
Demand is very unevenly distributed; while the volume of inbound loaded containers to US West Coast Ports is barely
growing, the intra-Asia trades and new-markets trades are
growing briskly. This difference in growth rates is very illustrative for the underlying market.
The battle against oversupply has to be fought simultaneously
with low demand and in a tough competitive environment. On
the world’s largest trading lane from the Far East to Europe it
has been possible to observe the “open exchange of punches”
between the market participants during most of 2011. Vessels
of ever increasing sizes have lowered the cost per transported
unit, and triggered a massive cascading from this trade of suboptimal vessels - this trend will only get more severe. 2012 will
see another 50% increase in capacity in the segment for Ultra
Large Container Ships (ULCS) capable of carrying more than
10,000 containers.
0
-5
-10
-15
2003
2004
2005
2006
2007
2008
2009
2010
2011F 2012E 2013E 2014E
Source: BIMCO, IMF.
Slow steaming of any tanker would ease the pressure from the
supply side, as it remains the least bad option for the cashstrapped owner as he attempts to maintain his cash flow.
Moreover, being at the right place at the right time continues
to be crucial, to take advantage of any non-planned-for events
that would provide a window of higher earnings e.g. shortage of prompt tonnage in the Mediterranean due to Bosporus
Strait congestion.
For the longer perspective; should the world decide to move
fast away from using nuclear power plants for power generation – this could improve tanker demand. In the meantime,
product tankers are expected to see the sun first of all segments, as the supply side pressure is easing and the complex
demand picture leaves able room for upside. Whereas crude
oil tankers are likely to face challenging markets for an extended period of time.
100
Container shipping: We have been here before …
A very high number of newbuilding contracts placed in 2011
have made this sector stand out from the tramp shipping segments which have avoided a repeat of last year’s astoundingly
high contracting activity. Half of the new box-ships orders are
for 2013-delivery which is the earliest possible delivery time.
It remains unknown whether it is pressure from ship yards or
owners that has pushed delivery dates closer – instead of further away which probably would be more prudent. 62 of the
orders in 2011 were made in the ULCS segment.
Homegrown and Venturing Out
Born in Gibraltar but expanding internationally
Interview with Mr James Gaggero, Chairman, Bland Group
Milestone GRP - What parallels can be drawn between
Gibraltar‘s 300-year history and the Bland Group’s development?
Mr James Gaggero - My family came in from Genoa as Italian
traders to carry out business with the British garrison, as did
the Maltese, Portuguese and others around the Mediterranean.
Our family business was founded in 1810 by Bland, a merchant
from Liverpool, who came to trade on the Mediterranean and
West African coasts; it was through this sort of activity that
Gibraltar developed as the port it is today. My family came in
as ship agents, facilitating trade between the UK and this part
of the world and eventually bought the business.
Gibraltar gradually evolved from being a military base into the
diversified economy that exists today. The shipping industry
and the port activity in general, from the provision of bunker,
safe refuge, crew changes, ship repair, towage and salvage,
grew to the point that Gibraltar reached a high status. As the
economy grew alongside the civilian community, we established more businesses.
Milestone GRP - What set of circumstances have allowed
Bland Group to grow internationally?
Mr Gaggero - One of the things that sets us apart from many
companies in Gibraltar is that we have worked very hard and
have always been at the vanguard of going overseas to look
for opportunities, very often bringing businesses to Gibraltar. So
when we ran an airline out of Gibraltar and Gibraltar became
stuck in a political difficulty with its neighbours, we were very
quick to recognize that that was going to cause us difficulties.
We therefore moved our headquarters to Gatwick.
Concluding remarks
Gibraltar was still a significant part of our operation, but it became less than 10% of the new business that we had created
at Gatwick. The scale of the business grew from a few hundred
thousand passengers to 3 million passengers a year; from 3 or
4 routes, we grew to 44 routes; and from 1 or 2 aircrafts, we
ended up with 17. Therefore we were able to significantly grow
our business scale by recognizing that Gibraltar had limitations,
and not being afraid to grow internationally.
To sum up, Gibraltar’s geographical location make it very attractive for shipping companies, and Gibraltar has catered well
for the industry with a variety of bunkering and repair facilities
as well as a solid political and juridical framework. Last year
was not kind to Far East-EU routes in the container segment,
nor was it kind to westbound tanker routes from the Arabian
Gulf. However, there is light at the end of the tunnel. Macroeconomic indicators suggest an end to the slump before long,
especially if it is backed by the right politics. Should these
positive predictions materialise, Gibraltar has great prospects
of upholding and improving its position as an important maritime services centre.
When our borders were closed in 1968, Gibraltar lost a lot of its
capacity to be seen as a gateway, so we went over to England,
we brought in marketing companies and we promoted Gibraltar
as a destination in its own right, rather than a stepping stone to
Spain. This gives you a flavour of how you can either sit here and
want others to solve your problems, or pick yourself up and pick
your own quest for solutions beyond the frontiers of Gibraltar.
That worked very well for us. It also made us less dependent
on a single basket of eggs. We have got a significant variety of
businesses, and that makes us much less vulnerable to shocks
in our hometown. Gibraltar has done remarkably well to adapt
to the changing circumstances around us. One of the greatest
successes of Gibraltar in recent years is the determination of
getting the regulatory regimes in harmony with international requirements, in terms of money laundering, tax evasion or even
tax avoidance. Gibraltar has dealt with them vigorously in an
attempt to create a reputable and credible finance centre that
is not a predator and a parasite, but actually a complimentary
source of activity meeting the needs of the international community, and in harmony with our neighbours.
Milestone GRP - How much did these efforts at harmonization
with international requirements help Gibraltar in dealing with
its sovereignty issues and to position itself internationally?
Mr Gaggero - This is a critical point. You can be either a parasite where you encourage your client market to come to you as
a way of hiding and creating false profit at the cost of others;
or you partake in an endeavour aimed at efficiently creating a
competitive jurisdiction, which is well regulated, transparent,
and collects its values by attempting to do business in a legitimate way. I think the critical factor that allows Gibraltar to
be a single uniform low tax regime, is that if you conduct your
activity in Gibraltar in a correct manner, you will enjoy the fruits
of a very efficient regime that is good for business. Gibraltar
enjoys a much better reputation today as a result. And we have
a community that understands what it takes to meet the needs
of international investors wanting to trade with Gibraltar.
Milestone GRP - What emerging trends do you foresee for
Gibraltar in the region? Where can Bland Group play a significant part in their development?
Mr Gaggero - Gibraltar is able to capitalize on its ‘Britishness’,
its location, its culture, bilingualism and its serious attitude towards business. I am very optimistic about the future of Gibraltar. I would like to see our relation to Spain at the very least
become neutral. Spain was never able to get away form its
anachronistic attitude towards Gibraltar and to see Gibraltar
for what it is: a good neighbour and a willing participant in
generating jobs and economic activity in this region. I think
if the relationship with Spain was positive, Gibraltar and the
hinterland would do enormously well.
Many of the offshore jurisdictions are based on islands which
offer very limited capacity to grow. Gibraltar is not an island,
it is attached to the mainland by the isthmus, it is a peninsula.
It has all the attributes of an island offshore centre but with all
the benefits of having unlimited access. It is also able to create a lifestyle for those who live and work here which is second
to none. You have all the facilities here. As far as the Bland
Group is concerned, we will continue to invest into this environment. But if we had a situation whereby Gibraltar started
to stagnate then that would be a great sadness. I see Gibraltar
as one of the key dynamos of regional economic activity and
it would be a shame if we lost that desire to be number one
in this area.
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Milestone GRP - Which units of your business have grown
more than others?
importations of equipment, employee relocations and courier
requirementsneededinthisindustry.
Mr Davis -Ourshippingdepartmentcontinuestogrow.Weprovideavarietyofservicesforshipscallingatourport.Customs
brokerageisalwaysontheincrease.
Milestone GRP - Is international expansion part of your
growth strategy?
Theimportationofoverlandfreighthasgraduallygrownandis
generallymadeupofthreesectors:
•DirectweeklyimportsfromtheUnitedKingdom
Mr Davis -AlthoughwearealreadyactiveintheUnitedKingdomandinSouthernSpaintherearestillsubstantialbusiness
possibilities within Gibraltar itself. Gibraltar’s progress on the
Maritime, Financial, Gaming and Tourist fronts during the last
tenyearsaugurswellforthefuture.
•DailyimportsfromSpain’sCampoDeGibraltar–theneigbouringareaacrosstheborder
•DailyimportsofEuropeanconsignmentsviaTNT.
Land, Air and Sea
Connecting all the freight shipping dots
Interview with Mr Colin Davis, Operations Director, East Gate Express
ColinWDavishasextensiveon-the-groundandmanagementexperienceintheLogisticsIndustry.Hespecialisesincustoms
proceduresforbothEuropeandGibraltar.AsOperationsDirectorheoverseestherunningofallthecompany’simportand
exportlinehauls.HestartedEastGate,alongwithco-partnerDaphneAlcantara,17yearsagoinasmallofficeatGibraltar’sInternationalAirport.EastGateisnowoneofGibraltar’smajorlogisticsplayersandcurrentlyoperatesofficesandhandlinghubs
atstrategicpointsinGibraltar,suchastheirCommercialFrontieroffices,Depot,andofficesattheNewInternationalAirport
andtheMainDepotatNewHarboursIndustrialPark.MilestoneGRPmetwithMrDavistogethisperspectivesonGibraltar’s
freightandlogisticssector,andEastGate’spositionwithinit.
Milestone GRP - What services does East Gate Express offer?
Mr Colin Davis - East Gate Limited is an established locally
basedfreightforwarderthatprovidesweeklyoverlandservices
from the UK mainland and daily airfreight services. As CountryAssociatesforTNTinGibraltarweofferworldwidenext-day
documentexpresscouriers,andEuropeanroadexportsandimportsusingTNT’sextensiveroadnetwork.Customsformalities
forimportationandexportationplayaveryimportantrolewithin
our service provision since Gibraltar is outside the European
CustomsUnionduetoitszeroVATratestatus.
Milestone GRP - Gibraltar has historically been a shipping
hub. How would you characterize the various elements of the
sector in this day and age?
Mr Davis-ThefactthatweareVAT-freeandwithinEuropewith
a great port facility naturally attracts business from maritime
shippingactivity.Thissectorcreatesserviceprovisionactivities
for many local businesses ranging from customs declarations
upon importation into Gibraltar to 24/7 ship supply at port,
warehousingandstorage,couriersreceivedorsentonbehalfof
vessels,andmanyotherservices.
Bunkering services are another important area of Gibraltar’s
port activities and although these are not part of our services
102
Mr Davis - Gibraltar has survived economic and political turmoil.ThankstoGibraltar’ssuccessfuleconomyweareweatheringthecurrentinternationalcrisiswithconsiderablesuccess.
The presence of the Gaming industry in Gibraltar contributes
to our employment stability and our sector benefits from the
Set down
Picked up
300
250
Tonnes
Milestone GRP - Since East Gate’s operations are international by their nature, how have the financial crisis and European downturn affected your business?
350
200
150
100
50
0
2001
2002
2003
2004
CommercialAirFreight
2005
2006
2007
2008
2009
2010
2011
Source: GSO
theyalsoprovidealotofspinoffservicerequirementsforusand
otherlocaltraders.
Gibraltar is not a manufacturing or agricultural country. Just
about everything has to be imported hence an indispensable
import industry has developed with constant incoming freight
requiring services from locally based freight forwarders, such
asourselves.
Milestone GRP - The airport has just been upgraded and its
capacity in terms of passengers expanded. Will that affect
your business in one way or another?
Mr Davis -Theimpressivenewairportterminalwillconsiderably
increasetourismintoGibraltar,whichwillindirectlycreatemore
businessinoursector.Moretourismmeansmorebusinessboth
forthehighstreetshopsandthefreightindustry.
ThenewAirportTerminalbuildingwillbeprovidinguswithmuch
betterwarehousingfacilitiesfortheprovisionofairfreightandcourieractivities.ThechallengeforusandtheGibraltarGovernment
istopromoteairfreightactivityviatheairportwiththeobjective
ofservingbothGibraltarandtheneighbouringPortofAlgecirasin
Spain,whichisoneofthebusiestportsinEurope.Itwillhopefully
enableustoreroutesubstantialbusinesscominginfromneighbouringSpanishairportssuchasthoseinSevilleandMalaga.
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Tourism
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verysafeplace,andthecurrencyhasalsobeenveryimportant
becausewearenotaEurodestinationbutaPounddestination.
Withalltheeconomicproblems,visitorsfromtheUKwerelookingforplaceswheretheexchangeratewasmorefavourable,
orwheretheydonothavetochangetheirmoney.Sothatisone
ofourbigsellingpointsandweemphasisethisinourmarketing
campaigns.
In terms of the day trip market our main source is the area
aroundGibraltar-theCostadelSolinparticular,whereGibraltar
isoneofthebiggest-sellingdaytrips.Agreatpercentageofour
visitorsareday-tripvisitors.Soit’seasytoseethatwedonot
specificallyhaveoneprofileforvisitors,itvaries.Gibraltarissold
mainlyasashortbreakdestination,becauseitsproductisideal
forthatmarket.
Milestone GRP - Do you see opportunities in event or sport
tourism?
A tourism sector ready for investment and growth
Interview with Mr Nicky Guerrero, CEO, Gibraltar Tourist Board
NickyGuerreroisagraduateofthehospitalityindustryandhasworkedinGibraltarforthegreaterpartofhiscareer.Hejoined
theGibraltarTouristBoardin1997andcarriedouttherolesofProductManagerandSales&MarketingManager.Nickyis
responsibleforallairlinemattersfortheGovernmentandinparticularforroutedevelopmentwork.MilestonespoketoMr
GuerreroaboutGibraltar’stourismproductsandthemainchallengesfacingtheindustrytoday.
Milestone GRP - Based on its main tourism offerings, what
category would you classify Gibraltar in as a tourism destination?
Mr Nicky Guerrero - Gibraltar does not fall under one single
categoryoftouristdestinationsincewehavesomuchinsuch
a small space, and people visit us for many different reasons.
Wehaveournaturalhistory,ourheritageandtheviewsfromthe
UpperRock.Ourgeographicallocationisalsounique.Unique
isawordthatIoftenusewhentalkingaboutGibraltarasthere
arenotmanyplaceswhereyoucanstandatthetopofabeautifulrockandseetwocontinentsandthreecountries.Youcan
alsolookoutattheStraitofGibraltar,whichisoneofthemost
important shipping lanes in the world, the Pillars of Hercules,
theAtlanticOceanandtheMediterraneanSea.Whenyouwalk
downMainStreetitispossibletoseethedifferencesinarchitecture,wherethemanydifferentcivilizationsofGibraltarhaveall
left their mark. For example, the buildings covered in ceramic
tileshaveaPortugueseinfluence,theshuttersareItalian,andso
on.Thereissuchasmixofarchitecture,withBritishinfluences
aswell.Then,ourmilitaryhistorywithbarracks,wallsandfortificationsfromdifferenterasisimpressive.Therearenotmany
placeswithsuchawealthofheritageandnaturalhistory,allwith
thebeautyoftheUpperRockinview.Wehavetheadvantage
of being able to offer something for everybody, even if some
aspectshavetobepromotedanddeveloped.
Milestone GRP - What are the main facets of your tourism
marketing and outreach strategy, and which market segments do you target?
106
Mr Guerrero - Our main source market is the UK. So the UK
iswherewecarryoutthebulkofourmarketing.TheUKisour
numberonesourceforovernighttourismandbusinessvisitors
whichareveryimportanttous.WerunacampaignintheUK
thatisamixtureofallthemarketingmediaavailable.Thereisour
mainwebsite-visitgibraltar.gi-thatcarriesalltheinformation
aboutthedestinationandwealsohaveFacebookandTwitter
portalswhichtheteaminourLondonofficekeepsupdatedand
interesting for visitors and people looking for information. Our
office in London also provides an information and marketing
servicefortheUKmarket.
IntheUKwedoseveralactivities.Someofthemarebasedon
road shows and tourism events and exhibitions. For example,
for the travel trade we hold road shows, where we invite travelagentstocometohospitalityeventswheretheyaregivena
destinationpresentation.AlongsidetheGibraltarTouristBoard
willbedifferenttourismindustrypartnersfromGibraltarandthe
UKthattravelwithusandexhibittheirproductsandservices.
Wealsoholdconsumerroadshowsspendingacoupleofdays
in some of the largest shopping centres in the big cities. We
recentlycarriedoutoneoftheseeventsinNottingham.Thiswas
primarilytopromotetheroutefromEastMidlandsAirporttoGibraltar,startedattheendofMarch.Wedoalotofadvertisingin
thepressintheUK.Finally,wehavearepresentativeintheUK
who goes out and does destination training courses for travel
agents.
Gibraltar also has fantastic sporting facilities. We are surroundedbysea,whichprovidesopportunitiesforalotofactivities.
Wewouldliketoseedivingandwater-basedactivitiesdevelop.
Atthemomentwearelookingtopromoteournichemarkettourismofferings,suchasbirdwatching.Thesearethemarketswe
wouldliketodevelop.
Milestone GRP - What are the main challenges the Tourist
Board currently faces?
Mr Guerrero -Wewanttodevelopmoreovernighttourism,but
wedonothavemanyhotelbedsinGibraltar,sothereistheneed
formorehotels.HowpeoplemovearoundGibraltarisachallengetoo.Whenwewelcomeacoupleofcruiseshipstheimpact
isverybig.Gibraltarisasmalldestination,sooneofourmain
challengesishowtoefficientlymovepeopletowheretheywant
tobe.
Mr Guerrero -Yes.Thisisprimarilybecausewehavebuiltupa
day-tripmasstourismmarket.Wehaveovernighttourists,but
therehasbeenlessofabalancebetweenbothsegments.We
obviouslywouldliketogetpeopletostayovernightaswefeel
we have so many interesting products. Overnight tourists are
the ones who can truly experience the product and the many
beautifulattractionsthatGibraltarhastooffer.Itisnowaquestionofdevelopingtheproductforcertainsectorsofthemarket,
suchasovernighttourism,aswemustattractmoreofthattype
oftourist.
Milestone GRP - What is the path that a typical investor
would follow when willing to invest in Gibraltar and develop
this infrastructure?
Mr Guerrero -TheymaycontacteithertheTouristBoardorInvestGibraltar.Theinquirieswouldthenbechannelledtoanyof
therelevantdepartmentswhowouldstarttoreceiveproposals
and take it from there. Investment proposals are usually dealt
withbyInvestGibraltar,andtheTouristBoardwouldusuallywork
withthisentity.
Milestone GRP - The cruise segment has been highlighted as
one that is ripe for development. What plans do you have in
this regard?
Mr Guerrero -Oneoftheadvantageswehavewithregardsto
cruisepassengersisthatthereisaveryshorttransfertimefrom
the port to the attractions. In five minutes visitors can get to
MainStreetandtheyarenotfarawayfromanyofthetourism,
retailandhospitalityservices.TheairportandportareafewmiVisitors by Nationality, 2010
12
Air Departure
Coach Park
Frontier
Spanish
Other EU
Cruise Liner Visitors
100
10
80
8
60
6
%
4
40
2
20
0
2000
For the UK, in particular, Gibraltar is a very familiar market in
termsoflanguageanditisnottoofaraway.Gibraltarisalsoa
Milestone GRP - Are you in a situation where you would like
to attract more tourists, but more infrastructure is needed to
do so?
Tourism by Year 2000-2010
(million)
An Amazing Location and Prime Attractions
Mr Guerrero -Event-ledandsporttourismaretwoaspectswe
wanttodevelop.WehaveaChessFestivalthatwasstarted10
yearsago,andthishashadafantasticimpactonthetourism
industryinthemonthofJanuary.Itisoneofthemostimportant
openchessfestivalsintheworld.Itsbenefitshavemadeuslook
intoevent-ledtourismveryseriously.TheimpacttheChessFestivalhasonoursmalldestinationisgreat,andtherearethings
we can look at, such as music festivals, for example. We do
haveeventsinGibraltartakingplaceeveryyearthatappealto
manyvisitors.Peoplearelookingatdifferentthingstodoand
experienceandweareverywellplacedtoprovidethesedifferentofferingsbecauseofouruniqueness.
Wearealsolookingathowpeoplearetravellingandhowthey
choosetobooktheirholiday.Therehasbeensuchashiftfrom
the traditional tour operator-led booking patterns. We have to
beawareofthesetrends.Thisiswhyourwebsiteisresponsive
toFacebookorTwitter,whichhavebecomepowerfulmarketing
tools.Wearefacedwiththechallengeoflookingatallthemarkets we serve, how they interact, how to accommodate them
andhowtoprovidetherightproductsandservicesfortourists.
Furthermore,wewouldliketoseemoremovingforwardinterms
of creating visitor attractions. The majority of those are on the
Upper Rock right now. We need to create a balance between
touristattractionsandthenaturalenvironment,achallengefaced
everywhereintheworldnow.
2001
2002
TouristsbyYear
Gibraltar statistsics office
2003
2004
2005
2006
2007
2008
2009
2010
Source:GSO
0
British
Gibraltar statistsics office
VisitorsbyNationality,2010
Other
Source:GSO
Gibraltar 2012
107
Tourism
milestone GRP
nutesawayfromeachother.Therefore,wewouldliketoseethe
developmentofpartialturn-aroundcruises,meaningwewould
havetouristsjoiningshipsandcomingoffshipshereinGibraltar,whichisnotthatcommonrightnow.Wehaveaninitiative
forcruiselinerstoallowthemtoopentheirfacilitieswhilethey
areinport.Thisisquiteattractivetothecruisecompanies.
Milestone GRP - The new air terminal was a controversial
project and the present Government was clear that it didn’t
believe it was necessary. However, now that it is a reality,
what are your plans for the maximization of its use?
Mr Guerrero -We need to develop traffic for the airport. Part
ofmyresponsibilitiesistomanageroutedevelopment,whichis
somethingIhavebeendoingformanyyears.Thepriorityatthe
momentistodevelopmoreregionalconnectionswiththeUK,
astheUKisourbiggestsourcemarket.InthelastcoupleofyearswehaveseentheintroductionofflightsfromtheNorthWest
oftheUKandfromtheMidlands.Wewouldliketolookatother
destinationsintheUKsincethiswillcreatenewcatchmentareas.EastMidlandsAirport,forexample,hasmanycitiesaroundit
andfeedingintoitsuchasNottingham,LeicesterandDerby.We
haveflightsfromLondonGatwick,HeathrowandLuton,which
isoneofthelargestcatchmentareasforus.Sowearelookingto
developtrafficfromtheUKandfromothercountriesinEurope.
WefeelthereisapotentialmarketinnorthernEurope.
Milestone GRP - What does the new air terminal offer in
terms of facilities and benefits for Gibraltar?
Mr Guerrero -Thenewairterminalhasallthefacilitiesyouwould
expect a modern terminal to have including retail and catering
outlets.Itisanimprovementonthepreviousterminal.Asfaras
airlinesareconcerned,Gibraltarisauniquemarket.Wehaveour
ownspecificcatchmentareas,notonlyhereinGibraltarbutin
thesurroundingareasaswell.Itisapreferredgatewayforthose
whohavepropertiesaroundthisarea.Furthermore,Gibraltaris
notonlyatourismdestination,butalsoabusinesscentre,sowe
alsohavealotofbusinesstrafficcomingtoGibraltar,whichis
obviouslyverywelcomed.Therefore,ouraimnowistodevelop
trafficwithinallsegments,frommoredestinationsintheUK,and
fromotherdestinationsinEurope.
Milestone GRP - What would you point to as the highlights
and unique selling points of Gibraltar’s tourism offering?
Mr Guerrero -ThereissomuchtoexploreinGibraltar.'Unique'
isprobablythebestwaytodescribeourdestination.Itoffers
such a mix of culture, heritage, natural history, and you can
walkeverywhere,theviewsarefantasticandwehaveagood
climate.Gibraltaroffersanexcellentshoppingexperiencetoo
andthebarsandrestaurantsoffergreatproducts.Therereally
iseverything,Ithink.
Therearechallengesasweoffersuchadiverseproduct,forall
thesedifferentmarketsegments.Weareverywellplacedasa
centreorbasetoexploredifferentculturesandareas.Tourists
cancomehereanddoatwoorthree-centreholiday,withAfrica
being a short hop away. Gibraltar has always been very well
placedforthissortofmulti-stoptourism.
Ultimately, it is also fair to say that the people make a destination.Ourhospitalityisveryhighuponthescaleandweare
friendly and helpful to our visitors, making them feel at home
and part of the family. The place is striking, and it has a very
specialatmosphere.WeareproudofourbeautifulRock.
Arrivals by Air
Visitor Arrivals by seas, 2009,2010
Seats Offered
Seats Used
2009
500
60,000
400
Arrivals (000‘s)
2010
70,000
50,000
300
40,000
200
30,000
20,000
100
10,000
0
2001
2002
2003
2004
ArrivalsbyAir
2005
Gibraltar statistsics office
2006
2007
2008
2009
2010
0
2011
Source: GSO
Jan
Feb
Mar
ArrivalsbySea
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
Source: GSO
Average lenght of stay, all arrivals
Tourist Expenditure , 2000-2010
7
300
5
225
4
£ (million)
Days in Gibraltar
6
3
2
150
75
1
0
2000
2001
2002
2003
2004
2005
2006
AverageLengthofStay–AllArrivals
108
2007
2008
2009
2010
Source: GSO
0
2000
2001
2002
2003
TouristExpenditure
Gibraltar statistsics office
2004
2005
2006
2007
2008
2009
2010
Source: GSO
Gibraltar 2012
109
Tourism
milestone GRP
Gibraltar as a Cruise Port
Punching above its weight
by Mr Peter Wild, Managing Director, G. P. Wild (International) Limited
Gibraltar’s present position and future prospects as a cruise
port can only be understood in the context of the developmentofthecruisemarketintheMediterraneanandinparticular
cruisingintheWesternMediterranean.
Figure1:GrowthofCruiseCapacityintheMediterranean2001-2012
Med Total
Linear (Med Total)
East. Projections for 2012 are a little more modest reflecting,
toadegree,somereductionincapacityamongstNorthAmericanoperatorswithongoinguncertaintiesleadingtoAmericans
continuing to cruise closer to home, although capacity is still
expected to exceed 30 million. Royal Caribbean International
isonesuchoperatorwhichhasplannedasignificantredeploymentofcapacityowingtotheweakdemandinthisregionduring 2011 and because it is making a “big push” into the Asia
Pacificmarkets.
TherehasalsobeensomereductionincapacityfromEuropean
operatorsstrugglingwithongoingdomesticeconomicdifficulties
such, as operators in Spain (Iberocruceros) and Greece (Louis
CruiseLines),whileCostahasofnecessityhadtoreducecapacity,followingwell-publicisedaccidentsaffectingtwoofitsships.
45
40
Within the Mediterranean the Western segment currently representsaround40%ofcapacity,asillustratedinFigure2.Gibraltar,however,alsobenefitsconsiderablyfromcruisestothe
Mediterraneanfromnon-Mediterraneanports,whichrepresent
12%ofcurrentcapacity.
Pax-nights (million)
35
30
25
20
15
10
Figure2:SectorSharesofMediterraneanCruiseCapacity2012
5
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
12% Non Med
2012
40% West Med
Source:G.P.Wild(International)Limited.
Growth of Cruise Capacity in the Mediterranean 2001-2012
Source:G.P. Wild (International) Limited
2% Black Sea
As shown in Figure 1, cruise capacity in the Mediterranean,
expressedinpassenger-nights(bed-days)hasrisenthree-fold 12% Adriatic
sincetheMillennium.Although2012appearstorepresentasetback,causedpartlybyreactiontolastyear’s“ArabSpring”and
partlybythefall-outfromtheCostaConcordiaincident,theupwardtrendisexpectedtoresume.Ifthehistorictrendscontinue
to2020,themarketmayreach50millionpax-nightsinthatyear.
34% East Med
Figuresfor2011showedtheregion’sbestyearever,withtotal
capacityrunningaheadofthetrendandtotalpax-nights(beddays) exceeding 30 million for the first time. In the event, demand for 2011 was moderated by reluctance amongst some
Americans to travel to Europe owing to the uncertainty surrounding the region in terms of both economic turmoil in the
EurozoneandpoliticalupheavalinNorthAfricaandtheMiddle
2001
2002
2003
2004
2005
2007
2008
2009
2010
2011
%
+ 2001-11
Valletta
273,521
356,031
389,361
291,225
320,263
408,264
487,817
555,861
441,913
493,748
566,042
+107
Cadiz
72,017
114,664
145,000
164,248
125,877
171,608
190,000
224,905
235,324
334,162
376,000
+422
Gibraltar
118,628
116,918
215,352
162,780
188,810
210,799
275,993
308,989
348,199
305,161
328,636
+177
Ibiza
23,087
36,983
79,983
80,105
118,474
69,786
79,904
79,210
103,485
132,149
129,369
+460
Alicante
34,353
25,909
44,615
48,001
36,253
51,868
72,063
82,487
96,615
75,911
111,711
+225
Cartagena
16,415
15,040
12,423
18,401
29,073
29,337
39,799
35,374
67,931
104,294
90,000
+449
Source:G.P.Wild(International)Limited.
110
portiscurrentlyheavilydependentoncruisesfromUK-based
operators and North American operators cruising from UK
ports,whichtogetheraccountfor68%ofpassengersvisiting
theportthisyear,whereasthesetwosegmentsmakeuponly
22%ofthetotalWesternMediterraneanandex-UKmarket.To
someextentthisbiasisunderstandableforbothgeographical
and cultural reasons, for, as noted above, Gibraltar is especiallywell-placedtocapturecruisespassinginandoutofthe
Mediterraneanbasin,whileitscoloniallinkswiththeUKgiveit
aparticularappealtoUKpassengers.
Figure 3: Gibraltar Passenger Profile compared with Western
Mediterranean and Northern European-based cruises 2012
UK operators
N American ex-UK
S Europe
N American fly
Other
100
90
80
70
60
50
40
30
20
10
0
Gibraltar
Western Med
non-Med port
Source:G.P.Wild(International)Limited.
Source: G.P. Wild( International) Limited
Gibraltarhas,however,achievedsomethingofabreakthrough
amongsomeofthecruiselinesservingSouthernEurope,with
MSCinparticularmakingaseriesofninecallsin2012withits
33,300-passenger mega-cruise ship, MSC Splendida. As can
beseenfromTable2,MSCisnowthirdamongthetenleading
cruiselinescallingatGibraltar.Thesetenlinesrepresentaround
90%ofallpotentialpassengervisitstotheportthisyear.
Table2:LeadingCruiseLinesusingGibraltar2012
Source:G.P.Wild(International)Limited.
Gibraltar’spassengerthroughputhasalsoincreasedduringthe
lasttenyearsorso,asshownin Table1,whichcomparesits
progresswiththatoffivecompetitorsintheWesternMediterranean and Atlantic Europe. These are all ports that compete
mainlyforport-of-call(asopposedtoturnaroundorhomeport)
businesswithintheMediterraneanoronrepositioningandexNorthernportvoyagestoandfromNorthernEurope.
2006
Asaresultofthisrestrainedgrowth,fromapositionofsecond
largestportintermsofthroughputin2001,onelargelymaintained until 2009, Gibraltar now occupies third place among
theselectedports.Moreover,thispositionisexpectedtocontinuein2012withanestimated303,842passengersexpected
bytheport.Currently,nevertheless,theportiswell-equipped
toreceivecruisecalls,offeringatotalquaylengthof940metreswhichallowsuptofourmediumsizedortwolargesized
vesselstoberthalongsidesimultaneously.TheCruiseTerminal
wascreatedin1997,usingarenovatedwarehouse.Although
additionalberthscanbemadeavailableelsewhere,ifrequired,
it is perceived by the port that expansion is necessary if Gibraltar is to fully capitalize on the market growth. Plans are
thereforeinhandtoextendtheTerminal,toexpandthosefacilitiesalreadyonofferandtocreateadditionalamenitiesfor
cruisepassengersandcrew.
Itisalso,however,arguablethatGibraltarneedstoextendits
appealbeyondtheUKsourcemarket.AsFigure3shows,the
Table1:GibraltarThroughputscomparedwithSelectedCompetitorPorts2001-11
Port
Evidently Gibraltar’s growth as a cruise port reached somethingofaplateauin2009anditsthroughputshavefallenaway
slightly since then at a time when most of its competitors
have benefited from the strong recent growth in the market
asawhole.Notably,Cadiz,whichisamajorcompetitorasa
“staging-post” between North and South, has expanded its
businessatmorethandoubletherateofGibraltar.Amongthe
lesserports,Cartagenahasalsoachievedaveryhighgrowth
rateandalsosecuresasignificantamountofitsbusinessfrom
shipsonrepositioningcruises.
Pax-nights (%)
Gibraltar occupies a strategic position at the gateway betweentheAtlanticOceanwithaccesstoNorthernEuropeand
the Mediterranean Sea, stretching the full length of SouthernEurope.Asacruiseport,itmaybesmall,comparedwith
the marquee ports of Barcelona, Civitavecchia and Venice,
butitpunchedwellaboveitsweightwith2011throughputof
329,000-overtentimestheterritory’sresidentpopulationof
29,000.
Cruise Line
Primary Source Market(s)
No of calls
Potential Passenger Throughput
*
P&O
UK
32
81,210
Royal Caribbean
N America (ex-UK port)
16
49,448
MSC
Italy
13
40,750
Princess Cruises
N America (ex-UK port)
11
25,152
Thomson
UK
13
19,138
Fred Olsen
UK
16
15,005
Celebrity
N America (ex-UK port)
4
11,400
Costa
Italy
4
10,324
Cunard
UK
5
10,226
Holland America Line
N America
Total
8
9,683
122
272,336
*Thismeasuresthetotalnumberofpassengersvisitingtheportif100%oflowerberths(normallytwopercabin)oneachshipareoccupied. Source:G.P.Wild(International)Limited.
Apart from MSC and Costa, the leading cruise lines are largely
taken from the major operators serving the UK market, P&O,
Thomson, Fred Olsen and Cunard, together with North AmericanoperatorsplacingshipsatUKports,normallySouthampton,
for the summer season namely Royal Caribbean, Princess and
Celebrity. Holland America Line calls are derived from a mix of
fly-cruisesandvoyagesoutofRotterdam,partlytargetedatthe
Dutchcruisemarket.
Gibraltar 2012
111
Tourism
milestone GRP
Welcoming Tourists and Ships
Some key source markets are, therefore, largely absent from the
mix of passengers and these include some of the fastest growing
markets in Europe, as shown by Table 3.
A long history operating in Gibraltar’s ports of entry
Table 1: Gibraltar Throughputs compared with Selected Competitor Ports 2001-11
2007
2008
2009
Interview with Mr George Gaggero, Deputy Chairman, MH Bland
Source
Market
2006
2010
% Change
2006/11
% of
Gibraltar
2012
UK ¹ ²
1,204
1,335
1,477
1,533
1,622
1,700
28.0
+41.2
67.8
Germany
705
763
907
1,027
1,219
1,388
22.9
+96.9
0.8
Italy ³
517
640
682
799
Spain
391
518
497
587
889
923
15.2
+78.5
16.6
645
703
11.6
+79.8
1.9
‘000s Pax
2011
‘000s Pax
%
Share
(Eur)
France
242
280
310
347
387
441
7.3
+82.2
0.5
Sub-total,
Big Five
3,059
3,536
3,873
4,293
4,762
5,155
85.0
+68.5
87.6
Scandinavia
62
94
123
173
283
306
5.0
+393.5
0.5
Benelux
64
82
92
110
126
159
2.6
+148.4
n.a.
Austria
44
52
59
80
93
104
1.7
+136.4
n.a.
Switzerland
56
64
65
76
91
121
2.0
+116.1
n.a.
Other
123
175
211
212
212
224
3.7
+82.1
0.7
Total
3,409
4,004
4,422
4,944
5,567
6,068
100.00
+78.0
88.8
10,380
10,452
10,290
10,402
10,997
11,520
-
+11.0
11.2
North
America
4
¹ Includes Republic of Ireland. ² Gibraltar % includes North American ships cruising from UK.
³ Gibraltar % includes all passengers on Italian-based ships.
4 Data published by the Cruise Lines International association
Source: G.P. Wild (International) Limited from ECC and CLIA data.
(CLIA) have been inflated by 2% to take account of non-CLIA lines supplying the North American market.
It will be evident from the table that Gibraltar is heavily dependent for its business on the two slowest growing markets, the
UK and North America, which together make up 79% of its business. Their growth figures over the five years of 41% and 11%
respectively are in sharp contrast to the 97% growth in Germany,
which is frequently tipped to eventually take over from the UK as
the leading European source market for cruise passengers. However, with a handful of calls by Peter Deilmann, Hapag Lloyd and
Phoenix Reisen, less than one per cent of passenger throughput
at Gibraltar can be ascribed to the German market. This is a lower
share even than that of the Spanish cruise lines, where there has
been perhaps an understandable reluctance to cruise to a territory to which Spain has a claim. In particular, the two largest
German operators, Aida Kreuzfahrten and TUI Cruises, are absent
from the current call schedule.
Aida is a part of the Carnival group, while TUI Cruises is jointly
owned by Royal Caribbean and the German-based travel giant,
TUI. Other members of these cruise groups are already calling at
Gibraltar:
• Carnival – P&O, Princess, Costa, Holland America, Seabourn,
Iberocruceros;
• Royal Caribbean – Royal Caribbean, Azamara, Croisières de
France (CDF), Pullmantur;
• TUI – Hapag Lloyd, Thomson.
We would suggest, therefore, that Germany should be a key target market for Gibraltar as it seeks to extend its capability and,
at the same time, broaden its client-base. In addition, some of
112
the smaller countries in Europe have also achieved high five-year
growth rates, some well over 100%, and should also be borne in
mind. One of the smaller markets, Finland, is represented among
Gibraltar’s source-markets and indeed, the operator, Kristina
Cruises, has used Gibraltar as a turnaround port for embarking
and disembarking passengers. Here again is something on which
Gibraltar can build, as it seeks a share of the additional passengers expected to cruise the Western Mediterranean in the course
of the next decade.
Milestone GRP - How was MH Bland established in Gibraltar and how did your family get involved in the business?
Mr George Gaggero - It goes back 200 years, when Marcus
Henry Bland, a Liverpool merchant, arrived in Gibraltar just
before 1810 and set up a Port Services agency. The business
was then passed down to his son and then his grandson. At
the time, Emanuel Gaggero was working as a manager of
his business. When Bland‘s grandson died, he bought the
business off the family and took it over with his brother. I am
the fourth generation participating in the business with my
brother. Then, the family parted, one part going to the Airline
business while my father kept the Ship Agency business in
1986.
We have always felt that our roots are in Gibraltar. Geographically and strategically, it is a wonderful place for the Shipping
business and it provides fantastic opportunities. In the early
days, MH Bland provided Salvage and Ship Repair, then the
business evolved. In the last ten years we opened up Port
Agencies in Algeciras, Ceuta, Las Palmas, Gran Canaria. We
have also diversified the business by offering shore excursions out of Malaga. We felt the need to offer a wide range
of services and extend beyond the Port of Gibraltar. So, for
example, we will handle 60 cruise liner calls in Malaga and
160 in Gibraltar this year. We are building on the relationships
we have with our clients and trying to transfer that standard
of service to places where they feel it is lacking. Tangiers is a
particular port of interest.
The ports of Malaga, Gibraltar and Tangiers could work together as a triangle with regards to cruise liners in the same
way that Gibraltar, Algeciras and Ceuta are working together
in the Bunkering sector. If one port works better than the
others, we are going to benefit from it. So we are trying to
make the region as a whole more attractive.
Milestone GRP - Has the crisis affected the Shipping business either in terms of volume or in key trends?
Mr Gaggero - Gibraltar only needs a small percentage of any
market to be able to flourish. With regards to Shipping, the
number of ships coming into the Port of Gibraltar has actually increased since companies have been taking advantage
of the duty free fuel and the efficient service our Port offers.
Despite the global crisis the business has not decreased.
This means that MH Bland, and Gibraltar as a whole, are
both offering the right services.
Milestone GRP - What is the competition like within
Gibraltar’s Shipping sector?
Mr Gaggero - Some of the biggest agency players in the
world are here, such as Inchcape and Wilhelmsen. Then, the-
re are 4 or 5 local companies. Nevertheless, two local companies handle more business than anybody else: MH Bland
handling 25% of the ships coming into Gibraltar and Gibunco, accounting for about 20% of the total business. Moreover, MH Bland is not just competing against the other players
in Gibraltar, but also against other Ports such as Algeciras,
Ceuta, Malta or Rotterdam.
Milestone GRP - Although the new government has been
very clear on the fact that Gibraltar’s new airport terminal was not an investment they would have made, there is
consensus that its utility and economic return must now
be maximized by increasing air traffic to Gibraltar. What
role will MH Bland play in this development?
Mr Gaggero - First of all, in terms of Gibraltar’s Tourism sector, it is not a matter of bringing in more people, it is a matter
of improving the product and increasing our capacity. Both
these aspects need to be improved and everybody is aware
of that. Out of the 3 million genuine tourists coming to Gibraltar every year, only a third go to the Natural Reserve and see
the sights. Gibraltar has a fantastic product that needs to be
moved into the 21st century.
We have wonderful potential in the assets of Saint Michael‘s
Caves, the Barbary Apes and the Upper Rock with its fantastic scenery. If we improve the product, it will promote itself.
The previous administration did a fantastic job in other fields,
but they did not focus on tourism as they should have. It was
one strong pillar of the economy they did not give enough
attention to, and the potential of the Tourism sector to contribute to the economy is far greater than people appreciate.
Milestone GRP - What investments is MH Bland looking to
make into the Tourism sector?
Mr Gaggero - We are conscious of the limitations of the
Upper Rock. At the moment, we are developing plans for a
complete rebuild of the cable-car facility, which will offer expanded capacity. At the moment its carriages are capable of
carrying 30 people per trip, every 6 minutes, and the new one
would carry 80 passengers per trip. We have already talked
to the Government and the other stakeholders with the view
to enhancing the transport system on the Upper Rock.
Although the private sector must drive investment into the
Tourism sector, the new Government is in a unique position
to assist in that process since its representatives represent
the grass roots of Gibraltar‘s community. The Chief Minister
in particular, having previously represented the Tax Association as a lawyer, has got an understanding of the mentality,
issues, the business community and its requirements. If he
can bring the various stakeholders together it will be a massive step forward for Gibraltar’s Tourism product.
Gibraltar 2012
113
Tourism
milestone GRP
Hotel Arrivals 2000-2010
hotels whilst in other destinations, the leisure market is going
in the other direction, as a result we are having to compete
with emerging destinations and the global economic climate,
which has created an extremely competitive market - to an
extent price driven more than destination driven.
Milestone GRP - The human resource aspect of your operations is a key priority at the Caleta Hotel. What initiatives
are in place to maintain high standards?
Mr Ostuni - Human resources are most probably the most
important aspect of our business. At the Caleta Hotel we are
very fortunate because we have a very low turnover compared to industry average. Out of our total workforce 15% have
over 20 years of service, 30% over 10 years of service and
25% over 5 years. The rest are really seasonal positions and
fluctuate following business levels.
Milestone GRP - In terms of the development of the tourism sector, what project would you like to see completed
under the new Government and how will they support your
activity?
The Caleta Hotel
A Gibraltar Landmark
Interview with Mr Franco Ostuni, General Manager, The Caleta Hotel
The Caleta Hotel is the largest hotel in Gibraltar, and a hub for social and business activity on the Rock. Opened in 1964, it has
been refurbished many times since to maintain the hotel’s position at the vanguard of Gibraltar’s hospitality offerings. Major
changes it has been through include the addition of a dedicated conference center that hosts many yearly international events
such as the Tradewise Gibraltar Chess Festival and the KPMG eGaming Summit. Milestone GRP sat down with the Caleta
Hotel’s General Manager, Mr Franco Ostuni, to discuss the current trends affecting Gibraltar’s tourism industry, the benefits and
potential of event-led tourism, and his perspective on how Gibraltar should approach the development of its tourism image.
Milestone GRP - Can you please give an historical overview of the Caleta Hotel?
Mr Franco Ostuni - The Caleta Hotel was built in the early
1960’s and opened in 1964 by a local businessman who had
a vision to build the largest Hotel in Gibraltar on the eastside
of the rock next to the fishing village of Catalan Bay, with the
aim of attracting holiday makers to the destination.
This was an innovative concept considering what Gibraltar
was at the time - fundamentally a naval base living directly from the military presence in Gibraltar. During the last 50
years the Hotel has received various transformations, extensions and development of facilities like conference centre, health and beauty club in order to offer the product the
market required. The Hotel has achieved prestigious awards;
Gibraltar Leading Hotel in 2009/10/11, the Hotel features the
only 2 AA Rosette Restaurant in Gibraltar, the award received
in 2006 and maintained since. 114
Mr Ostuni - Indeed the new Government came into office
with a manifesto strongly supporting tourism in Gibraltar. I
believe tourism is not about hotels, restaurants and nightlife,
these elements are the commercial response to a demand, it
is really about destination. I am confident the new Govern75,000
60,000
45,000
30,000
15,000
0
2000
2001
Gibraltar
statistsics office
Hotel
Arrivals
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: GSO
ment will look at improving the Gibraltar tourism experience
as a whole, as a result of this activity we will directly and
indirectly benefit and I am sure new players will come to the
market.
Milestone GRP - The Government aims to increase the
frequency of international events in Gibraltar. The Caleta
Hotel hosts the annual Tradewise Gibraltar Chess Festival.
What potential do you see in this area?
Mr Ostuni - Event lead tourism is very important and I believe the Tradewise Gibraltar Chess Festival is proof of the
potential in this niche market. It is the result of considerable work and 10 years of constant effort in positioning the
event at international level. It is now recognised as the best
ness, need to respond to clients needs. In the 70’s and 80’s
the average shelf life of a hotel ranged between 8-12 years,
nowadays, due to technological progress and changes in
trends, hotels need refurbishment every 4-6 years on average. This translates to an increase in capital expenditure
required and a shortening of repayment periods.
Milestone GRP - What is the hotel’s capacity? What are
the occupancy rates and the business to leisure traveller’s
ratios?
Mr Ostuni - The Hotel has 151 bedrooms including suites
and self-catering apartments, this makes us the largest hotel
in Gibraltar not only in bedroom stock but also for the facilities on offer, Health and Beauty Club, Conference Centre,
two restaurants, the largest banqueting facilities in Gibraltar
and so on. Our occupancy is generally constant throughout
the year and ranges around 60%, our business mix between
leisure and corporate market is 50/50.
Milestone GRP - What were the challenges faced over the
years during the transformation of the Hotel?
Milestone GRP - How would you qualify the Gibraltar business and tourist visitors in terms of consumer behaviour?
Mr Ostuni - Challenges are part of the hospitality industry
and they seem to get tougher over the years due to the rapid evolution of our society. Fashion, customs and trends
change so quickly nowadays that hotels, like any other busi-
Mr Ostuni - There are different business segments within
both the leisure and business markets. While the business
and conference market coming to Gibraltar is becoming more
and more sophisticated and using 5 star and 5 star deluxe
Gibraltar 2012
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opentournamentintheworld.ThishasputGibraltaronthe
map and attracted in 2012 some 400 participants from 58
countriesaroundtheworld.ThemodeloftheChessFestival
canbeeasilyduplicatedforothereventsandadjustedtothe
specificneeds.
Milestone GRP - Did the idea for this event originate from
the Caleta Hotel?
Mr Ostuni-ItwasourChairman,MrBrianCallaghanO.B.E.,
whohadtheideatoorganiseaninternationaleventofsome
sort in order to attract visitors to the Hotel and Gibraltar in
the winter months. Many activities were considered, chess
was chosen because it is an indoor activity and therefore
weather conditions are not so important and because the
tournament is an 11 round and not a knockout tournament
therefore particularly interesting from a hotel point of view,
consideringallparticipantswillplayfortheentireduration.
Milestone GRP - The Government and Tourist Board participate in numerous international tourism events, such
as the Fitur International Tourism Fair in Spain. What
role does the Caleta Hotel play in terms of developing
Gibraltar’s image internationally, and what initiatives does
it take part in?
Mr Ostuni-TheCaletaHotelhasalwayssupportedandparticipatedalongsidetheGibraltarTouristBoardinexhibitions,
roadshowsandgeneralactivitiesaimedtopromotethedestination.IntheparticularcaseofFitur,wedonotparticipate
becausewedonotbelieveinapotentialmarketfromSpain
into Gibraltar for resident tourism in the Hotel. Spain has
nevergenerated,inspiteofGibraltarTouristBoard’smarketingactivities,anymeaningfulinflowoftouristsinGibraltar
hotels. We prefer to invest our limited marketing budget in
markets that have responded and enjoyed our product or
canpotentiallydosointhefuture.
Tourism Hotel Occupancy, 2000-2010
Percentage of Visitors by Length of Stay
Total
80
Family/Friends
Business
Holiday
Transit
100
70
60
80
50
%
60
40
%
30
40
20
20
10
0
2000
0
2001
2002
2003
Gibraltar statistsics office
HotelOccupancy
116
2004
2005
2006
2007
2008
2009
2010
Source: GSO
1
2-7
8-14
15 Or More
Average
DaysinGibraltar
PercentageofVisitorsbyLengthofStay
Source: GSO
Tourism
milestone GRP
Hosting the World of Chess
Chess in Schools
Withpopularpassionforthegameandawidespreadbeliefthatall
whoplaychessatsometimeintheirlivesbenefitfromit,Chess
has also been introduce to Gibraltar’s schoolchildren. Gibraltar
todaycanboastachessclubinalmosteveryschool,andayoung
BritishchampioninStephenWhatley.AlsothefirstJuniorInternationalwasheldlastsummer,thesecondandbiggereventwillbe
heldinAugust2012.
A global tournament with a high – and rising – rank
by Ms Alice Mascarenhas, Features Editor, The Gibraltar Chronicle
Gibraltar’s Tradewise Chess Festival
TheworldofchesshasauniquerelationshipwithGibraltar.The
overwhelmingsuccessofitsinternationalchesstournament,the
TradewiseChessFestival,whichatthestartof2012celebrated
its tenth year, owes much to this special bond. Its tenth editionwasoversubscribed.Itbrokeallitspreviousrecordswith58
GrandMasters(GM)participating,11ofwhichwererated2700.
It also saw the greatest ever gathering of female chess players
inamixedevent-neverbeforehadsomanyoftheworld‘stop
womenjoinedleadingmaleplayerstocompeteinthesametournament.
Tradewise2012wastorocktheworldofchessandmakehistory.
HouYifan,17yearsofagefromChina,playedthebestresultby
afemaleplayerinthehistoryofthegame.Theworldofchesswill
be talking about her achievements in this tournament for many
yearstocome–she not only beat Judit Polgar, up till now, the
bestwomanintheworld,butfourtopplayerswayaboveherown
rating.Thefinalroundwasthrillingaseveryonewaitedtoseeif
NigelShort,whobyhisownadmissionplayshisbestchesson
theRock(believingitisthebestopentournamentintheworld),
wouldmakeitanawe-inspiringfinish–asheplayedagainstHou
Yifanintheplay-off.Andhedid,victoriousafterjustonehour,and
regainingthetitlehefirstwonin2003.
The 2012 Winner
Inall,thetentheditionattracted240players–thelistoffamiliar
namesimpressive,establishingthetournamentasthestrongest
openeventintheworld.Butperhapsthehugesuccessofchess
inGibraltarisbestillustratedbyastunningstatisticrevealedby
ChiefMinisterFabianPicardoonthefinaldayofthetournament
whenheannouncedthetournamentwebsitehadfaroutreached
itsownrecord,attractingaquarterofabillionhitsasthechess
internetworldwasrunningonoverloadoverthose10days,since
the chess commentary and analysis from the team and Grand
Mastersareamustforinternationalfans.
Fortwoweekseveryyear,theRockbecomesthefocalpointof
theprofessionalandamateurchessworld-atightshipcaptained
byitsfounderandorganiserBrianCallaghan.Itwashisbrainchild,
andithasbecomearegularfixtureontheglobalchesscalendar.
Theexclusiveatmospherecreatedbyeveryoneinvolvedhasbeen
acrucialpartofitssuccesswithaprivatevisitafewyearsback
bythelegendaryBorisSpasskyandtheworld’snumberone,MagnusCarlsen.
Effective organization, led by Stuart Conquest, and impeccable
hosting by the Caleta Hotel management and staff, are key to
the event’s success. Also, the fact that amateur players can sit
side-by-sidewithprofessionalGrandMastershasprovenamajor
pull,attractingplayersfromfivecontinents.Equallyvitalarethe
sponsors who make the tournament possible. Gibtelecom was
thefirstmajorplayerandcontinuesonboard,especiallyonthe
technicalside.TheTradewiseInsuranceCompanyisnowthelead
sponsorandforthetentheditiontheprizemoneyincreasedtoan
amazing£155,000.
energyandresources,everythingispossible.Hefirmlybelieves
the festival offers a blueprint for the future of Gibraltar tourism,
ledbyinternationaleventsofthisnature.Italsoconfirmsthedrive
thatifaspecificnicheisfound,itshouldbetargetedwithvigour.
Fromdayone,MrCallaghansawanothernicheinthemarketand
quicklysetouttowelcomeallwomenplayersandGrandMasters
totheRock.Aseparateprizewastheanswerandthisprovedto
beamostimportantpartofthetournamentandthecompetition.
ThisiswhythereweremoretopfemaleplayersandindeedWorld
Championsinthetournamentwithsevenofthetoptenwomenin
chessplayingontheRock,includingJuditPolgar,theonlyfemale
playertohavewonagameagainstaMen‘sWorldchampion.
Advances in Live Streaming
Overtheyears,thetournamenthasbeenenjoyedbyahugeinternetaudience.Ithasbecometheleaderinthisareaofthechess
world and has introduced the game to a wider audience. This
hasbeenthankstoGibtelecom’sinnovativetechnologyandthe
unique,built-for-purposewebcastingsuiteinstalledattheCaleta
Hotel,whichhasbroughtthousandsofchessenthusiastsfromall
overtheworldintothearena.
NigelShortnotonlytookthefirstprizein2012butalsowonthe
specialCommonwealthprizeinthisDiamondJubileeyear.HouYifan,whocamesecondinthetournament,alsotooktheWomen’s
Award,aswellastheJuniorAward.VicktorKorchniowontheSeniorAward,andBestGamewasawardedtoEmmanuelBerg.
GMNigelShortfromEnglandsaidinhiswinner’sspeech:“Idon’t
knowwhatitisaboutthisplace.Igetsuchagoodfeelatthistournament,itissowellorganisedthatithelpsmeplaybetter.Ireally
couldnotimaginethatIcouldbeupherethiseveningmakingthis
speech.Iwasranked15thandIthought,mygoodnesswehave
comealongwayin10years.Ihavenotplayedeveryyearasitis
myfifthyear.Iplayedinthefirstyearanditwasagoodlittletournamentwith60players,andIwasthestar,andnowIamjustoneof
manysuperstars.TherearemanyrealgiantsofthegamewhoIam
honouredtoplayagainst.Itisagreatevent.Iamgladtohaveseen
itgrowandIreallydobelievethatthisisthebestopentournament
intheworld.”
Thestreaming,explainedaGibtelecomspokesman,hasbeenenhancedfromyear-to-yearandcanhandlethousandsofconcurrent
connections,whereaswhenthetournamentfirststartedithada
limitofonly10.Today,itboatsabillionhitsinjust10days,with
visitsfromasfarafieldasGermany,Russia,BrazilandtheUSA.
ButMrShortwhohadfeltthemightoftheyoungChineseplayer
intheplay-offjustafewshorthoursearlierinsistedhewasnotthe
storyoftheevent.Thestorywastheresultoftheyounggirlfrom
China whom, he said, had put in a remarkable performance and
shownwhataworldclassplayersheis.
“Maybe,” he suggested, “what we are seeing here is the start of
somethingnewinwomen’schess.IhaveinfrontofmeJuditPolgarwhohasbeenforever,basically,therepresentativeofwomen’s
chess–thestarabovestars.ThisisnothingagainstJudit,whoI
respectgreatly,butIamgladshenowhassomecompetition.Long
liveGibraltar!Longmaythiseventgoon!I’llbebacknextyear.”
“Itisdifficulttobelievethatfromourmodestbeginnings,Gibraltar
nowhoststhemostprestigiousOpenChessTournamentinthe
World. ItisacredittoGibraltarthattheTradewiseChessFestival
isatournamentthatparticipantsfromallovertheWorldnowwish
toplay”,saysBrianCallaghan.
Chief Minister Fabian Picardo, wife Justine and tournament organizer Stuart Conquest
118
A Niche Market
For Gibraltar, the tournament’s success has meant that in the
slow winter months – for those two weeks a year – hotels are
full. Mr Callaghan has made his hobby pay-off, reinforcing the
knowledgethatevent-ledtourismhasamarket,andwiththewill,
Governor Sir Adrian Johns presents the Commonwealth Trophy to winner Nigel Short,
next to him Is Bruno Callaghan
Brian Callaghan and Hou Yifan
FortournamentorganiserBrianCallaghan,withworldpressheadlinesdescribingthisasthebestopenever,theevent’ssuccesswas
clear.2012hadbeenanhistoricyearcoupledwiththeGovernment’s
assurancesofproactivesupporttochessinGibraltar.Hestated:
“Whatanamazingtournamentwehavehad.It‘sabouthavingfun
andplayingserious,veryseriouschess.ThechessplayedinGibraltarthisyearhasreverberatedaroundtheworld.”
Gibraltar 2012
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milestone GRP
WeavesouththroughourbustlingMainStreetshoppingarea
- I dare you to resist the bargains. Pause for shade in our
quaint museum. Stroll between cathedrals, mosques, synagogues almost within touching distance of each other; but
you'llfeelnoreligiousorculturaldisharmonyhere.
Informally salute or photograph the military guard stationed
outside our Governor's residence and then pay homage to
menwhofoughtanddiedforourBritishwayoflifelyingburied in the Trafalgar cemetery. The military are challenged to
shoreline-to-summit running races but you're on holiday, so
takethecablecar412mtothetop.
Two mighty continents, Europe and Africa, and three countries, Gibraltar, Spain and Morocco are at your feet. To the
ancients,thiswasthefinalfrontier.Nothingoftheworldwas
known beyond. The legendary Pillars of Hercules were createdtoprotectintrepidmarinersfromcascadingintotheunderworldabyss.Onlyin1492didColumbusventurebravely
duewestfromhere.OnepillarstandsinGibraltar,buttryto
spottheother24ksouthinMorocco,liketheRoman,Greeks,
CarthaginiansandPhoeniciansdidfromthesea.
Gibraltar’s Tourism Highlights
Lots to Discover
Gibraltar occupies a pivotal position on the main route betweenthehemispheresandtheaxislinkingtheoldandnew
worldsEastandWest.Assuch,itspeoplehavebeenagatekeepersandkeybearersoftheMediterranean.Phoenicians,
Arabs, Egyptians, Greeks, Romans and others had only this
Cable car to the top of the Rock
accesspointbeforetheSuezCanalopenedin1869.Ourflag
reflects this dominance. We've become a fortress citadel
foughtoverthroughthecenturiesbyArabs,SpanishandBritish. We've been battered, bruised, bombed, blitzed, beleaguered,infected,invadedandisolated.Butwesurvive.Some
by Ms Karen Lawson, Gibraltar Tourism Enthusiast & Author
Discover Gibraltar, colloquially known as The Rock. The biggest pebble in the world, the best of Britain without the rain,
theworld'sonlyrealthemepark:smallinsize,hugeonhistory.
Wehatetobrag,butwhennature,orthegods,createdasolid
6.5km²limestonerockattheepicentreoftheworld,aquirky,
unique holiday destination was created. Think location, climate,sun,sea,sand,historystretchingback100,000years,
culture,myth,legendandwildlife-withdolphinsridingyour
bow wave, eagles soaring above and monkeys hitching lifts
on vehicles. All this in a place so safe that if you stumble
someonewillcatchyoubeforeyouhittheground.
Wehavebeautifullyplacedhotels;maybetheCaletaHotelon
our rugged geographically inspiring eastern side would appeal? Wake peacefully like a cat warmed by the sun rising
overtheMediterraneanandponderwhetheritwilleverclear
theloomingrockbehindyou.WatchasdescendantsofGenoese migrant fishermen bring their Italian styled village to life
frombelowyourbalcony.
If you're fit, everything is within walking distance but buses
andtaxisspeedyourjourney.Sofollowthesun-timetohit
thewestendastheBritishwouldsay.
PauseinCasematesSquareforSpanishcaféconleche.Spain
held this rock for over 250 years, secured within monstrously
thickdefensivewalls.TodaythisBritishoverseasterritoryisstill
dominatedbythewatchful14thcenturyArabcastlerememberingaperiodof750yearswhenGibelTarikwasinArabpossession.Fortunately,we'veabsorbed,andyoucanenjoy,thebest
ofthreerichcultures.Peopleareaneclecticmix,mostproudly
Gibraltarian,withblendedbloodlinesfromBritish,Italian,Maltese, Portuguese, Jewish, Indian and Arab forefathers. Some
marrySpanishcitizensandasneighbourswehaveasymbiotic
relationship. Remember later to sample fish and chips, couscous, sardines, tapas, pizzas and other local delicacies, all
servedinamyriadofeateriesbyfamiliesthathavebeencookingthisfoodforgenerations.
120
Local fare, in all its international varieties, by the marina
Gibraltar 2012
121
Tourism
milestone GRP
areas look rough and neglected but what a story every cannon,crumblinggunposition,shatteredsteporwallcanshare!
Meanderoverthespineofourrockwheretheonlywildmonkeys in Europe scamper round. They've survived here since
the British brought them from the Barbary Coast 300 years
ago. They fooled us into believing they symbolise the sovereignty of the British on the Rock. Winston Churchill insisted
theybeforeverprotected,registeredandevennamedduring
theupheavalofWorldWarII.
Strideuptoourhighest point at the south and almost touch
the heavens above and Africa beyond. The monkeys wait
while you explore our bottomless abyss, St Michael's Cave,
among 173 formations magnificently created over millions of
years by water seeping through Jurassic limestone. Phoenicians named the Rock ‘Calpe’ probably derived from a word
meaninghollowedout.InWorldWarIIthecavewasprepared
asanemergencyhospitalandnowhousesabreathtakingamphitheatre,contrastingwiththeonebuiltoverwaterwithinthe
tranquil Alameda botanical gardens below. Neanderthal and
NeolithicmeninhabitedsomecavesandtheirstoriesarecontinuallybeinguncoveredaswecurrentlyseekWorldHeritage
Status.GibraltarhasthehighestdensityofNeanderthalsites
worldwide,soyou'rewalkinginthefootprintsofthelastNeanderthalsfacingextinctionhere24,000yearsago
Gibraltarisafortressandassuchhasbeenbesiegedfourteen
times. The Great Siege of 1779-83 was the longest in Brit-
ish history. A contingent of 5,500 military, surrounded by the
empiresofFranceandSpain,stoicallyresistedoverwhelming
odds, starvation and disease and what was surely inevitable
defeat.Drivedesperatementowheretheyhavenothingleftto
giveandnothinglefttolose,andoutstandinglybraveorvery
foolhardyriskswillbetaken.Thesurroundedsoldiersrealised
theonlythinginabundancewastheRockitself.Courageously
they created tunnels above the enemy, using anything availableinsiegeconditions.Provingtheoldadage“Solidasthe
Rock of Gibraltar” right, they audaciously fired cannons impacted inside 400m of rock down upon the enemy; even inventingadownward-facinggunforthepurpose.Takeascenic
long walk to the famous north face of Gibraltar. All the hard
workhasbeendonesowanderthroughourextraordinary18th
centurydefensivepositionsandpitythehaplessexposedenemytryingtogetafootholdonourrockbelow.
Churchill,duringWorldWarII,withvisionbuoyedupbyhistoricalawareness,againmadeGibraltaraninternalfortress.With
Eisenhower's aid British and Canadian engineers excavated
50km of tunnels creating one colossal air raid shelter and
warehouse. Everything from partially constructed airplanes,
offices,operationalcentres,roadtransport,ammunition,food,
water, equipment, hospitals, hutted accommodation, galleys,
rest areas and latrines were housed safe from enemy action.
Take a guided tour within these more contemporary tunnels;
youmayevenmeetanonagenarianrevisitinghiscreation.
Our nightlife sizzles with action and romance; the casino,
nightclubs,moonlightbeachwalks,gourmetrestaurants…but
ifyouhavetoleave,lookbackatGibraltar.It'snotverybigis
it? But it's famous throughout the entire world. Don't underestimateuslikeourenemieshavetotheircost.Wemayhave
cannons peeping out behind every plant pot and are riddled
with gun positions but you can safely walk through history
andreceiveaquintessentialBritishwelcomeanywhereinGibraltar.
St Michael’s cave right in the Rock itself
Stroll towards town past the City under Siege exhibition, a
Wildlife from sea level all the way up
122
stark reminder of a harsh and cruel world 300 years ago, or
visittheArabcastle,datingbackto1333.Thenwindthrough
ancientArabstreetsintotown.Ourvibrantmarinasbeckon.
Take a meal at The Landings restaurant in Queensway Quay
andletthebayentertainyou-maybetomorrowgamefishing,
divingoradolphintrip?
The Caleta Hotel perched between rock and sea
Gibraltar 2012
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Holdings
Tourism
milestone GRP
Mr Montegriffo -Weplay2roles:weactasrealestateagents
offeringthebestandmostaccurateserviceaswepossiblycan
with the aim of building on our success. Our second role was
developed10yearsagowhenwewentintoadvisingdevelopers
whowerelookingtoinvestinGibraltar.Basically,wetooktherole
ofanestateagenttoanotherlevelandgotinvolvedinprojects
fromthemomentthedevelopershadlocatedaplot.Anotherkey
factorthatwehavebeenkeentomonitoristhestructureofsales
andtypeofclientsthatgetinvolvedinprojects.Inasmallplace
likeGibraltar,theadvantageisthatweknowalotofourbuyers
personally and are better able to guide developers toward the
typeofbuyersormarketthatweaimtotarget.Thisgeneratesa
greatdealofconfidencewithourdevelopersandbanksthatare
financingtheprojects,andIbelievethatthestrategywechose
ontargetingtherightmarketandfocusingonowneroccupiers
thereby underpinning the developments, gave way to the successofKingsWharfandTheAnchorageunderdifficulttimes.
Building on Rock-solid Foundations
Agents on the ground, and higher
Interview with Mr Louis Montegriffo, Director, BMI Group
MrLouisC.Montegriffoisco-founderandDirectorofBMIGroup,aleadingrealestateagencyanddevelopmentconsultants
basedinGibraltar.Louishasbeenakeyplayerinthepropertysectorsince1996andbeeninstrumentalinpositioningBMIat
theforefrontofpropertysales,lettingandcommercialrealestateontheRock.Hehasactedforvariouspropertygroupsas
developmentconsultantandplayedanimportantroleinthesaleofGibraltar’slargestcommercialcomplex.Hisknowledge
inproperty,andthatofhisteams,istestamenttothesuccessofBMIandisunderpinnedfurtherbycloserelationshipswith
leadingbusinesspartnersinthefinancesector.
Milestone GRP - What impact has the global financial crisis
had on Gibraltar’s Real Estate sector?
Mr Louis Montegriffo -Fromourperspective,2008wasavery
alarmingyearintermsoftheimpacttheglobaldownturnmight
haveonus.Inthe1980’sandearly1990’stheeconomiccrisesreallyharmedGibraltarlargelybecauseoureconomyinthosedays
wasnotasrobustanddiversifiedasitistoday.Safetosaythat
most were surprised how well we managed to sail through this
crisis.Theeconomycontinuedtogrow,unlikemuchoftherest
oftheworldwithGDPgrowthof5%to8%between2008and
2012.Insteadthough,wehavesufferedacrisisofconfidenceas
a result of external factors and internal expectations. We have
also had an issue of oversupply of real estate, in terms of new
buildprojects;howeveritwouldbefairtosaythatmostactually
stillmadeprofits.GenerallyIthinkthemarketheldverywelland
thepricespersquaremeterhavenotgonedownmuch.Insome
areas,priceshaveactuallygoneup.Thetopendofthemarket,
whichstandsatabout£5,500to£6,000/m²,hasmaintaineditself.
Milestone GRP - Where does the market stand today?
Mr Montegriffo-ThereistalkabouttheneedfornewpropertiesandtheGovernmentislookingtofurtherdevelopthelocal
market,whichisconsideredagoodfeedertothepropertyladder.ThelastmajordevelopmentstobecompletedwereOcean
VillageandKing’sWharf,whichhavenowbeenoccupiedforthe
last2to3years.Speculativeinvestmentshavenowbeenre-sold
124
Milestone GRP - What is BMI’s client portfolio and what key
projects is the company involved in going forward?
Mr Montegriffo -Iwouldsayabout60%ofourclienteleisinternational and 40% is local and that has been the trend for a
while.Wearecurrentlyworkingwithonecompanyrelocatinginto
700m²,whichisconsideredfairlylargeforGibraltar.Wearealso
workingwithadeveloperwhoiscreating1,400m²ofofficeaccommodationinGibraltarforanestablishedplayer.Thataspect
ofthebusinessisverypositiveandisdrivenbynewinvestment
in Gibraltar. We are also at the early stages of working on two
commercialdevelopmentswhichwouldamounttoasubstantial
andmuchneededincreaseofofficeaccommodationinGibraltar.
In residential sales our average market lies between £250,000
and £600,000 but lately we have been encouraged by larger
transactions,includingsomewellabovethemillionPoundmark
andwehaveseenseverallargesalescomingfromthelocalmarketwhichalsospeaksvolumesaboutourownlocalwealth.
We are also delighted to have been instructed in the sale of
Gibraltar’s newest and finest address; Buena Vista Park Villas
isanexclusivelow-densitydevelopmentofvillasandtownhouseslocatedintheuppersouthdistrictoftheRockandperched
onaclifffacelookingovertheBayandStraitofGibraltar.We
havebeenhugelyencouragedbythefactthatoutofthe16£1m
plusunits,nearly40%aresold;alltoowneroccupiersandall
purchasersbaronearelocallybasedalready.
Wearealsopleasedtoseehighnetworthindividualsrelocate
from places such as Switzerland or other competing jurisdictionssuchasMaltaandMonacoforinstance.Thisshowsthat
Gibraltarhasdoneagreatjobatcreatingtherightsortofenvironment,whichiswellregulatedandstillenjoysgreatstandards
ofliving,bothculturallyandeconomically;whilstwearenowherenearMonacointermsofmarketandprices,Iamconfident
thatGibraltarpresentsgreatpotentialandmarginsforthefuture.
orrentedandthereforereflectsnewbusinessdevelopmentsand
internalgrowthintheOnlineGamingandFinancesectors.
Asfor2011,weknewitwouldbeagoodyearbutwedidnot
expectittobeasgoodasitwasforBMI.Wereachedlevelsof
interestnearlyasgoodas2006and2007andhadhighvolumes
ofpeoplerenting.Thelasttimewesawsomethingsimilarwas
around1998-1999,attheadventoftheonlinegamingboom.At
BMI,wehaverecentlydealtwithseveralfunds,Insuranceand
E-moneycompanies.Ibelievethemarketisstableandweare
cautiouslyoptimisticinGibraltar.
Milestone GRP - What is your outlook for the coming years?
Mr Montegriffo - Some experts argue that another recession
could be an opportunity for Gibraltar, others will argue that a
smalleconomymightbemorevulnerable,sofarwehaveprovedotherwise.IwouldliketothinkGibraltariswellpositioned
toattractmorebusiness.Gibraltarissmall,safe,well-regulated,
EnglishisourfirstlanguageandweapplyCommonLaw,which
also presents advantages for firms looking to relocate to our
shores.AccesstotheEUmarketthrough‘passporting’andthe
uniformtaxregimethatwasimplementedlastyearcouldlead
companiestocontinuetotakestepstorelocatetoGibraltar.In
short,wehaveanopportunitytocreatefurtherbusinessopportunitiesandhavetheeconomicfundamentalstodoso.
Milestone GRP - What role does BMI play in Gibraltar’s market?
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re-fashion what is already available. This is however also why
thingsarefairlyefficientinGibraltarbecausewecandrawonthe
substantialvolumeofliteratureandlegaltomesanddealwithall
thosewithourownchallenges.Thisissomethingthatwehave
workedwithformanyyearsandithasprovenveryuseful.We
havemanagedtore-draftlocallegislationand,infact,Ispent
many years advising the Government on the implementation
of European directives with regards to financial services, anti
money-laundering,banking,insuranceandmanyotherdirectives.WhenGibraltarwasstrivingtoimplementthesedirectives,
myteamandIbroughttensofEuropeandirectivesup-to-date,
together with a consultant who was probably the most senior
legaldraftsmanintheUKGovernmentatthetime.
At the Centre of Gibraltar’s Legal Evolution
Growing in and beyond Gibraltar
Interview with Mr James Levy QC, Senior Partner, Hassans International Law Firm
JamesLevyadviseslargepubliccompaniesonmergersandacquisitionsandpropertycompaniesonacquisitionsthroughoutEurope.MrLevyassistedtheGovernmentofGibraltaronitsdevelopmentofthejurisdictionasafinancecentre.This
hasincludedadviceonanti-moneylaundering,banking,insurance,financialservicesandtrustlegislation.JamespioneeredtheuseofAlternativeDisputeResolutioninGibraltarandisaqualifiedMediator.AnHonoursgraduatefromManchesterUniversity,MrLevyattendedtheCouncilofLegalEducationinLondonandqualifiedin1972,becomingapartnerof
Hassanssoonafterin1974.HewasappointedQueen‘sCounselinOctober2002.HeistheonlylawyerinGibraltartohave
beenrated"Starperformer"byChambers&PartnersandLegal500forfouryearsinarow.InMay2008hereceivedthe
highlyprestigious"LifeTimeAchievementAward"fromChambersandPartners.MilestoneGRPmetMrLevytodiscuss
Hassans’tandemgrowthwithGibraltar’seconomy,theevolutionofthejurisdiction’slegalframework,aswellasthefirm’s
internationaloperationsanditsplanstodoubleinsizewithinthenext2or3years.
Milestone GRP - Hassans has a long history in Gibraltar. What
are the firm’s roots?
Mr James Levy -Thefirmwasfoundedbymyuncle,thelateSir
JoshuaHassanwhoisalegendinGibraltar,asahumanbeing,as
apolitician,asalawyerandeverythingelse.Hefoundedthefirm
in1939.Ijoinedthefirmin1972andatthetime,wewereintwo
roomsandakitchenwithSirJoshua,apart-timesecretaryand
myself. We moved several times, bought neighbouring facilities
and today, we have this office, the neighbouring premises and
athirdpremiseonMainStreet.Sonowwehavereachedacertaincriticalmass;andasafirmwehaveaverylargeinternational
practiceinfinancialservices,mergersandacquisitions,litigation,
trustworkandmuchmore.
Milestone GRP - From a legal perspective, what are the challenges Gibraltar faces?
Mr Levy-Gibraltarhasevolvedfromatax-freejurisdictionto
a financial centre, which applies taxes on its individuals and
businesses. The challenge is therefore to be recognized as a
verygoodEuropeancentrewherecompaniescanbebasedand
operatefrom,wheretaxationisreasonableandtheinfrastructureisverygood.Byinfrastructure,Imeanmuchmorethanthe
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physicalaspect,whichisverygood;wealsohaveanabundant
poolofqualityprofessionalsandapplyCommonLaw,whichis
very important as illustrated by some of the cases happening
intheUnitedKingdom(UK)atthemoment,someofwhichwe
areinvolvedin.Infact,someofthemattersbeingdealtwithin
thesecasesemanatefromGibraltar.IwouldsaythatGibraltaris
probablyoneofthemostefficientCommonLawjurisdictionsin
Europebecauseofthegoodjudiciaryandcourtsysteminplace
andbecausewehavelawyerswhocanactuallycopewithboth
transactionalandlitigationwork.
So the challenge now is for the larger countries and corporations to recognize Gibraltar as a legitimate European centre
wherepeoplecanbasetheirheadoffices,inasimilarwaythey
doinLuxemburg,IrelandorMalta,forinstance.
Milestone GRP - How much has to be re-invented or even
created in Gibraltar in terms of legislation, and how is that
helping the Rock position itself globally?
Mr Levy - A lot has to be re-fashioned in Gibraltar. Indeed,
manyUKprecedents,transactionalorlitigationdocumentation
andtheso-called‘WhiteBook’applyinGibraltar;butithasits
own peculiar difficulties and therefore from there, we have to
These directives now apply in Gibraltar and it is safe for large
companiestoestablishhereintheknowledgethatwearethe
same as Ireland, Malta, Cyprus or Luxembourg, for instance.
Moreover,wehavetheproximitytoalargehinterlandwithgood
facilities in terms of recreation; therefore, Gibraltar is now positionedtotakeoffasanimportantfinancialcentreinEurope.
Ihavebeenadvocatingforreasonabletaxationsincethemid90’s,forwhichpolicyhasnowbeenimplementedafteranumber
ofyears.Wenowhavetoattracttherightsortofcompaniesto
GibraltarapartfromtheGamingcompaniesthataredoingvery
wellhere.Asyouknow,Gibraltarattracts la crème de la crème
intheOnlineGamingworldandwewanttoremainexclusivein
general.
Milestone GRP - Could you please provide an example of legislation that has been specifically re-fashioned in the context of foreign investment?
Mr Levy -Wehaveverygoodantimoney-launderinglegislation
whichisbasedonEuropeandirectivesandUKlegislationand
workswell.Moreover,wehaveexcellentbanking,insuranceand
financialserviceslegislationingeneral.Gibraltarisanimportant
gatewayfor‘passporting’servicesintheEU;whilstaGibraltar
licenseisnoteasytoobtain,itismoreuser-friendlythaninbiggercountriesandallowscompaniestopassporttheirservices
inanyEuropeanstate.
Forexample,wehaveactedforlocalbanksandotherfinancial
servicescompaniesthathave‘passported’theirservicesinto
Spain,despitetheissuesbetweenourtwocountries,andother
EU jurisdictions. Similarly, we have acted for Spanish banks
that have ‘passported’ their services here in Gibraltar, as well
as other European companies. Gibraltar is not only attractive
asabaseforfinancialservicesprovidersbutalsoforfinancial
institutionsfromoutsidetheEUtolicensehereand‘passport’
intotheEU.
Milestone GRP - What are some of the key criteria applied for
business registration in Gibraltar?
Mr Levy-Ifwearetalkingaboutinsurance,bankingandfinancialservices,thesamecriteriaareappliedasanywhereinEurope.
Theonlydifferenceisthathereonehasgoodandquickaccess
totheFinancialServicesCommissionandthereforeonecanget
promptanswerstoanyquery.Forinstance,settingupahedge
fundorabankisquickerthaninotherplacesbecauseGibraltar
isverysmall;butthevalueofaGibraltarlicenseisequivalentto
alicenseinLondon.
WhatIthinkpeopledonotunderstandyetisGibraltar’ssophistication, the valuable asset of our location, being next to the
hinterlandaswellasthegenerallevelofinfrastructurehere.The
gamingcompanieshaverecognizedthepotentialGibraltarpresentsasaheadofficelocationbuttheinternationalcommunity
hasyettodoso.
Milestone GRP - As an authority in your sector and on Gibraltar in general, how much of your work at Hassans revolves
around reassuring investors?
Mr Levy -Notsomuchtobehonest;IthinkGibraltar’sstability
isquiteclear.However,peoplesimplyjustdonotthinkofus.We
needtobepublicizedmore.ThisishowtheOnlineGamingtrend
started;andlookatwherewearenow.IamofteninLondonand
people often admit that they did not consider Gibraltar as an
investmentdestination.Asafirm,wehavesetupanumberof
bankshere,especiallyinthe1980’sandthe1990’s,tothepoint
whereitalmostbecamefashionableforbankstosetuphere.
Today, things have changed simply because of the way the
world functions. We are however seeing a number of funds
setting up here; our Funds department only must have 60 to
70ExperiencedInvestorFundsinitsportfolio.Buttothisdate,
GibraltarisstillnotthefirstpointofcallandIthinkweneedto
improveourimage,especiallyforfunds,financialservicesand
indeedforheadquarters.
Milestone GRP - How has Hassans’ work in Gibraltar influenced the firm’s operations internationally?
Mr Levy -WestartedinGibraltarofcoursebuttodayitisour
baseaswehaveofficesinLuxemburg,inSpainandwe’recontemplatingopeningnewpremisesinCyprus.Whilstitisnotincidentalthatclientscometoushereandtheyoftenwanttobe
inGibraltar,ourclienteleisveryinternational.Wedoagreatdeal
ofworkforpeopleoutsideGibraltar.Forexample,wehavejust
completedaLetterofIntent(LOI)foralargeAmericancompany
withaEuropeancompanyinrespectofassetsinSouthAmerica,
AfricaandAsia.ThissortofworkhasverylittletodowithGibraltarbutratherwiththefactthatourclientswerehereandmany
companieshereareveryinternational.
Gibraltarhasbeenourfoundationanditisourintentionthatit
willremainourbaseforalongtime,evenifweexpandhugely.
For one, my family has been in Gibraltar since the early 18th
centurysowehaveover300yearsofhistoryhere.
Milestone GRP - You have stated your intention to double the
firm’s size within the next couple of years. Which direction
will this expansion take?
Mr Levy -IexpectourgrowthtobeorganicandIhopeitwillbe
matchedbythesettingupofsubstantialheadofficesforlarge
companiesthatwillrequireourservices.Weemploytheservices
of numerous in-house chartered accountants. I would indeed
saythatthefirmwillprobablydoubleinsizeinthenext2to3
yearsalongsideGibraltar’sgrowthandthatofourpractice.For
instance,oneofmysonsjustjoinedusandanotheroneofmy
sonswillstartnextyearbutofcoursetheystartasIstarted,from
thebottom,astheyneedtolearn.
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distribute dividends without any withholding tax. From a cash
managementpointofview,italsobecomesquiteinterestingas
theprofitswouldaccrueataverylowleveloftaxation.
Milestone GRP - What challenges do companies face when
doing business in Gibraltar?
Upholding International Standards
A well-regulated European jurisdiction for serious investors
Mr Pisharello-Ithink,inthiscase,oursizeworksgenerallyin
ourfavour.Forinstance,itiseasiertogettoknowtheorganisations and people with which companies need to engage to
dobusiness.Wedohoweversufferfromalackofofficespace,
whichisasymptomofourownsuccess.Forexample,thenew
gamingcompaniessettingupinGibraltar,whichemployabout
10%oftheworkingpopulation,haveabsorbedmuchofourofficespace.ThenewWorldTradeCentreexpectedtosetupin
Gibraltarsoonandotherdevelopmentsinthepipe-lineshould
alleviatethesituation.Livingspacehasbeenanotherproblem,
butatthesametime,theneighbouringSpanishcitieshavebenefitedfromitandprovidedtheneededbuffer.
Milestone GRP - International firms like Baker Tilly are governed by global principles and adopt local expertise and knowhow. How is this balance best illustrated in Gibraltar?
Interview with Mr Joe Pisharello, Chairman, Baker Tilly Gibraltar
MrPisharelloqualifiedasaCharteredCertifiedAccountantin1991andhasbeenworkinginpracticeinGibraltareversince,
acquiringin-depthknowledgeandexperienceofthelocalcommercialandbusinessenvironment,particularlyinthefieldoffinancialserviceswherehehasspecializedinbankingandinsurance.Histeam’sexpertiseininsurancehasresultedinBakerTillyGibraltarbecomingaleadingfirmintheprovisionofauditandadvisoryservicestotheInsuranceindustryinGibraltar.Hehas
servedasPresidentoftheGibraltarSocietyofAccountantsandiscurrentlyamemberofitstaxfaculty.MilestoneGRPspoke
tohimaboutthechallengesandopportunitiesofdoingbusinessinGibraltar,andhisfirm’soutlookforitsfutureontheRock.
Milestone GRP - Which do you identify as the key characteristics that most affect the set-up and operation of business
in Gibraltar?
Mr Joe Pisharello -GibraltaroffersthebenefitsoftheBritish
legalandregulatorysystemcombinedwiththeattractivenessof
beinglocatedinabeautifullocationsuchastheMediterranean
withgreatweatherandgreatleisurefacilities,aswellasitsproximitytoNorthAfricaandtoSpain.BeingpartoftheEuropean
Union also brings business opportunities to Gibraltar, such as
beingabletotakeadvantageoftheSingleEuropeanPassportin
areassuchasbanking,insuranceandinvestmentservices.The
passportallowsGibraltarlicensedentitiestoprovideservicesor
setupsubsidiariesandbranchesinotherEEAmemberstates.
TherearealsoattractivetaxbreaksforHighNetWorthindividualsandpeoplewithspecialistskills.
Intoday‘svolatilefinancialandeconomicclimate,manypeople
arelookingforplacestheycantrust,wheretheregulatoryenvironmentissufficientlystrongandrobustbutwithoutitbeing
detrimentaltodoingbusiness.PeopleconsideringGibraltarnowadaysdosobecausetheywanttobringbusinesstoaplace
wheretheyaregoingtobewellregulated;infact,ourclientacceptanceproceduresaresuchthattheywouldactasadeterrent
forpeopleconsideringGibraltarforthewrongreasons.Thisis
thekindofmessagewewanttosendtotheworld:Gibraltaris
theidealplaceifyouwanttodogoodqualitybusinessinawellregulatedenvironment.Nevertheless,Ithinkthattheinstitutions
Mr Pisharello -BakerTillyInternationalisoneofthe8largest
accounting networks in the world. Most of the other large accounting networks are also represented in Gibraltar. Baker
Tilly Gibraltar, our predecessor firms, can trace its origins to
the1920’sandwearealsooneofthelargestfirmshere.Asa
memberfirmoftheBakerTillyInternationalnetworkwehaveto
follow quite strict rules; however, as an independently owned
firm,weenjoyconsiderableautonomytobeabletotakedecisionslocallyandquickly.Ourmembershipalsoallowsustobring
in business, or refer business, from other parts of the world.
Crucially, clients may seek international solutions and we can
dothatbecausewearerepresentedgloballyinmorethan100
countries.Thisgivesusandourclientstremendousleverage.
Milestone GRP - Do you see any opportunities coming from
new markets and new investors coming to Gibraltar?
Mr Pisharello -Yes.AsGibraltarisincreasinglyconsideredby
moreandmoreplayersasamodern,wellregulatedjurisdiction,
itwillcertainlybenefitfromthat;wehopetherewillbea"tipping
point"effectifyoulike.Areassuchasfundsandinsuranceare
potentialgrowthareas.Infunds,forinstance,thenegativeeffectsfromMadoffcouldmakeinvestorsturntowellregulated
andtaxneutraljurisdictionssuchasours.WithrespecttoInsurance,manycompanieshavelookedatGibraltarandhavecome
in,consideringGibraltarasanexcellentlocationfromwhichto
insuretherisksofassetsandriskssituatedintheEuropeanUnion by, for example, setting up captives here. This has been a
traditionalgrowtharea.Ithinkthatapartfromwhatishappening
aroundtheworld,thefutureisstillbrightforus.
wehaveinGibraltar,liketheFinancialServicesCommission,for
instance,havetaken,whereverpossible,apragmaticapproach
in the sensible application of EU directives and regulations to
avoidregulatorycreep.IalsobelieveitwasimportantforGibraltartorepositionitselffromtheinevitablenegativeconnotations
ofbeinglabelledanoffshorecentreor‘taxhaven’tothatofa
reputableonshoreinternationalfinancialcentre;andthisisexactly how we want to be seen. For example, until recently we
were grey listed by organisations like the OECD but, through
measures such as agreeing Tax Information Exchange AgreementswithanumberofcountriesincludingtheUSandUK,we
have been removed and are now white listed. We also introducedothersignificantchangestoourlegislationtoeffectively
repositionourselves.
Wenolonger,forinstance,discriminatebetweenlocalandoutsideinvestors;allbusinesses,whichaccrueandderiveincome
inGibraltarwillbeliabletotaxinGibraltar.Thisrepresentsabig
attractivenessinoperatinginGibraltarwherethetaxrateis10%,
probablyoneofthelowestintheEuropeanUnion;andthatisthe
headlinerate.Dependingonhowtheoperationsaresetup,the
actualeffectiveratecouldbelessthan10%.Forinstance,wedo
nottaxpassiveinvestmentincome,dividendsorroyaltiesandwe
donothavecapitalgainstaxorVAT.Thisprovesveryattractive
for someone who considers investing in Gibraltar. In addition,
anydistributionofdividenddoesnotcarryawithholdingtax.So,
imagineanoutsideinvestorsettingupanoperationinGibraltar
paying tax at a maximum rate of 10% and then being able to
S ample • Sa m p l e • S a m p l e • S a m p l e • S a m p l e • Sample
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Mr Vaughan - Our firm provides not only the expected services of accountants, such as audit, accounting and tax, but
as a professional services firm our range of services is broad
andthedepthofknowledgeandexpertiseisevidencedbythe
relatively, for Gibraltar, high staff numbers. This makes us the
leadingaccountancyfirminGibraltarintermsofsizewithover
110 partners and staff. Our local knowledge and practical experience in the full range of business and legal issues facing
inwardinvestors,andthosebusinessesandindividualsalready
establishedinGibraltar,allowsustoadviseacrossallindustries
andservicessectors.Inaddition,withouraccesstotheglobal
networkofPwCfirms,andthespecialistandexpertresources
providedbymorethan169,000peoplein158countries,wecan
adviseonpracticallyanyareaandsubjectmatterthatourclients
mayrequestfromus.
Serving Businesses On and Off the Rock
Local knowledge, international network
Interview with Mr Colin Vaughan, Territory Senior Partner, PwC Gibraltar
Colin Vaughan is PwC Gibraltar’s managing and territory senior Partner, and has been with the firm since 1985. Mr
VaughanistheVicePresidentoftheGibraltarSocietyofAccountantsandhasservedseparatetermsasChairmanof
theSociety’sAudit,TaxandAccountingFaculties.HeiscurrentlyaboardmemberoftheRegulator’sAuditAdvisoryPanel,theFinancialCentreCouncilandtheInvestorCompensationScheme.Heisalsoanalternateboardmemberofthe
DepositGuaranteeScheme.HemetwithMilestoneGRPtodiscussGibraltar’sinvestmentpotentialandopportunities
itoffersemergingmarkets.
Milestone GRP - How do you compare Gibraltar as an investment destination to other markets?
Mr Colin Vaughan -Gibraltarisaself-governingterritorythat
joinedtheEUatthesametimeastheUK.MostofitsinhabitantsarebilingualinEnglishandSpanish.Fromaninvestment
destinationperspective,ourmaincompetitorsareotherjurisdictionswithaBritishconnection,pastorpresent,suchasthe
ChannelIslands,theIsleofMan,CyprusandMalta.Nevertheless,unlikesomeofthesecompetitors,asGibraltarispartof
theEU,itcantakeadvantageofEUdirectivesandpassporting
servicesassociatedwiththis–thissuitsmanyfinancialservicescompanieschoosingtoinvesthere.AndunlikethosecompetitorswithintheEU,GibraltarisexemptfromapplyingVAT.
Milestone GRP - What are some of the concerns and other
factors that investors and businessmen consider when coming to Gibraltar?
Mr Vaughan - Without having visited Gibraltar, investors are
mostlyconcernedabouttheregulatoryenvironment,theability
to operate at a low cost base, and of course, taxation. The
truthisthattheregulator,theFinancialServicesCommission,
isveryefficientandresponsivetoinvestorapplications,which
impacts positively on investor confidence immediately. By
comparison to other jurisdictions, Gibraltar offers a low operatingandlivingcostbase,withahighstandardofliving.Gibraltartaxesallcompaniesataheadlinetaxrateof10%,and
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respectto“category2”individuals,effectivelycappingtheannualtaxliability,Gibraltarisattractingindividualswithahigher
levelofwealththanbefore,whichhasledustostartoffering
Family Office services to those who require such dedicated
service.
Milestone GRP - According to PwC‘s Global CEO Survey,
CEOs see strong opportunities in the BRIC countries. How
does that impact your activities here?
Milestone GRP - What do you offer High Net Worth Individuals (HNWI)?
Mr Vaughan -OurleadershipinPwCconcurswiththesurvey
asdoestheGovernmentofGibraltar,whichhasidentifiedthe
BRICcountriesasprovidingmajorpotentialforinwardinvestment. For some years, Russia has represented growth areas
for PwC Gibraltar, and it is likely that this will continue. We
havealreadystartedtofocusontheotherBRICcountriesand
wecanexpectmoreactivitystemmingourway,notonlyfrom
Brazil,butfromtherestofSouthAmericainthenearfuture.
Mr Vaughan -PwCoffersapersonalconcierge,orhand-holding,servicetohighnetworthindividuals.Wehavededicated
teamssupportingthoseHNWindividualsthroughtheapplicationsrequiredtoestablishinGibraltar.Theservicesincludeliaising,ifapplicable,withimmigration,assistingintheopening
of bank accounts and in finding suitable properties. Beyond
this, we offer private wealth management solutions for those
needingitonanannualbasis.Duetothespecialtaxrateswith
We fully support transparency and disclosure, which is why
theGovernmenthassignedTIEAs(TaxInformationExchange
Agreements)with20countriesandintendstoenterdoubletaxation agreements with other territories as well. We feel it is
imperativethatGovernmentislobbiedtoensurerelevantTIEAsanddoubletaxationagreementsaresignedwiththeabove
countries to allow efficient business relations with investors
fromthesecountries.
theGovernmenthasembarkedonapolicytoreducepersonal
income tax, which is already relatively low, over the coming
years.Soasajurisdiction,Gibraltaristaxcompetitive.
Milestone GRP - Is human resources a major challenge for
overseas investors?
Mr Vaughan - Gibraltar’s education system mirrors the United Kingdom’s except that there are currently no universities
inGibraltar,althoughtheGovernmentofGibraltarisexploring
thepossibilityofsettingupauniversityinGibraltarinthenear
future. Gibraltarian students continue their further education
atuniversitiesintheUnitedKingdom.Thesestudiesarefully
fundedbytheGovernmentofGibraltar,whichrecognisesthat
investmentineducationisnecessaryforthefuturesuccessof
Gibraltar.
The number of Gibraltarian students continuing with further
education,includingsubsequentprofessionalqualifications,is
thereforeproportionatelyhigh.Accordingly,Gibraltarprovides
abroadbaseofhighlyeducatedandqualifiedpeople.Nevertheless, the continued success of Gibraltar as an investment
locationhasplaceddemandsonhumanresources,whichcannotbemetbylocalsupplyalone.Asaresult,asignificantproportionoftheworkforceinGibraltarisnon-Gibraltarian.
Milestone GRP - What services does PwC offer investors
looking at Gibraltar?
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