Jersey, the leading international finance centre, has long been a prime jurisdiction for institutions and individuals in the Middle East to hold assets and structure investments. With a rich tapestry of history and a strategic connection between the Middle East and Jersey, the island offers a gateway to opportunities. As a firm, Bedell Cristin has long-established links and many clients in the Middle East. This briefing reviews the foundations of the relationship between Jersey and the Middle East and some key elements of the Jersey proposition.
Historic and contemporary ties
Jersey stands as a testament to enduring relationships. Jersey is a self-governing 'crown dependency' of the UK, a status that has been relatively unchanged for centuries. Jersey also has abiding historical ties with the Middle East, in part framed by the relationship between the Middle East and the UK and the City of London, with shared history and principles cultivating collaboration between the island and the Middle East.
Connections exist at many levels. There are strong political links, with members of the Jersey government making regular visits to the Gulf, and representatives from the region having been made welcome on official visits to the island – including delegations from Bahrain, Kuwait, Oman and Saudi Arabia. Formal arrangements include double taxation agreements signed with the UAE and Qatar and Jersey's first Bilateral Investment Treaty, which was signed with the UAE in 2021. Jersey's financial regulator, the Jersey Financial Services Commission, has a series of Memoranda of Understanding with equivalents in the Middle East, including with Bahrain, Qatar and the UAE.
Jersey Finance also has a presence in the Dubai International Financial Centre (DIFC) and there is a wealth of well-established relationships between Jersey-based businesses and those in the Middle East. Many in the Middle East have long-standing connections with Jersey as a financial centre, which connections are founded on a number of core principles.
Reputation and track record
The overall reputation and track record of Jersey is a key foundation for the trust placed in the island by clients of its financial services industry. Operating as an international finance centre for over 60 years, Jersey has a sound legal framework, supported by an independent judicial system, providing a secure environment, stability, certainty and high standards.
Jersey also has a strong regulatory framework, providing effective regulation of service providers in compliance with relevant international standards, whilst also allowing for flexibility and proportionality for client structures. This flexibility makes Jersey an ideal jurisdiction for a range of activities, including private wealth structuring and institutional or pooled investments.
Expertise and excellence
There is a depth of financial services expertise in Jersey, with the island having one of the largest numbers of finance industry professionals of any international finance centre, giving a vast pool of skills. The strength and breadth of the industry also provides for a wide range and choice of competitive products and services. Jersey also offers real substance and governance, providing quality and reassurance, underpinning its role as a hub for international capital and business.
A key feature of Jersey's offering as an international finance centre is Jersey's tax environment. Jersey offers a clear and straightforward tax-neutral environment, with the island having a zero rate of income tax and no capital gains or transfer taxes. Investors may pay tax in their own countries or in those they invest in, but will avoid complex cross-border tax issues, or being taxed twice. The certainty and simplicity of the tax position in Jersey is a key attraction.
Sharia compliance and Islamic finance
Naturally, there is a demand for sharia-compliant solutions in the Middle East. Jersey's legal system readily accommodates sharia-compliant structures and investments, with Jersey being routinely used for sharia-compliant asset structuring, fund domiciliation, and capital markets activity, such as sukuk issuances, as well as sharia-compliant private wealth management and administration.
There is strong support for sharia financial solutions from the island's authorities. For example, Revenue Jersey (the island's tax authority) has issued strong confirmation that certain types of funding, specifically Tawwarruq/Murabaha structures, are not subject to tax in Jersey. The Jersey Financial Services Commission is also highly familiar with the regulation of Islamic finance products, and routinely issues regulatory consents in respect of such structures where they are required.
With an extensive record of accomplishment in establishing sharia-compliant structures, the Bedell Cristin team has developed significant expertise and experience in many areas of Islamic finance.
Expertise in real assets
Real assets – real estate and infrastructure – have long been a favoured asset class among Middle Eastern investors, with investing in UK commercial real estate being an investment staple for many. Jersey is the 'go to' jurisdiction for investment in UK real estate, including through SPV holding companies, joint venture companies or partnerships, or the Jersey Property Unit Trust (JPUT), which is familiar to many advisors, investors and lenders. Based on the familiarity with, and confidence in, the jurisdiction, Jersey is also often used as the holding jurisdiction for real estate investments elsewhere, whether in Europe, Asia or the US. A large part of Bedell Cristin's commercial law practice encompasses the structuring and financing of real estate investments for Middle Eastern investors. Equally, the international private client team advises on many private or family structures holding real estate portfolios.
In addition, Jersey is often used for other alternative assets, including private equity and venture capital, with many high-profile investment advisors having domiciled their funds or other investment structures on the island, enhancing Jersey's reputation as a domicile for specialised assets. That said, Jersey structures are also used to invest in conventional assets, with a number of sharia-compliant investment funds investing in equities or other conventional assets having also been established in Jersey.
As a jurisdiction, Jersey offers a variety of flexible structures to meet the specific investment needs of clients. Whether it's wealth preservation or management, asset holding, joint ventures, funds, real estate or private equity, Jersey can provide tailored solutions that align with client objectives.
Looking to the future, the long-standing links between Jersey and the Middle East look set to continue. The Middle East remains a priority region for Jersey, with political, regulatory and industry attention focussed on the development of the already significant relationship. The strength of that relationship, combined with the fundamentals of Jersey's proposition – including stability, excellence and flexibility – should mean that Jersey continues to be a jurisdictional partner of choice for clients in the Middle East.