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Guardian Global Capital (Suisse) SA v JFSC 29-Apr-2020 judicial review - Trust Company Business "in or from within Jersey."

06/05/2020

Jersey trust company businesses have been waiting a long time for any case to reach the Royal Court regarding the interpretation of what is meant by "in or from within Jersey" with regard to the definition of Trust Company Business under Article 7(1) of the Financial Services (Jersey) Law 1998.

In Guardian Global Capital (Suisse) SA v JFSC 29-Apr-2020 judicial review proceedings were brought by Guardian, a Swiss incorporated entity, against a notice from the JFSC requiring it to furnish the JFSC with information regarding the administration of certain trusts of which it had been a trustee in the past.

Guardian was owned by a Jersey holding company and had a sole director who was Jersey resident. The said director was also the owner of the holding company and ergo the ultimate owner of the Swiss trustee.

The case is an interesting one for two main reasons.

1. The trustee had a choice: faced with an order from the JFSC to produce papers it would have liked to protect itself from complaints about a decision to comply by issuing an application to the Royal Court under the T(J)L for directions, but instead found itself challenging the JFSC’s order by applying for it to be subjected to a judicial review.

Then it set out the grounds for its concern. As a Swiss company not regulated by the JFSC was it correct for the Commission to seek to exercise jurisdiction over it?

2. The answer was yes. It turned out to have numerous close connections with Jersey (so the arm of the JFSC was not extending quite so far as appeared) but the fundamental point is this: the Financial Services Law has to have a degree of extra territorial effect, otherwise foreign companies could simply run rings round the rules that regulate the industry.

Ultimately, the Royal Court had little issue in determining that the JFSC had lawfully issued the notice because there was sufficient connection between the Swiss trustee and Jersey (following authority from R (KBR Inc) v Director of the Serious Fraud Office [2019] 2 WLR 267).

ROYAL COURT - Conclusion

• 44. As we have already indicated, in our judgment a combination of Article 7, Article 32(2) and Article 40 of the Law persuades us that the legislature understood that there would be some extra-territorial reach to the statute.
• 45. The public interest is, to us, clear. It must be open to the Commission to investigate questions of potential carrying out of unlawful trust business as the entire thrust of the Law is to protect the Island’s reputation and to create a properly regulated financial services industry. If GGC’s argument were to be correct, then it would be open to anyone to set up a trust company in any jurisdiction at all outside Jersey and could administer Jersey trusts within the Island but refuse to provide information. That cannot be in the public interest nor can it have been within the intention of the legislature.
• 46. Furthermore the public interest in giving the Commission the effective means to carry out the obligations foreshadowed in Article 7 of the Law, and indeed the broader public interest of safeguarding the reputation of the Island and its financial services industry and to prevent business being conducted within the Island of a financial services nature without the control of the Commission, seems to us to afford more than ample justification for the extra-territorial reach of the Law in these respects.
• 47. Moreover we are entirely satisfied that there is a sufficient connection, if such be necessary in the light of our primary view of the statute. The Commission has served a notice on GGC requiring the production of documents for the purpose of conducting an enquiry as to whether unauthorised business has been conducted in or from Jersey. That notice was served on a Jersey resident and the documentation to be produced is located in Jersey. The trusts concerned are Jersey trusts and GGC’s holding company is a Jersey company and the notice was served on its principal. Indeed as far as we can determine the only foreign element is the residency of GGC itself.
• 48. Indeed GGC accepts, in its skeleton argument, that if the principles in KBR set out above are felt to be persuasive by the Court then the Court is “likely to be persuaded that a ‘sufficient connection’ exists …’.
• 49. We are persuaded by the principles set out in KBR.
• 50. In our view any extra-territoriality concerned in this case is ‘marginal’. In our judgment for the reasons set out above, we hold that on a proper construction and applying the principles set out in KBR and in Jimenez, Article 32(2) has extra-territorial effect in these circumstances and the notice is accordingly valid.

READ THE JUDGEMENT - https://www.jerseylaw.je/judgments/unreported/Pages/[2020]JRC073.aspx