Polo Tournament. Our hospitality suite waswell attended on all match days and theatmosphere proved warm, friendly and ascasual as we had hoped. This being theSeptember edition of the Communique,we will at the time of going to print haveenjoyed our annual Golf Tournament at La Reserva in Sotogrande where a total ofaround fifty players will have tried their handon a hot September’s afternoon. On onefinal, social note, the Cape St Vincent(Portugal) to Gibraltar Charity Cycle is nowliterally around the corner and finalpreparations are now under way. As you maybe aware, we are looking to raise funds for anumber of charities in Gibraltar and wouldbe grateful for any support you can offer inthis regard.

Finally, I have the great pleasure ofwelcoming Karl Tonna onboard, a lawyer

As you may be aware, we are looking to raisefunds for a number of charities in Gibraltarand would be grateful for any support you

can offer in this regard.

Welcome to our September edition of theCommunique. In this edition a variety ofsubjects of importance have been covered byour lawyers: Selwyn Figueras explains howthe Gibraltar Government’s efforts aredriving the jurisdiction on course and onschedule for the placement of Gibraltar onthe OECD’s white list of companiescomplying with the internationally agreedtax standard. Steven Caetano covers theprinciples and use of injunctions in respectof executives starting up in similar businesseson their own in the absence of restraint oftrade clauses. The third and last item on theprofessional front is an explanation by JoeyGarcia of our funds team and the impact ofthe Alternative Investment Fund Managersdirective on the funds industry in both aglobal and local sense.

I write at the conclusion of what I hope willhave been a restful summer for most of theteam and what was certainly a busy socialcouple of months. During the month ofAugust we had the opportunity of spendingsome time in a casual/informal setting at theSanta Margarita Polo Club as we watchedthe teams vie for the silverware in the Annual

I S S U E 5 S E P T E M B E R 2 0 0 9I S S U E 5 S E P T E M B E R 2 0 0 9I S S U E 5 S E P T E M B E R 2 0 0 9

In this issuePage

1. Introduction

2. Springboard Injunctions

for Bad leavers

3. On the White Road

4. AIFM Directive Implications

5. History and Profile of the

Funds Team

6. ISOLAS welcome...

Regulated by the Gibraltar Financial Services Commission. Licence Numbers FSC00277B FSC00276B

www.gibraltarlawyers.com

www.gibraltarlawyers.com

Portland House Glacis Road PO Box 204 Gibraltar Tel +350 200 78363

joining our firm as an associate about whomyou can read on the back page and who I amcertain will prove to be a valuable addition tothe team here at ISOLAS as we continue todevelop and look for ways of providing theservice of which we are so proud.

CommuniquéIntroduction

By Christian Rocca

Gibraltar’s position as a rapidly growingjurisdiction for Funds has been wellrecognised and ISOLAS have been on thefront of this development. Our positionwithin the EU, and the advantage ofworking within a jurisdiction that is highly regulated, operating internationallyrecognised and EU standard anti-moneylaundering and Organisation for EconomicCo-operation and Development (‘OECD’)conventions, makes Gibraltar a veryattractive alternative funds jurisdictionwithin Europe.

The Experienced Investor Fund (EIF)regime was launched in 2005 and has seenmany other jurisdictions follow suit withsimilar styled products. The speed and ease of set up along with the degree offlexibility that the EIF allows makes it an excellent alternative/hedge fund/privateequity/property vehicle. EIF’s can also bestructured as protected cell companiesunder the Gibraltar Protected CellCompanies Act 2001. This allows for asingle corporate body, with an internal‘umbrella’ structure consisting of anynumber of subdivisions that allow for thelegal segregation of assets and liabilities intodifferent Cells allowing for multiplestrategies.

ISOLAS have advised private clients, familyoffices and an international base ofinvestment managers on the structuringand set up of Gibraltar based fundsolutions. We are regarded as one of theleading Fund teams in Gibraltar, offering afirst class and personal service while alsodeveloping synergies with our clients in theFunds sector. Our team is able to advise onall aspects of a fund set up and to assist intaking any project from concept through tolaunch and beyond as well as being able toact as a central reference point for allcounterparties to make the procedureseamless. ISOLAS have also advisedinternational firms on Gibraltar fundrelated issues, and on the promotion ofcollective investment schemes in Gibraltaras well as the effect of the newly proposedAlternative Investment Fund ManagerDirective.

Associated with

Karl was called to the Bar in 2002. He has

been an Associate in the Commercial and

Litigation Departments of a local law firm

and has wide-ranging experience on

different transactions, including corporate

restructures, acquisitions and general civil

and international funds litigation.

In addition to his legal training and

insurance qualifications, Karl has also had

four years industry experience as Managing

Director of a leading Gibraltar-based

Insurance Broker. The rise in personal

injury claims in the past decade has given

Karl a unique outlook of the real issues for

both claimants and defendant insurers. Karl

has also garnered firsthand experience of the

range of issues a local business may face and

is thus well placed to provide thorough yet

sensible advice. Karl is an active member of

The Round Table Gibraltar.

ISOLAS IS PROUD TOWELCOME... KARL TONNA

Up and coming eventsDate Event Location

October 2009 Gibraltar, London Day London

October 2009 ISOLAS Charity Cycle Portugal - Gibraltar

September/October 2009 Switzerland Seminars Week Switzerland

The rise in personal injury claims in the past decade has given Karl a unique outlook of the real issues for both claimants

and defendant insurers.

HISTORY AND PROFILE OFTHE FUNDS TEAMby Joey Garcia

not subject to any restrictive covenants. G obtained an interim injunction againstW and the case went to trial.

The Judge found that W breached hisfiduciary duty to G by failing to alert itthat he was threatening to compete withthem by approaching their customers andtaking confidential documents with him.G was therefore restrained from anycompeting activity for 12 months after hisresignation.

This decision is a helpful one for companieswhose former directors or senior employeesset up new business in competition withthem in four main aspects:

1. It adds two matters to the list ofrelevant principles to be applied by acourt in cases where a company seeksto restrain the activities of a formerdirector or senior manager in theabsence of restrictive covenants cases(see Foster Bryant Surveying Limited vBryant [2007] 2 BCLC 239) namely:

(i) it is impermissible to copy or takedocuments belonging to the companywith a view to using them to competewith the company after therelationship has ended and

(ii) a director is obliged to alert thecompany to any nascent threat to itsbusiness, even if he is himself part ofthat threat;

2. It finds that the nature of the conductof a fellow employee which gives rise toa duty to report on the part of thecompany director need not itself besuch as would amount to a breach ofthat employee’s duty of fidelity;

3. It provides guidance as to exactlywhen, and how, a director crosses theline into impermissible activity whilstpreparing to compete with his formeremployer/company - for example,when the possibility of contracts withthe new company was discussed withthe old company’s customers; and

4. It shows the Court imposing aSpringboard Injunction of as long asone year despite the absence of anysuch restrictive covenants in theexpress terms of employment of thatformer director or senior executive.

It is obvious then that, as regards to threatsto existing companies from elementswithin eventually looking to establishthemselves as competitors, the law is noslouch.

I S S U E 5 S E P T E M B E R 2 0 0 9

When a senior executive leaves yourcompany and takes with him valuableinformation and contacts, to help him in anew and competing business, there is notime to waste if you want to get a“springboard injunction” to prevent thatperson and his new business unfairlytaking advantage of information andcontacts belonging to the company.

Restrictive covenants and confidentialityprovisions in a contract of service oremployment are the first line of defencefor any prudent employer. But if it is clearthat the person leaving was actually a“fiduciary” occupying a senior positionsuch as a director (whether formallyappointed to the Board or not) then anemployer may rely on a whole new series ofoptions to protect company interests, notjust against the leaving executiveoccupying a fiduciary position as regardsthe company, but also against anyoneknowingly assisting him.

Where the “fiduciary” has either startedsetting up his new business before leaving

the company or has taken with him aproject or opportunity that he acquiredand incubated whilst working with thecompany, the courts will bend overbackwards to restrain the fiduciary from taking advantage of theinformation/business opportunity that hetook with him. The recent UK decision inthe case of Attwood v Woodward belowshows that the courts continue to take ahard line against “fiduciaries” that cross theline in these circumstances, somethingwhich, sadly, is very common.

The recent Judgment in G AttwoodHoldings Limited and Another v GordonWoodward and Others [2009] EWHC1083 (Ch) can be summarized as follows:

W, a former director of G, a companysupplying technical personnel to the USGovernment, took steps to set up acompeting company and took otherpreparatory steps to promote his newbusiness whilst still a director of G. W then left and took a number ofconfidential documents with him. W was

The Alternative InvestmentFund Directive and implicationsfor Non-EU fundsMuch has been published on the newlyproposed Alternative Investment FundDirective (‘AIFM’) which if it materialisesin its proposed form would affect all fundmanagers in Europe who manage or marketa fund which is not regulated in Europe as suitable for retail sales (effectively, anynon-UCITS fund). This would include notonly funds in their purest form, but anyarrangement that can be characterised as a‘collective investment undertaking’ that iseither managed in Europe or is seekinginvestors in Europe.

The burdens of the AIFM are weighty andinclude among other things, rules relatingto suitable qualification, risk management,liquidity management, the management ofconflicts, and prescriptive disclosure topotential investors while the benefit on theflip side would be easier marketing toprofessional investors (as defined byMiFID) but this is of little comfort to mostmanagers.

The Commission’s justification for thedirective is the management of risk arisingfrom Alternative Investment Funds (AIF’s)

based on recent market events and toaddress issues raised in previousconsultations. This seems strange given thatthe detailed analysis of these same events(such as the Larosiere report, the TurnerReview and the work produced from theG20 summit) has laid no blame for marketevents on hedge funds or other private poolsof capital involved in the financial markets.It is unclear why all non-UCITS fundsshould be affected by the directive in such abroad way and although the Commissionhas maintained that this is not a one size fitsall approach it is difficult to envisage ascenario where those AIF’s which presentvery limited risks (other than to theinvestors in them) would not beunintentionally ‘caught’ by the Directive.

The potential effects of the Directive arealready being felt in the industry withseveral of London’s largest hedge fundspoised to launch onshore funds in order toavoid any uncertainty. The Financial Timesrecently reported that Cheyne Capital, the£3.6bn hedge fund manager, was set tobecome the latest high profile Londonname to launch a UCITS III fund. Thiswould allow the fund to operate within theexisting European regulatory framework foran investment vehicle that can be marketed

AIFM DIRECTIVE IMPLICATIONS:by Joey Garcia

across the EU, but this might not be anoption for most smaller managers currentlyoperating within the EU who will face adifferent set of implications and potentialrestrictions.

Marketing Non-European Fundsin EuropeThe classic scenario might be of a smallermanager managing a Cayman Island hedgefund, or a Jersey limited partnershipproperty fund (Non-EU). If the Directivewere to come into force in 2011 asproposed, rules on non-European fundsand non-European managers would comeinto effect three years later in 2014. Untilthen, existing rules will continue to apply,for example, marketing on the basis of theprivate placement regime (if one exists) inthe relevant country where the fund is beingmarketed. However, there is also the clearpossibility that some European countriescould restrict their private placementregimes in the meantime which could resultin managers finding it even more difficult tomarket offshore funds in Europe.

After 2014 the Directive (Article 35)provides clear limitations on thedistribution of Non-EU funds. No funddomiciled outside of Europe can bemarketed to any professional investor unlessthe country in which that fund is domiciledhas signed an agreement with the relevantmember state in which the marketing willtake place. This agreement must complywith the standards set in Article 26 of theOECD Model Tax Convention and ensureeffective exchange of information in taxmatters. This is a significant burden andultimately, European-domiciled funds, suchas Gibraltar funds, could be placed at asignificant advantage to their offshorecounterparts.

Furthermore, Non-EU managers will notbe able to rely on the private placementregime and will also need to be authorisedbut this deals with a separate issue.

Gibraltar is a member of the EuropeanUnion by virtue of Article 229(4) of the Treaty establishing the EuropeanEconomic Community. All EU Directivesand Regulations are fully transposed intoGibraltar law. For further information onhow your fund or business may be affectedby the AIFM, or on re-domiciliationprocedures, contact Joey Garcia -joey.garcia@isolas.gi.

The OECD’s Secretary General, AngelGurria, is, by all accounts, having a prettygood run of form recently. In the last fewdays he’s had the opportunity of revealing tothe financial world at large that the majoreconomies of the world excluding, notsurprisingly, the UK, are now on the road to recovery. As common sense no doubtdictates he did encourage governments to continue to take measures to stimulatetheir economies to minimise risingunemployment and other ill-effects of thecrisis/turnaround.

I say ‘not surprisingly’ in respect of thedowngrading of the UK’s status in theOECD’s survey because throughout thecrisis, if there’s been any bad economic newscoming out of Europe, British Ministersand spokespersons have typically fallen overthemselves to claim, later the same day, that however bad the European news maybe, the UK is always worse off by asignificant margin. Some might argue that this was part a textbook exercise in economic/political machiavellianismdesigned to maintain the pound’s weaknessand, therefore, the domestic export andtourism sectors. Others might just thinkthat this was a Government fast losingcontrol of its economy and being overlyfrank about it!

To aid him in his smugness, however, theOECD’s Secretary General can also claim,

in respect of the OECD’s objective oferadicating banking secrecy laws and taxevasion, that ‘we have delivered more in 10months than we achieved in 10 years.’Spurred on by German and US authorities’attacks on Liechtenstein and Switzerland,the OECD has seen a dramatic increase inthe number of model tax informationagreements signed between membercountries and so-called ‘tax havens’currently on the grey list of countriescommitted to achieving the standard.Whilst Mr Gurria heralds ‘the end of an eraof banking secrecy as a shield for tax havens’others aren’t quite as impressed.

Anthony Travers, Chairman of the CaymanIslands Financial Services Associationbelieves that the news that the OECD’snewly announced global monitoring andpeer review process, to ensure that membersimplement their commitments, will onlyreveal the inconvenient truth that theoffshore centres targeted through thisprocess were not, in fact, the rogue, moneylaundering and tax evading capitals of theworld the OECD indicated they were.Travers believes that this process will revealthe ‘not so hidden agenda’ of the OECD,namely the achievement of a one size fits all,global tax system and, furthermore, lead toan eventual dwindling of support for itswork as this objective becomes clearer.Travers further believes that the OECD will

find itself embarrassingly short of teethwhen the time comes to target Beijing andother centres paying not even lip service tothe international pressure in respect of theexchange of tax information.

Whatever one’s views on the OECD’sobjectives, compliance is key if the levelplaying field is to be achieved. Switzerlandhas recently entered into an agreement withthe UK and Gibraltar continues apace withits efforts to comply. As at the date ofwriting, Gibraltar has entered into sevenagreements with various countries, just fiveshort of the magic number twelve,following which, Gibraltar will be placed onthe white list of jurisdictions by the OECD.It is expected, following the most recentsigning with Denmark, that the remainingfive agreements will follow briefly withSweden, Finland and the other Nordiceconomies.

We are well on our way and will shortlyachieve the objective of being white-listedby the OECD, a status which will vindicateall the work done by the local industry incomplying with European and worldwidedirectives in relation to money launderingand tax evasion. Gibraltar’s continuedpresence on the white list is, by virtue of thehard work put in by all those involved andthe dedication to enjoying business on alevel international playing field, virtuallyguaranteed.

ON THE WHITE ROAD?by Selwyn Figueras

SPRINGBOARD INJUNCTIONSFOR BAD LEAVERSby Steven Caetano

not subject to any restrictive covenants. G obtained an interim injunction againstW and the case went to trial.

The Judge found that W breached hisfiduciary duty to G by failing to alert itthat he was threatening to compete withthem by approaching their customers andtaking confidential documents with him.G was therefore restrained from anycompeting activity for 12 months after hisresignation.

This decision is a helpful one for companieswhose former directors or senior employeesset up new business in competition withthem in four main aspects:

1. It adds two matters to the list ofrelevant principles to be applied by acourt in cases where a company seeksto restrain the activities of a formerdirector or senior manager in theabsence of restrictive covenants cases(see Foster Bryant Surveying Limited vBryant [2007] 2 BCLC 239) namely:

(i) it is impermissible to copy or takedocuments belonging to the companywith a view to using them to competewith the company after therelationship has ended and

(ii) a director is obliged to alert thecompany to any nascent threat to itsbusiness, even if he is himself part ofthat threat;

2. It finds that the nature of the conductof a fellow employee which gives rise toa duty to report on the part of thecompany director need not itself besuch as would amount to a breach ofthat employee’s duty of fidelity;

3. It provides guidance as to exactlywhen, and how, a director crosses theline into impermissible activity whilstpreparing to compete with his formeremployer/company - for example,when the possibility of contracts withthe new company was discussed withthe old company’s customers; and

4. It shows the Court imposing aSpringboard Injunction of as long asone year despite the absence of anysuch restrictive covenants in theexpress terms of employment of thatformer director or senior executive.

It is obvious then that, as regards to threatsto existing companies from elementswithin eventually looking to establishthemselves as competitors, the law is noslouch.

I S S U E 5 S E P T E M B E R 2 0 0 9

When a senior executive leaves yourcompany and takes with him valuableinformation and contacts, to help him in anew and competing business, there is notime to waste if you want to get a“springboard injunction” to prevent thatperson and his new business unfairlytaking advantage of information andcontacts belonging to the company.

Restrictive covenants and confidentialityprovisions in a contract of service oremployment are the first line of defencefor any prudent employer. But if it is clearthat the person leaving was actually a“fiduciary” occupying a senior positionsuch as a director (whether formallyappointed to the Board or not) then anemployer may rely on a whole new series ofoptions to protect company interests, notjust against the leaving executiveoccupying a fiduciary position as regardsthe company, but also against anyoneknowingly assisting him.

Where the “fiduciary” has either startedsetting up his new business before leaving

the company or has taken with him aproject or opportunity that he acquiredand incubated whilst working with thecompany, the courts will bend overbackwards to restrain the fiduciary from taking advantage of theinformation/business opportunity that hetook with him. The recent UK decision inthe case of Attwood v Woodward belowshows that the courts continue to take ahard line against “fiduciaries” that cross theline in these circumstances, somethingwhich, sadly, is very common.

The recent Judgment in G AttwoodHoldings Limited and Another v GordonWoodward and Others [2009] EWHC1083 (Ch) can be summarized as follows:

W, a former director of G, a companysupplying technical personnel to the USGovernment, took steps to set up acompeting company and took otherpreparatory steps to promote his newbusiness whilst still a director of G. W then left and took a number ofconfidential documents with him. W was

The Alternative InvestmentFund Directive and implicationsfor Non-EU fundsMuch has been published on the newlyproposed Alternative Investment FundDirective (‘AIFM’) which if it materialisesin its proposed form would affect all fundmanagers in Europe who manage or marketa fund which is not regulated in Europe as suitable for retail sales (effectively, anynon-UCITS fund). This would include notonly funds in their purest form, but anyarrangement that can be characterised as a‘collective investment undertaking’ that iseither managed in Europe or is seekinginvestors in Europe.

The burdens of the AIFM are weighty andinclude among other things, rules relatingto suitable qualification, risk management,liquidity management, the management ofconflicts, and prescriptive disclosure topotential investors while the benefit on theflip side would be easier marketing toprofessional investors (as defined byMiFID) but this is of little comfort to mostmanagers.

The Commission’s justification for thedirective is the management of risk arisingfrom Alternative Investment Funds (AIF’s)

based on recent market events and toaddress issues raised in previousconsultations. This seems strange given thatthe detailed analysis of these same events(such as the Larosiere report, the TurnerReview and the work produced from theG20 summit) has laid no blame for marketevents on hedge funds or other private poolsof capital involved in the financial markets.It is unclear why all non-UCITS fundsshould be affected by the directive in such abroad way and although the Commissionhas maintained that this is not a one size fitsall approach it is difficult to envisage ascenario where those AIF’s which presentvery limited risks (other than to theinvestors in them) would not beunintentionally ‘caught’ by the Directive.

The potential effects of the Directive arealready being felt in the industry withseveral of London’s largest hedge fundspoised to launch onshore funds in order toavoid any uncertainty. The Financial Timesrecently reported that Cheyne Capital, the£3.6bn hedge fund manager, was set tobecome the latest high profile Londonname to launch a UCITS III fund. Thiswould allow the fund to operate within theexisting European regulatory framework foran investment vehicle that can be marketed

AIFM DIRECTIVE IMPLICATIONS:by Joey Garcia

across the EU, but this might not be anoption for most smaller managers currentlyoperating within the EU who will face adifferent set of implications and potentialrestrictions.

Marketing Non-European Fundsin EuropeThe classic scenario might be of a smallermanager managing a Cayman Island hedgefund, or a Jersey limited partnershipproperty fund (Non-EU). If the Directivewere to come into force in 2011 asproposed, rules on non-European fundsand non-European managers would comeinto effect three years later in 2014. Untilthen, existing rules will continue to apply,for example, marketing on the basis of theprivate placement regime (if one exists) inthe relevant country where the fund is beingmarketed. However, there is also the clearpossibility that some European countriescould restrict their private placementregimes in the meantime which could resultin managers finding it even more difficult tomarket offshore funds in Europe.

After 2014 the Directive (Article 35)provides clear limitations on thedistribution of Non-EU funds. No funddomiciled outside of Europe can bemarketed to any professional investor unlessthe country in which that fund is domiciledhas signed an agreement with the relevantmember state in which the marketing willtake place. This agreement must complywith the standards set in Article 26 of theOECD Model Tax Convention and ensureeffective exchange of information in taxmatters. This is a significant burden andultimately, European-domiciled funds, suchas Gibraltar funds, could be placed at asignificant advantage to their offshorecounterparts.

Furthermore, Non-EU managers will notbe able to rely on the private placementregime and will also need to be authorisedbut this deals with a separate issue.

Gibraltar is a member of the EuropeanUnion by virtue of Article 229(4) of the Treaty establishing the EuropeanEconomic Community. All EU Directivesand Regulations are fully transposed intoGibraltar law. For further information onhow your fund or business may be affectedby the AIFM, or on re-domiciliationprocedures, contact Joey Garcia -joey.garcia@isolas.gi.

The OECD’s Secretary General, AngelGurria, is, by all accounts, having a prettygood run of form recently. In the last fewdays he’s had the opportunity of revealing tothe financial world at large that the majoreconomies of the world excluding, notsurprisingly, the UK, are now on the road to recovery. As common sense no doubtdictates he did encourage governments to continue to take measures to stimulatetheir economies to minimise risingunemployment and other ill-effects of thecrisis/turnaround.

I say ‘not surprisingly’ in respect of thedowngrading of the UK’s status in theOECD’s survey because throughout thecrisis, if there’s been any bad economic newscoming out of Europe, British Ministersand spokespersons have typically fallen overthemselves to claim, later the same day, that however bad the European news maybe, the UK is always worse off by asignificant margin. Some might argue that this was part a textbook exercise in economic/political machiavellianismdesigned to maintain the pound’s weaknessand, therefore, the domestic export andtourism sectors. Others might just thinkthat this was a Government fast losingcontrol of its economy and being overlyfrank about it!

To aid him in his smugness, however, theOECD’s Secretary General can also claim,

in respect of the OECD’s objective oferadicating banking secrecy laws and taxevasion, that ‘we have delivered more in 10months than we achieved in 10 years.’Spurred on by German and US authorities’attacks on Liechtenstein and Switzerland,the OECD has seen a dramatic increase inthe number of model tax informationagreements signed between membercountries and so-called ‘tax havens’currently on the grey list of countriescommitted to achieving the standard.Whilst Mr Gurria heralds ‘the end of an eraof banking secrecy as a shield for tax havens’others aren’t quite as impressed.

Anthony Travers, Chairman of the CaymanIslands Financial Services Associationbelieves that the news that the OECD’snewly announced global monitoring andpeer review process, to ensure that membersimplement their commitments, will onlyreveal the inconvenient truth that theoffshore centres targeted through thisprocess were not, in fact, the rogue, moneylaundering and tax evading capitals of theworld the OECD indicated they were.Travers believes that this process will revealthe ‘not so hidden agenda’ of the OECD,namely the achievement of a one size fits all,global tax system and, furthermore, lead toan eventual dwindling of support for itswork as this objective becomes clearer.Travers further believes that the OECD will

find itself embarrassingly short of teethwhen the time comes to target Beijing andother centres paying not even lip service tothe international pressure in respect of theexchange of tax information.

Whatever one’s views on the OECD’sobjectives, compliance is key if the levelplaying field is to be achieved. Switzerlandhas recently entered into an agreement withthe UK and Gibraltar continues apace withits efforts to comply. As at the date ofwriting, Gibraltar has entered into sevenagreements with various countries, just fiveshort of the magic number twelve,following which, Gibraltar will be placed onthe white list of jurisdictions by the OECD.It is expected, following the most recentsigning with Denmark, that the remainingfive agreements will follow briefly withSweden, Finland and the other Nordiceconomies.

We are well on our way and will shortlyachieve the objective of being white-listedby the OECD, a status which will vindicateall the work done by the local industry incomplying with European and worldwidedirectives in relation to money launderingand tax evasion. Gibraltar’s continuedpresence on the white list is, by virtue of thehard work put in by all those involved andthe dedication to enjoying business on alevel international playing field, virtuallyguaranteed.

ON THE WHITE ROAD?by Selwyn Figueras

SPRINGBOARD INJUNCTIONSFOR BAD LEAVERSby Steven Caetano

not subject to any restrictive covenants. G obtained an interim injunction againstW and the case went to trial.

The Judge found that W breached hisfiduciary duty to G by failing to alert itthat he was threatening to compete withthem by approaching their customers andtaking confidential documents with him.G was therefore restrained from anycompeting activity for 12 months after hisresignation.

This decision is a helpful one for companieswhose former directors or senior employeesset up new business in competition withthem in four main aspects:

1. It adds two matters to the list ofrelevant principles to be applied by acourt in cases where a company seeksto restrain the activities of a formerdirector or senior manager in theabsence of restrictive covenants cases(see Foster Bryant Surveying Limited vBryant [2007] 2 BCLC 239) namely:

(i) it is impermissible to copy or takedocuments belonging to the companywith a view to using them to competewith the company after therelationship has ended and

(ii) a director is obliged to alert thecompany to any nascent threat to itsbusiness, even if he is himself part ofthat threat;

2. It finds that the nature of the conductof a fellow employee which gives rise toa duty to report on the part of thecompany director need not itself besuch as would amount to a breach ofthat employee’s duty of fidelity;

3. It provides guidance as to exactlywhen, and how, a director crosses theline into impermissible activity whilstpreparing to compete with his formeremployer/company - for example,when the possibility of contracts withthe new company was discussed withthe old company’s customers; and

4. It shows the Court imposing aSpringboard Injunction of as long asone year despite the absence of anysuch restrictive covenants in theexpress terms of employment of thatformer director or senior executive.

It is obvious then that, as regards to threatsto existing companies from elementswithin eventually looking to establishthemselves as competitors, the law is noslouch.

I S S U E 5 S E P T E M B E R 2 0 0 9

When a senior executive leaves yourcompany and takes with him valuableinformation and contacts, to help him in anew and competing business, there is notime to waste if you want to get a“springboard injunction” to prevent thatperson and his new business unfairlytaking advantage of information andcontacts belonging to the company.

Restrictive covenants and confidentialityprovisions in a contract of service oremployment are the first line of defencefor any prudent employer. But if it is clearthat the person leaving was actually a“fiduciary” occupying a senior positionsuch as a director (whether formallyappointed to the Board or not) then anemployer may rely on a whole new series ofoptions to protect company interests, notjust against the leaving executiveoccupying a fiduciary position as regardsthe company, but also against anyoneknowingly assisting him.

Where the “fiduciary” has either startedsetting up his new business before leaving

the company or has taken with him aproject or opportunity that he acquiredand incubated whilst working with thecompany, the courts will bend overbackwards to restrain the fiduciary from taking advantage of theinformation/business opportunity that hetook with him. The recent UK decision inthe case of Attwood v Woodward belowshows that the courts continue to take ahard line against “fiduciaries” that cross theline in these circumstances, somethingwhich, sadly, is very common.

The recent Judgment in G AttwoodHoldings Limited and Another v GordonWoodward and Others [2009] EWHC1083 (Ch) can be summarized as follows:

W, a former director of G, a companysupplying technical personnel to the USGovernment, took steps to set up acompeting company and took otherpreparatory steps to promote his newbusiness whilst still a director of G. W then left and took a number ofconfidential documents with him. W was

The Alternative InvestmentFund Directive and implicationsfor Non-EU fundsMuch has been published on the newlyproposed Alternative Investment FundDirective (‘AIFM’) which if it materialisesin its proposed form would affect all fundmanagers in Europe who manage or marketa fund which is not regulated in Europe as suitable for retail sales (effectively, anynon-UCITS fund). This would include notonly funds in their purest form, but anyarrangement that can be characterised as a‘collective investment undertaking’ that iseither managed in Europe or is seekinginvestors in Europe.

The burdens of the AIFM are weighty andinclude among other things, rules relatingto suitable qualification, risk management,liquidity management, the management ofconflicts, and prescriptive disclosure topotential investors while the benefit on theflip side would be easier marketing toprofessional investors (as defined byMiFID) but this is of little comfort to mostmanagers.

The Commission’s justification for thedirective is the management of risk arisingfrom Alternative Investment Funds (AIF’s)

based on recent market events and toaddress issues raised in previousconsultations. This seems strange given thatthe detailed analysis of these same events(such as the Larosiere report, the TurnerReview and the work produced from theG20 summit) has laid no blame for marketevents on hedge funds or other private poolsof capital involved in the financial markets.It is unclear why all non-UCITS fundsshould be affected by the directive in such abroad way and although the Commissionhas maintained that this is not a one size fitsall approach it is difficult to envisage ascenario where those AIF’s which presentvery limited risks (other than to theinvestors in them) would not beunintentionally ‘caught’ by the Directive.

The potential effects of the Directive arealready being felt in the industry withseveral of London’s largest hedge fundspoised to launch onshore funds in order toavoid any uncertainty. The Financial Timesrecently reported that Cheyne Capital, the£3.6bn hedge fund manager, was set tobecome the latest high profile Londonname to launch a UCITS III fund. Thiswould allow the fund to operate within theexisting European regulatory framework foran investment vehicle that can be marketed

AIFM DIRECTIVE IMPLICATIONS:by Joey Garcia

across the EU, but this might not be anoption for most smaller managers currentlyoperating within the EU who will face adifferent set of implications and potentialrestrictions.

Marketing Non-European Fundsin EuropeThe classic scenario might be of a smallermanager managing a Cayman Island hedgefund, or a Jersey limited partnershipproperty fund (Non-EU). If the Directivewere to come into force in 2011 asproposed, rules on non-European fundsand non-European managers would comeinto effect three years later in 2014. Untilthen, existing rules will continue to apply,for example, marketing on the basis of theprivate placement regime (if one exists) inthe relevant country where the fund is beingmarketed. However, there is also the clearpossibility that some European countriescould restrict their private placementregimes in the meantime which could resultin managers finding it even more difficult tomarket offshore funds in Europe.

After 2014 the Directive (Article 35)provides clear limitations on thedistribution of Non-EU funds. No funddomiciled outside of Europe can bemarketed to any professional investor unlessthe country in which that fund is domiciledhas signed an agreement with the relevantmember state in which the marketing willtake place. This agreement must complywith the standards set in Article 26 of theOECD Model Tax Convention and ensureeffective exchange of information in taxmatters. This is a significant burden andultimately, European-domiciled funds, suchas Gibraltar funds, could be placed at asignificant advantage to their offshorecounterparts.

Furthermore, Non-EU managers will notbe able to rely on the private placementregime and will also need to be authorisedbut this deals with a separate issue.

Gibraltar is a member of the EuropeanUnion by virtue of Article 229(4) of the Treaty establishing the EuropeanEconomic Community. All EU Directivesand Regulations are fully transposed intoGibraltar law. For further information onhow your fund or business may be affectedby the AIFM, or on re-domiciliationprocedures, contact Joey Garcia -joey.garcia@isolas.gi.

The OECD’s Secretary General, AngelGurria, is, by all accounts, having a prettygood run of form recently. In the last fewdays he’s had the opportunity of revealing tothe financial world at large that the majoreconomies of the world excluding, notsurprisingly, the UK, are now on the road to recovery. As common sense no doubtdictates he did encourage governments to continue to take measures to stimulatetheir economies to minimise risingunemployment and other ill-effects of thecrisis/turnaround.

I say ‘not surprisingly’ in respect of thedowngrading of the UK’s status in theOECD’s survey because throughout thecrisis, if there’s been any bad economic newscoming out of Europe, British Ministersand spokespersons have typically fallen overthemselves to claim, later the same day, that however bad the European news maybe, the UK is always worse off by asignificant margin. Some might argue that this was part a textbook exercise in economic/political machiavellianismdesigned to maintain the pound’s weaknessand, therefore, the domestic export andtourism sectors. Others might just thinkthat this was a Government fast losingcontrol of its economy and being overlyfrank about it!

To aid him in his smugness, however, theOECD’s Secretary General can also claim,

in respect of the OECD’s objective oferadicating banking secrecy laws and taxevasion, that ‘we have delivered more in 10months than we achieved in 10 years.’Spurred on by German and US authorities’attacks on Liechtenstein and Switzerland,the OECD has seen a dramatic increase inthe number of model tax informationagreements signed between membercountries and so-called ‘tax havens’currently on the grey list of countriescommitted to achieving the standard.Whilst Mr Gurria heralds ‘the end of an eraof banking secrecy as a shield for tax havens’others aren’t quite as impressed.

Anthony Travers, Chairman of the CaymanIslands Financial Services Associationbelieves that the news that the OECD’snewly announced global monitoring andpeer review process, to ensure that membersimplement their commitments, will onlyreveal the inconvenient truth that theoffshore centres targeted through thisprocess were not, in fact, the rogue, moneylaundering and tax evading capitals of theworld the OECD indicated they were.Travers believes that this process will revealthe ‘not so hidden agenda’ of the OECD,namely the achievement of a one size fits all,global tax system and, furthermore, lead toan eventual dwindling of support for itswork as this objective becomes clearer.Travers further believes that the OECD will

find itself embarrassingly short of teethwhen the time comes to target Beijing andother centres paying not even lip service tothe international pressure in respect of theexchange of tax information.

Whatever one’s views on the OECD’sobjectives, compliance is key if the levelplaying field is to be achieved. Switzerlandhas recently entered into an agreement withthe UK and Gibraltar continues apace withits efforts to comply. As at the date ofwriting, Gibraltar has entered into sevenagreements with various countries, just fiveshort of the magic number twelve,following which, Gibraltar will be placed onthe white list of jurisdictions by the OECD.It is expected, following the most recentsigning with Denmark, that the remainingfive agreements will follow briefly withSweden, Finland and the other Nordiceconomies.

We are well on our way and will shortlyachieve the objective of being white-listedby the OECD, a status which will vindicateall the work done by the local industry incomplying with European and worldwidedirectives in relation to money launderingand tax evasion. Gibraltar’s continuedpresence on the white list is, by virtue of thehard work put in by all those involved andthe dedication to enjoying business on alevel international playing field, virtuallyguaranteed.

ON THE WHITE ROAD?by Selwyn Figueras

SPRINGBOARD INJUNCTIONSFOR BAD LEAVERSby Steven Caetano

Polo Tournament. Our hospitality suite waswell attended on all match days and theatmosphere proved warm, friendly and ascasual as we had hoped. This being theSeptember edition of the Communique,we will at the time of going to print haveenjoyed our annual Golf Tournament at La Reserva in Sotogrande where a total ofaround fifty players will have tried their handon a hot September’s afternoon. On onefinal, social note, the Cape St Vincent(Portugal) to Gibraltar Charity Cycle is nowliterally around the corner and finalpreparations are now under way. As you maybe aware, we are looking to raise funds for anumber of charities in Gibraltar and wouldbe grateful for any support you can offer inthis regard.

Finally, I have the great pleasure ofwelcoming Karl Tonna onboard, a lawyer

As you may be aware, we are looking to raisefunds for a number of charities in Gibraltarand would be grateful for any support you

can offer in this regard.

Welcome to our September edition of theCommunique. In this edition a variety ofsubjects of importance have been covered byour lawyers: Selwyn Figueras explains howthe Gibraltar Government’s efforts aredriving the jurisdiction on course and onschedule for the placement of Gibraltar onthe OECD’s white list of companiescomplying with the internationally agreedtax standard. Steven Caetano covers theprinciples and use of injunctions in respectof executives starting up in similar businesseson their own in the absence of restraint oftrade clauses. The third and last item on theprofessional front is an explanation by JoeyGarcia of our funds team and the impact ofthe Alternative Investment Fund Managersdirective on the funds industry in both aglobal and local sense.

I write at the conclusion of what I hope willhave been a restful summer for most of theteam and what was certainly a busy socialcouple of months. During the month ofAugust we had the opportunity of spendingsome time in a casual/informal setting at theSanta Margarita Polo Club as we watchedthe teams vie for the silverware in the Annual

I S S U E 5 S E P T E M B E R 2 0 0 9I S S U E 5 S E P T E M B E R 2 0 0 9I S S U E 5 S E P T E M B E R 2 0 0 9

In this issuePage

1. Introduction

2. Springboard Injunctions

for Bad leavers

3. On the White Road

4. AIFM Directive Implications

5. History and Profile of the

Funds Team

6. ISOLAS welcome...

Regulated by the Gibraltar Financial Services Commission. Licence Numbers FSC00277B FSC00276B

www.gibraltarlawyers.com

www.gibraltarlawyers.com

Portland House Glacis Road PO Box 204 Gibraltar Tel +350 200 78363

joining our firm as an associate about whomyou can read on the back page and who I amcertain will prove to be a valuable addition tothe team here at ISOLAS as we continue todevelop and look for ways of providing theservice of which we are so proud.

CommuniquéIntroduction

By Christian Rocca

Gibraltar’s position as a rapidly growingjurisdiction for Funds has been wellrecognised and ISOLAS have been on thefront of this development. Our positionwithin the EU, and the advantage ofworking within a jurisdiction that is highly regulated, operating internationallyrecognised and EU standard anti-moneylaundering and Organisation for EconomicCo-operation and Development (‘OECD’)conventions, makes Gibraltar a veryattractive alternative funds jurisdictionwithin Europe.

The Experienced Investor Fund (EIF)regime was launched in 2005 and has seenmany other jurisdictions follow suit withsimilar styled products. The speed and ease of set up along with the degree offlexibility that the EIF allows makes it an excellent alternative/hedge fund/privateequity/property vehicle. EIF’s can also bestructured as protected cell companiesunder the Gibraltar Protected CellCompanies Act 2001. This allows for asingle corporate body, with an internal‘umbrella’ structure consisting of anynumber of subdivisions that allow for thelegal segregation of assets and liabilities intodifferent Cells allowing for multiplestrategies.

ISOLAS have advised private clients, familyoffices and an international base ofinvestment managers on the structuringand set up of Gibraltar based fundsolutions. We are regarded as one of theleading Fund teams in Gibraltar, offering afirst class and personal service while alsodeveloping synergies with our clients in theFunds sector. Our team is able to advise onall aspects of a fund set up and to assist intaking any project from concept through tolaunch and beyond as well as being able toact as a central reference point for allcounterparties to make the procedureseamless. ISOLAS have also advisedinternational firms on Gibraltar fundrelated issues, and on the promotion ofcollective investment schemes in Gibraltaras well as the effect of the newly proposedAlternative Investment Fund ManagerDirective.

Associated with

Karl was called to the Bar in 2002. He has

been an Associate in the Commercial and

Litigation Departments of a local law firm

and has wide-ranging experience on

different transactions, including corporate

restructures, acquisitions and general civil

and international funds litigation.

In addition to his legal training and

insurance qualifications, Karl has also had

four years industry experience as Managing

Director of a leading Gibraltar-based

Insurance Broker. The rise in personal

injury claims in the past decade has given

Karl a unique outlook of the real issues for

both claimants and defendant insurers. Karl

has also garnered firsthand experience of the

range of issues a local business may face and

is thus well placed to provide thorough yet

sensible advice. Karl is an active member of

The Round Table Gibraltar.

ISOLAS IS PROUD TOWELCOME... KARL TONNA

Up and coming eventsDate Event Location

October 2009 Gibraltar, London Day London

October 2009 ISOLAS Charity Cycle Portugal - Gibraltar

September/October 2009 Switzerland Seminars Week Switzerland

The rise in personal injury claims in the past decade has given Karl a unique outlook of the real issues for both claimants

and defendant insurers.

HISTORY AND PROFILE OFTHE FUNDS TEAMby Joey Garcia

Polo Tournament. Our hospitality suite waswell attended on all match days and theatmosphere proved warm, friendly and ascasual as we had hoped. This being theSeptember edition of the Communique,we will at the time of going to print haveenjoyed our annual Golf Tournament at La Reserva in Sotogrande where a total ofaround fifty players will have tried their handon a hot September’s afternoon. On onefinal, social note, the Cape St Vincent(Portugal) to Gibraltar Charity Cycle is nowliterally around the corner and finalpreparations are now under way. As you maybe aware, we are looking to raise funds for anumber of charities in Gibraltar and wouldbe grateful for any support you can offer inthis regard.

Finally, I have the great pleasure ofwelcoming Karl Tonna onboard, a lawyer

As you may be aware, we are looking to raisefunds for a number of charities in Gibraltarand would be grateful for any support you

can offer in this regard.

Welcome to our September edition of theCommunique. In this edition a variety ofsubjects of importance have been covered byour lawyers: Selwyn Figueras explains howthe Gibraltar Government’s efforts aredriving the jurisdiction on course and onschedule for the placement of Gibraltar onthe OECD’s white list of companiescomplying with the internationally agreedtax standard. Steven Caetano covers theprinciples and use of injunctions in respectof executives starting up in similar businesseson their own in the absence of restraint oftrade clauses. The third and last item on theprofessional front is an explanation by JoeyGarcia of our funds team and the impact ofthe Alternative Investment Fund Managersdirective on the funds industry in both aglobal and local sense.

I write at the conclusion of what I hope willhave been a restful summer for most of theteam and what was certainly a busy socialcouple of months. During the month ofAugust we had the opportunity of spendingsome time in a casual/informal setting at theSanta Margarita Polo Club as we watchedthe teams vie for the silverware in the Annual

I S S U E 5 S E P T E M B E R 2 0 0 9I S S U E 5 S E P T E M B E R 2 0 0 9I S S U E 5 S E P T E M B E R 2 0 0 9

In this issuePage

1. Introduction

2. Springboard Injunctions

for Bad leavers

3. On the White Road

4. AIFM Directive Implications

5. History and Profile of the

Funds Team

6. ISOLAS welcome...

Regulated by the Gibraltar Financial Services Commission. Licence Numbers FSC00277B FSC00276B

www.gibraltarlawyers.com

www.gibraltarlawyers.com

Portland House Glacis Road PO Box 204 Gibraltar Tel +350 200 78363

joining our firm as an associate about whomyou can read on the back page and who I amcertain will prove to be a valuable addition tothe team here at ISOLAS as we continue todevelop and look for ways of providing theservice of which we are so proud.

CommuniquéIntroduction

By Christian Rocca

Gibraltar’s position as a rapidly growingjurisdiction for Funds has been wellrecognised and ISOLAS have been on thefront of this development. Our positionwithin the EU, and the advantage ofworking within a jurisdiction that is highly regulated, operating internationallyrecognised and EU standard anti-moneylaundering and Organisation for EconomicCo-operation and Development (‘OECD’)conventions, makes Gibraltar a veryattractive alternative funds jurisdictionwithin Europe.

The Experienced Investor Fund (EIF)regime was launched in 2005 and has seenmany other jurisdictions follow suit withsimilar styled products. The speed and ease of set up along with the degree offlexibility that the EIF allows makes it an excellent alternative/hedge fund/privateequity/property vehicle. EIF’s can also bestructured as protected cell companiesunder the Gibraltar Protected CellCompanies Act 2001. This allows for asingle corporate body, with an internal‘umbrella’ structure consisting of anynumber of subdivisions that allow for thelegal segregation of assets and liabilities intodifferent Cells allowing for multiplestrategies.

ISOLAS have advised private clients, familyoffices and an international base ofinvestment managers on the structuringand set up of Gibraltar based fundsolutions. We are regarded as one of theleading Fund teams in Gibraltar, offering afirst class and personal service while alsodeveloping synergies with our clients in theFunds sector. Our team is able to advise onall aspects of a fund set up and to assist intaking any project from concept through tolaunch and beyond as well as being able toact as a central reference point for allcounterparties to make the procedureseamless. ISOLAS have also advisedinternational firms on Gibraltar fundrelated issues, and on the promotion ofcollective investment schemes in Gibraltaras well as the effect of the newly proposedAlternative Investment Fund ManagerDirective.

Associated with

Karl was called to the Bar in 2002. He has

been an Associate in the Commercial and

Litigation Departments of a local law firm

and has wide-ranging experience on

different transactions, including corporate

restructures, acquisitions and general civil

and international funds litigation.

In addition to his legal training and

insurance qualifications, Karl has also had

four years industry experience as Managing

Director of a leading Gibraltar-based

Insurance Broker. The rise in personal

injury claims in the past decade has given

Karl a unique outlook of the real issues for

both claimants and defendant insurers. Karl

has also garnered firsthand experience of the

range of issues a local business may face and

is thus well placed to provide thorough yet

sensible advice. Karl is an active member of

The Round Table Gibraltar.

ISOLAS IS PROUD TOWELCOME... KARL TONNA

Up and coming eventsDate Event Location

October 2009 Gibraltar, London Day London

October 2009 ISOLAS Charity Cycle Portugal - Gibraltar

September/October 2009 Switzerland Seminars Week Switzerland

The rise in personal injury claims in the past decade has given Karl a unique outlook of the real issues for both claimants

and defendant insurers.

HISTORY AND PROFILE OFTHE FUNDS TEAMby Joey Garcia