The growing popularity of Arbitration in the banking and finance sector and why this trend will continue
Last month the London Court of International Arbitration (LCIA) released its 2018 annual casework report. This showed a notable increase in the proportion of cases relating to banking and finance: up by 5%, from 24% to 29%. Although this can partly be attributed to the continuing growth in the popularity of arbitration, there are other specific reasons why this is happening in the banking and finance sector.
First, with the continued geographical widening of the financial markets, there has been an increase in both the number of financial products available generally, and also in the demand for those products from emerging markets. Taken together, the need for more certain prospects of both justice and enforceability across national borders should things go wrong become correspondingly greater and as such more arbitration clauses are being written into the underlying contracts. For transactions involving emerging markets particularly, an arbitration clause is often favoured where a party or asset is in a jurisdiction where the courts are perceived as less reliable and/or no agreement can be reached on the choice of national court.
Second, the increasing complexity of financial products, and therefore the corresponding increasing complexity of the cases involving them, makes arbitration a popular choice. The disputes that are arising require a deep understanding of both the financial products and the financial markets involved. There is concern that some national courts may have an insufficient level of judicial experience and proficiency for such disputes, especially as they can affect global markets (i.e. regarding industry standard contracts such as the ISDA Master Agreement). Arbitration allows parties to appoint arbitrators with the relevant experience for the matter in question, sidestepping this concern.
Third, political developments mean that the advantages of international arbitration have a greater premium compared to the court-based alternative. For example, uncertainties surrounding Brexit have been cited as a reason why international arbitration is increasingly being chosen by the London based financial services sector as their favoured dispute resolution mechanism. Currently, the UK is a member of the EU and subject to the EU Judgments Regulation 1215/2012. The EU Judgments Regulation provides a framework for the recognition of court judgments issued in one EU member state (i.e. the UK), in the courts of another member state. However, with the UK’s impending exit from the EU there is perceived uncertainty over the mechanisms by which the continued reciprocal recognition of court judgments between the UK and the EU will continue. Arbitration avoids that problem, relying instead on the New York Convention 1958 for both the recognition and enforceability of awards – there is still no convention that provides for the reciprocal recognition and enforcement of court judgments with anything remotely close to the widespread acceptance of the New York Convention for arbitral awards.
Due to the increasingly globalised world in which we live, where there is political and economic uncertainty not only in emerging markets but also in well-established financial centres like London, it is likely that the LCIA’s 2019 annual casework report will show when it is released next year another uptick in the proportion of cases from the banking and finance sector.
JHA is a specialist dispute resolution firm, with a track-record of advising clients from the banking and finance sector, as well as many other sectors. Our experts have led on cases under a variety of different institutional rules including the LCIA, ICC and ICSID Rules, in many different seats and subject to various governing laws.
Increased Investment in Personal Tax Compliance in the UK (Published in Thought Leaders 4 Private Client)
Advances in technology and increased international fiscal co-operation have made global personal tax compliance initiatives pop up in abundance in recent years. To compound the issue, the Russian invasion of Ukraine and the corresponding economic fallout prompted domestic governments to increase transparency in relation to investments held by wealthy foreign individuals (with a focus on oligarchs).
In the UK, in the context of the cost-of-living crisis, public opinion certainly seems to be in favour of increased accountability for high-net-worth individuals (eg, on 9 October 2022, 63% of Britons surveyed thought that “the rich are not paying enough and their taxes should be increased”).1
HMRC is one of the most sophisticated tax collection authorities in the world and the department is making significant investments in technology in the field of compliance work; they are well placed to take advantage of new international efforts to increase tax compliance, particularly considering the already extensive network of 130 bilateral tax treaties in the UK (the largest in the world).2 The UK was also a founding member of the OECD’s Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC) forum.
This article discusses the main developments in support of the increased focus on international transparency and personal tax compliance in the UK. There are other international fiscal initiatives, particularly in the field of corporate taxation, but such initiatives are beyond the scope of this article.
It should be noted that a somewhat piecemeal approach, with constant tinkering makes compliance difficult for the taxpayer and is often criticised for lacking the certainty that a stable tax system needs to thrive.
This article was first published with ThoughtLeaders4 Private Client Magazine
Tax-Related Measures in the Autumn Statement 2022
On 17 November 2022, the Rt Hon Jeremy Hunt MP, the Chancellor of the Exchequer, unveiled the contents of the Autumn Budget 2022. This comes after the International Monetary Fund (IMF) published its world economic forecast on 11 October 2022. The IMF expects the British economy to grow 3.6% in 2022 and 0.3% in 2023. Other major developed economies are also expected to stagnate next year, namely Spain (1.2%), the US (1.0%), France (0.7%), Italy (-0.2%) and Germany (-0.3%).
This note focuses on tax measures included as part of that statement.
Offshore Structures and Onward Gifts
The so-called “onward gift” tax anti-avoidance rules were introduced by the Finance Act 2018 to complement the changes brought in the previous year aimed at restricting the UK tax privileges afforded to non-UK domiciled individuals. The rules were designed to close some perceived loopholes in relation to the taxation of non-UK resident structures (including but not limited to non-UK trusts). With effect from 6 April 2018, it would no longer be possible for an individual to receive a gift without questioning its providence, particularly where family trusts are involved.
The rules were designed to prevent non-UK structures from using non-chargeable beneficiaries as conduits through which to pass payments in order to avoid tax charges. Gone are the days of “washing out” any trust gains that could be matched to offshore income or gains by prefacing a payment to a UK-resident taxable beneficiary with a non-taxable primary payment to a non-UK resident beneficiary.
“It is notoriously challenging to prove a negative (especially to HMRC) and even more tricky where the taxpayer must speak to someone’s intention other than their own.”
Note that the new rules will apply where funds are received from non-UK resident structures before 6 April 2018 to the extent that they are subsequently gifted after that date.
Increased Investment in Personal Tax Compliance in the UK
Changes in public opinion, advances in technology and increased international fiscal co-operation have made global personal tax compliance initiatives pop up in abundance in recent years. In addition, the Russian invasion of Ukraine and the corresponding economic fallout have prompted governments to increase transparency in relation to investments by wealthy foreign individuals in their countries.
The UK’s HMRC is one of the most sophisticated tax collection authorities in the world and the department is making significant investments in technology in the field of compliance work.
It should therefore be well placed to take advantage of new international efforts to increase tax compliance, particularly against the backdrop of the already extensive network of bilateral tax treaties in the UK, and not forgetting that the UK was a founding member of the OECD’s Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC) forum.
This article discusses the main developments in support of the increased focus on international transparency and tax compliance in the UK. There are other international fiscal initiatives, particularly in the field of corporate taxation, but such initiatives are beyond the scope of this article.
Case note: Lynton Exports (Alsager) Ltd v Revenue and Customs Commissioners  UKFTT 00224 (TC)
As HMRC continue to apply the Kittel principle to increasing numbers of industries and businesses, taxpayers need to be vigilant about evidential requirements that HMRC must fulfil in order to discharge their burden of proof. Read JHA’s latest insight into the First-tier Tribunal’s decision in Lynton Exports (Alsager) Ltd v Revenue and Customs Commissioners  UKFTT 00224 (TC).
If you require any further information about the Kittel, Mecsek, and Ablessio principles, or any other allegations by HMRC of fraud or fraudulent abuse, please contact Iain MacWhannell (firstname.lastname@example.org).