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Open for Business: The Gibraltar family office

Wealthy families are increasingly resorting to “family offices” to manage their activities. Isaac Levy and Stephen Noguera comment on the phenomenon.

Recent years have seen the world of private client legal work become more complex due to the ever increasing need for transparency and accountability, coupled with having to operate within, and comply with, stricter regulatory and taxation frameworks. Likewise, the management of trust and corporate structures is becoming increasingly onerous and demanding. Investments in general are also becoming more sophisticated, and individuals are consequently faced with having to place greater reliance on the expertise of specialists to manage their wealth.

It is against this background that family offices – private operations routinely dedicated to the strategic management of financial investments, trusts, legal affairs and philanthropic enterprises for wealthy families – have proliferated. Gibraltar has been no exception to these developments, and the jurisdiction offers a number of important advantages which make it an attractive location in which to base a family office.

The generational difficulties that wealth can present is just one of the more ephemeral and long-standing challenges to be tackled. Social awareness, the hunger to develop, innovate and persevere, are all traits which the older generation want to instil in the next. The effects of wealth on a younger generation that have been born into it can run counter to these values, resulting in a reluctance on the part of certain families, celebrities included, to have their accumulated wealth automatically included in the family inheritance pool. Intergenerational dynamics are thus key, and the family office is often used to ensure a smooth transfer of wealth and values across generations.

Although there is no one-size-fits-all family office structure that can be implemented across the board, the core features which are prevalent across many setups will often include enterprise/investment, governance and compliance, risk and security management, and philanthropy.


  1. Enterprise/investment

This represents the crux of the family office’s day-to-day activities. Office managers will in effect provide a range of investment management services: making decisions in respect of asset allocation (bonds, equities, private equity etc.); identify sectors and industries to invest in; provide feedback to the managing board in respect of the financial performance of the company; and very frequently, back the family members in other enterprises that are not necessarily within the remit of the family office.

Gibraltar is a thriving, modern and efficient European financial centre, compliant with all the latest international fiscal and administrative standards and with almost full employment. Gibraltar is part of the European Union, and any family office situated in the jurisdiction can accordingly benefit from the associated advantages. Significantly, however, Gibraltar is exempt from VAT, which has an important bearing on service provision costs, both locally and from within the EU, which is generally a significant expense incurred by family offices.

The jurisdiction also offers additional advantages. Gibraltar company law largely follows that of England and Wales, and the recently enacted Companies Act and Insolvency Act have done much to provide a consolidated and modern statutory regime. In addition, Gibraltar’s financial services regulator has developed a reputation for robust regulation, together with an efficient regulatory process.


  1. Governance and compliance


The family office is manned by a host of suitably qualified and experienced professionals, who are each allocated specific titles, roles and responsibilities. Lawyers are also regularly engaged, be it as private third party consultants or as in-house counsel. In the context of the family office, the lawyer’s role is thus not only to advise on the technical side of the law, but also to advise on a suitable organisational structure that assists and promotes the objectives of the family company.

Family members are not precluded from staffing the family office, although in many instances, family input comes at the board level of the family office, or at the family council level.

Monitoring how the family office runs has become fundamentally important in recent years. The corporate structure employed is thus paramount, with suitable management and control as well as a sufficiently substantive physical presence in the chosen jurisdiction. The existing fiscal and administrative infrastructure in Gibraltar both on the corporate and personal side is such that it allows for the Gibraltar-based family office to properly discharge its numerous functions without any detrimental effect on the structure.


  1. Risk and security management

Ultra-wealthy families ordinarily tend to shy away from publicity and the limelight. There are also additional physical security and confidentiality considerations to be weighed up. By its very nature, the Rock’s physical geographical situation, its stable socio-political and economic climate, and its friendly, family-oriented atmosphere are conducive to allowing families the privacy and safety to run their respective offices without undue concern for their wellbeing.


  1. Philanthropy

The family office is also very well placed to manage the family’s philanthropic efforts, not only in terms of evaluating philanthropic proposals the office may receive from third parties, but also administering their own charitable foundations or trusts. In the Gibraltar context, there is a local Charity Commissioner at the Supreme Court with whom Gibraltar charities are registered. The roles, functions and responsibilities of the local Charity Commissioner are similar to those of the Charity Commission for England and Wales.

Gibraltar’s unique geo-political status and fiscal and administrative infrastructure has to date, allowed the jurisdiction to flourish and to be at the forefront of trends in wealth management, preservation and succession planning. For reasons discussed in this piece, Gibraltar is well placed to accommodate the family office, and to this extent, the Gibraltar family office is open for business.

Isaac Levy and Stephen Noguera are lawyers at Hassans International Law Firm

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The disputed waters around Gibraltar: time for a judicial settlement?

 Incursions by Spanish state vessels into Gibraltar waters have increased in frequency during 2015 and, in the absence of an effective British naval deterrent in the area, the actions of the Spanish authorities are also becoming more brazen.

With Spanish elections due in December, the Partido Popular government has raised the stakes in the dispute over the waters around Gibraltar. Incursions by Spanish state vessels into Gibraltar waters have increased in frequency during 2015 and, in the absence of an effective British naval deterrent in the area, the actions of the Spanish authorities are also becoming more brazen.

In recent weeks the Foreign Office has protested at, amongst other things, attempts by a Spanish vessel to take soundings in Gibraltar waters ostensibly for research purposes, and a hot pursuit by air and sea of suspected smugglers within metres of the Gibraltar coast, during which the Spanish authorities failed to notify – let alone cooperate with – their Gibraltarian counterparts. One of the most troubling incidents of the year took place on 22 August. A Spanish customs vessel operating in Gibraltar waters attempted to board a local pleasure boat. When the two occupants of the boat tried to evade capture, the Spanish crew fired live rounds in their direction. The pleasure boat was then apprehended by a vessel of the Royal Gibraltar Police and towed ashore. The boat and its occupants were searched and no sign of illicit activity was found. Initially, the Spanish authorities denied that shots had been fired, but they later admitted firing shots ‘into the water’ after video footage of the incident emerged.   

Such incidents invariably draw a diplomatic protest from Britain. The Foreign Office recites the mantra that the incursions are a violation of British sovereignty but not a threat to it. The more serious transgressions sometimes result in the Spanish ambassador to London being summoned to Whitehall for a dressing-down. The recent shooting incident was something of a game-changer. Lives had been needlessly placed at risk, and this prompted a more robust response from Britain. Diplomatic exchanges reportedly took place behind the scenes at the ‘highest level’. This resulted in an agreement, pursuant to which Britain, Spain and Gibraltar, in separate written communiqués, declared their intention to ‘step up’ law enforcement cooperation in the waters around Gibraltar. In reality, Spanish and Gibraltarian law enforcement agencies usually co-operate quite effectively at sea. Operational co-operation only tends to break down when the sovereignty dispute heats up. The crux of the problem is certainly not operational, and while the underlying sovereignty dispute persists, the latest agreement is unlikely to achieve much.

Unfortunately, the questions of sovereignty and jurisdiction over the waters around Gibraltar are as contested today as they have ever been. Whenever Britain issues its standard protest that Spanish incursions are a violation of British sovereignty, but not a threat to it, this is met by an equally formulaic rebuttal from Spain. The waters around Gibraltar, according to Spain, are Spanish. Gibraltar is not entitled to any territorial waters because, other than the internal waters of the port, no waters were expressly ceded to Britain by Spain under the Treaty of Utrecht in 1713.

The Spanish Foreign Minister said recently that Spanish state vessels would continue to operate in the waters that Britain and Gibraltar call ‘British Gibraltar Territorial Waters’. He nevertheless acknowledged that there was a difference of legal opinion between the British and Spanish authorities. He explained that when Spain acceded to the 1982 UN Convention for the Law of the Sea (UNCLOS) it made a declaration to the effect that it did not accept that Gibraltar was entitled to any territorial waters.

In legal terms, disputes between states over maritime space can be notoriously complex. Expert hydrographers are often enlisted and equitable principles applied in order to determine where a maritime boundary should lie, or what the extent of a state’s continental shelf should be. The question of whether Gibraltar is legally entitled to a band of territorial waters is different. For a start, it is a zero-sum game. There is no room for a negotiated compromise – either Gibraltar has territorial waters or it does not. Secondly, in legal terms at least, the dispute is as simple as they come.

One of the cardinal principles of the international law of the sea is that coastal territories are automatically entitled to a band of territorial sea. International courts and tribunals have repeatedly affirmed this principle. When Spain ceded Gibraltar to Britain in 1713, the extent of a coastal state’s jurisdiction depended on the reach of its cannons. The so-called ‘cannon-shot rule’ evolved over the centuries into a principle of international law, permitting states to assert three, and later up to twelve, nautical miles of territorial sea. The principle is today enshrined in Article 2 of UNCLOS, which states that ‘the sovereignty of a coastal State extends, beyond its land territory and internal waters … to an adjacent belt of sea, described as the territorial sea’. Relying on this principle, Britain currently asserts three nautical miles of territorial sea around Gibraltar. The declarations made by Spain when signing and ratifying UNCLOS, to the effect that it does not accept that Gibraltar is entitled to a territorial sea, change nothing. Article 310 of UNCLOS provides that such declarations cannot ‘purport to exclude or to modify the legal effect of the provisions of this Convention’.

The Treaty of Utrecht does not define the extent of the ‘Port’ that was ceded, nor the extent of Gibraltar’s maritime jurisdiction more generally, but this is not unusual for a treaty of that period. The modern Spanish confection that jurisdiction over the waters was somehow excluded from the cession would have seemed ridiculous to those who sat around the negotiating table in Utrecht in 1713. Gibraltar and its surrounding sea have always been inseparably linked. The Rock’s strategic value stems precisely from its usefulness as a location from which to project maritime power. Britain has done this to good effect in the waters around Gibraltar for the past three centuries, with only occasional Spanish interference.

For most of the last 300 years, Britain exercised jurisdiction and control over a larger section of the waters around Gibraltar than it does today. Some of the waters under British control, in front of the Rock’s northern defences, washed onto several hundred metres of Spain’s south-eastern coastline. This particular stretch of water – and ‘dry coast’ – was the traditional focus of the Anglo-Spanish maritime dispute. Spain was understandably aggrieved that the waters off a section of its coastline were under the jurisdiction and control of another state, and made frequent complaints to Britain. In one piece of diplomatic correspondence, from 1878, Spain suggested that the waters should be divided ‘in a convenient manner and in such a way that no part of the coast should remain without jurisdictional waters’.

By the mid 20th century, the so-called ‘equidistance principle’ had become the internationally accepted standard, requiring adjacent territories to divide their territorial seas along a median line, in the absence of special circumstances or an agreement to the contrary. Britain maintained that it had special historic rights over the contested patch of waters adjoining the Spanish coast, but it eventually retreated to the median line in the late 1960s, at around the time that Franco’s government closed Spain’s border with Gibraltar. Spain was thus spared the humiliation of having a British anchorage directly off its coastline and, perhaps sensing that Britain was on the back foot, the Franco government decided to go on the offensive. Spain’s own ‘dry coast doctrine’ – the argument that in 1713 it ceded the town, castle, fortifications and port of Gibraltar, but not a jot of water around it – became the standard and regularly asserted Spanish position. The argument is practically absurd and legally indefensible.

The Spanish Foreign Ministry knows this. It employs a highly qualified team of legal advisors who are experts in international law. José Antonio de Yturriaga, a jurist who was formerly Spanish ambassador to Ireland, Iraq and Russia, and who for a time headed Spain’s special mission in Law of the Sea matters, has stated publicly that there is no legal basis to the claim that Gibraltar has no territorial waters. The current Spanish Foreign Minister – also legally qualified, and perhaps not expecting that his comments would be reported – acknowledged at a university seminar that the Spanish position regarding the waters around Gibraltar would be difficult to defend in court (while expressing greater confidence in the Spanish claim to Gibraltar’s disputed isthmus and its adjoining waters). In order for this issue to be settled in the International Court of Justice or an arbitral tribunal, Spain and Britain would both have to agree to submit to the proceedings. In 1966, Spain refused a proposal from Britain to settle the question of Gibraltar’s territorial waters, as well as other matters relating to the sovereignty of Gibraltar, in the International Court of Justice.

It is clear that Spain has no appetite for resolving the dispute over Gibraltar’s waters by judicial means. This is a shame, as an international court or tribunal would be the ideal forum in which to draw a line under this issue in a peaceful manner. The proceedings need not be complicated. Spain and Britain could agree to ask the court for an answer to a discrete legal question: ‘is Gibraltar entitled to a band of territorial waters under international law?’ In the absence of an authoritative judicial intervention, the waters around Gibraltar are likely to remain a flashpoint in the broader dispute over Gibraltar’s sovereignty.  

Dr A J Trinidad is a Gibraltarian barrister and a tutor at the University of Cambridge.