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Letter from America

12 months ago The American Chamber of Commerce (AmCham) set up store in Gibraltar. James Lasry, the organisation’s president, and Nicole Kayner, co-ordinator, offer their thoughts on progress to date.

It has been just over a year since the American Chamber of Commerce Gibraltar (AmCham) was established and we are thrilled to share our level of progress so far. Accredited by the U.S. Chamber of Commerce, AmCham Gibraltar is a business organization that was started last spring (2014) in order to develop business relationships between Gibraltar and U.S. companies and strengthen cultural ties. We have been hard at work doing just that.

It’s important to note just how extraordinary Gibraltar really is. We have a diverse, strong and vibrant economy, a highly skilled workforce and an ideal location at the intersection of Europe and Africa. But many U.S. companies don’t know about all we have to offer. Our goal at AmCham Gibraltar is to help spread the word and to equip Gibraltar companies with the connections and know-how they need to forge mutually beneficial business relationships with the United States.

Who we are…

AmCham Gibraltar is proud to already have over thirty local members. Representing a wide range of Gibraltar's industries from finance and maritime to law and insurance, our members are respected business leaders who represent the best of Gibraltar's potential. Our members are committed to promoting Gibraltar as an incredible place to do business and building lasting relationships with U.S. companies.

One Year On…

In order to help draw attention to all Gibraltar has to offer, we have already sponsored two Trade Missions. Our inaugural Trade Mission took place last May (2014) and was led by former U.S. Secretary of the Interior the Hon. Ken Salazar, who served during the first term of President Obama’s administration. Twenty-two companies attended, fifteen Memoranda of Understanding (MOUs) were signed and 170 business-to-business introductory meetings took place. It was a fantastic networking opportunity for our AmCham members and we were pleased to be joined by a number of Gibraltar dignitaries as well. The highlight was a Gala Dinner sponsored by Chief Minister Fabian Picardo in St Michael’s Cave.

In November 2014, AmCham Gibraltar led a Trade Mission to the U.S. with stops in Washington D.C. and New York City. There we celebrated the official accreditation of the Gibraltar-American Chamber of Commerce by the U.S. Chamber of Commerce. We are now officially the 117th international AmCham.

Current Happenings…

We are currently preparing for our upcoming Trade Mission to Gibraltar this June 21-23 at the newly refurbished The Rock Hotel. This next Trade Mission will focus on financial services, the maritime industry and e-commerce. The Trade Mission is open to all AmCham Gibraltar members and will feature exciting special guest speakers from the U.S. as well as Chief Minister Fabian Picardo and other local dignitaries. There will be a welcome reception on the evening of Sunday, June 21st. On Monday, the Trade Mission will feature presentations about Gibraltar’s unique position as a gateway to Europe and Africa and an overview of our key industries, favorable tax climate and fantastic business environment. Time will then be allotted for key meetings between the visiting U.S. companies and Gibraltar firms. We are looking forward to the opportunity to showcase Gibraltar’s dynamic economy and create new business prospects.

In preparation for the Trade Mission, AmCham held a “Perfecting Your Elevator Pitch” training session the morning of Friday, May 22nd.  It was led by respected business growth expert, Kevin Allen  -- who counts Google, Burberry, Smythson, Swedbank and Verizon as clients – and focused on providing guidance and insight into making a strong, business-generating pitch to potential clients. The event was a huge success with over 40 people participating. Attendees were coached in how to tailor their approach to fit the client’s needs and how to project a confident, knowledgeable image. Feedback was overwhelmingly enthusiastic and AmCham Gibraltar plans to continue to offer these types of training opportunities in the future. We knew the event was a success because during the entire two hour presentation, not one person looked at his/her phone!

Going Forward…

After last year’s Trade Missions we heard over and over again from U.S. companies about what a remarkable place Gibraltar is and that they were so pleased to have the chance to discover the wealth of opportunities here. Our goal at AmCham Gibraltar is to continue to provide these networking chances so that more and more companies “across the pond” decide to do business in Gibraltar.

It can be easy to take for granted all that we have here. Our team at AmCham Gibraltar is focused on making sure we are touting our unique strengths as effectively as possible so as to continue to grow our economy. As a result of last year’s Trade Mission, at least two deals are in progress, each of which has a value of over £50 million.

 James Lasry is the president of AmCham, and Nicole Kayner a co-ordinator.

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Gibraltar - impact of Brexit

Last week our editor took a general overview of some of the scenarios for Gibraltar if Britain were to leave the Euro. This week, as the atmosphere in the British Conservative Party becomes ever more toxic, Michael Castiel, partner at Hassans lawyers on the Rock, goes into more detail (this piece written before the Iain Duncan Smith resignation and subsequent arguments happened).

However unlikely it may prove, the prospect of Britain's withdrawal from the EU sends shivers through Gibraltar's financial services, gaming and tourism industries, which are at the core of Gibraltar’s economy. For, if Britain leaves the EU, Gibraltar goes too, and, should Brexit occur, it is Gibraltar’s relationship with the UK that as in the past, largely will shape Gibraltar's future.

Gibraltar joined the European Union in 1973 as part of the UK. While rights to freedom of services across borders of EU member states apply between Gibraltar and the rest of the EU, because Gibraltar is not a separate member state (and is in fact part of the UK Member State) those rights do not apply between Gibraltar and the UK. Instead a bilateral agreement, formalised almost two decades ago, gives Gibraltar's financial service companies the equivalent EU passporting rights into the UK. Accordingly and pursuant to such agreement, where EU rights in banking, insurance and other financial services are concerned, the UK treats Gibraltar as if it is a separate member state.

This reliance on the special relationship with the UK is recognised by both the Government and the Opposition in Gibraltar, and when the territory (which in this instance as part of the UK electorate) goes to the polls on 23 June, the vote to remain in the EU is likely to be overwhelming. This may have symbolic significance but realistically seems unlikely to influence the outcome. In actual terms, although some non-EU jurisdictions use Gibraltar and its EU passporting rights as a stepping stone into Europe, almost 80% of Gibraltar’s business dealings are with the UK.

But whether or not Britain maintains the 'special relationship' with Gibraltar, if Brexit becomes a reality, other factors will come into play, with the ever-present Spanish Government’s historic sovereignty claim over Gibraltar topping the list.

Recently Spain's caretaker Foreign Minister Jose Maria Margallo went on record that if the UK voted to leave the EU he would immediately 'raise with the UK the question of Gibraltar.' If this was to come about it could take one or more of several different forms, ranging from a complete closure of the border between Spain and Gibraltar, demanding that Gibraltar passport-holders obtain costly visas to visit or transit Spain, imposing more stringent border controls, or a frontier toll on motorists driving into or out of Gibraltar. The latter idea was in fact floated by the Spanish Government three years ago, but dropped when the EU Commission indicated that any such toll would contravene EU law.

Here, again, imponderables come into play, for much will depend on which political parties will form the next Spanish government. A Spanish government headed by the right wing PP party is likely to take a less accommodating attitude towards Gibraltar (the Foreign Minister having recently indicated that in case of Brexit the Spanish Government may opportunistically push once again for a joint sovereignty deal with the UK over Gibraltar) whereas a left of centre coalition will likely adopt a more pragmatic and cooperative relationship with Gibraltar in the event of EU exit.

The most significant changes to Gibraltar's post-Brexit operation as an international finance centre are likely to be in the sphere of tax, and while Gibraltar has always met its obligations in relation to the relevant EU rules and Directives, it has also been slightly uncomfortable with aspects of the EU's moves towards harmonisation of corporate taxes across member states.

Although it was formed as a free market alliance, since its inception fiscal matters have been at the root of the EU, but Gibraltar's 'special relationship' with Britain has allowed considerable latitude in relation to what taxes it imposes or those it doesn't. However, as is the case with other member states, Gibraltar has increasingly found in recent years its fiscal sovereignty eroded and its latitude on tax matters severely curtailed.

As in Britain, Gibraltar has benefitted from several EU Directives introduced to harmonise and support the freedom of establishment, particularly the Parent-Subsidiary Directive which prohibits withholding taxes on cross-border intra-group interest dividend and royalty payments made within the EU.

As a stepping stone for foreign direct investment, should Brexit come about EU subsidiaries could no longer rely on these Directives to allow tax-free dividend or interest payments to their holding companies based in Gibraltar. In the case of the UK, bilateral double tax treaties will no doubt mitigate the impact of the non-application of any tax related Directives. Gibraltar, however, is not currently a party to any bilateral double tax treaties. Accordingly, Gibraltar would either have to seek from the UK the extension of all or some of the UK’s bilateral tax treaties to Gibraltar (subject of course to the agreement by the relevant counterparties) or it would need to negotiate its own network of bilateral double tax treaties with a whole series of EU and non EU Member States. To say the least, neither of these options would be straightforward to implement at short notice and would need the wholehearted support of the British Government

Whilst Gibraltar’s economy is likely to be adversely affected should Brexit occur, there may be some potential benefits. An EU exit would result in fewer regulations and possibly may provide Gibraltar with greater exposure to emerging economies.

From a tax perspective, an EU exit would probably enable Gibraltar to introduce tax rules and incentives that are contrary to EU tax laws and would provide the Gibraltar Government more freedom to adopt competitive tax regimes that may be considered contrary to EU state aid rules. How possible or effective any such strategy would be is doubtful given the OECD driven anti-tax avoidance climate affecting all reputable jurisdictions whether within or outside the EU.

In this as well as other possible change much will hinge on any post-Brexit relationship with the UK - an issue which the Gibraltar Government addressed recently in a paper sent to Westminster's Foreign Affairs Committee. It stressed not only that 'EU membership has been an important factor in the development of Gibraltar’s economy' but also the importance of 'clarity as to the rights the British Government will protect and defend for Gibraltar in the context of its own negotiations.'