Category: Offshore Centers

The future of investment dispute settlement

The original article was published in Family Office Magazine and can be found here.

Entrepreneurs engaging in international investments face several issues when they are accused of a breach of contract. When the investment agreement does not provide solid provisions for dispute settlement, endless legal discussions and expensive court cases in unfamiliar jurisdictions can be the result. This article provides simple solutions for both investor and beneficiary to avoid such issues. 

The solution to avoid endless legal battles is to insert an arbitration clause in the investment agreement (out of court legislation). Arbitration has numerous advantages.

  1. Unlike in court, parties can select an arbitrator with an appropriate degree of practical experience. For example, a Court of Arbitration has a list of arbitrators who are experts in the field of digital commerce.
  2. Arbitration is faster than litigation in court, and a time limit can be placed on the length of the process.
  3. Arbitration is cheaper and more flexible, more commercial and less formal than court.
  4. Unlike court rulings, arbitration proceedings and arbitral awards are confidential.
  5. Unlike in court, there are very limited avenues for appeal of an arbitral award, which limits the duration of the dispute and any associated liability.
  6. Due to the provisions of the New York Convention 1958, arbitral awards are far easier to enforce in other nations than court judgments.

From an international perspective, there are several courts of arbitration that offer an effective way to solve investment disputes. Below are examples (in alphabetical order).

Astana International Financial Court (AIFC Court)

The AIFC Court in Kazakhstan provides a common law court system that operates to the highest international standards to resolve civil and commercial disputes in the Astana International Financial Centre.  It adjudicates exclusively all claims arising out of the AIFC and its operations and other claims in which all parties to the dispute agree in writing to the jurisdiction of the AIFC Court.  

The AIFC Court has its own court of final appeal, its own procedural rules, and a special fast track for small claims. Its Chief Justice and judges are among the most experienced and distinguished judges from the common law world with global reputations for independence, impartiality, integrity, unconditional application of the rule of law, and incorruptibility. The judges, procedures, practices and standards at the AIFC Court will be familiar to businesses currently operating in major financial centres around the world.

Website: http://aifc-court.kz

Dubai International Financial Courts (DIFC Courts)

The laws establishing the DIFC Courts were designed to ensure the highest international standards of legal procedure, thus ensuring that the DIFC Courts provide the certainty, flexibility and efficiency expected by the global institutions operating in, with and from Dubai and the UAE. The laws enacted provide for a court system capable of resolving all civil and commercial disputes, ranging from sophisticated, international financial transactions to debt collection and employment disputes.

The DIFC Courts deal exclusively with all cases and claims arising out of the DIFC and its operations and any other claims where all parties agree in writing to use the DIFC Courts. The DIFC Courts carry out their functions in an independent manner, in accordance with the provisions of the DIFC laws and regulations.

Website: https://www.difccourts.ae

Court of Arbitration of the European Chamber of Digital Commerce (ECDC Court)

As an activity of its parent organization, the Swiss Chamber of Commerce in The Netherlands, founded in 1933, the Court of Arbitration of the European Chamber of Digital Commerce plays a crucial role in today’s digital world. Issues specific to digital technology include fintech, blockchain, cybersecurity, digital currencies, and intellectual property. Fairness has always been a business tradition observed in Europe, making the region so prominent as an arbitration location. The Court of Arbitration is conveniently located at Schiphol International Airport in The Netherlands.

The Court of Arbitration applies the UNCITRAL Arbitration Rules of the United Nations Commission on International Trade Law which meet international legal standards. The rules are concise and easy to understand, comply with current national and international legal developments, and are published in several languages.

Unless parties do not agree otherwise, the Court will apply the neutral UNIDROIT Principles of International Commercial Contracts to judge the dispute.

Website: https://europeanchamberofdigitalcommerce.com

London Court of International Arbitration (LCIA)

The LCIA is one of the world’s leading international institutions for commercial dispute resolution. The LCIA provides efficient, flexible and impartial administration of arbitration and other ADR proceedings, regardless of location, and under any system of law. The international nature of the LCIA’s services is reflected in the fact that typically over 80% of parties in pending LCIA cases are not of English nationality. 

The LCIA has access to the most eminent and experienced arbitrators, mediators and experts from many jurisdictions with the widest range of expertise. The LCIA’s dispute resolution services are available to all contracting parties without any membership requirements.

Website: https://www.lcia.org

Arbitration Institute of the Stockholm Chamber of Commerce (SCC)

The Arbitration Institute of the Stockholm Chamber of Commerce (SCC) has developed into one of the world’s leading forums for dispute resolution. The SCC was established in 1917 and is part of, but independent from, the Stockholm Chamber of Commerce. The SCC consists of a Board and a Secretariat and provides efficient dispute resolution services for both Swedish and international parties. The SCC was recognized in the 1970’s by the United States and the Soviet Union as a neutral centre for the resolution of East West trade disputes. Also China recognized the SCC as a forum for resolving international disputes around the same time. The SCC has since expanded its services in international commercial arbitration and emerged as one of the most important and frequently used arbitration institutions worldwide.

Website: https://sccinstitute.com

Conclusions

When you want to avoid legal dramas unfolding from an investment agreement, check the websites above and copy the relevant clause into the agreement before signing. Another option is to persuade the counterparty to allow an already arisen case be settled by one of these arbitration institutions.

About the author: Bob Juchter van Bergen Quast, LLM, FSS, is the President of the Court of Arbitration of the European Chamber of Digital Commerce. Juchter van Bergen Quast has the right of audience before the AIFC. He is Chief Executive Officer of the Swiss Chamber of Commerce in The Netherlands and the European Chamber of Digital Commerce.

DIFC Courts corporate video

The DIFC Courts are an independent English language common law judiciary, located in the United Arab Emirates (UAE) and based in the Dubai International Financial Centre (DIFC). This video briefly explains the work of the Courts, why leading international law firms in the region use their services and how their role encourages investment in Dubai. The DIFC Courts’ jurisdiction governs civil and commercial disputes nationally, regionally and worldwide. The DIFC Courts are part of the sovereign structure of the UAE Emirate of Dubai and more than 500 cases have been decided since the Courts began operations in 2006. Based on international best practice, the Courts are an important resource for international businessmen seeking to resolve commercial legal disputes, as well as the enforcement of national and cross-border judicial decisions. The DIFC Courts’ official Enforcement Guide was created in 2012 to provide details on the enforcement of DIFC Courts’ judgments in Dubai, the UAE, the Middle East and across the world. The document is available on our website www.difccourts.ae

See the corporate video here.

Intermediary commission percentages to raise money from investors

Investment banks and other consultants can plan and execute a fundraising campaign for startups and for companies in the growth phase. A reputable fundraising intermediary will likely speed up the process, reduce the legal risks, and negotiate a better deals. Most brokers will take a monthly retainer plus 5 percent to 15 percent of the investment. That may sound like a lot, but taking into account the time and risks, hiring an experienced expert can be very budget friendly.

Commission guidelines

The Lehman formula is a compensation formula developed by Lehman Brothers to determine the commission on investment banking or other business brokering services. Lehman Brothers developed the Lehman Formula, also known as the Lehman Scale Formula, in the 1970’s while raising capital for corporate clients.

The original structure of the Lehman Formula is a 5-4-3-2-1 ladder, as follows (accumulated amounts):

  • 5% of the first million EURO involved in the transaction
  • 4% of the second million
  • 3% of the third million
  • 2% of the fourth million
  • 1% of everything thereafter (above EUR 4 million)
Today, financial experts often seek some multiple of the original Lehman Formula, such as the double Lehman Formula (or the triple Lehman) (accumulated amounts):
  • 10% of the first million EURO involved in the transaction
  • 8% of the second million
  • 6% of the third million
  • 4% of the fourth million
  • 2% of everything thereafter (above EUR 4 million)
A more common variant used by mid-market M&A specialists and business brokers is the Double Percentage Lehman (“Modern Lehman”). Under this variation both the percentages and the scale are adjusted, instead of the percentages only. In addition, the percentage is held constant at 3% above EUR 8 million (accumulated amounts):
  • 10% of the first  million EURO
  • 9% of the second  million
  • 8% of the third million
  • 7% of the fourth million
  • 6% of the fifth million
  • 5% of the sixth million
  • 4% of the seventh million
  • 3% of everything thereafter (above EUR 7 million)

Source: Investopedia

How Chambers of Commerce Help Family Offices and Wealth Management Firms

A Chamber of Commerce has traditionally furthered the interests of businesses in a particular geography or market sector by way of representation, business services, and networking opportunities. Multilateral Chambers of Commerce can link the business environments of two or more countries, such as the Swiss Chamber of Commerce in The Netherlands.

International Chambers of Commerce, such as the European Chamber of Digital Commerce, aim to boost companies’ reputation and growth in a particular business sector, such as Digital Technology. Some are governmental, nonprofit, or private organisations.

This article, written by Bob Juchter van Bergen Quast and published in Family Office Magazine, presents some unique benefits that Chambers of Commerce can offer businesses in an independent, impartial manner.

Read the full article here

Functions of the AIFC Court

The AIFC is underpinned by an ambitious objective to become the financial hub for Central Asia, the Caucasus, Eurasian Economic Union, the Middle East, and Europe. The new financial centre is positioning itself to attract US$ 40 billion of investments by 2025 and ensure about 1 per cent growth in the carbonless GDP of Kazakhstan. Kazakhstan is the largest and most oil rich country in Central Asia.

Legal framework

The governing law of the AIFC is based on the Constitution of Kazakhstan and has a special legal regime, consisting of the AIFC Constitutional Law “On the Astana International Financial Centre” (the Law), its own independent judicial system and jurisdiction based on English common law and standards of leading international financial centres. The official language of the AIFC is English.

Like its neighbouring financial free zone the Dubai International Financial Centre (DIFC) (whose Courts were selected to advise the Kazakhstan Central Bank on establishing the AIFC’s commercial court and arbitration centre), the AIFC has its own specific legislation to address issues arising in the context of companies, contract, implied terms, obligations, damages and remedies, employment and partnership law.

It is reported by the Prime Minister of Kazakhstan that a total of 30 general-purpose AIFC Acts and 17 financial services regulation acts were developed and subsequently adopted by the relevant bodies of the AIFC. About 50 acts constitute the legislative framework of the AIFC.

Source: Norton Rose Fullbright

Official opening of the Court of Astana International Financial Center (AIFC)

The official opening of the Court of Astana International Financial Center (AIFC) took place in Nur-Sultan.

Since January last year, civil and commercial disputes have been solved in accordance with the best international practices and based on English law. The first case went to AIFC court in February of this year. The case is now available in English and Russian on the court’s website.
At similar international financial courts in Dubai and Qatar the first case was considered much later. “We managed to get enforced through the enforcement agency in Kazakhstan almost immediately and that is a world first, that never happens in new international financial centers,” said Registrar of AIFC Court, Christopher Campbell-Holt.
The AIFC Court is an independent institution as part of the financial center. According to the registrar of the Court, Christopher Campbell-Holt, the presence of this court in Kazakhstan is an additional factor to investment attractiveness of not only the country, but also the Eurasian region. “No one can tell our judges what to do. That is written in the constitution in law, court and arbitration center. It is very important to protect international investors, to show them, to give them perception,” Campbell-Holt also said. He added that the AIFC court and the International Arbitration Center will enable investors from all over the world to invest safely in Kazakhstan.

The importance of the Dubai International Financial Centre Courts

In his important and interesting paper “The Story of the Dubai International Financial Centre Courts: A Retrospective“, Mr. Jayanth K. Krishnan addresses the role of the Dubai International Financial Centre Courts (DIFC) in an international legal environment. The DIFCs are part of the sovereign structure of the Emirate of Dubai, within the UAE. Specifically, Dubai Law No.12 of 2004 (Dubai Law No.12) is the governing statute which originally established the DIFC Judicial Authority (including the two DIFC Courts, the Court of First Instance and the Court of Appeal). The Dubai International Financial Courts are an independent English language common law judiciary, based in the Dubai International Financial Centre (DIFC) with jurisdiction governing civil and commercial disputes nationally, regionally and worldwide. The Courts began operations in 2006. Originally, the jurisdiction of the DIFC Courts was limited to the geographical area of the DIFC. On 31 October 2011, the signing of Dubai Law No 16 allowed the DIFC Courts to hear any local or international cases and to resolve commercial disputes with the consent of all parties.

Krishnan researches the question regarding the succes of the DIFC:

Can Western-based, English-speaking, common law commercial courts operate successfully in an environment that are not their own — such as in the Middle East?

As Krishnan states, this question is not a simple thought experiment but rather the reality that has occurred since the mid-2000s in the Emirate of Dubai. Krishnan’s monograph recounts the history of how the Dubai International Financial Centre Courts emerged and developed. Drawing on extensive interviews with key stakeholders involved in the process, along with original documents as well as all of the Courts’ judgments, his narrative offers important lessons for those seeking to understand more fully the complex interactions among law, legal institutions and legal and political actors of today’s globalisation.

In my opinion the answer to his question is simply: “yes”, as I will explain below.

Most of the specificities of international arbitration result from its principal feature: party autonomy. Arbitration is essentially the result of contract and can be fashioned by parties in their own ways. Parties are thus free to select the place of arbitration, the language of the arbitration, the procedure governing the arbitration, the number and identity of arbitrators constituting the tribunal, the type of evidence they wish to allow and so on.

Apart from these advantages, in my opinion, the most important advantage is the relative ease with which an international arbitral award rendered in one country can be enforced in another country. This advantage is crucial, as the prevailing party in an international dispute frequently has to enforce the judgment or award rendered in its favor in another country in which the unsuccessful party has assets.

European – Gulf trade

The United Arab Emirates is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the NYC), which was adopted into UAE law by Federal Decree No. 43 of 2006. The NYC has been ratified by over 140 countries and, subject only to a very limited list of exceptions, requires signatory states to recognize arbitral awards rendered in other countries (see Section IV(A) (4)(b)).

There is no equivalent multilateral treaty in which countries agree to recognize and enforce each other’s judgments. The recognition of a judgment obtained in a foreign court will thus usually be subject to the domestic rules on the recognition of foreign judgments of the country in which recognition is sought. Generally, such rules allow for much more extensive review of the judgment than the New York Convention does with respect to foreign awards, and recognition and enforcement are more likely to be denied.

The six member countries of the Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE) represent an important region from a trade point of view and were the European Union’s fourth largest export market in 2018. The GCC countries have formed their own customs union and are working towards the goal of completing an internal market. There is an ongoing cooperation between the EU and GCC on trade and investment issues, macro-economic matters, climate change, energy and environment as well as research. Considering these trade volumes and the legal uncertainty of the applicability of national legislation, I consider the work of the DIFCs crucial from a business perspective in the context of trade between the Gulf region and Europe.

Recommendation

It is recommended that, before entering into an DIFC-arbitration agreement, a party checks whether at least one of the countries in which the other party has its assets, is a signatory to the convention. The DIFC is a premier choice regarding effective dispute regulation in European – Gulf trading.

Krishnan, Jayanth K., The Story of the Dubai International Financial Centre Courts: A Retrospective (November 8, 2018). The Story of the Dubai International Financial Centre Courts: A Retrospective; Monograph – Motivate Publishing Company (2018); Indiana Legal Studies Research Paper No. 404. Available at SSRN: https://ssrn.com/abstract=3280883

Becoming an International Offshore Centre – Steps to be taken by African nations

Introduction

A number of African countries have began the process of moving away from being a tax haven to being an international finance centre, offering financial products to take advantage of the increasing international mobility of capital and labour. Legislations are continually being written with this goal in mind. It is important to enact laws that are in line with internationally accepted standards of an international finance centre. This article describes the steps to be taken for an African nation to become a modern international financial centre. It describes the way Rwanda is developing towards becoming an international financial centre and describes the importance of blockchain technology in this respect.

Goals

The broad objectives of governments that are willing to play a role as a financial centre should include:

  • to encourage businesses to form companies and take advantage of all the benefits the corporate form provides;
  • to create a sound base for business law framework in Africa which engenders confidence;
  • to promote a system which ensures sound reporting mechanisms as well as accountability and transparency;
  • to provide a simple and sound system which will ensure access for all to the company law;
  • to create a well functioning Companies Registry to support the new legislation and provide users with a reliable, cost effective and time efficient service; and
  • to provide urban and rural communities with open and affordable access to the proposed company law.

Requirements

African countries should havein place a comprehensive legislative framework covering local and international companies incorporated. These legislations are designed not only for ease of incorporation but to also provide sufficient and non onerous compliance and ease of maintenance. Since their independence, numerous pieces of legislation have been enacted to compliment and update existing African laws inherited from Britain and France. Such legislations were required to enhance regulation which were lacking in specific areas of the industry. In addition, there should beimplemented a Prevention of Fraud Act to prevent the use of a country for fraud and illegitimate commercial purpose, to promote African countries as a legitimate tax havens and to encourage foreign investments in Africa.

Todo

In most cases, the entire list of actions below needs to be executed. In some cases one or more steps already have been taken.

  • A new Companies Act should be drafted, with input from the industry’s stakeholders. Such an act should eliminate the complex and cumbersome approach to formation and operation of companies. A well functioning Companies Registry to compliment thesenew laws should eventually provide affordable accessibility to the company law. Ultimately, a significant reduction in the overall cost of doing business in Africa should be the direct result.
  • With technical aid from the International Monetary Fund, anew International Banking Act should bepassed to regulate and supervise all offshore licensed banks. This ensures protection of depositor’s assets and sound banking practice and qualified management are in place.
  • A Mutual Assistance in Criminal Matters Act is needed. The aim is to regulate the provision by African nationsof international assistance in criminal matters in the prevention of Money Laundering of proceeds from criminal activities and terrorist funding.
  • A new Insurance Act is neededto provide for the licensing, regulation and supervision of insurance business. This is to promote the maintenance of efficient, fair, safe and stable insurance markets for the benefit and protection of policyholders.
  • Providers of company and trust services must apply for a license to offer such services and to be regulated with a system that sets out their legal obligations as license holders. This ultimately protects users of financial products and further enhances the reputation as a finance centre.
  • A new Companies Act should provide the courts with as much direction as possible to allow them to continue to make decisions on company law. The underlying objective of this is to reduce gaps and grey areas in the legal system.
  • The promise this proposed law is holding out is to ultimately remove the expensive, time consuming and protracted process of incorporating a company. The approach to this is to replace the traditional Memorandum and Articles of Association with a straight forward Application Form. The Application Form will contain the essential information required by the Registrar of Companies to satisfy himself prior to accepting or declining the application to incorporate a company.
  • Part of this shift is to introduce a set of “Model Rules”. This replaces the traditional Memorandum and Articles of Association which only servesthe legally trained. The Model Rules is essentially the internal governance rules which apply to the company and by which the company operates on a daily basis. Logically therefore, the Model Rules cover such things as appointments of directors, removal and powers of officers, meeting procedures, shareholders rights and so forth. In line with the Act’s objective to reduce costs and achieve simplicity, Model Rules will be attached as schedules to the required Act. There will be no need to get the Model Rules prepared professionally. And the Model Rules will provide both directors and shareholders with guidance for the management of the company. All types of company: private, public, single shareholder and community will be covered by the Model Rules which can be amended to meet specific needs of the company.

Case study: Rwanda

Rwanda will soon be able to handle cash transactions for regional and international financial service providers following an endorsement to establish Kigali International Financial Center (KIFC).The center will basically serve as a home for nationally or internationally significant financial service providers, enabling Rwanda to handle finances for others. They will include banks, investment managers, hedge-funds or stock exchanges.

Currently, Rwanda is on the move to have its financial systems especially the local stock exchange integrated within the regional dynamics. So far the Rwanda stock exchange (RSE) has announced plans to get automated by June 2018 – a step towards standards money handling procedures.

As one of the most interesting features, besides boosting the GDP, the establishment of a financial center means that Rwanda will be able to handle offshore accounts and attract investors to bank their money in Rwanda even when their projects are in other countries (1).

Blockchain technology

An extra and in my opinion, very important step to taken, is the implementation of Blockchain technology in the new (to be developed) African offshore banking sector. There are offshore jurisdictions that are working to attract Crypto banks. As an example, Puerto Rico just issued a license for a Cryptocurrency International Financial Entity (Puerto Rico’s version of a banking license). Dominica is also active in the issuance of quality offshore banking licenses and makes allowances for cryptocurrency. 

In addition, a number of open-sourced groups have been formed to increase the availability of blockchain technology for offshore banks. For example, the Enterprise Ethereum Alliance became the world’s largest open-source blockchain initiative on July 18, 2017. With members like MasterCard, Cisco and Scotiabank, I have high hopes for this team.

Conclusions

The end result in the proposed change to the incorporation process will make company formation much easier and cheaper. An executing agency, e.g. a Financial Services Commission (FSC), will no longer undertake extensive reviews of documents at the assessment stage since simple user-friendly forms will be used. An old fashion discretion of the Minister in the incorporation process will bereplaced by a new set of rules, as described above. This effectively will expedite the process and reduce the time involved in forming a company.

The future of African countries as International Finance Centres is bright. With changes in the regulatory regime, Africais poised to take advantage of the increasing mobility of capital and labour with the goal of capturing a slice of this market. With common sense regulation designed to avoid suffocating bureaucracy and onerous compliance, Africais poised to be a major international financial centre.

(1) KT Press, 6 December 2017, Rwanda To Establish International Financial Centre

Getting Haiti back in the saddle

Goal of the article

In 2017, Professor Michael E. Porter of Harvard Business School gave an important presentation about a strategy for restoring Haiti’s prosperity. A crucial part of his advice is to “make attracting foreign investment a core strategy“. In this article I will provide a suggestion to implement such a strategy.

The causes of Haiti’s poverty

Poverty in Haiti affects its people in many aspects of everyday life, including housing, nutrition, education, healthcare, infant mortality rates, as well as environment. Haiti has constantly been plagued with low levels of living conditions, with many Haitians moving into the capital city of Port-au-Prince in a bid to escape poverty in the more rural areas of the country. Levels of poverty in Haiti are generally regarded as among the most severe in the western hemisphere. This short article describes the origin of Haiti’s poverty and provides a solution to get the country back in the saddle.

French extortion for re-enslaving

An important cause of this poverty is the debt they ‘owed’ to France after fighting for their independence; France demanded a payment of 150 million francs ($20 billion dollars) as ‘compensation’ for the profit they lost when Haitians freed themselves from slavery on plantations producing coffee and sugar. Most of this was still being paid until 1947.

The United States stealing Haiti’s gold

On July 28, 1915, United States Marines landed in Haiti on the orders of President Woodrow Wilson, who feared that European interests might reduce American commercial and political influence in Haiti, and in the region surrounding the Panama Canal. The precipitating event was the assassination of the Haitian President, Jean Vilbrun Guillaume Sam, but United States interests in Haiti went back as far as the previous century: president Andrew Johnson wanted to annex both Haiti and the Dominican Republic. Twenty years later, Secretary of State James Blaine unsuccessfully tried to obtain Môle-Saint-Nicolas, a northern Haitian settlement, for a naval base. By 1915, the Americans were also afraid that an ongoing debt Haiti was forced to pay to France tied the country too closely to its former colonizer; Germany’s growing commercial interests in Haiti were another major concern. So one of the first actions carried out by the United States at the start of the occupation was to move Haiti’s financial reserves to the United States and then rewrite its Constitution to give foreigners land-owning rights.

During the nineteen years of the United States occupation, fifteen thousand Haitians were killed. Any resistance to the centralized, United States-installed puppet governments was crushed, and a gendarmerie—a combination of army and police, modelled after an occupation force—was created to replace the Marines after they left. Although United States troops officially pulled out of Haiti in 1934, the United States exerted some control over Haiti’s finances until 1947.

Stealing by the Duvalier family

From 1957 to 1986 Haiti was ruled by the corrupt and oppressive Duvalier family. Loans incurred during this period alone were estimated to account for approximately 40% of Haiti’s debt in 2000, before debt relief was granted. These funds were used to strengthen the Duvaliers’ control over Haiti and for various fraudulent schemes. Large amounts were simply stolen by the Duvaliers.

New loans

With the devastating effects of the early 2010 earthquake in Haiti there came renewed calls for a further debt cancellation from civil society groups. In light of the tragedy and new borrowing that lifted Haiti’s debts back to $1.25 billion, groups such as the Jubilee Debt Campaign called for this debt to be dropped. Furthermore, during the aftermath emergency money was offered to the Haitian government from the IMF in the form of loans. Civil society groups protested the offer of loans and not grants for such an already heavily indebted country trying to cope with such destruction. 

On 28 May 2010, the World Bank announced it had waived Haiti’s remaining debts to the bank. The value of the waiver was only $36 million.

In 2015, France forgave only about US $77 million in a modern debt, unrelated to independence. In 2004, the Haitian government demanded that France repay Haiti for the millions of dollars paid between 1825 and 1947 as compensation for the slaves’ freedom. In 2015, the French government rejected this plan and said that it would consider investing in the country.

Conclusions

The Battle of Vertières on the island of Haiti on 18 November 1803 was the final event that stood between slavery liberty in Saint-Domingue. It involved forces made up of former enslaved people on the one hand, and Napoleon’s French expeditionary forces (who were openly committed to re-enslave the former enslaved people and regain control of the island) on the other hand. The result was that Napoleon’s troops pulled back from Vertières, knowing they were defeated and that Haiti was lost to France.

Because Napoleon had failed to re-enslave Haiti he was missing the plantation revenues. As war with England was inevitable and he could not raise enough assets, Napoleon abandoned his colonial policy. France’ immense territory of Louisiana was sold to the United States on 30 April 1803 by means of the Louisiana Purchase Treaty. It was the birth of what now is considered the most powerful nation in the world, as Livingston made clear in his famous statement: “We have lived long, but this is the noblest work of our whole lives…From this day the United States take their place among the powers of the first rank.”

The West still profits from the international political and economic role that the United States plays in the world. The country contributes to world peace and has liberated Europe twice from German dominance. However, until now, the West has only contributed to Haiti’s poverty. It is my opinion that not much can be expected from the West and that Haiti needs to take into account that it needs to get back on its feet without or with minimal foreign aid.

Solutions

In order to restore Haiti to its former glory, I suggest the following.

  • As France has suggested it would invest in Haiti, a way of doing so would be to implement access to internet all over the country, so Haitians can have access to the open education platforms of e.g. Coursera. The French government could also fund a liaison office of the Institut européen d’administration des affaires (INSEAD) in Haiti that provides open education. INSEAD prides itself that it offers participants a global educational experience. With campuses in Europe (France), Asia (Singapore) and Middle East (Abu Dhabi), and alliances with top institutions, INSEAD’s business education and research spans around the globe. Our 150 renowned faculty members from 40 countries inspire more than 1,400 students in our degree and PhD programmes. In addition, more than 11,000 executives participate in INSEAD’s executive education programmes each year. I see INSEAD as an institution that can provide an ideal impuls to develop the level of education that Haiti needs to become an emerging market.
  • A very important step to taken, is the implementation of Blockchain technology in a new (to be developed) Haitian offshore banking sector. There are offshore jurisdictions that are working to attract Crypto banks. As an example, Puerto Rico just issued a license for a Cryptocurrency International Financial Entity (Puerto Rico’s version of a banking license). Dominica is also active in the issuance of quality offshore banking licenses and makes allowances for cryptocurrency. 
  • In addition, a number of open-sourced groups have been formed to increase the availability of blockchain technology for offshore banks. For example, the Enterprise Ethereum Alliance became the world’s largest open-source blockchain initiative on July 18, 2017. With members like MasterCard, Cisco and Scotiabank, I have high hopes for this team.
  • A new Companies Act should be drafted, with input from the industry’s stakeholders. Such an act should eliminate the complex and cumbersome approach to formation and operation of companies. A well-functioning Companies Registry to compliment these new laws should eventually provide affordable accessibility to the company law. Ultimately, a significant reduction in the overall cost of doing business in Haiti should be the direct result.
  • With technical aid from the International Monetary Fund, a new International Banking Act should be passed to regulate and supervise all offshore licensed banks. This ensures protection of depositor’s assets and sound banking practice and qualified management are in place.
  • A Mutual Assistance in Criminal Matters Act is needed. The aim is to regulate the provision by Haiti of international assistance in criminal matters in the prevention of Money Laundering of proceeds from criminal activities and terrorist funding.
  • A new Insurance Act is needed to provide for the licensing, regulation and supervision of insurance business. This is to promote the maintenance of efficient, fair, safe and stable insurance markets for the benefit and protection of policyholders.
  • Providers of company and trust services must apply for a license to offer such services and to be regulated with a system that sets out their legal obligations as license holders. This ultimately protects users of financial products and further enhances the reputation as a finance centre.
  • A new Companies Act should provide the courts with as much direction as possible to allow them to continue to make decisions on company law. The underlying objective of this is to reduce gaps and grey areas in the legal system.
  • The promise this proposed law is holding out is to ultimately remove the expensive, time consuming and protracted process of incorporating a company. The approach to this is to replace the traditional Memorandum and Articles of Association with a straight forward Application Form. The Application Form will contain the essential information required by the Registrar of Companies to satisfy himself prior to accepting or declining the application to incorporate a company.
  • Part of this shift is to introduce a set of “Model Rules”. This replaces the traditional Memorandum and Articles of Association which only serves the legally trained. The Model Rules is essentially the internal governance rules which apply to the company and by which the company operates on a daily basis. Logically therefore, the Model Rules cover such things as appointments of directors, removal and powers of officers, meeting procedures, shareholders rights and so forth. In line with the Act’s objective to reduce costs and achieve simplicity, Model Rules will be attached as schedules to the required Act. There will be no need to get the Model Rules prepared professionally. And the Model Rules will provide both directors and shareholders with guidance for the management of the company. All types of company: private, public, single shareholder and community will be covered by the Model Rules which can be amended to meet specific needs of the company.

Sources

  • Porter, Michael E. “A Strategy for Haitian Prosperity.” (pdf) In Keynote Presentation. Paper presented at the Forum on Competitiveness and Investment, Port-au-Prince, Haiti, September 22, 2017
  • “World Bank cancels Haiti’s debt”. AFP. 29 May 2010. 
  • Wroughton, Lesley (28 May 2010). “World Bank cancels remaining Haiti debt”. Reuters. 
  • “Hollande pledges Haiti investment”. BBC News. 2015-05-13. 
  • “France Confirms Will Not Repay Haiti ‘Independence Debt'”. TelesurTV. 12 May 2015. 
  • Wikipedia
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