Insight

New OECD measures are an opportunity for Malta

The OECD’s new measures on base erosion and profit shifting have caused much uncertainty for companies throughout Europe. However, as Malta already has a transparent tax system in place, this could prove to be a positive step, Max Ganado tells MaltaProfile.

GANADO Advocates are one of Malta’s largest law firms. Having contributed directly over several decades towards creating and enhancing Malta’s hard-won reputation as a reliable and effective international centre for financial and maritime services. The firm strive to provide high standards of legal advisory services in a wide spectrum of international commercial and corporate activities. The company has grown and adapted itself over the years to meet the changing and challenging needs of the international business and legal community. GANADO Advocates now hold a team of over 60 lawyers and professionals from other disciplines, supported by a growing complement of committed managerial, administrative and clerical assistants.

Can you give an overview of the firm, its core business segments and key markets?

Professor Joseph Ganado established GANADO Advocates on the same model it has now in the early 1950s, after specialising in London just after the war. GANADO Advocates moved from being a family firm in the early 1970’s to a fully fledged commercial law firm with over 70 lawyers and other professionals today. Its business is focused on three main pillars; shipping and aviation, corporate and financial services, with the tax, litigation and labour law practice areas servicing all other sectors. The firm’s key markets reflect the business practice areas: Pireaus, Hamburg and London for shipping, London, New York, Paris and Frankfurt for financial services and globally for corporate, tax, immigration and fiduciary services. 

For both local and international clients, what would you highlight as your competitive edge over other firms in the industry?

We focus a lot of our efforts on the main areas of law we specialise in and avoid the distraction of trying to do everything. This has allowed us to lead in areas like shipping, investment services, insurance and banking as well as trusts and foundations. We are determined to excel in areas we choose to promote and consciously avoid some areas, for instance gaming, even though it is a very successful area of activity. In such areas, we limit ourselves to mergers and acquisition matters, capital markets, litigation and other specialist tasks. Organisationally, we are structured in teams that work towards the same focus. We operate as an association of lawyers without equity, and we promote a sharing culture, which means that all associates share a common focus within a lockstep structure. This has resulted in a high level of collaboration and common orientation to clients, tasks and development.

What kind of major developments are shaping the legal sphere in Malta?

The crisis we are seeing in the banking sector is a major global problem that is opening opportunities for Malta to develop its capital markets capacity. Likewise, securitisation is on the rise again, while intellectual property as a bankable asset is gaining attention again. Not all countries are open to new ideas, while Malta usually is – or has been so far. Wherever intermediation is important, we see an opportunity for Malta. EU legislation is always a good source for new ideas to come into the Maltese legal system, though sometimes it has the opposite effect when basic EU principles, like the freedom of movement of services or capital, is ignored in favour of dominant jurisdictions. This closes markets for Malta which is a peripheral state. A stark example is in investment services, where instead of opening the market to cross-border services, we see doors being closed through the imposition of local custodians for certain types of funds. This is nonsense in an open market. Malta always used custodians in Ireland, Luxembourg, the UK or US for its funds, and this poses a closed door to cross-border services, which is detrimental. We think Malta should contest the obvious violation of this basic and fundamental visionary value, as that was the basis on which Malta joined the EU and invested so heavily in investment services.

What are the key challenges facing the legal profession at the moment, and how is your company attempting to tackle them?

The legal profession is not regulated in an effective manner, and we have been lobbying for a Legal Professions Act for a long time. Our regulatory infrastructure is slow, non-transparent and does not pay enough attention to the serious fraud cases we have been unfortunately seeing in the last few years. Few lawyers have been disbarred and, unless serious regulation comes in, we risk losing the excellent reputation our profession enjoys. Continuing Professional Education is not mandatory. We do not have limited liability firms. We cannot associate with non-lawyers, although the services industry all around us is fast becoming multi-disciplinary. Simple, non-aggressive advertising is prohibited, although our rules state otherwise, resulting in inconsistent practices. The large Audit firms remain a major challenge due to their international connectivity, their networks and excellent reputations, which when used to offer full range services and one-stop-shop ideas to clients often leads to legal work being undertaken as part of the brief, to the natural detriment of lawyers who offer only legal services. The trend among these audit firms to own and operate large law firms in their own right can also be very detrimental to general practice legal firms, though it is less of a problem to specialist legal firms, such as ours, as we retain the thought leadership in very focused areas of law which remains a unique selling point for us.

What is your opinion on the state of Malta’s current legal and court system?

The legal system is sophisticated and lives up to expectations, sometimes surpassing expectations because of innovation drives. The Court system is continually under review, but the focus is mostly dominated by domestic orientations which miss the international expectations. It is clear we need to speed up processes which are still too slow because of procedural rigidity. Specialisation in new commercial areas of importance is lagging behind. There is a specialist judge for corporate and insolvency matters and another for maritime law, which has worked very well. However, this is rather informal and has not been enhanced by resources and greater focus, apart from not being extended to financial services, for example. We will not see radical advance in this area as long as politicians continue to focus on domestically relevant law like family or criminal law rather than commercial law, the latter being less relevant to them in their constituencies. We have been lobbying for a review of the law of insolvency and it is only now, after years of effort, that we are seeing some small steps in that direction. However, international commercial specialisation assumes co-ordination with specialist professional groups. While this does sometimes happen, the link with the judiciary is very superficial and that with politicians is fairly inconsistent. Most specialist legislation is happening through the interaction with the regulatory authorities. Some new legislative drives on family business, social enterprise, intellectual property and the like are happening, and we have no doubt we will see new laws on these subjects within the next year.

How do you view the OECD’s measures on base erosion and profit shifting (BEPS), and what are your thoughts on the impact of the 15-point plan on Malta?

We welcome and support the BEPS initiatives taken by the OECD in order to have a better co-ordinated approach by all countries so as to ensure global transparency and responsible taxation. Malta’s tax system is a transparent one, and is generally in harmony with the rationale behind the BEPS project and the 15-point plan. Our tax laws have a GAAR (General Anti-Avoidance Rule) which has been in place for a long number of years, and Malta has been one of the early adopters of full exchange of information with its Tax Treaty partners as well as being one of the first States to sign an Inter-Governmental Agreement with the US.

While a number of the proposed measures in the OECD Action Plan could be of particular relevance to Malta, it is clear that all countries are currently studying the voluminous reports to understand their implications. The recommendations in the Reports would have to be implemented by countries separately or by means of multinational instruments, and we will be actively monitoring whether such eventual implementation would have any impact on Malta. However, in view of the transparency of the Maltese tax system and all the safeguards in place to avoid abuses of our tax rules, we are confident that Malta will be able to – as it has done in various other instances in the past – take up these international developments as an opportunity to enhance its attractiveness for foreign direct investment into the country. The Maltese Government and all political parties are also committed to support the retention of Malta’s attractiveness for such foreign investment, financial services, and international business.

What should the government be doing to ensure a business environment in which the Maltese economy can thrive over the next decade?

We have to continue doing what we have been doing well since we joined the EU ten years ago, which can be summarised as follows:

-     adopt EU legislation effectively

-     review commercial and financial legislation regularly and ensure that we keep at the cutting edge of thought on subjects which are relevant, such as laws on legal organisations, security, enforcement of rights and insolvency, whilst avoiding slow, impractical and bureaucratic rules with over formalistic tendencies

-     introduce new laws on opportunity areas early, and do not wait for all the other countries of Europe, America, Australia and others to adopt them before acting

-     develop the environment around the new legislation robustly and quickly address obstacles which emerge. For example, it is obvious that laws on dematerialised securities are needed to expand the capital markets sector. This is because the new realities of the digital age cannot be regulated by old rules from the paper age. We cannot do this with small steps to solve single issues, as that does not change the legal environment, but we need to do this holistically.

What personal message would you like to share with the international business community about Malta?

Malta is an exciting and very pleasant place to be. Those who visit us often like the country very much. Sometimes, there is a frustrating insistence on keeping inefficient systems in place. But on the whole people achieve what they set out to do, sometimes with some frustration, but generally constructively and amicably. There are cultural idiosyncrasies due to our history of external powers coming from different places and this is even reflected in our language skills, making most of us multilingual and capable of working across foreign systems, even across common law and civil law, of which we have both.

Dr Louis Cassar Pullicino took over the firm as Managing Partner in the summer of 2015. Looking to the future, what are GANADO Advocates’ growth plans for the next three to five years?

Louis Cassar Pullicino’s challenge is to maintain GANADO’s drive for quality in client service and commitment, systems and processes, so that our management can provide the best back-up for the 75 lawyers of the firm, and those joining in the next five years, and so that clients can feel well served and getting value for their money. He will, no doubt, continue to promote specialisation through internal and external education, and through secondments overseas while study international trends on alternative billing methods and client feedback systems. The firm is investing heavily in its IT infrastructure, and we are growing our regulatory team, mixing lawyers with other professionals. We continue to focus on innovation in the law so that we can survive in a world which is determined to eliminate tax as a differential basis for choosing locations of business or products. It is our excellence in providing support and solutions to complex commercial issues. This will allow us to compete in the future in a borderless Europe and the wider world.

Dr. Max Ganado began his career in law 34 years ago. Starting as a maritime lawyer, dealing with all aspects of shipping including ship finance, he became a Partner at GANADO Advocates in 1986 and moved on to develop the financial services practice of the firm. He has been heavily involved in the drafting of new legislation required for the development of Malta as a financial centre, including the revision of the law relating to Trusts and the law on legal persons and foundations as well as securitisation and aviation. Max has lectured in investment funds and trusts for the last few years.

 

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