Corporate and Mergers & Acquisitions (M&A)

The Report Company Interviews Dr. Andrew J. Zammit – Managing Partner at GVZH Advocates

18 Jan 2012

7 min read

Extract from the Report Company

The Report Company (TRC): What are the main areas that your firm focuses on?

Andrew J. Zammit (AJZ): We are mostly a corporate and commercial law firm. We primarily target foreign clients, mostly European-based. The firm was set up towards the end of 2005, shortly after Malta joined the EU [in 2004]. It was this development in Malta’s political history that has catapulted Malta economically. We’ve grown to 40 people now. It’s been quite organic, steady growth. Not growth for growth’s sake, but growth driven by increased business opportunities.

TRC: Do you actively seek business in new sectors or do your existing clients lead you there as they expand?

AJZ: It’s a bit of both. You can’t really control the direction of your growth. Law firms are at the cutting edge of where an economy is going, because they tend to deal with the start-ups, the licensing formalities and the incorporations, so we have a very good feel for where things are going.

The financial services sector is an area in which we’ve had considerable involvement. Apart from the foreign exchange platform, we’ve also seen high frequency trading and fund manager type structures, that is, fund managers moving part of their infrastructure to Malta to run their operations from here.

There is this Highly Qualified Persons 15% tax that has been granted for individuals, which seeks to attract more talent locally. All in all we see financial services are certainly the backbone of where Malta is going.

E-gaming has, I think, reached maturity. It is a logical development that gaming is going to be regulated more tightly on a pan-European basis. Gaming had very steep growth in the first few years. It reached its climax in about 2006/2007. Then there was the economic crash. In 2006 the US closed its doors to e-gaming and gambling. So it hit its peak and it seems to have started getting knocks to send it back down again.

TRC: Do you think some e-gaming companies will move out of Malta into other jurisdictions, in the Caribbean or elsewhere?

AJZ: There will be some of that. We’ve spoken to our larger clients that have a presence here in Malta. They see a role in continuing to be in Malta because there is an expertise and understanding of the industry. They’re finding good, dedicated people in Malta for salaries that would be less than what they’re paying in other jurisdictions perhaps, so they feel that there is still a value to being in Malta. How long that will last is anyone’s guess. I think five years is the longest timeframe you can think in business terms.

TRC: The Maltese legal system is a mix of continental and British law. Is that confusing for overseas companies coming to the island?

AJZ: It’s a very interesting hybrid system. Our financial services legislation and all our corporate legislation draw heavily on English legal sources. Our Companies Act is a sort of UK Companies Act ‘light’. There are many parallels in terms of the corporate governance and corporate principals that you need to apply.

People aren’t surprised when they see our legislation. I think Italy or France would be more surprising to the UK businessman than Malta in terms of law.

We have kept a lot of our history from the years we were under British rule, in terms of our civil service and our methods of doing business. That has worn off in always looking at the UK in the way it has regulated its financial services in the hands of one super-regulator – I think that’s a good model that we emulated. The generally pragmatic approach taken to regulatory affairs is pretty much a British experience.

TRC: From a legal perspective, what advantages does Malta have over other jurisdictions such as Gibraltar?

AJZ: I think that Gibraltar has one edge over Malta in that it is outside the VAT zone and that is a tremendous advantage because gaming companies, for example, have had very big issues in terms of trying to manage their VAT exposure. So Gibraltar has managed to attract some of the big gaming operators and financial services operators precisely because of that.

Here, there is definitely an approachability to the authorities, which I think also exists in Gibraltar, but some of our clients have emphasised how much more amenable the regulators are here, how much more pragmatic they are in their approach. That does not mean they will bend over to accommodate the client, but they are ready to listen to a solutions-based approach if the client has a problem.

TRC: Is it a case of Gibraltar or Malta for most clients, or are there other jurisdictions they also consider?

AJZ: We sometimes come into contact with Cyprus. In our business we tend to become less jurisdiction-specific. Although our expertise is clearly in Malta, we do have a very valuable network in other jurisdictions around Europe – not only in tax-planning jurisdictions, but in London, France, Italy, which is valuable. You can’t be too localised.

TRC: Does the push to harmonise laws around Europe dent Malta’s competitive edge?

AJZ: I think being outside the EU would have been a disaster for Malta. Being inside at least gives us a chair at the table where issues are being discussed and decisions are being made. That Malta has weak political power at the European table is clear, but it seems to align itself with other states with similar interests to be able to steer things through with an acceptable compromise.

Malta has been put in the spotlight over harmonisation of corporate taxes. There was a discussion a couple of weeks ago that was blocked by member states because it needed a two-thirds majority. That will be a hard one to push through and, with tax being outside the European harmonisation area, it is going to be some time before we see harmonisation there.

Tax harmonisation will obviously hurt Malta. Being on the fringes of the EU and having no natural resources, we have to fall back on the services industries and how do you get people to do business on an island of 400,000 people which has its basic infrastructure, its sea and its tourism to offer? You need to have something else to offer and I think the value added has come through, as in Luxembourg, by delivering on services. What is fair and unfair tax competition is a raging debate.

TRC: What is the future for Malta?

AJZ: I think you’ll see e-gaming start to shrink, keeping the big players and some of the very small start-ups that are not really looking to market themselves in the EU. I think it will break down into the big boys and the cowboys because the big boys can afford to get a licence in every jurisdiction and the cowboys don’t care about getting a licence and just do it anyway.

I don’t think Malta’s ambition is to just focus on gaming.

The appointment of Joseph Tabona as High Commissioner to the UK was a very wise choice. He’s been involved in hospitality but he’s also a qualified auditor and has been involved in PricewaterhouseCoopers locally. So he’s got an all round diplomatic approach. He sees where Malta’s growth potential lies in the financial sector. I think you’ll be seeing a lot more of Malta on the radar for hedge funds, fund management companies and insurance companies.