Banking & financial services
Legislation
2021 did not see many legislative changes that impacted the banking or financial services sectors. With the Central Bank updating its key legislation in 2020 and the Securities Commission having done the same in 2019, there were no substantive changes to the legislation regulating banks, trust companies, securities business, investment funds or financial and corporate services providers.
There were some broader legislative amendments that impact the banking and financial services sector, however, including the amendment to the Value Added Tax Act, 2014 (the VAT Act). In particular, the VAT Act was amended to, amongst other things:
1. Reduce the rate of value added tax from 12% to 10%, which took effect from 1st January 2022; and
2. Zero-rate the supply of financial services where the use, benefit or advantage of such services is obtained outside The Bahamas, which was given retroactive effect from 1st July 2019.
Key Developments
In 2021, The Bahamas underwent a mutual evaluation culminating in the 4th Enhanced Follow-up Report (FUR), which was published on 15th September 2021. In the FUR, The Bahamas was assessed as Compliant and Largely Compliant in 38 of the 40 Financial Action Task Force (FATF) Recommendations. Compared to the 4th Round Mutual Evaluation Report (MER) produced in July 2017, The Bahamas was upgraded in 9 FATF Recommendations.
Correspondingly, in December 2021, the European Commission College of Commissioners (the “Commission”) met to discuss, amongst other things, the revision of the list of third-country jurisdictions which have strategic deficiencies in their anti-money launderingand combating the financing of terrorism (AML/CFT) regimes (AML Blacklist). The Commission decided that The Bahamas should be removed from the AML Blacklist, as “The Bahamas has addressed the strategic deficiencies previously identified by the Commission in its AML/CFT regime”. Accordingly, on 7th January 2022, the Commission submitted to the Council of the European Union proposed delegated regulations to amend Delegated Regulation (EU) 2016/1675 to, amongst other things, remove The Bahamas from the table under point “I. High-risk third countries which have provided a written high-level political commitment to address the identified deficiencies and have developed an action plan with FATF." It is expected that such delegated regulation will be passed in Q1 2022.
In 2021, the Securities Commission licensed its first digital asset exchange pursuant to the Digital Assets and Registered Exchanges Act, 2020 (DARE Act). The licensing of FTX, the world’s second largest cryptocurrency exchange, highlighted The Bahamas as one of the first jurisdictions to roll out a fully comprehensive regulation for cryptocurrency in the world and one of the premier jurisdictions for cryptocurrency business. There has been a significant increase in attention on The Bahamas as a fintech hub and desire for fintech companies to establish digital asset businesses in The Bahamas.
Dispute Resolution
The Bahamas is a common law jurisdiction. The legislative provisions of the Rules of the Supreme Court govern the procedure of the Courts in conducting litigation, and common law precedent is also relied on.
The rules of the Supreme Court mirror the English rules of the Supreme Court, which have been superseded by the Civil Procedure Rules. The Bahamas is moving towards enacting Civil Procedure Rules which would result in changes to the case management process and a shift in procedure in some instances, enabling swifter resolution of cases that can be resolved without the need to progress to trial and with the ability for greater sanctions for non-compliance with the rules which bind parties to progressing cases towards trial.
Civil cases are heard by the Supreme Court and appeals may be made to the Court of Appeal. The Judicial Council of the Privy Council is the court of final appeal. As a result, decisions of the Privy Council are highly persuasive, save for where there is a difference in statutory provisions. The Bahamas Judiciary is comprised of one Chief Justice and seventeen Supreme Court Justices. There are five Justices of Appeal. This is a significant number of judges for an offshore centre and assists the court system in functioning efficiently. The Bahamas Bar is comprised of over one thousand attorneys, a number of whom have experience before the Court of Appeal and the Judicial Committee of the Privy Council.
Following the COVID-19 pandemic, court hearings including trials and contentious interlocutory applications have been argued remotely. The court system has not been hampered by the pandemic in terms of progressing cases.
Decisions of the UK Supreme Court are binding. Bahamian jurisprudence has therefore developed largely in ways that mirror English law, although in the area of trusts The Bahamas has developed certain statutory enactments, such as: i) provisions relating to the arbitration of trust disputes; ii) statutory enactment for the common law rule of Hastings Bass in order to declare the exercise of a fiduciary power void or voidable; andiii) statutory limitations to disclosing information to a discretionary beneficiary.
In the area of insolvency, the relief which is obtainable in cross-border proceedings largely mirrors the UNCITRAL Model Law and relief which is available in other offshore jurisdictions, which provides for greater cross-border cooperation and relief including the appointment of foreign office-holders.
Commercial litigation cases typically heard by the Supreme Court include applications concerning asset tracing, Norwich Pharmacal and other disclosure relief, applications for directions by trustees and contentious trust litigation, banking-related disputes, property-related disputes, insolvencies, receiverships and applications for interlocutory injunctions, including Mareva injunctions.
However, it should be noted that The Bahamas does not at this time have the jurisdiction to grant free-standing injunctions in aid of foreign proceedings. The ability to grant a free-standing Mareva injunction could only be mandated by way of a legislative change and presently there is no discussion to do so. Additionally, there are limited remedies in the form of restructuring available for distressed companies. The Bahamas is a creditor-friendly jurisdiction with limited options available for debtors who may require relief and assistance, although the Companies Winding Up Amendment Act, 2011, provides for assistance and cooperation with foreign liquidators, which may give rise to the possibility of restructuring through the use of cross-border proceedings. The Bank and Trust Companies Regulations Act, 2000, maintains the public policy of The Bahamas to promote bank secrecy, by preserving the confidentiality of a customer’s bank account information in court proceedings when an application is acceded to that the proceedings be heard in camera and that the court file may be sealed. The Bahamas is a very effective and mature legal environment in which to pursue the resolution of legal disputes.
Real Estate
Current Market Conditions
The real estate market in The Bahamas is steady and strong. Due to the global impact of the COVID-19 pandemic, 2021 was a robust year with historic activity in both the sale and rental markets. The current demand exceeds available inventory but the market projections for 2022 are quite strong. Investors are especially drawn to The Bahamas for the appeal of island living, the warm climate and the incentives offered to high-net-worth buyers to obtain residency status. The most sought-after residential communities in New Providence and the Family Islands are in high demand for the marina or beach views and access to luxury and serviced amenities.
There are several waterfront projects under construction in New Providence which are slated for completion within the next 12 to 48 months. These projects are in steady demand.
The hotel and resort development market remains steady with projects scheduled to launch in 2022-2024. Emphasis is shifting to boutique hotels and turnkey residential ownership projects operated under premier hotel brands.
Unregistered Land System
The Bahamas has an unregistered land system which is based on the conveyancing laws of England and Wales prior to 1925. A seller of land must deduce title for a period of no more than 30 years or title must otherwise commence with a grant or lease by the Crown, or a certificate of title granted by the Court in accordance with the provisions of the Quieting Titles Act, whichever period is shorter. Accordingly, it is customary for a buyer to engage a local attorney to search title and to issue a title opinion for the purpose of ensuring that the seller has good and marketable documentary title. If a buyer wishes to obtain title insurance, there are authorised agents in The Bahamas.
Instruments granting an estate, right or interest in land must be lodged for record in the Registry of Records to establish their priority under the Registration of Records Act, 1928.
Key legislation
• The Conveyancing and Law of Property Act, 1909, regulates the sale of land, leases and forfeitures, the exercise of the power of sale by mortgagees and various other matters.
• The Law of Property and Conveyancing (Condominium) Act, 1965, governs the creation and management of condominium property.
• The Bahamas Vacation Plan and Time-Sharing Act, 1999, governs the creation, regulation and management of time-sharing property.
Land Ownership by Non-Bahamians
The ownership of land by non-Bahamians is regulated under the International Persons Landholding Act, 1993, and it will be necessary for the buyer to apply for a Certificate of Registration or a Permit depending on the size of the property and whether the intended use is for residential or commercial purposes.
Local financing is available for non-Bahamians who wish to purchase real estate in The Bahamas, and non-Bahamians who rent or own a residence may also apply for residency status (without the right to work) to facilitate their entry and re-entry into The Bahamas.
Non-Bahamians who purchase a home with a minimum value of USD750,000for use as a family residence will be eligible to apply for economic permanent residency (without the right to work).
Foreign Direct Investment
Foreign direct investment in hotel and resort development, time-share, mixed-use, subdivision or condominium development requires coordination with several government departments. All non-Bahamian investors must apply to the Bahamas Investment Authority (“BIA”), the administrative arm of the National Economic Council (“NEC”), for approval to operate in The Bahamas. NEC is under the direct control of the Office of the Prime Minister and the NEC Board consists of the Prime Minister and several Cabinet Ministers.
Investment incentives and concessions are available under the Hotels Encouragement Act, 1954, to provide for the exemption of customs duties and other tax relief in the construction of hotel and resort projects in The Bahamas. Concessions are also available under the Family Islands Development Encouragement Act, 2008, to encourage development in the Family Islands.
