IFLR 1000
The Guide to the World's Leading Financial Law Firms

The main issue that has dominated firm's thinking in the last few years has been the AIFM (Alternative Investment Fund Managers) directive. The new rules have clarified the situation regarding how funds and their managers operate within the EU....

The main issue that has dominated firm's thinking in the last few years has been the AIFM (Alternative Investment Fund Managers) directive. The new rules have clarified the situation regarding how funds and their managers operate within the EU. "Essentially, the advantage now is that the fund manager can domicile to Malta, it is increasing the speed, reducing the cost, and also such a fund manager would be able to benefit from the local system," says one partner.

The protracted discussions over the directive had an unsettling effect to a certain extent, but most partners agree that despite teething troubles, in the end it has produced a positive outcome. "Professional investment funds are much better than the last two years. There is an increase in professional investment funds licensed by the EU," says one partner.

One potential result of the new rules, partners hope, will be a re-domiciliation of funds and managers from the traditional offshore centres outside the EU, the likes of the Cayman Islands and the BVI. "I believe after the implementation of AIFM, we expect an influx of non-EU funds managers to set up their funds in Malta," says one partner adding the caveat that, "The forefront places that will benefit from AIFM also include Dublin and Luxemburg."

Indeed there is a general feeling that some of the EU's other funds capitals are set to feel the benefit more than the smaller centres like Malta, however practitioners are hoping that all ships will rise with the tide. "We see that happening already, basically we have funds that are re-domiciling to Malta from the Caribbean, Cayman, we see quite a nice amount coming in, and obviously it (AIFM) also helps new funds management set up," says another funds lawyer.

The new Ucits (Undertakings for Collective Investment in Transferable Securities) IV regime has been another topic of debate and again practitioners see it as a positive development for the island. "Ucits IV gives the passport to the management company, which is of course a very important development, we will see management companies now being set up in Malta, that's the current trend," says one partner.

Essentially the rules allow funds to be 'passported' into the EU from other centres. Again Malta finds itself competing with the likes of Ireland, Luxembourg and the Channel Islands for this work, but as one partner points out, the jurisdiction may benefit from being quicker out the starting blocks when it comes to implementation. "Malta is probably going to be the first implemented together with Luxembourg and that gives a bit of the advantage because the other member states will probably be a bit slower to implement it."

Another development that practitioners are hoping will generate new work is the rise of the air finance and registration industry. "Malta implemented the Aircraft Registration Act in October 2010, and the government wants to do more work in the aviation industry. It will be particularly good for businesses and investments," says one finance partner. "At the moment, we are all learning how to apply the new Act to our business and I am looking forward to getting involved in related legal work." Any form of economic diversification is of course welcome in a small jurisdiction and firms are hopeful that the new industry can compliment the maritime and shipping industries already active. "Malta definitely is one of the top five countries with its own very successful maritime industry," says one partner. "We hope that the aviation industry will be the same." However the same partner does add the caveat that it took "25 to 30 years to build the maritime industry up".