The Mauritius International Financial Centre: A platform to Africa
Mauritius has been consolidating its position as an International Financial Centre (IFC) over the past few years. The financial services industry in Mauritius is regulated by a robust and elaborate regulatory framework: the Financial Services Commission (FSC) regulates non-banking financial services and the Bank of Mauritius (BOM) regulates banking financial services. The Mauritius IFC offers various products namely companies holding a Category 1 or Category 2 Global Business Licence (GBL), trusts, foundations, collective investment schemes (CIS) and limited partnerships, among others.
It should be noted that Mauritius was the first African jurisdiction to become FATCA-compliant. To date, the majority of banks, management companies, global business companies and other relevant financial institutions based in Mauritius have registered with the US Internal Revenue Service and have put in place the requisite due diligence and reporting systems in order to comply with the FATCA legislation.
In October 2014, Mauritius was one of the 51 jurisdictions to sign the multilateral Competent Authority Agreement for the automatic exchange of information (CAA) developed by the Organization for Economic Cooperation and Development (OECD). It is inspired from FATCA and is intended to create a framework for the systematic and periodic transmission of bulk taxpayer information by the source country to the country of residence of the taxpayer. Mauritius has since adhered to the Common Reporting Standard (CRS) which will be effectively implemented in September 2018.
The African Adventure
As a member of the African Union (AU), the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA), Mauritius obtains numerous advantages in terms of trade, commerce and cross border transactions. The adherence to these organisations countries gives Mauritius access to markets which cover more than 260 million persons. The island also has an impressive network of double taxation agreements (DTAs) of which 17 are with African countries. These DTAs enable entities which are registered in Mauritius, and consequently are tax residents of Mauritius, to claim benefits under the various treaties. The jurisdiction also has an interesting network of Investment Promotion and Protection Agreements (IPPAs) – sometimes known as Bilateral Investment Treaties (BITs). Mauritius has signed 19 of such IPPAs with African states, out of which 8 have been ratified. The IPPAs particularly afford protection to investments made in the counterparty African country from nationalisation. This would not have been available if the investor was using a special purpose vehicle incorporated in any of those offshore jurisdictions now commonly used by international investors and which offer no IPPAs.
Moreover, Mauritian professionals may, with ease, accompany clients towards their target destination in Africa since they are bilingual, speaking and working in English or French. Lawyer work in a unique hybrid system of laws with on the one hand, a Code Civil, a Code de Procedure Civile and a Code de Commerce which are French inspired and on the other hand, the English common law. Mauritian lawyers therefore feel at ease working in Francophone or Anglophone Africa.
Mauritius is positioning itself as an international arbitration centre with the setting up of the Mauritius International Arbitration Centre (MIAC) in conjunction with the London Chamber of International Arbitration (LCIA), now known as the LCIA-MIAC. The Permanent Court of Arbitration (PCA) established at The Hague, in the Netherlands, is also based locally through the Host Country Agreement signed by the Mauritian government in 2009.
In parallel, the Mauritius Chamber of Commerce and Industry (MCCI), has signed an agreement with the Centre de Mediation et d’Arbitrage de Paris to develop and strengthen its arbitration services locally. This centre operates under the aegis of the Chambre de Commerce et d’Industrie de Paris.
The island is proud to host, for the first time on the African soil, the Congress of the International Council for Commercial Arbitration (ICCA) in May 2016. Regarding Global Business (what was previously known as offshore business), new substance requirements were recently put into place by the FSC in 2015. There are now several options from which companies may choose to add economic substance to their activities in Mauritius. Thus, global business companies are encouraged to open up offices in Mauritius, employ local manpower on a full time basis, spend more money locally or, if applicable, get listed on the Stock Exchange. One further innovative option is the possibility of having in the constitutive documents of the company, arbitration clauses which provide for shareholders’ disputes to be settled in Mauritius pursuant to the International Arbitration Act 2008. Such option for arbitration is deemed to satisfy one of the required substance requirements.
Mauritius has enacted legislation on captive insurance. The Captive Insurance Act 2015 came into force in January 2016 and sets up the regulatory framework for captive insurance. Mauritius has the potential to be a domicile of choice for captive insurance in relation to the African Continent and indeed for other markets too. Essentially, captives are a form of self-insurance whereby the insurer is wholly owned by the insured. The captive insurance company can be subsidiary of the parent company to provide insurance to it. They are established to meet the risk management needs of the company and once set up will act like a commercial insurer. The Act only applies to “pure captives” meaning the business of undertaking liability restricted to the risks of parent and affiliated corporations. It will not generally offer insurance to the public but only to the company or group which owns it.
With this new Act, Mauritius aims to have a large captive insurance industry which will in turn provide work to banks, corporate and financial services providers.
The services industry represents today more than 70% of the GDP of the island and there is no other alternative but to develop them to create jobs and add value to the economy. Financial and corporate services are once more taking the lead in the development of the financial services hub.
The jurisdiction continues to be the ideal platform for investments in India but as of late has shown its capacity to be the hub of reference for facilitating investments into Africa.