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Lawyers describe the past year as "challenging" and the market as "stagnant," with one noting that "the Barbados' economy is still in the doldrums". The country was hit hard by the global crisis and has yet to fully recover, according to a notice released by the International Monetary Fund (IMF) in December 2011....

Lawyers describe the past year as "challenging" and the market as "stagnant," with one noting that "the Barbados' economy is still in the doldrums". The country was hit hard by the global crisis and has yet to fully recover, according to a notice released by the International Monetary Fund (IMF) in December 2011.

In the aftermath of the economic downturn, there has been little upscale residential real estate business, an area which is important to the economy. "Law firms' real estate work used to be busy and lucrative, but that has been languishing since 2008," one partner says.

One vibrant sector though is international business. Firms have benefited from foreign clients who are looking to use vehicles in Barbados to take advantage of the tax incentives. "That sector has been busy for us," one lawyer notes. Another area of growth reported by lawyers is banking. "Not in terms of establishing new banks, but meeting new regulatory compliance and standards," another lawyer notes.

Barbados' favourable double tax treaty with China has also helped to generate a consistent deal flow. "We have the best treaty in the world with China," one partner says. "Whoever wants to do business in China comes to us." The same lawyer points out that the clientele for China-related transactions are now coming from a wider collection of countries. In the past, investors mainly come from the US and Europe, while now even those from South Korea, Singapore and countries in Asia are coming to Barbados, despite the fact that they are geographically closer to Hong Kong.

Based on the IMF's assessment, Barbados boasts a "stable and healthy" banking system and a "relatively good business environment." In 2011, the jurisdiction rationalised its financial regulatory regime by establishing the Financial Services Commission. The commission regulates the non-banking financial services sector, while previously there were multiple regulators for securities, insurance and pensions respectively. This consolidation of supervision of the nonbank financial sector under the newly operational commission wins praise from the market, with one lawyer noting that "the head of the commission is doing a good job leading the team" and "people have developed confidence in him".

In April 2012, the Organisation for Economic Co-operation and Development (OECD) issued a report, ruling that Barbados' compliance with international standards for tax transparency and information exchange had progressed significantly and thus can proceed to Phase Two of the evaluation process. Lawyers responded positively to this development, with one describing it as "a milestone". "It's bad PR if you can't pass your OECD review," one partner says. "It's positive for us that they gave us a good review. It's helpful from a credibility perspective."

Despite the developments, challenges remain. With a double tax treaty with Canada that dates to 1980, Barbados has long been a convenient tax-saving jurisdiction for Canadian businesses. Nonetheless, after Canada's Tax Information Exchange Agreements (TIEA) with both Cayman Islands and Bermuda came into force in the middle of 2011, there is a sense that Barbados is facing more competition for Canadian business from other offshore jurisdictions. "We've long been a jurisdiction for Canadian clients," one lawyer says. "Since Bermuda and Cayman signed TIEA with Canada, some of banking and insurance business has moved there." However, some lawyers hold a more positive view. "Canada's TIEA with those two jurisdictions have not had an impact on Barbados," says one partner adding that double tax treaties are more favourable than TIEAs, considering that they include some terms that TIEAs do not feature.

Another challenge noted by lawyers is that clients are much more cost-conscious after the economic recession. With clients requesting fixed fee agreements, a.k.a., a flat rate agreement, instead of traditional hourly rate billing model, "firms have been required to be more attentive to cost," one partner says. "Profitability in this business is not as it was in the golden years." But there are also positive signs. "Towards the end of last year till this year, clients have been less cost-conscious".

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