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The entrance of international firms into Mauritius following the introduction of the 2009 Law Practitioners Act has been an important sign of the liberalisation of Mauritius legal market. Taking advantage of their international network and comparatively sophisticated offshore support, Appleby and Conyers Dill & Pearman have been successful in picking up transactions in the country since their establishment and have continued to be active, particularly in cross-border work....

The entrance of international firms into Mauritius following the introduction of the 2009 Law Practitioners Act has been an important sign of the liberalisation of Mauritius legal market. Taking advantage of their international network and comparatively sophisticated offshore support, Appleby and Conyers Dill & Pearman have been successful in picking up transactions in the country since their establishment and have continued to be active, particularly in cross-border work. Similarly Bedell Cristin, since its establishment in 2011, has been seen on a number of cross-border deals, after recruiting partner Yuvraj Juwaheer, a specialist in banking, finance, corporate and funds last year and adding partner Vikram Seesunkur this year.

Many of the bigger local firms on the Island though, despite the changes noted above, have maintained their market share, as one client explains: "Many of the older law firms on the island would have had prior exposure to international clients and thus their capability in communicating with international clients is on par with the international firms."

One interesting aspect of the Mauritian legal market is that fact that transactional work is done by both barristers' chambers and solicitors' firms, though practitioners from both sides point out that the difference between the two have become less significant and indeed are generally overlooked by lawyers themselves. Most of the major chambers and firms handle both litigation and transactional work, although some law firms have been promoting their corporate structures as a reflection of their capacity in handling transactions.

One major regulatory development, which will impact both the legal and wider market in Mauritius, is the implementation of GAAR (General Anti Avoidance Rule) in India. The GAAR has been introduced to avoid aggressive tax avoidance and under the new regime the taxability of a transaction is determined by its substance instead of its form. The Indian Income Tax Department has the power to deny tax benefits to an entity if a transaction is carried out with the sole intention of tax avoidance.

The GAAR puts the onus on companies to prove that they are using specific structures for commercial purposes and not to avoid tax. The Authority, on the other hand, can question claims of companies and FIIs. This means that deals that are structured to take advantage of tax benefits by complying with Indian tax provisions might still be taxed if the Authority goes back to the deals and reinterprets them based on the substance of the transaction.

Foreign investors are particularly worried about the GAAR because a large proportion of their investments in India are carried out through companies registered in Mauritius that are exempted from tax in India under a Double Taxation Avoidance Agreement. The introduction of GAAR could give powers to the India Tax Authority to deny double taxation treaty benefits to foreign funds based out of tax-havens like Mauritius. Obtaining a residency certificate in Mauritius might not be adequate to avoid tax.

The Double Taxation Treaty itself is also facing instability, as the Indian government has proposed to revise it in the near future.

CONTEXT AND TRENDS In the past, many Mauritius firms have benefited from getting work from companies that are set up in the country with the sole objective of investing into India, taking advantage of the Double Taxation Treaty. Far from having actual operations in Mauritius, these are often holding companies, which lack actual substance and activities in the domestic market....

In the past, many Mauritius firms have benefited from getting work from companies that are set up in the country with the sole objective of investing into India, taking advantage of the Double Taxation Treaty. Far from having actual operations in Mauritius, these are often holding companies, which lack actual substance and activities in the domestic market. With a potential decline in these types of transactions due to the new tax regulations mentioned above, many law firms are seeking to increase their focus on Africa.

"The provisions have been put on hold for a year or so in short term and it means that a lot of transactions are now going back to the law firms to restructure the deals before the GAAR is implemented," explains one partner. "From a long term point of view, the implementation of GAAR could impact activities in Mauritius significantly, especially the financial services industry."

A number of law firm partners have mentioned that this might result in a consolidation of the Mauritius legal market. "Smaller law firms in Sri Lanka have had a hard time picking up deals from the Africa market, as they are often more complicated transactions compared to the India deals, such as large scale joint ventures, big constructions or the setting up of infrastructure funds," explains one partner. "The smaller firms lack the capacity to take up these deals and it is very likely that these smaller firms will merge with the larger law firms in the future." How individual firms cope with the changes will only be seen once a significant shift in workflow has taken place of course, but it will be interesting to see how the situation develops.

Some practitioners are however positive about the economic development of the island, despite the potential reduction in investment that a revision of the Double Taxation Treaty might cause. Practitioners are hopeful that the changes may result in a more mature economic landscape, as one partner explains: "Companies are now spending more money in Mauritius as some of them are trying to restructure their businesses to make them become businesses with actual operations in Mauritius. We are expecting a much more sophisticated financial industry to be developed in Mauritius in the near future. It is most likely to end up being a good thing in long term."

MAJOR LATERAL HIRES

Vikram Seesunkur
From: private practice
To: Bedell Cristin