Banking & Financial Services
2020 saw the modernisation of key financial services legislation. The Central Bank of The Bahamas (Central Bank) sought to consolidate and modernise its primary legislation, repealing and replacing the Banks and Trust Companies Regulations Act (BTCRA). The new BTCRA, greatly enhances the ability of the Central Bank to take steps to maintain financial stability, protect depositors and enhance public confidence in the stability of the Bahamian banking system. In particular, the new BTCRA empowers the Central Bank to intervene as a statutory administrator or liquidator of a licensee in order to accomplish those aims.
Likewise, in a step to modernise the non-banking financial services sector, the Securities Commission of The Bahamas (Securities Commission) oversaw the repeal and replacement of the legislation governing financial and corporate service providers. The new legislation brought into force in December 2020 modernises the licensing regime, expands the oversight function of the Securities Commission and enhances the consumer protection regime in respect of financial and corporate services.
The Securities Commission also introduced the Digital Assets and Registered Exchanges Act, 2020 (DARE Act) in December 2020. The DARE Act regulates the issuance and sale of digital tokens, as well as the conduct of those issuing digital tokens and those providing intermediary services related to the issuance of digital tokens.
Digital tokens were a theme of 2020, as the Central Bank of The Bahamas launched a digitised version of the Bahamian Dollar, called Sand Dollar, nationwide in October 2020. Sand Dollar are backed by the Central Bank of The Bahamas and issued through authorised financial institution. Currently, Sand Dollars can only be used within The Bahamas but, as with fiat Bahamian currency, it can be exchanged for foreign currency through authorised financial institutions.
The industry experienced the first reporting deadline under each of the Commercial Entities (Substance Requirements) Act, 2018 (CESRA) and the Multinational Entities Financial Reporting Act, 2018 (MEFRA) in 2020, bringing to the fore the importance of affected Bahamian entities maintaining an economic presence in The Bahamas. The enforcement of the above referenced legislation, as well as other steps taken by the government of The Bahamas, aided in the Financial Action Task Force (FATF) de-listing The Bahamas from the list of Jurisdictions under Increased Monitoring in December 2020. In doing so, the FATF congratulated The Bahamas for the significant progress it made in improving its AML/CFT regime.
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 fifteen 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, iii) 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.
Current Market Conditions
Abaco, Grand Bahama and the surrounding Cays were severely impacted by Hurricane Dorian in 2019. The real estate market in these affected areas has been hard hit and property is being sold at a significant undervalue. There is special tax relief currently available under the Disaster Reconstruction Authority (Special Economic Recovery Zone) (Relief) Order, 2020, to assist with the importation of building materials, real property tax and the sale of real property in these islands. This tax relief is due to expire on 30th June, 2021.
Due to the impact of the COVID-19 pandemic in certain countries, The Bahamas is experiencing a surge in the sale and rental of property in New Providence and certain other Family Islands. Non-Bahamians who purchase a home with a minimum value of $750,000.00 will be eligible to apply for economic permanent residency (without the right to work) and this is particularly attractive to high net worth buyers at this time. There are several multi-unit waterfront projects under construction in New Providence which are slated for completion within the next 18 months to 4 years. These projects are in steady demand as they will offer marina or beach views and access.
The hotel and resort development market remains steady. Projects are continuing and are scheduled to launch in 2022 after the global pandemic normalises. There is a general shift in foreign direct investment from larger resort projects to boutique hotels in the Family Islands with serviced units and amenities to meet the demand for extended occupancy periods.
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.
• 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.
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.