Originally published on 24 July 1999
On the first of May 1995 the Principality of Liechtenstein joined the European Economic Area (EEA) as the last of the 18 states to join the economic union which ties the EFTA states into the unified market of the European Union. At the same time however Liechtenstein is retaining its close relations to the non-EU-Country, Switzerland which is based upon a Customs Union, a Monetary Union as well as an agreement concerning post and telecommunications. This new direction in Liechtenstein's foreign politics has no effect upon the financial services sector because the important conditions for this sector are retained. Liechtenstein therefore continues to offer investors interesting investment possibilities.
The treaty concerning the European Economic Area entered into force on January 1st, 1994 with a one year's delay after the Swiss "EEA-No" on 6th December 1992 necessitated further negotiations and modifications.
With the EEA-Treaty a single European market was created in which 380 million persons live and in which goods, persons, services and capital can circulate freely. In order to permit this, the EEA-states agreed on a number of common principles. The most important are the prohibition concerning the discrimination among Europeans, Euro-services, Euro-goods and Euro-capital as well as a European competition law. Moreover, the treaty creates a closer co-operation in areas such as research and development, education, social insurance, ecology and consumer protection. On the other hand, agriculture and taxation are not the subject matter of the Treaty.
ADVANTAGEOUS GEO-POLITICAL FACTORS REMAIN INTACT
By reason of its membership in the EEA, Liechtenstein will assume a great portion of the so called "Acquis communautaire", that is established European law. However, none of the advantages of Liechtenstein as a financial services center are effected by the so called "Acquis". In particular the EEA calls for
- no administrative co-operation in taxation matters
- no harmonisation of the tax systems or of marginal personal or corporate rates with those in effect in other european countries
- no changes in the tax privileges of offshore companies
- no changes in the bank secrecy laws
- no abrogation of the absolute political neutrality of the Principality of Liechtenstein
Most important is that amendments to the EEA-Treaty may only take place with the agreement of all the member states.
LIBERAL COMPANY LAW REMAINS
Liechtenstein has a very liberal Persons and Companies Law which offers a wide choice of corporate forms. This wide range of corporate forms not only meets the needs of the Liechtenstein economy, but also those of foreign investors who incorporate foundations and companies for the purpose of investing.
The EEA-Treaty requires its member states to harmonise certain areas of company law. However only the joint-stock company, the company with limited liability (having no shares, but having members) as well as the partnership limited liability company are effected by the relevant EC directives. The provisions which must be incorporated into national law, effect for example accounting, financial statements, a prohibition concerning the accumulation of retained earnings as well as the prohibition concerning restrictions on the transfer of stock. The said provisions protect creditors and shareholders. It is important to know in this regard that there is no prescription requiring the disclosure of the owner of the company. Moreover, the corporate vehicles which are very important for foreign investors, namely the establishment, the foundation and the trust enterprise as well as the trust, are not subject to the directives.
BANK LAWS ARE ALREADY TO A GREAT EXTENT EEA COMPATIBLE
On January 1st, 1993 a modern bank law entered into force in which the relevant European directives were to a great extent incorporated. Liechtenstein has until January 1st, 1997 to incorporate the remaining provisions contained in the EC directives into its national laws.
At the core of the new law is more rigorous bank supervision.
Bank secrecy is understood to be the confidentiality of the client's affairs which the bank is to protect. Not only the organs of the bank and the auditors are bound by bank secrecy, but also such Liechtenstein government agencies as are responsible for supervising the bank.
With respect to the supervision of banks, the "home country control" principle rules. This means that the national supervisory authority where the bank has its headquarters is to supervise the bank in its own country as well as the branches in other countries. Information which is gathered for the purpose of supervising the banks may only be used for this purpose and may not be passed along to any other agency or authority. Thus bank secrecy remains intact in Liechtenstein.
MONEY LAUNDERING AND INSIDER TRADING
Within the framework of the harmonisation of EEA laws, Liechtenstein has passed criminal law provisions concerning money laundering and insider trading.
Moreover, a law is now being prepared concerning the professional duty of care concerning the receipt of moneys which effects not only banks, but also finance companies, investment trusts, attorneys, fiduciaries and trust companies.
The laws only codify what has for many years been the practice in Liechtenstein and will bring no material changes to the bank or professional secrecy laws. However, because the long standing code of conduct is now being incorporated into law, the reputation of Liechtenstein as a financial services sector will be strengthened.
Please contact Arcomm Trust Company directly for an update on the subject matter.The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.