Q: Please tell us about Volaw. What are its aims, its focus, departments and interest in Islamic banking and finance?
Volaw is a privately owned Trust Company, headquartered in Jersey, Channel Islands. We were established in 1982 and offer a full range of trust and company services to both private clients and institutions. We employ just over 100 people and are closely associated with the Jersey legal practice of Voisin. This means we have direct access to legal services and can be very proactive in the nature of the advice we give and in the solutions we offer to meet our client’s requirements.
As we have been in business for almost 30 years, and have been actively administering Shari’a-compliant structures for about 20 years, there are very few structures that we have not come across, and so we can often offer a turn-key solution to a client’s requirements. However, where those requirements are new or innovative, we are happy to embrace these concepts and will ensure that a structure can be developed that complies with the principles of both Shari’a and Jersey law.
Q: Who are Volaw’s main clients and target audience?
Our core business is in the establishment and administration of trusts, foundations and companies for private wealth structuring purposes, in particular the preservation and enhancement of family wealth. Over the past 15 years or so, our business has evolved into providing services to corporate and institutional clients, particularly in funds and capital markets whereby we work with institutions to establish investment vehicles either for their own corporate needs or their investors and customers.
Our client base is truly international, but we are particularly well known for our work in the structuring and administration of Shari’a-compliant funds and special-purpose vehicles on behalf of Islamic financial institutions from the GCC.
Q: Please share with us examples of your experience in Islamic finance in terms of the structures that you have worked upon and your experience of working with people in the industry?
Volaw have had a client relationship with the Dar Al Maal Al Islami group for over 30 years. In 1995 their Swiss subsidiary, Faisal Finance Switzerland SA (now Faisal Private Bureau), approached us to assist with the establishment of a real estate fund.
This first fund led to several other Shari’a-compliant real estate funds, various equity funds and other structures including sukuk issuance vehicles.
Back in 1995, I had very little knowledge about Shari’a compliant investing and the principles of Islamic finance, but I started reading extensively on the topic and took every opportunity to increase my knowledge, particularly in meetings with other practitioners and the various scholars advising on the structures. I particularly remember a lengthy meeting in Bahrain with Sheikh Nizam Yaquby in 1999 to discuss the capital structure of a specialist equity fund during which I learnt more about the principles of Islamic finance than I had in 4 years of reading about the topic. This taught me that for any innovative structure, it is important to have an early dialogue with relevant scholars. Over the intervening 15 years I have had the pleasure of meeting or corresponding with many of the leading scholars on various products for which I am very grateful.
Whilst my initial interest in Shari’a was driven by work, that requirement has developed into a much greater interest in the history, culture and food of the Middle East. I have read many books on a wide variety of topics associated with the region and have traveled extensively, both for work and on holiday, such that I now regard the region as my second home, as does my wife.
Q: Please tell us more about your education background and your interests, both intellectually and extracurricular.
I was born and educated in Jersey before going to university in the UK and gaining a degree in Business Studies, following which I returned to Jersey to train as a Chartered Accountant with one of the Big 4 firms. After qualification, I worked with the firm’s training and privately owned business departments out of London, but missed the sea and island life so did not spent long living in London.
My interests revolve around my family, cycling and the sea. Indeed I have just returned from an activity holiday with my adult ‘children’ and their other halves, centered around sailing and other water-based sports. I have sailed, surfed, fished and kayaked all my life, so it seemed only fitting that in 2005 I should become Treasurer of the fundraising arm of the Royal National Lifeboat Institution (RNLI) in Jersey, for which I received my bronze award last month.
Q: You have been a director at Volaw since 1989. Tell us how different Volaw is now from when you started?
The two biggest changes I have seen at Volaw over the past 25 years are the implementation of regulation of financial services businesses in Jersey and the effect of technology on the way we conduct our business.
The regulations and legislation introduced in 1998 and 1999 documented the way Volaw is required to manage its business and relationship with clients. There was very little in the laws that had not already been adopted by Volaw, and most of the industry, as best practice. Regulation of trust companies was seen by some as unnecessary and unwelcome, but it has proved to be extremely useful in showing Jersey as a place where international business can be undertaken without compromising on quality, assuring the highest of standards.
There is no doubt in my mind that the technological change that has brought about the greatest change in our business is email. Volaw’s client base is spread around the world and email has made is easier for us to communicate with them without having to arrange telephone calls at all times of the day and night. Email, together with mobile devices such as Blackberries, iPads and similar devices, have enabled greater responsiveness to our clients, but there are times when it can be difficult to switch off and have some private time.
Q: What are Volaw’s short, medium and long-term plans?
As mentioned above, Volaw has expanded greatly in recent years, particularly with the acquisition and integration of two other trust companies. In the short term we are in a period of consolidation and integration, whilst looking at the international markets with a view to establishing an office elsewhere (probably within the GCC) as a short to the medium-term objective.
Our long-term objective is to continue to remain as a privately owned and client-focused institution. We believe that as a private company we can be more responsive to our clients, whilst being large enough to meet the challenges of compliance and regulation that arise from the international scrutiny of offshore financial centres such as Jersey.
Q: Are you a firm believer of the concepts of Islamic finance and economics?
I am not a Muslim, but I do believe in the basic principles and concepts of ethical investment and have a great deal of respect for the values enshrined in Islamic finance. In particular, the principle of sharing risk and reward on a partnership or equitable basis, according to the effort and capital contributed by parties to a particular transaction or activity. My ideal transaction structure is a mudaraba structured as a Jersey Limited Partnership as this seems to encompass those fundamental principles.
Q: How have offshore jurisdictions assisted the Islamic banking and finance industry?
The main role of Jersey, and other offshore jurisdictions, is to provide a conduit for the Islamic financial institutions (IFI’s) to undertake transactions on behalf of their customers. Most IFI’s (and their customers) are not subject to taxation in their home jurisdiction within the GCC. By structuring a transaction through Jersey, which is a tax-neutral jurisdiction, it is normally possible to minimise the incidence of taxation on the transaction, thereby maximizing the returns to investors.
Another major advantage in using a Jersey vehicle in a transaction is that the corporate law in Jersey is very similar to the UK and therefore it is easily understood by lawyers advising on a transaction. In the event of a dispute, the parties (and the courts) will be able to rely on precedence established by previous rulings, which may lead to the conflict being resolved before incurring unnecessary and expensive court costs.
Q: The Islamic funds industry has reached a figure of US $60billion, but has failed to grow significantly since. How do you see it going forward?
Personally, I do not have much faith in statistics such as this as it is very difficult to collate such numbers with any real accuracy.
The question refers to ‘Islamic funds’ and whilst it is true that interest in publically quoted ‘funds’ has failed to revive following the crisis in 2008/9, we have seen increased activity in private fund-type vehicles where a small group of investors pool their resources to invest in a particular asset or transaction. This activity is rarely reported as a ‘fund’ in such statistics, but from an academic perspective, these pooling vehicles are funds. I believe that there will be continued interest in these private ‘fund’ type vehicles as investors can be more selective in determining the assets or transactions they wish to participate in rather than delegating the decision-making to a third-party manager.
Q: What are the benefits for Islamic financial clients in choosing Jersey over other off shore jurisdictions?
There are several benefits in choosing Jersey over other jurisdictions. These include:
- Support at government and regulatory level – There are regular visits to the Middle East at a Ministerial level. Also Jersey has Memorandum of Understanding with regulators in most GCC countries.
- Legal framework – There is no requirement for special laws or amendments to law to facilitate Islamic finance. In 20 years of structuring Shari’a-compliant transactions I have never found a contract or legal principle that could not be accommodated by Jersey’s legal framework.
- Time zone and proximity to the financial markets in London and other European centres.
- Familiarity with principles of Islamic finance from many practitioners and advisers across the whole spectrum of financial services in the Island.
Q: You are a qualified Chartered Accountant. How different are the accounting standards in Islamic finance compared to conventional?
I qualified as an Accountant in 1983 and joined Volaw in 1988, so whilst I am an accountant by qualification, it is many years since I have been involved with detailed accounting work.
One of my frustrations with international accounting standards (be they conventional or Islamic) is that often the requirements are too formulaic, and the published financial accounts do not highlight the true underlying activities of the entity, which may become buried in pages upon pages of almost meaningless notes and irrelevant disclosure.
Q: You have spoken for limited standardization in the industry as a route to further innovation. This appears to be opposite to the general clamour for standardisation. Please explain the reasons for this opinion?
I am not against the standardisation of documentation itself as this should lead to reduced costs (a perceived barrier to the growth of Islamic finance) and increase the amount of transactions being undertaken.
However, I am against standardisation when this is used as a barrier against innovation by those that argue that documentation for a particular transaction must be made to fit within certain standard formats, which may not meet the commercial requirements of a particular transaction. The basis of many of the forms of contract used in Islamic finance actually predates Islam itself and the principles documented by those contracts are often not unique to Islamic finance.
In some circumstances, it may not be appropriate to shoehorn a particular modern financial structure into such a contractual form, but in some quarters if the contract cannot be given the ‘badge’ of a commonly recognised Islamic contract, then it is deemed not to be Shari’a compliant.
Q: Has there been real innovation in the industry? What are your thoughts about those who say that Islamic finance is simply mimicking conventional finance?
Over the past 20 years I have had several discussions on this topic and I am firmly of the view that the precept for this statement is incorrect.
It should be recognised that the basic function of Islamic finance is to enable Muslims to conduct their financial affairs, including trading and investing, in a Shari’a-compliant manner. Their basic needs are very similar to those of a ‘conventional’ investor or trader, so it is wrong to say that Islamic finance is simply mimicking conventional finance. Both are required to meet very similar needs and as such it should be no surprise that both look very similar.
Q: Share with the readers of ISFIRE a typical day of Trevor Norman.
Probably the thing I love most about my job is the variety, such that there is no such thing as a ‘typical day’. It normally starts by checking my emails at home over breakfast, and this will often drive the content of my working day. Volaw prides itself on taking an active role in managing the affairs of our clients so much of my day will be spent speaking to clients and their advisers, holding Board meetings to discuss their structures, and generally overseeing the activities of my team in administering the funds and other structures we are responsible for.
Q: What are some of the most exciting projects you have worked upon?
Many of the structures we work on, particularly those for private individuals, are the subject of confidentiality agreements so they can’t be named. That first Shari’a-compliant real estate fund we established in 1996, was not only a first for Volaw but a first in Jersey. The model was replicated in other jurisdictions.
In 2004 we established the award-winning Caravan sukuk, often quoted as being the first commercial securitization sukuk, and one of my responsibilities was ensuring the Shari’a compliance of the structure which involved detailed study of AAOIFI standards and working closely with scholars to ensure the structure was endorsed by them.
Q: Has your Islamic finance work picked up since the uncertain days of 2008 or have you been experiencing a consistent level of work since then? What percentage of your work is dedicated to Islamic finance?
The period around 2008/09 comprised of difficult days as much of our Islamic finance work derives from investment in real estate. Those markets were badly hit. Added to this was the uncertainty created by AAOIFI statements on sukuk, at a time when the use of sukuk as a corporate financing tool was just gaining some acceptance in the markets.
Since these bleak days we have seen an explosion of interest in the UK real estate markets, with Shari’a sensitive investors from both the GCC and the Far East. This has been seen across all real estate sectors by both institutional and private investors. The use of sukuk as a financing tool has yet to reassert itself, but it is hoped that the June sukuk issuance by the UK will renew interest in this area of the Islamic finance market.
Q: You have contributed to the industry in different ways, through speaking engagements, article contributions, etc. How do you balance these with your workload?
Whilst my client work has to take priority, I am fortunate in that my fellow Directors at Volaw fully recognise that my contributions to the industry, through articles and speaking at conferences and other training events, is part of my role at Volaw and that by supporting the industry in this way, some benefit will often accrue to Volaw – although it is very difficult to measure any such benefit.
I am also very fortunate to have an understanding and supportive wife, who shares my love of the region, and accepts (sometimes rather grudgingly) that I may have to spend hours of my evenings or weekends researching and writing articles and/or presentations.
