TURKS & CAICOS: An Introduction to General Business Law

Introduction 

The Turks and Caicos Islands (TCI) are a British Overseas Territory situated to the south of the Bahamas approximately 500 miles southeast of Miami, Florida.

TCI has demonstrated significant corporate and financial law stability over many decades and continues to do so. This is partially due to TCI having a stable and strong government benefiting from TCI law being based upon English common law. This sits alongside a significant number of locally enacted TCI-specific laws.

The currency of the TCI is the US dollar and there are no capital controls.

Current Economic Conditions and Market Developments

Luxury tourism is a major component of TCI’s economy making up over 70% of TCI’s GDP, which is anticipated to be USD1.24 billion in 2023. The TCI continues to experience heavy levels of foreign direct investment, primarily in five-star hotels, condominium resorts, and managed luxury villa communities. The high demand for low-density upscale managed villa developments continues to grow exponentially and we are now seeing renewed interest in condominium developments. The construction industry grew by about 4% in 2022 and this growth is anticipated to continue into 2023.

The TCI real estate market had a record-breaking year in 2021 with USD765m in closed real estate transactions, as reported by TC Sotheby’s International Realty. The bulk of this activity was in TCI’s main commercial and tourist center, the island of Providenciales, and the main source of interest and activity was from US and Canadian high-net-worth individuals in the area of luxury villas.

Most activity in the real estate market is through the multiple-listing system of the Turks and Caicos Islands Real Estate Association (TCREA). Their figures (as reported by TC Sotheby’s International Realty) show total sales for 2022 of USD553m, making it the second-best year on record. This level of activity is anticipated to continue into 2023 with USD327m in pending transactions led by pre-construction villa sales.

Investment on the developer side is continuing and construction commencement is expected in 2023 on a major mixed-use resort on Providenciales and a St. Regis in the main tourist neighbourhood on Grace Bay, Providenciales, which will be a large mixed-use venture with both hotel and condominium elements and a branded hotel on Dellis Cay. In the meantime, gated villa developments continue to be announced across Providenciales, with construction anticipated to commence in 2023. Demand coupled with a lack of inventory on Providenciales has resulted in significant foreign investment in North Caicos, ten miles away and previously largely undeveloped for tourism purposes.

The zero direct tax climate in TCI and the ease of obtaining residency status continue to make investment desirable despite increasing land prices and relatively high construction costs. In the absence of any unforeseen economic or natural factors adversely affecting TCI, we anticipate a continued period of growth for the real estate sector.

Legislation  

The TCI government is continuing to make strides in diversifying the economy by seeking to grow the financial services sector. As part of this continued diversification, the TCI regulatory framework has been overhauled to make TCI competitive in the Caribbean marketplace. This has seen amendments to the companies, trusts, and insolvency legislation, all of which were wholly revamped, modernised, and largely follow the internationally successful BVI models. The promotion of TCI’s financial services industry has hitherto largely been handled by the private sector: however, the TCI Government has now established and funded a new body, TCI Finance, for that purpose, and so a higher international profile for the local finance sector is imminent.

Taxation  

TCI has no direct taxes: no income capital gains, gift, inheritance, estate, or corporation taxes. There are a number of indirect taxes that fund government revenue. These include hotel, restaurant, and tourism tax, customs import duties, stamp duty on land transactions, and departure tax. Revenues from financial services are also a significant contributor to government income.

Regulation  

In terms of financial services, TCI has an extensive regulatory scheme that governs most aspects of the TCI financial industry including banks, insurance companies, brokers, agents, company administration managers, trust companies, investment dealers, mutual funds administrators, and money transmitters.

The TCI Financial Services Commission (FSC) is independent of the TCI government and its functions incorporate the supervision and regulation of licensees under the financial services regulatory ordinances and the monitoring of financial services business.

TCI’s anti-money laundering regime incorporates international best practices. Anti-money laundering and anti-terrorist financing is a priority of both the TCI Government and the FSC and all local service providers are obliged to comply with the regulations and are subject to FSC compliance audits.

Consequently, any individual or corporation seeking to register a legal entity or obtain TCI licensing needs to comply with the relevant regulations. The TCI anti-money laundering regulations have continued to be upgraded in line with international and FATF standards.

Dispute Resolution 

In light of the continued commercial economic growth in TCI, it is necessary to have a strong foundation in the dispute resolution arena to assist in the likely increase in litigation that derives from such increased economic activity.

In addition to conventional courtroom litigation, TCI offers resolution through alternative dispute resolution with both arbitration and mediation available.

With respect to mediation, the TCI judiciary introduced and brought into force the Court-Connected Mediation Rules 2021 (the “Mediation Rules”) on 16 August 2021 which were implemented in 2022. The Mediation Rules apply to civil and criminal matters.

Chief Justice Agyemang reported that court-connected mediation is slowly taking its place, in TCI, as a trusted way of resolving disputes. In 2022, 81% of the cases referred to mediation were concluded, and 69% were settled through mediation.

The availability of these alternative dispute resolutions means that TCI is competitive within the region. They also make TCI more attractive for investors who are reassured that there are speedier, less expensive, and commercial avenues available to resolve disputes that may arise.

In terms of conventional litigation, the primary court of first instance for serious matters is the Supreme Court. The Supreme Court is similar to the High Court in England and is presided over by a single judge.

There is an appeal process from the Supreme Court to the TCI Court of Appeal. Appeals can be made from the TCI Court of Appeal to the Privy Council, which sits in England. The Privy Council is the final appellate court.

To further assist in the dispute arena, the TCI enacted the Limitation of Actions Ordinance 2021. In essence, the Ordinance bars the bringing of various civil actions to the court after the expiration of certain prescribed limitation periods. The Ordinance is comparable to statutes of limitation in other Caribbean common law jurisdictions.

AUTHOR

Karen Willis, Partner at Misick & Stanbrook

Karen Willis qualified as an attorney in 2006 and joined Misick & Stanbrook in 2013. Karen is tenacious and commercial and has specialized in all areas of real estate, corporate, and intellectual property law. Prior to joining Misick & Stanbrook, Karen worked in a top law firm in London with a particular emphasis on commercial real estate. Karen diligently assists clients with the sale and purchase of real estate within the Turks and Caicos Islands, focusing on hotels and commercial developments and residential property transactions to high net-worth clients.