When I joined STEP back in 1991 total membership was still only in the hundreds and branches were few and far between so it was particularly pleasing for me to write an article for The Journal in 2004 about the establishment of a branch in Panama of which I am a member.  The local branch continues to grow as does Panama’s role as an offshore financial services centre. 

The country’s economy grew by 8.1 per cent last year (producing a surplus of USD576 million – the first since 1996) and the world-famous canal’s operations have gone from strength to strength.  It was reported last year that in the first six years since the Panama Canal Authority (ACP) took over control of the canal from the United States of America, income has risen from less than USD800 million a year to over USD1.4 billion, with corresponding profits increasing from USD341 million to USD910 million. 

In order to have the canal function efficiently (some 50 ships per day now pass through it) its operators need to be properly trained and it is clear from reading about the study programme backing the operation that the ACP, like STEP, strives for a high degree of competence.  A significant tool in achieving the canal’s efficiency has been the special Executive MBA tailored by Incae business school based in Costa Rica and Nicaragua.  The 16-month course concentrates on best business practices which are slanted towards the specific requirements of canal management.  Students also study the history of Panama and the canal; specific aspects of the shipping industry form a separate element taught by Sweden’s Malmo University.  Since its start in May, 2003, the course, with its custom-designed content, has provided students with a solid base upon which to gain experience.  Sound familiar?  As with Incae, the courses STEP produces provide the skills and knowledge needed by students in their chosen profession. 

Like the ships which I see from my home on the Bay of Panama, the clients seeking trust and estate services in Panama come from all over the world.  Inevitably, some of them are confronted for the first time with an unfamiliar legal system.  Panama is a civil code jurisdiction so it is, for example, a natural home for foundations rather than trusts, the latter being the offspring of English equity.  Panama does have trust legislation but should there be a surge of trust business in the future it may raise questions about the number of existing precedents available when complex trust disputes arise.  But the same might be said of common law jurisdictions which have recently introduced foundations into their legislation.  Time will tell.

It has been flippantly said that bearer shares are the South American’s answer to a trust.  And certainly, as I discussed when speaking at a recent conference, such shares remain popular, despite their sinister connotations offshore, but, contentiously, less so when issued onshore.  Delivering ownership upon demise as easily as you would the bank note in your pocket is very attractive – provided the intended party is the recipient.  In the context of estate planning, the question bearer shares raise is this:  how secure is the chain of control between death and delivery? Clearly, in a region where equity is a stranger to most, this is an issue which can have repercussions.

The fact is that very often offshore estate planning cannot be centralised in one jurisdiction if the optimum benefits from the best choice of laws are to be achieved, much in the same way as a sophisticated international structure is usually a blend of onshore and offshore administration.

I read that when the Executive MBA designed for the ACP started, it had an initial intake of 35 students, close to the number of local STEP members at present, and, like the ACP, the branch has a growing reservoir of talent which augurs well for the more prominent role Panama will find itself playing in offshore financial services in the future.

The course a career takes in estate and trust administration depends on how well one is equipped to navigate the pitfalls and dangers often confronted by practitioners.  Training is the key and as Derek Bok, the former president of Harvard University, put it:  ‘If you think training is expensive, try ignorance’.  Truer words were never spoken in the case of trust and estate administration.