Vanderbilt Journal of Transnational Law

First Page



I was not present at the birth of the offshore financial centers or of their trust business, but I am told that the mother was taxation. Perhaps that is an oversimplification, but I do not doubt that taxation was the major influence. The typical settlor was a taxpayer from one of the major common law countries, and his primary motive for going offshore was tax avoidance. But there were also a few settlors from other places, some motivated by estate planning considerations (the trust allowing them to make property arrangements which could not be made at home), some by fear or distrust of rulers. With the Second World War vividly remembered, the Cold War in progress, widespread exchange controls, and much of the world under socialist, repressive, or untested regimes, the wealthy man (or corporation) might understandably seek to invest in the United States or other "safe" countries, and to hold these investments in a way that would protect them from any rapacious tendencies on the part of his own or neighboring governments. In those days, the Swiss account was the standard answer for fearful individuals, but some thought Switzerland too close to the Iron Curtain. Bermuda and the Bahamas had the geographic advantage and also a flexible legal mechanism by which the client could obtain continuing protection for his family.