Since more than one court may have jurisdiction under conflict of laws principles, legislative provisions which merely proclaim that an offshore financial court has jurisdiction, do not automatically preclude the jurisdiction of an onshore court [‘OC’]. The OC will determine whether it has jurisdiction. Where the issue of jurisdiction turns on the ‘proper law’ of the trust, and the OC determines that the offshore trust is governed by onshore law, the trust will be deprived of investor friendly rules under the offshore trust law regime. Thus, the existence of an ‘exclusive jurisdiction’ clause in an offshore trust instrument is not determinative of jurisdiction. While the rule against the ‘enforcement of foreign revenue laws’ is that a state will not enforce or assist in the enforcement of the revenue laws of another state, the status of the rule is convoluted. Recently, the rule has also been circumscribed. Some offshore jurisdictions have voluntarily bypassed the rule, expressing a willingness to assist onshore tax authorities, particularly where criminal activities have been alleged. The rule should also be considered within the context of treaty arrangements, either in relation to double taxation treaties, or in the facilitation of exchange of information agreements. Therefore, a jurisdictional challenge based on ‘conflict of laws’ can nullify offshore legislative initiatives.

‘An emerging basis for assuming jurisdiction over offshore trusts, particularly by US courts, is the in rem jurisdiction of the courts in relation to fraud and injustice, utilizing an “alter-ego” or “sham” argument. In International Credit Investment Company (Overseas) Ltd  v. Adham [1997] 141 SJLB 56, the court found that it could assume jurisdiction over shadowy offshore trusts and companies and “pierce the corporate veil” of such entities because they were still “indirectly controlled” by onshore residents. The court recognized that an earlier generation of judges “would not have exercised such jurisdiction but felt that such drastic action was now a matter of necessity because of international fraud.”’ (Trusts And Related Tax Issues In Offshore Financial Law, by Rose-Marie Antoine).