Perils and pitfalls of directing a Jersey energy company

Over the past 10 years the number of energy and natural resources companies establishing a head office in Jersey has grown considerably. With its well-regarded financial services sector and promotional campaigns, Jersey has become attractive to the natural resources sector. However, Jersey is not immune to the challenges and risks posed by extractive industries.

The vast revenues generated from natural resources and the extensive discretionary powers of government and public officials expose the sector to potential criminality.

Jersey’s appeal to energy companies rests not only in its tax regime, financial expertise and governmental independence, but also in its robust regulatory framework. It is therefore essential that companies and their directors in this sector take the necessary precautions not to fall foul of Jersey’s laws and regulations.

Corruption, bribery and fraud

While energy companies may be headquartered in Jersey, their mining/extraction operations are invariably elsewhere. This does not, however, preclude criminal proceedings being brought in Jersey. First, most corruption and sanctions offences have extra territorial effect and apply to acts done by Jersey domiciled companies and directors overseas. Second, to be tax resident in Jersey, a business must be managed and controlled here (e.g. by having Jersey resident directors, holding board meetings in Jersey and so on). This means Jersey individuals (e.g. corporate service providers) are likely to be involved in the company’s operations and thus subject to potential prosecution under Jersey law. The most obvious offences would be under Jersey’s Corruption Law which, like its UK equivalent (the Bribery Act), has extraterritorial effect. Other potential offences include:

• Procurement fraud
• Falsifying records - pumping, mining or harvesting more natural resources from public lands than is reported to the government
• Misrepresenting compliance with licencing requirements, environmental regulations, or safety regulation 
• Embezzlement facilitated by the complex nature of energy or mining contracts

It is therefore imperative that directors of Jersey registered energy companies familiarise themselves with the relevant laws prohibiting such activities such as:

• Fraudulent inducement to make deposits (prohibited by Article 23 of the Banking Business (Jersey) Law 1991, with a maximum penalty of 7 years’ imprisonment or a fine, or both);
• Fraudulent inducement to invest money (prohibited by Article 2 of the Investors (Prevention of Fraud) (Jersey) Law 1967, with a maximum penalty of 7 years’ imprisonment or a fine, or both);
• Providing false or misleading information (prohibited by Article 10 of the Collective Investment Funds (Jersey) Law 1988, with a maximum penalty of 10 years’ imprisonment or a fine, or both);
• Bribery (whether occurring in Jersey or abroad) (prohibited by Articles 5 and 6 of the Corruption (Jersey) Law 2006, with a maximum penalty of 10 years imprisonment and a fine.