High quality legal institutions
Most IFC legal systems are based on English common law. English law is widely-regarded as one of the best forms of law to protect property rights and reach a fair conclusion between competing parties.
International financial centres (IFCs), otherwise known as offshore financial centres, are countries or territories with specialised legal institutions and regulatory frameworks that facilitate the flow and investment of international capital.
That definition of IFCs is vague, but they usually demonstrate the following characteristics:
Which countries fall into the definition depends on one’s methodology.
The IMF conducted a statistical study that identified the Bahamas, Bahrain, Bermuda, the Cayman Islands, Cyprus, Hong Kong, Guernsey, Ireland, the Isle of Man, Jersey, Luxembourg, Malta, Singapore, Switzerland, and the United Kingdom as IFCs.
Most IFCs are small, although countries like the United Kingdom and the Netherlands prove they aren’t necessarily. However, small countries have an inherent incentive to be open, tax-neutral, and focused on trade in services, while islands are more likely to be globalised and use both English common law and the English language. As a result, many such jurisdictions are British Overseas Territories or Crown Dependencies: a situation that offers benefits to the IFC and the United Kingdom.