In welcome news, the Council of the European Union (the EU Council) removed the Cayman Islands from the EU’s official list of non-cooperative jurisdictions (the EU blacklist) on October 6, 2020. As we reported here, the Cayman Islands had been added to the EU blacklist in February 2020 because the Cayman Islands had not timely amended its "economic substance" legislation to apply to certain investment funds and partnerships. The EU Council cited the Cayman Islands’ adoption of new reforms to its framework on Collective Investment Funds in September 2020 as justifying its removal from the EU blacklist.

This news will be of interest to investors that invest in Cayman funds, to private fund sponsors that use Cayman vehicles in their fund structures, and to businesses that have Cayman vehicles in their corporate structures.

From a broader European perspective, the removal of the Cayman Islands from the EU blacklist should reduce the need to report certain transactions under the EU and UK mandatory disclosure regime (DAC 6) on the basis that Cayman parties will no longer be within the scope of the hallmark applicable to non-cooperative jurisdictions.

The removal of the Cayman Islands from the EU blacklist also should mean that Cayman entities and structures should not be subject to the proposed “defensive measures” (including additional monitoring and non-deductibility measures) that EU Member States are encouraged to adopt before January 2021. The announcement also should mean that Cayman entities are no longer at risk of being within the scope of Luxembourg’s proposed measures against EU blacklisted jurisdictions, or “blacklists” of any other European jurisdictions that have considered taking unilateral action against certain jurisdictions insofar as such blacklists may track the EU blacklist.

While this announcement is a welcome change in the EU Council’s assessment of the Cayman Islands, Anguilla and Barbados have both been added to the EU blacklist. Oman was also removed from the EU blacklist.

The next revision (and potential changes) to the EU blacklist is due in February 2021.