I was a little surprised to find that my arguments on this blog as to why the UK has the right to intervene in the affairs of the Crown Dependencies at present switched from here to the pages of FT Alphaville almost seamlessly yesterday. Finding myself quoted at length there for the second time recently made it seem like all those quotes I have borrowed from the FT over the years can be justified.
It also just turned up the heat from those who argue that I do not understand that the UK has no right at all to intervene, all of whom appear to come from the Crown Dependencies in general and most likely Jersey in particular. So, let me stress that this is not the place for me to argue the legal rights and wrongs of this at length, because I simply have not got time to do so. Instead let me make a few major points.
The first is that I think we can ignore all history before the Kilbrandon Report of 1973 (see here for a summary of that history, although I should add that much of which may well be wrong in my opinion). The Kilbrandon Report reviewed that history at the point that the UK was joining the EU to determine just what the legal relationship with the CDs was at a time when that had to be reviewed and determined (and I summarise). It suggested that whilst the CDs are self-governing, that is by consent and that in the event of a dispute as to who has the final say on an issue, power always rests with the UK (again, I summarise, but I think correctly). I suggest that is the baseline and that all prior argument (much of it based on fanciful reference to the Constitution of King John, which suffers the problem of not existing, rendering it irrelevant) can be ignored. In essence, Kilbrandon makes clear that ultimately London rules but the CDs are allowed much local discretion so long as they act within the boundaries of good governance.
So the only question now needing to be answered is whether or not the boundaries of good governance have been breached, so justifying an intervention.
My answer is that this is determined equitably, in the fashion of common law, with precedent and context being considered in determining whether intervention is required in the situation being considered. That is how all our constitutional law works in the UK as a whole, including in this area.
As to precedent, it is clear that this has been developed greatly since Kilbrandon reported as a consequence of dealing with the Overseas Territories over the intervening years. These may not have identical legal status to the CDs but the situations are so similar in many cases that decisions made effectively create precdent for the relationship with Jersey et al. And it is important to note that Parliament has set new precedent on this issue by intervening on the issue of beneficial ownership registers in these places, very recently. Since no real differentiation between the CDs and OTs is possible on this issue because the matter being decided upon is the desirability of these registers, and is effectively identical in both cases with identical consequences for the UK, then precedent for intervention in the CDs now exists and can be relied upon.
Second, the issue that justifies intervention is one of good governance and as a matter of fact it is now understood in the UK that the lack of a public register of beneficial ownership in the CDs does threaten moves to uphold the law in countries other than the CDs to whom the UK has responsibility. This may not have been considered the case in the past, but changing law, practice and events in this area suggest that it is now. The UK is, then, entitled to intervene because the CDs are, in unison, threatening the principles of good governance by refusing to create these registers.
And third, Parliament can determine this. Kilbrandon makes clear that the decision on whether there has been a break down in good governance in the CDs cannot be made by the CDs themselves: it has to be made in London, and there is no greater power than parliament to decide on this. As such Parliament is acting wholly within its legal rights to determine this issue, and the CDs are then bound to comply. That is the law. Otherwise we would have law determined by the party guilty of poor governance, and that cannot be right.
So, Parliament can intervene.
And for the record, the government's decision to back off is not an indication that it does not agree with that right to intervene. Instead it is indication that it accepts that it is true and the withdrawal is simply evidence that it has sided, against the better judgement of Parliament, withtge perpetuation if tax haven malpractice. Parliament is also sovereign on this issue, for the record: it can rule what the government of the day is doing is wrong as well. In this case that is what it wishes to do. And it has that right, just as it has the right to intervene in the CDs.
So what is the CD protest really about then? It is simply noise in defence of what is now indefensible: there is no justification left for the secrecy that these places wish to promote that facilitates illicit financial flows in all their forms. But the CDs wish to support those still profiting from those flows. If evidence was ever required of the breakdown of good governance, then the protests made by the CDs in support of the corrupt practices of those who use secrecy to facilitate their illicit activities is the clearest evidence of it. In fact, the CDs are making my case for me. They must be over-ruled precisely because their overt desire to perpetuate a now unacceptable practice makes it necessary that they very publicly be over-ruled.
And, I would suggest, any appeal from them will only undermine their position still further. It really is time for them to pipe down and realise that if they want the protection of the UK, which is critical to their financial services sectors, then they have to comply with the UK's laws. Of course, they can leave if they wish, but so too in that case would finance. They should not protest too much then: if they do the outcome could be much worse for them. The rule of British (actually, English) law applies to these places, and is precisely that which attracts peoples' money to them in the first place. They really should comply with that law as a result or the money will leave. They should muse on that. And smell the coffee.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
This has a very familiar ring to it. The entity wants to make money, it wants to be left alone to do that but also wants to establish an unfair advantage to do so. On top of that it wants the state to provide it with a safety net should their business model/dice rolling/high risk strategy fail. On top of that it wants to have no responsibilities to the state.
Looks like you have a strong case. The CDs won’t like it though so they will fight back.
Richard
This is all very subjective and these are merely your opinions and interpretations. You are of course entitled to have your own opinions and interpretations, but it does not mean that you are right.
The CDs themselves plus, crucially, those advising UK government, clearly do not agree with your opinions and interpretations. They may well agree that you are right regarding the British Overseas Dependent Territories, which is why the earlier decision re public beneficial ownership registers was passed in respect of those particular territories, but very importantly it was recognised that the nature of that CDs’ different constitutional relationship with the UK prevented the UK from imposing that decision on the CDs. That but is factual and beyond any doubt. It is what actually happened.
Your argument depends entirely on your own reasoning that the CDs are not practising good governance by not having public registers. That just does not stack up. Firstly, the private registers in the CDs are readily available to all law enforcement agencies and tax authorities. What “good governance” is being thwarted by them not being open to prying journalists and tax justice campaigners? They have nothing to do with “good governance”. They are simply snooping. That claim simply does not wash.
Secondly, the CDs’ private registers have total integrity as they are only populated by heavily regulated corporate service providers. You yourself have frequently observed that the UK’s registry records have no integrity because anyone can populate them without incorrect information. A private register with totally accurate information, open to those who need that information, has far more value than a public register which is full of false information which goes unchallenged. The UK could try regulating it’s own corporate service providers as a starting point.
Thirdly, the CDs cannot be attacked for failing to adopt something which is not only not a global standard, but something which is not even a standard amongst the G7 and G20 countries. The CDs have frequently stated that they will adopt public registers when it is a global standard. It is far from that. Moreover, if something is not recognised as being a global standard, then failing to comply with it cannot remotely he considered as falling short of “good governance”.
Your claims simply do not stack up. Your interpretation of the constitutional position of the CDs has consistently been wrong, and the correct position has consistently been reinforced by those advising UK Government. They are correct. You are not.
I am quite sure that it will be tested. It will be robustly defended robustly by the CDs. It will force a constitutional crisis, and either the UK will back down or the CDs will divorce themselves from the UK or a new constitutional relationship will be negotiated, which will take years. It will not be decided by 29th March 2019, that is for sure.
If the CDs are blacklisted by the EU as a result, then that will be a small price to pay, and will be one well worth paying.
If this amendment was illegal the Clerks of the House of Commons would not have permitted it. They did. I rest my case. I am right.
The UK government pulled the amendment not because it was illegal but because they support the abuse the CDs permit. You might want to ponder why that is. I am more than happy to point their failing out.
And will you leave the protection of the UK? Please do not make me laugh: there is not a hope of it. Being ‘British’ is essential to your appeal to illicit funds.
As ever, what you do not like is the fact that relentlessly we are chipping away at your abuse. And relentlessly we are undermining your business model. And you know the writing is on the wall. It’s only when, not if.
Richard
There is no harm in the constitutional position being formally tested. It will in due course be formally clarified. That should be welcomed by all.
I am quite certain that the CDs will seriously consider leaving the protection of the UK. It is worth far less than it used to be. But you refer to “illicit” funds. Please substantiate your claim.
There is full compliance with all international standards, higher standards than the UK, full exchange of information under CRS. What “abuse” is going on?
Who knows?
We know nothing about CD companies
Open the records
And for the record, your argument is the one I have been presented with since 2005, and every exposure has shown there have been illicit funds
“If this amendment was illegal the Clerks of the House of Commons would not have permitted it. They did. I rest my case. I am right.”
If only it were that simple. In 2016 the Clerks of the House of Commons permitted The Immigration Act 2016 to be passed which helped pave the way to the “hostile environment” by laying responsibility for checking that individuals are entitled to live in the UK at the feet of landlords. Only last week it was found that the policy was breaching human rights … but it obviously got past the Clerks.
Any legal arguments will be very complicated when it comes to this sort of issue, they aren’t the sort of thing that a Clerk could just glance at and know the answer to.
A judge of the Courts of Appeal of all three Crown Dependencies said back in 2017 that he didn’t know the answer to this question, but that what “can be said with confidence is that constitutional law has moved on since the Kilbrandon Report and that, in the event of a dispute arising over the constitutional relationship which ends up before the courts, the Crown Dependencies will have a number of legal arguments in support of their autonomy which would not have been available in 1973”.
Until that happens none of us will know for certain what the outcome will be, albeit that we might think the answer is obvious.
And so will the UK, if it wishes
As I have noted
Oh – the old “prove a negative” tactic. Some things never change.
Except that what has changed has been the introduction and adoption of CRS and the resultant extensive reporting of tax information which is being shared as required. So just how much “illicit” activity is likely to be going on first? It appears you want to use a sledgehammer to crack a bit which has already been cracked.
Moreover, if the CDs’ registers were to go public, thousands of companies would very quickly migrate to jurisdictions where privacy remains available. Delaware, Hong Kong, Dubai, the Bahamas and Mauritius will be laying out the red carpet. How exactly will that improve the position? Tax officials and law enforcement agencies currently have access to everything through the very highly-regulated CDs. They would then have access to nothing, having effectively driven that business away to jurisdictions over which the UK has no sway whatsoever, all because of the completely under-estimated strength of the desire for legitimate privacy from completely law-abiding persons who don’t want nosy parkers prying into their personal affairs.
How will that improve the situation?
That’s like saying ‘why take precautions against crime in one place if it just means crime will happen elsewhere’
The aim is to stop it everywhere
That is the aim
And the second aim of securing transparency on all companies, everywhere
Just having read through the thread and having nothing more than a passing interest..If the British authorities have access to Company information registered in Jersey & Guernsey then they will identify whether a crime will have been committed?..are you saying crimes won’t be identified because the information isn’t made Public?
“Tax officials and law enforcement agencies currently have access to everything through the very highly-regulated CDs”
Richard – are you calling it a crime that the information isn’t public?
Yes, I am
Because there are many more crimes than tax crime
And even tax crime is hard to spot by under-resourced officials
That is why many eyes are needed to see it
What crime? If you’re referring to tax crime, which would seem logical given the name of this site, what crime do you think is still taking place since the implementation of CRS?
The reality is that there’s a lot of tax crime still happening in poorly regulated jurisdictions, and negligible tax crime still happening in the CDs, so why try to crush the CDs? Tax crime has already been virtually eradicated. What’s left is tax-compliant business. Why drive that away to unregulated jurisdictions because the owners of the wealth demand privacy?
Makes no sense whatsoever.
Why not let CRS continue to do the job that it is already doing very well?
The issue is much broader than this
The crime is to abuse all the stakeholders of all the companies that hide their affairs from sight, preventing us assessing all the risks that they create, wilfully assisted by the CDs who in the process go out of their way to undermine fair markets and to, beyond doubt, assist illicit financial flows.
But you will never understand that
Richard @8.35pm
What “stakeholders” in the context of personal holding companies? What “risks that they create”? What are you talking about? They aren’t trading with the public as they are merely holding passive private wealth. Do you actually understand what the private wealth industry is about?
But we don’t know that, do we?
So you cannot assert it
Richard
Yes we do “know it” because of CRS reporting obligations.
For UK companies there is no supervision or checking whatsoever of the accuracy of whom is being disclosed as the beneficial owners of UK companies. Much of it is fabrication. Using your approach, how do we know?
No you don’t know it
Any more than we know it
The data is hidden
Stop telling untruths
Richard
YOU don’t know it and YOU don’t need to know it. YOU aren’t a law enforcement agent or a tax official. I know how that information is shared with law enforcement and tax officials.
I do need to know it
I am a stakeholder of all limited liability companies and can be abused by them
That is why we require data on them on public record
It is reason enough
Like I said yesterday, this is not enforceable.
Jersey cannot have Laws forced upon it by Politicians unelected by its own people.
We have our own democratically elected Politicians, we have our own Government and we make our own Laws.
But like others have mentioned, a Public Register of BO is not even a Global Standard so why should any Finance Centre do this?
Peter has summed it all up perfectly.
You are a Dependency
Deal with it, as people younger than me say
Richard, this is simple.
If the UK was ever able to force Laws onto Jersey it would have started years ago.
It did
Let’s start with the EU Code of Conduct
And the Savings Tax Directive
And so on
You really are in denial of the truth
A United Kingdom Crown dependency at that. Perhaps the relationship with the CDs and BOTs should be well up on the agenda of this elite group of constitutionalists:
http://www.constitutionreformgroup.co.uk/about/
Richard
That is simply not true. Yes, pressure was imposed on the CDs to adopt the EU Code of Conduct and EU Savings Directive. The CDs took that pressure into account and decided to adopt it. There may well have been a threat of sanctions which played a big part.
But let’s be clear. The UK did NOT legislate for the CDs. That factually did not happen.
No, they coerced instead, using the threat that they would impose if they had to
And you knew they would
So you did what was required
Richard
That is categorically not true. They might have gone on to try to impose and they’d have been in exactly the same constitutional position as they are now.
I know with unequivocal certainty that the CDs decided to go along with the EU Savings Directive once there was the option of a level playing field with Luxembourg and Switzerland.
It is a FACT that the UK did not and has not forced legislation on the CDs. Your assertion is simply not true.
I obviously know how things work better than you
Richard
I can say with absolute certainty that you do not. I was privy to a copy of the official correspondence at the time of the EU Savings Directive discussions.
You are completely wrong. Your assertion is 100% untrue.
I do not believe you
I am well aware of how the negotiations actually worked
The correspondence is the ‘sanitised’ version
Ask Piers Horsfall, if he’s still alive (I do not know)
Well, you very clearly are not better informed. If you were, then you’d know better.
I have no need whatsoever to check anything with former Senator Pierre Horsfall or indeed anyone else.
Peter
I don’t believe you
You will not even say who you are
Which rather makes my case….
Now go away and stop wasting my time
Richard
“I am a stakeholder” , “I can be abused”..
Do you realise how ridiculous you sound? I can imagine you being one of these characters who gets into a lifetime argument about the size of your neighbours hedge..a complete wierdo
Except that my statement has been the logic of UK law since the 19th century. Publicity is required precisely to protect creditors and other third parties. So I am the mainstream, and it is you who is the weirdo, to s
Use your language.
This amused me today. Hargreaves Lansdowne have issued their current thinking on tax and investor mistakes
was recently asked for the most common mistakes that I’ve seen from investors during my career.
You might think it would be losing money in speculative shares, or not saving enough for retirement. But in fact one of the most common mistakes is so easily avoided — failing to use your ISA allowance.
ISAs are a gift from the government — and a generous one too.
There’s lots of evidence to suggest that taxes will rise over the next few years. We must all pay our fair share — but to encourage us to save for the future, we can put £20,000 each tax year into ISAs, where our money can grow free from UK tax.
As ever, be mindful that tax rules can and do change , and the benefit you’ll get from ISAs depend on your circumstances.
Are the people at Hargreaves Lansdowne hinting at changes to come to tax rules on disclosure?
2 things – HL are just saying to a private investor tax rules change, no big deal as the Tax man sees everything as he does in the CDs.
with regard to CDs – is privacy justified? If law enforcement have access to all information then we must assume criminal activity is been dealt with. If you took this a stage further then you are basically saying journalists should have the same access to police in all walks of life. so Privacy in many cases is a good thing. I remember Richard you were very keen recently not to disclose your source of funding because the person concerned demanded privacy.
The default position in the UK for well over a century has been shareholders are known
For the sake of protection application for privacy can be made
A founder did that with good reasons stated to me
I can accept that when a person might be at risk and has shown good reason to a registrar
But the reason why we need names and accounts in public record is to revert the abuse of limited liability
The chance of moral hazard is high
That has been known as a market abuse as I note for centuries
And what you are arguing for is market abuse
Richard
You claiming that there ‘might’ be tax abuse going on so everything should be public knowledge is like me saying that you ‘might’ be involved in tax abuse so should publish your tax returns.
You won’t. A campaigner for tax transparency who won’t publish their own tax return has no moral high ground.
This isn’t about what you ask of other people’s tax return. This is about your tax return. What tax abuse are you involved in? We’ll never know.
But I have never asked anyone to publish their tax returns
I am in record as saying it would be a bad idea to require it
That somewhat undermines your case
But you don’t have one, anyway
Richard
But how do we know?
You can’t pick and choose when to use the “can’t prove a negative” doctrine.
Except it;’s simply not a question, so it is irrelevant
And I will not be discussing irrelevance further
This is absolutely hilarious. Richard wants all details of all companies known so he can be nosey. That’s it.
You want to know why the “left” policies aren’t implemented and given little credence. Simple, they’re based on nothing more than jealousy.
You want to know how much money people are making, how they are making it, through what companies to do nothing more than attack them for making the money they do.
Stop focussing on how much money other people are making and maybe look at improving your own life.
Oh dear: the politics of envy are on display, again
If you visit companieshouse.gov.uk then you will discover that you can look up any company, read the accounts, see the list of Directors and Shareholders, etc. And now all for free too. That is not for just being nosey (though you can be if you want), but rather so you can see who you are dealing with. Companies have limited liability so ABC Ltd places an order with you for £1million of widgets. How should you decide whether to grant credit or insist on cash up front if all details of the company are secret? That is the fundamental purpose of a public register. Otherwise you provide a charter for the fraudster to hide. And that is nothing to do with tax, though tax is also an important issue.
Agreed
There will be a blog in the morning
Hang on a minute. The requirement is to disclose directors and shareholders – but unlike in the CDs there is no strictly regulated industry undertaking to only submit correct information with major sanctions for them if they submit false names. The UK “public” register isn’t worth the paper it is written on.
Finding about about creditworthiness of a company is totally irrelevant if you aren’t going to be trading with that company because it’s a simple private wealth holding company which is carrying out no trade. They won’t be looking to trade with you and you won’t be trading with them because they aren’t trading.
Hang on
There are non-financial services business in the CDs
Maybe you have not noticed?
Maybe you have also not noticed we do not trust the CD financial services sector?
There is, after all, no reason to do so
So how would your stance differ in relation to unlimited companies who are not afforded limited liability protection?
You know the answer to that
Richard
If you were thinking about entering into a commercial trading relationship in the CDs you can do precisely the same as you would do know. You’d right to them, you’d ask them for a copy of their latest audited accounts, and you’d demand independent verification of their ultimate beneficial ownership, and if they didn’t provide it to you but you’d decline to buy from them or to sell to them. It’s worked perfectly well for decades.
By contrast, I could go to Companies House in the UK, see a set of (probably abbreviated) annual accounts (maybe not audited) and would see that Mr M Mouse is the declared beneficial owner because the CSPs are totally unregulated. You think that’s better?
There is absolutely no reason to question the integrity of the CDs private beneficial owner registry. It is only populated by very highly regulated CSPs (since 2001) who would their licence if they knowingly made false statements. There is also course CRS in place. Massive amounts of information being exchanged.
Why not allow the UK and EU authorities the ability to base officers in the CDs, at the CDs’ expense, and give them 24/7 unfettered access to our private beneficial ownership records? Nothing to hide whatsoever.
See the black g I am posting this morning
You completely ignore the issues because you view it all throughout a lens that assumes that there is no such thing as society
Richard
No, I genuinely don’t. Please clarify
Limited liability creates the obligation, in my opinion
[…] to have a register of the beneficial owners of companies formed in those places on public record. My comments have fuelled that debate, including in some of those […]