On Tuesday (1 May 2018), the UK government reluctantly agreed to force British Overseas Territories to introduce publicly available registers of company beneficial ownership.
A large group of campaigning MPs from all three parties, led by Labour MP Margaret Hodge and Conservative MP Andrew Mitchell, had tabled an amendment to the Sanctions and Anti-Money Laundering Bill, requiring the government to enforce public registers on the 14 Overseas Territories (OTs) by the end of 2020. The present Conservative government has so far resisted imposing public registers by force on the OTs, instead preferring negotiations and salami tactics.
However, it does not have an absolute majority in the House of Commons, and decided to concede the point so that the Bill could be enacted on schedule. Foreign Office Minister Alan Duncan told the Commons that the government recognised the majority view in this house and would not oppose the amendment, despite his view that legislating directly would damage the Overseas Territories’ autonomy.
Duncan did however manage to alter the amendment to remove references to the Crown Dependencies, on the grounds that the UK does not have constitutional powers to enforce orders in council on Jersey, Guernsey or the Isle of Man. The requirement for open registers therefore does not extend to the Crown Dependencies, at least for the moment.
The Overseas Territories have already warned they will challenge this ‘colonialist’ policy. Lorna Smith, of BVI Finance, said the legislation was an undemocratic revival of colonialism and an infringement of constitutional conventions that subverted the British Virgin Islands’ right to self-determination, as agreed with the UK in 2007.
The use of an Order in Council to enforce UK law on the BVI ‘would be unprecedented and breach previous constitutional agreements that the BVI has with the UK to guarantee the BVI’s right to manage its own economy’, she said. About 396,684 firms were registered in the BVI as of June 2017, according to government statistics.
Moreover, she stressed that the BVI is deemed largely compliant on transparency by international bodies. Its register of beneficial ownership, though not open to the public, is at least verified, unlike the UK’s unverified public register which is ‘riddled with problems’. The UK is the only country in the world that maintains a publicly available register of company beneficial ownership, introduced in 2016.
‘BVI Finance and the BVI government are working tirelessly to ensure that the rights of the BVI’s people are not undermined, and will explore all options available in doing so’, said BVI Finance.
BVI premier Orlando Smith said the ‘deeply flawed’ imposition of public registers of beneficial ownership on the BVI could have negative economic consequences for it, in the absence of a global standard and a level playing field.
‘It is unfortunate that this development has taken place as we continue to recover from last years’ disasters’, he added. ‘We reject the idea that that our democratically elected government should be superseded by the UK Parliament, especially in an area which has been entrusted to the BVI people.’
Alden McLaughlin, premier of the Cayman Islands, said his government was ‘deeply aggrieved’ at the imposition of legislation through powers that date back to the colonial era. It represented, he said, ‘a gross affront’, especially as exempting the Crown Dependencies discriminated unfairly against the Overseas Territories. ‘This amendment is based solely on prejudice and a wilful misunderstanding of our current regulatory framework’, he said, warning that the Cayman government is keeping all options open including a legal challenge to the amendment.
Bermuda’s government said the development was a ‘retrograde step’ in Commonwealth relations. Its premier David Burt said the government ‘maintains that the constitutional position is clear and we will take necessary steps to ensure our constitution is respected’, after 50 years of constitutionally sanctioned internal self-government.
Gibraltar’s chief minister Fabian Picardo pointed out that there is an established convention that Orders in Council are not used to make law in Gibraltar, and that he considered them ‘an unacceptable act of modern colonialism which would in effect overturn democracy in the relevant territory.
But the outcome was a ‘sensible and pragmatic result’ for Jersey, said Jersey Finance CEO Geoff Cook. He welcomed the withdrawal of the threat against the Crown Dependencies, which, he said, ‘underlined the contention that the UK Parliament cannot and should not seek to legislate for the Crown Dependencies’.