British government can (and should) impose public registries on its overseas territories

“I studied at Oxford . . . majored in western hypocrisy.”

Ed Miliband, leader of Britain’s main opposition party, has written to the local governments of the U.K. Overseas Territories (OTs) and Crown dependencies (CDs), advising them that, if elected, a Labour government would require them to publish publicly available registers of the ultimate beneficial owners of all the companies registered in their territories.  This is good news, and we hope all other parties will follow suit.  However, the media – and particularly the BBC’s Chris Mason – are incorrectly reporting that these territories are independent, implying that the British government does not have the authority to require the OTs and CDs to take action.  The BBC is wrong and should issue a correction.  Mason is also wrong to say “there is a huge difference between tax evasion, which is illegal and tax avoidance, which is not.”  This is misleading, and, again, the BBC should issue a correction.

Here’s why Ed Miliband can take action on public registries in the OTs and CDs if he is elected.

For decades its been part of Britain’s tax haven strategy to wring its hands over the actions of the OTs and CDs, telling the international community that much as they’d like to take action, they can’t because these jurisdictions are independent, meaning that Whitehall can’t interfere.  Knowingly, or unknowingly, though we suspect the former, the Brits have been misleading the rest of the world – another instance of what Colonel Moon (see picture) was referring to in Die Another Day.

The first thing to remember is that the British Monarch, the Queen, is Head of State of all the OTs and CDs.  This means that the Queen, through her government in London, is responsible for their good government, which is why this blogger wrote to the Queen in November 2013 requesting that she ask her Prime Minister to take action to tackle the secret offshore companies registered in the OTs and CDs.

While it is true that the OTs and CDs have their own local governments, which have responsibility for internal affairs, its also true that the UK parliament has the power to legislate for the islands, and has responsibility for their defence and international relations.  Furthermore, while the local governments of the OTs and CDs can create domestic legislation, any laws created by them must be approved by the Queen’s Privy Council before they can be enacted.  Under the constitutional arrangements, which were reported on by the Kilbrandon Commission in 1973, the following conditions apply:

“the United Kingdom Government are responsible for defence and international relations of the islands, and the Crown is ultimately responsible for their good government.  It falls to the Home Secretary to advise the Crwon on the exercise of those duties and responsibilities.  The United Kingdom Parliament has the power to legislate for the islands (our emphasis), but it would exercise that power without their agreement in relation to domestic matters only in most exceptional circumstances.” 

furthermore:

“[The UK] Parliament does have the power to legislate for the islands without their consent on any matter in order to give effect to an international agreement.”   Source: Hansard, House of Commons debate,  3 June 1998, columns 471 and 465.

So why is the BBC reporting that Ed Miliband would not have authority, if elected, to take action to require the OTs and CDs to introduce public registries?  Is it because they’ve been taken in by the endless spin from Britain’s tax havens that they are self-governing in all matters.  They simply ain’t, and if you doubt our word on this take a look here and here at what happens when corruption and budget difficulties force the UK government to accept its responsibilities for the good governance of the OTs.  Further back in time the UK Parliament had to intervene in the Isle of Man when the Tynwald fell foul of the European Court of Human Rights in refusing to ban birching of juvenile offenders and withdrawing legislation against sodomy.

In 2013 Prime Minister David Cameron committed to Britain leading the way to creating public registries of beneficial ownership.  He subsequently wrote in 2014 to the OTs and CDs asking them – politely – to follow suit.  All good so far.  But words are cheap.  In December 2014 we blogged that little progress had been made between 2013 and end-2104.

Worse was to come.  In our January 2015 Taxcast, we reported that loopholes (which will undoubtedly become massive in the course of time) are being considered for the UK registry.  The BVI have rejected the introduction of a public registry. The Prime Minister’s promises are rapidly turning into hot air.

This is the context in which TJN welcomes Ed Miliband’s commitment to require the OTs and CDs to create public registries within six months of a Labour government being elected.  As we said above, we would welcome similar commitments from all the political parties.

By the way, the Queen did write back, noting that her position as a Constitutional Monarch “precludes her from intervening in matters such as this.”  Hopefully her Prime Minister, or potential future Prime Minister, will finally show a bit more bottle and take firmer action.  Otherwise the rest of the world will rapidly come to agree with the good Colonel Moon’s comments about western hypocrisy.