Ministers split on UK disclosure deal which could 'undermine trust' in Jersey

Tuesday 21 June 2016

Recently published Council of Ministers' minutes reveal the Island's leaders were deeply split over whether to sign a transparency deal with the UK government, with Jersey's 'foreign minister', Senator Sir Philip Bailhache warning it could undermine trust in the Island, and in its finance industry.

But Sir Philip's objections were over-ruled by his colleagues, including the Chief Minister Ian Gorst, and the Island signed the agreement.

In April, the Island's government was under pressure to open up about the beneficial ownership of Jersey-registered companies, following the massive leaks in the Panama Papers - confidential documents which revealed details of hundreds of offshore trust and company structures, which for a time focused intense media attention on the financial affairs of the UK Prime Minister, David Cameron, and his family's links to structures in Jersey. 

On the 12th April, the Chief Minister announced that a deal had been done to provide company data to the UK authorities within 24 hours, or within just one hour if the request was urgent or linked to terrorism.

He described it as "essentially business as usual", because the Island already had a central register of beneficial ownership, even if it wasn't open to the public. 

But recently published minutes of a Council of Ministers’ meeting, held just the day before that announcement was made, reveal that rather than being business as usual, it was a highly controversial issue which split the the Island's senior ministers, to the extent that one of them asked for his objection to signing the agreement with the UK to be officially noted.

Jersey’s ‘foreign secretary’, Senator Sir Philip Bailhache, didn’t want the Island to sign the deal with the UK government, as he feared it would undermine what he saw as one of the main reasons for doing business in the Island: "...the confidentiality of the affairs of bona fide clients." His opposition meant it was brought to the Council of Ministers for a decision. 

At the meeting, he explained to the Council he had two separate, but related, reasons for believing this.

According to the minutes, he was concerned "...that the automatic provision of beneficial ownership was something new, which would be confined to the UK and its dependent territories" – in other words, there wouldn’t be a level playing field, and competitors might gain a business advantage over the Channel Islands.

And secondly: "...the inward disclosure of information through Freedom of Information requests, would negate what Jersey believed to be a central register that was not open to public scrutiny."  Sir Philip told his fellow Ministers that, "...the second issue [was] a matter of great concern as it could be very dangerous to trust in financial services businesses in Jersey, and indeed to the Island itself."

That concern was also echoed by the Attorney General Robert MacRae who was reported as being worried the deal might,  "...run the risk of public exposure of information which was not public in Jersey." He is described as suggesting this possibility could be overcome if the UK government amended Freedom of Information rules and passed a law blocking the release of such information to the public.

However, the Chief Minister, Senator Ian Gorst, took the opposite view. He is recorded as arguing: "...the risks associated with not signing the agreement were that the Island would move from being a leader in the field [of openness], to being portrayed as a jurisdiction which trailed behind all the others, thus losing the advantages it had achieved over many years."

Similarly, the Island’s International Affairs Adviser, Colin Powell, noted that the finance services industry also recognised there were risks with signing the agreement, but considered, "...the risks inherent in not signing were potentially more significant." Consequently they had concluded, "...that the balance of advantage lay in the Island proceeding to sign the agreement, and thereafter subsequently addressing the public disclosure issue risk separately."

Having heard the arguments, the Council decided by a majority to sign the agreement, but the minutes record that Sir Philip was so determined to have his say, he demanded that his dissent from that decision be officially noted.

Commenting on the minutes, Senator Gorst said:

“I acknowledge, and indeed welcome, the External Relations Minister’s views on this subject. Full and frank discussion is a crucial part of the Council of Ministers’ function. It is what ensures that our policy decisions are as robust as they can possibly be. Obviously, not all ministers will agree all of the time but the onus is on CoM to reach a position of collective responsibility. The fact that such discussions might be minuted or published under the Freedom of Information Law is testament to the Government’s commitment to transparency and openness.”