The future of Cayman’s relationship with the UK: Dealings should be symbiotic

EDITOR’S NOTE:   

Former British Prime Minister Tony Blair will
visit the Cayman Islands as the guest speaker at the opening gala dinner
of the KPMG Legends Tennis Tournament on 16 November at the Ritz
Carlton. Given that the UK Overseas
Territories Consultative Council recently launched a consultation on a
new strategy for the Overseas Territories, there will be a range of topics he will speak to including
globalisation, peace talks and also the future of the overseas territories in modern Britain.
The Caymanian Compass is taking this opportunity to present a series of
viewpoints on the future of Cayman’s relationship with the UK.
Today’s viewpoint is from Anthony Travers, chairman of the Cayman
Islands Stock Exchange and a former senior partner at Maples and Calder. 

Former Prime Minister Mr. Tony Blair is unquestionably an extremely accomplished speaker. He will need to convince those in the audience the relationship between the Foreign and Commonwealth Office and the Cayman Islands during the tenure of his “New Labour” government was characterised by anything other than thinly veiled hostility.  

Much of the commentary leading up to the infamous exchanges between FCO Minister Christopher Bryant and Premier McKeeva Bush, although ostensibly from the FCO, clearly bore the heavy handed imprint of the UK Treasury. 

The message was relatively clear: Socialism is about high government spending and high levels of taxation; tax neutral jurisdictions such as the Cayman Islands, relentlessly labelled as “a tax haven”, had no place in the socialist spectrum.  

Much of the criticism amounted to no more than mischaracterisation, given the significant and ultimately, successful steps undertaken by the Cayman Islands throughout that period to improve tax transparency to the very highest of standards, to comply with the European Union Savings Directive by way of proactive reporting disclosure and in introducing and effectively operating suspicious transaction reporting.  

What was transparent is that the criticisms although couched in the language of tax evasion were really about attacking the status of the Cayman Islands as a tax-free jurisdiction.  

The paradox in this is that no credit whatsoever was given to the substantial investments, amounting to some US$500 billion at the height of the market in hedge funds alone, by Cayman Islands vehicles into the City of London largely through the investment management exemption, an established Inland Revenue approved procedure.  

That the socialist UK government could have avoided providing any credit for this dynamic, smacks of disingenuity of the highest order, possibly worse.  

Nor did the FCO projections of business transactions post financial crisis provide to be in any way accurate. The Cayman Islands hedge fund industry maintains its robust position and government revenues from the financial industry continue to meet projections.  

Fortunately, the change in government in the United Kingdom appears to have brought a more realistic assessment of the value of the Cayman Islands to the UK economy and a recognition that in fact the FCO has succeeded in establishing first class principles of transparency with the result that we and other Overseas Territories, which have established similar standards, should be regarded as an asset in accessing international capital flows for the benefit of the City of London.  

Whilst the extent to which the debate has shifted now to encompass criticism of tax avoidance, notwithstanding that it is legally permissible under the rule of law to which the British government adheres, is itself remarkable, the constitutional relationship between the Foreign and Commonwealth Office and the Cayman Islands should be in no way adversely affected by the criticisms of left wing radicals who find certain forms of lawful and proper financial structuring morally reprehensible.  

There is every reason, regardless of the aberrations which arose under the past socialist regime in the United Kingdom, to suppose that the relationship with the United Kingdom will, as a result of the current review, be strengthened and the principles which the Cayman Islands adheres to in terms of All Crimes Anti-Money Laundering and tax transparency given their proper recognition.  

The relationship between the Cayman Islands and the City of London should be symbiotic. Henry Bellingham, the new Minister for the Oversees Territories, has given every early indication that he fully understands that principle.