The Cayman Islands government is retaining legal advisers to challenge the threat of an order in council by the U.K. government forcing Cayman to implement a public register of beneficial ownership.
“The issue goes way beyond public registers and it is an issue that we are going to challenge,” Premier Alden McLaughlin said, speaking on Radio Cayman on Wednesday.
Mr. McLaughlin said the House of Commons was arrogating to itself the power to make legislation for the overseas territories with its decision to include a clause in its Sanctions and Anti-Money Laundering Bill that instructs the secretary of state to issue an order in council directing the territories to establish public registries detailing the owners of companies.
“We don’t want to wind up in a situation where every time the U.K. parliament disagrees with a decision in one of the territories, it has the power to legislate for us,” the premier said. “Then it is not just the issue of public registries, it is not just the future of our financial industry that is at risk, it is our very existence.”
Mr. McLaughlin said he would write to Prime Minister Theresa May and seek a meeting with her when he is the U.K. on May 14.
The government also retained two U.K. constitutional lawyers to look at the issue.
“We are prepared, if we get the advice that there is a proper basis for it, to challenge this at the highest possible levels in the court system,” Mr. McLaughlin said.
The U.K. government appeared fully aware of the difficult constitutional grounds it was embarking on during Tuesday’s House of Commons debate.
Alan Duncan, minister of state at the Foreign and Commonwealth Office, said the government was concerned that the economic impact of imposing public registries on the overseas territories will be significant.
“Furthermore, the overseas territories are separate jurisdictions with their own democratically elected governments. They are responsible for their own fiscal matters and they are not represented in this parliament. Legislating for them without their consent effectively disenfranchises their elected representatives,” he said.
“We do not want to legislate for them, nor do we want to risk our long-standing constitutional arrangements with respect to their autonomy.”
Mr. Duncan added that the U.K. government was “acutely conscious of the sensitivities about this in the overseas territories and the response it may provoke.”
Only two years ago, the U.K. government forced the Cayman government to sign an agreement that established centralized registries of beneficial ownership. The information stored there is accessible to U.K. law enforcement and tax authorities, but not the wider public.
The decision to force the overseas territories now to make these registries public betrayed the written and verbal commitment made by the U.K. and it betrayed the trust of the overseas territories, Mr. McLaughlin said.
The premier was particularly riled by the exclusion of the Crown dependencies from the obligation. A separate clause that would have imposed the same obligation on Jersey, Guernsey and the Isle of Man was withdrawn.
“It is ugly, raw politics,” the premier said. “Unfortunately, as the Windrush fiasco has demonstrated, while the U.K. will continue to protest that it is the champion of human rights and insists that its overseas territories adhere to these, when push comes to shove, the ancient prejudices remain, and it is no question that they view the ethnically and geographically different overseas territories in a completely different light than they do the Crown dependencies.”
Cayman Finance, the organization that represents Cayman’s financial services industry, said the measure will not have the desired effect.
“The House vote is a vain attempt to fight global problems like corruption and tax evasion by unfairly discriminating against a few jurisdictions – requiring public registers from Overseas Territories but not Crown Dependencies, for example,” said Jude Scott, CEO of Cayman Finance. “Global problems require global solutions and standards that apply to all jurisdictions.”
Cayman’s opposition joined the government in condemning the “discriminatory” move.
Leader of the Opposition Ezzard Miller in a statement said, “The Opposition supports the Government in taking the necessary steps to defend our financial services industry against this Draconian and despotic overreach by the U.K. Parliament.”
At the same time, the opposition renewed its call for the creation of a National Strategic Plan, as well as an update to the Development Plan to strengthen Cayman’s economic base. “While the U.K. politicians can blame the Overseas Territories for their failed policies, we will have no one to blame but ourselves if we fail to plan,” the opposition statement said.
Premier McLaughlin said it is not yet the time to reconsider Cayman’s constitutional relationship with the U.K.
“Cayman has been British for a long time and I still believe that there is a lot of merit and benefit for us in retaining our British association,” he said. “I don’t think we are at this stage ready, as a country, as a people, as a government, for independence. Independence requires a whole new set of skills and abilities which we are still developing.”
The premier said contemplating independence would require a lot of planning and preparation. There are many failed states which took the step to independence when they were not ready, he added.