The House of Lords has agreed to a controversial amendment of the U.K. Sanctions and Anti-Money Laundering Bill that instructs the British government to draft an order in council to institute publicly accessible registers of beneficial ownership in the British Overseas Territories by the end of 2020, if they have not been set up by then.
The amendment brought in the House of Commons at the end of April attracted strong criticism from the overseas territories governments, given that orders in council are only issued in extremely rare circumstances, typically involving the implementation of international human rights standards.
Cayman Islands Premier Alden McLaughlin said at the time that the move uses “powers that date back to the colonial era” and represented “a gross affront to the constitutional relationship” between Cayman and the U.K.
The House of Lords had voted down a similar amendment in January this year but in the third reading of the bill on May 21, the upper house of parliament agreed to the new text of the bill after considerable debate without going to a vote.
The bill now awaits Royal Assent, expected on Wednesday, May 23, to become law.
During the debate of the amendment, Lord Tariq Mahmood Ahmad of Wimbledon, the minister responsible for the overseas territories, made clear that his government would have preferred a different, collaborative approach with the territories on the issue of beneficial ownership registries.
However, a last-minute compromise amendment by the U.K. government was not accepted by the Speaker of the House in April because it was tabled too late. Facing a considerable number of defectors and defeats in the House of Commons, government then decided not to oppose the motion.
Lord Ahmad emphasized that the overseas territories are British, but also separate jurisdictions with their own democratically elected governments, who are responsible for their own fiscal matters and not represented in the British parliament.
“Financial services are an area of domestic responsibility for territory governments, where they surpass, an important point to remember, international standards in the context of beneficial ownership,” he said. “Legislating for these jurisdictions without their consent in this field effectively disenfranchises their elected representatives.
“We are also fully cognizant of the territories’ concerns that the economic impact of imposing public registers on them will be significant.”
Lord Ahmad said the centralized beneficial ownership registries that exist already in the territories had been used more than 70 times by British law enforcement as of Feb. 8.
Imposing public registers on the overseas territories would risk a flight of business to other, less-regulated jurisdictions where U.K. law enforcement authorities would not have the same level of access to beneficial ownership information.
A statutory review of the existing information exchange mechanism, which is not accessible by the public, is scheduled for 2019.
“I remain confident that that will provide further evidence to all concerned of the benefits this provides to law enforcement authorities,” Lord Ahmad said.
Meanwhile, Lord Naseby, Michael Morris, the vice chairman of the All-Party Parliamentary Group for the Cayman Islands, lashed out at the amendment, which he called “a catastrophe for financial services in the overseas territories.”
He said the Cayman Islands had taken advice from two QCs, Jeffrey Jowell and Lord David Pannick, who advised that if an order in council is issued in the future to implement a duty to adopt a public register, there would be a very strong legal case before the Cayman courts, and on appeal to the Judicial Committee of the Privy Council, that such an order would be unlawful.
“This is because the constitution of the Cayman Islands confers limited powers on Her Majesty’s Government to make laws for the Cayman Islands – none of which applies in this context – and because any such order would breach the guarantee of privacy in the constitution of the Cayman Islands, there being no adequate justification for requiring public access to this information,” Lord Naseby said.
According to the Conservative lord, Premier McLaughlin raised the need for a review of the constitution orders of the overseas territories with Prime Minister Theresa May, “with a view to putting in place safeguards to prevent the type of constitutional overreach demonstrated by the Commons in the case of this Bill.”
He also criticized the sponsors of the amendment, its supporters, the government for tabling a compromise amendment too late, and the way the amendment ultimately succeeded.
“In my judgment, [the amendment] was driven through by two particular maverick Members of Parliament – one a socialist and the other a member of my party not noted for his finesse or his understanding of very much at all,” he said.
“I now understand, through the grapevine, that there was an argument between the Whip’s Office and the Foreign and Commonwealth Office. Why should men and women in our overseas territories suffer because there is an argument between the Whip’s Office and the Foreign and Commonwealth Office?”
Lord Naseby said the overseas territories were “being hung out to dry,” especially by international charities that suggest offshore centers are the cause of money laundering to the detriment of some of the poorest countries in the world.
“I have to say, having seen the performance of Oxfam and Save the Children, Oxfam in relation to Haiti and the governance of Save the Children, that they have lost the moral high ground,” Lord Naseby said.