Gibraltar’s compliance with international rules on corporate transparency was highlighted yesterday in the House of Commons during a debate in which the UK Government agreed to order British overseas territories to make secretive company ownership information public in a bid to tackle corruption and tax avoidance.
Overseas territories and crown dependencies have come under increasing pressure to reveal who is behind anonymously owned companies, with campaign groups saying such secrecy aids money laundering, tax evasion and corrupt diversion of public funds from developing economies.
Gibraltar’s membership of the EU means it is already well-advanced toward meeting the new measures that the Commons was debating yesterday and which the UK will force its territories to comply with.
But the UK move is controversial because it will see the House of Commons in effect legislate – through a mechanism known as an Order in Council – for all its overseas territories, including Gibraltar.
While Gibraltar will have met the requirements being imposed by the UK way before the Order in Council is issued, the move was described by Chief Minister Fabian Picardo as “more than retrograde” and “unacceptable act of modern colonialism”.
Sir Alan, the Minister for Europe at the Foreign and Commonwealth Office, insisted British overseas territories were separate jurisdictions with democratically-elected governments, responsible for their fiscal matters and unrepresented in the UK Parliament.
Sir Alan said a consensual approach with the territories would have been preferred to make the registers publicly available and warned that legislating without their consent “effectively disenfranchises their elected representatives”.
But with defeat looming and last-ditch Government amendments not selected by Speaker John Bercow for debate, Sir Alan conceded to the demands outlined in an amendment to draft legislation moved by Labour’s Dame Margaret Hodge and supported by some 20 Tory MPs.
Speaking as MPs considered the Sanctions and Anti-Money Laundering Bill at report stage, Sir Alan told the Commons: “We do not want to legislate directly for them, nor do we want to risk damaging our long-standing constitutional arrangements which respects their autonomy.”
“However, we’ve listened to the strength of feeling in this House on this issue and accept that it is without a doubt the majority view of this House that the overseas territories should have public registers ahead of it becoming the international standard, as set by the Financial Action Task Force.”
The amendment to the Bill, known as ‘new Clause 6’, requires the Secretary of State to take steps to provide that British Overseas Territories establish publicly accessible registers of the beneficial ownership of companies.
MPs and campaigners have said public registers would make it easier to uncover money-laundering, corruption and tax-dodging.
“I give the overseas territories the fullest possible assurance that we will work very closely with them in shaping and implementing the order in council which this Act of Parliament might require,” Sir Alan added.
“To that end we will offer them the fullest possible legal and logistical support that they might ask of us.”
“Alongside that we retain our fullest respect for the overseas territories and their constitutional rights and we will work with them to protect their interests.”
Under the amendment, overseas territories would be required to establish public registers of the beneficial ownership of firms in their jurisdictions by the end of 2020.
But during the course of a wide-ranging debate, several MPs rose to highlight the fact that Gibraltar had a good record on transparency and was already implementing the desired measures through its compliance with EU directives.
The Commons was told Gibraltar would have a public register of beneficial ownership of companies by the end of 2019 in line with an EU directive on the matter, one full year before the requirement set out in the amendment to the UK legislation.
Ahead of the debate, Chief Minister Fabian Picardo wrote to Tory MP Andrew Mitchell, who led support on the Conservative benches, setting out Gibraltar’s commitment to transparency.
Mr Picardo also set out the Gibraltar Government’s opposition to any attempt by the Commons to legislate in Gibraltar.
“My government considers that the use of unilateral Orders in Council imposed without the consent of the government of the relevant territory, to legislate directly for an Overseas Territory would amount to an unacceptable act of modern colonialism which would in effect overturn democracy in the relevant territory,” Mr Picardo wrote.
“I cannot emphasise enough to you how unacceptable this is and how contrary to the direction of travel of the constitutional development of Gibraltar such a step would be be.”
“It would be more than retrograde and would call into question the very nature of the relationship of consent and mutual respect which exists today between Gibraltar and the United Kingdom, which I am forever committed to.”
Gibraltar’s compliance with transparency measures was raised by Conservative MP Bob Neill, who said this issue was often wrongly used by Spain to lash out at Gibraltar.
Mr Neill said Spain often used “broad brush terms like tax havens against the law abiding territory of Gibraltar”, even though the Rock had transposed and implemented all the relevant EU legislation.
“You don’t help the overall cause by allowing British territories that comply with the rules to be tarred with the same brush as those who do not,” he said.
“Some people use it against law abiding, British Gibraltarian citizens’ interests.”
Mr Mitchell, who acknowledged receiving the Chief Minister’s letter, replied that Mr Neill was “absolutely right in what he says”.
“I was at a loss to understand why [Mr Picardo] felt that new clause six negatively affected him since he has already committed, through the EU directive, to implement the whole of new clause six by one year earlier than new clause six specifies,” he added.
That drew an intervention from Tory grandee Ken Clarke, who said that while Gibraltar complied fully with all current requirements, this had not necessarily been the case 20 years ago.
Back then, the UK Government had been obliged to pressure Gibraltar toward compliance, he said, something that could be seen as a precedent within the context of the debate on the amendment.
Britain has been making efforts to clamp down on tax evasion and corrupt flows of money through its large financial services sector, but has faced resistance from some of its overseas territories because the secrecy and low taxes are what makes their finance sectors attractive.
Dame Margaret Hodge, the opposition Labour MP who introduced the amendment, said it will help prevent tax evasion and disrupt the activities of criminal gangs and militant groups.
“It will stop them exploiting our secret regime, hiding their toxic wealth and laundering money into the legitimate system, often for nefarious purposes,” she said.
“With open registers we will then know who owns what and where, and we will be able to see where the money flows, and then we will better equipped to root out dirty money and deal with the issues that arise from that.”
Dame Margaret said the move was “a remarkable, important and really world-changing measure in relation to the fight against corruption”.
Shadow foreign minister Helen Goodman welcomed the UK Government’s “change of heart” on the amendment, which was approved at the end of the session with cross-party support.
Ms Goodman also called for more transparency in the crown dependencies, after Labour former minister Liam Byrne warned that “dark money will move to wherever the law is darkest”.
He said: “If we bring transparency to the overseas territories most of it is simply going to relocate to the crown dependencies if we don’t change the law there too.”
Ms Goodman said: “He’s absolutely right and that’s why I think we need to make changes on the crown dependencies because we are going to make changes on the overseas territories.”
But not everyone supported the amendment.
Tory backbencher Geoffrey Cox said: “In 2009, we gave the people of the Cayman Islands a solemn pledge in this House.”
“We said ‘we will not legislate for you in these areas of public responsibility without your consent’.
“And by this measure today, we are breaking that promise to them, and it is beneath the dignity of this Parliament to do away with that promise and that pledge of good faith.”