BVI: UK Govt Should Do Constitutional Review

“Given the seriousness of recent decisions by the UK Parliament in relation to the OTs, the UK Government should undertake a constitutional review of the relationship between the OTs and the UK with a view to placing the relationship on a more modern and progressive constitutional footing,” the British Virgin Islands Government said.

This was contained in a submission by the BVI Government for the British Parliament’s Foreign Affairs Committee inquiry in to “How the Foreign Office manages its responsibility to ensure the security and stability of the UK’s 14 Overseas Territories.”

The full written evidence from the Government of the British Virgin Islands is below:

The British Virgin Islands Government [BVIG] welcomes the decision by the Select Committee to examine the relationship between the United Kingdom [UK] and its Overseas Territories [OTs].

The BVIG has addressed the specific Terms of Reference outlined and makes the following recommendations:

Recommendations

• Given the seriousness of recent decisions by the UK Parliament in relation to the OTs, the UK Government should undertake a constitutional review of the relationship between the OTs and the UK with a view to placing the relationship on a more modern and progressive constitutional footing

• The BVI and other OTs accrue significant benefits from associate membership of the European Union [EU]. Countering any negative impact from ‘Brexit’ must be a priority for the UK Government

• The BVI currently receives no UK funds for climate change adaptation and is also not eligible for any non-EU international funding for climate change, biodiversity and disaster preparedness. Access to any EU related funding will end in the advent of Brexit and the UK Government should prepare for how this unfunded liability will be met in consultation with the OTs.

• Following Hurricanes Irma and Maria the UK was unable to access the aid budget to provide support for the affected OTs. UK legislation should be amended as a matter of urgency to enable the UK Government to provide requisite funding, especially in times of a major natural disaster.

• OTs like the BVI, which suffer disproportionately from the impact of climate change and biodiversity loss, must be represented at international policy-making bodies where decisions are made on issues critical to them. It is recommended that the UK Government works with such bodies to ensure such representation is possible.

Executive Summary

• The BVI and UK have enjoyed a positive constitutional relationship since the Territory became a separate colony in 1956. Since then, periodic constitutional reviews brought advances in internal self-government and external affairs accompanied by major milestones in the Territory, including balancing the budget and coming off grant-in-aid 1978. UK support for greater internal self-government in the BVI was instrumental in the Territory’s gradual process of self-determination. Constitutional review is now due, after more than a decade since the adoption of the Virgin Islands Constitution Order 2007.

• The UK’s recent decision to impose public registers of beneficial ownership on its OTs by threat of Order in Council is a departure from conventional UK policy towards the BVI, which caused widespread discontent in the Territory and strained relations with the UK. It has led to assertions of constitutional overreach, evidenced by the recent civil action in the form of a march involving thousands of British Virgin Islanders and petition signed by about 3,000 individuals.

• While this specific issue remains of great concern to the BVI, the UK and the BVI continue to derive benefits from the constitutional relationship and the social and economic links between the two.

• The UK benefits from the BVI as a jurisdiction which significantly extends and amplifies its legal values and co-operation with law enforcement as well as expanding its economic footprint worldwide via the widespread use of BVI corporate structures for international business and trade.

• The Territory’s rich terrestrial and marine biodiversity significantly contributes to the biodiversity of the UK at international level and provides the UK with maritime jurisdiction in the Americas.

• Both face formidable external challenges that also offer opportunities for partnership. The challenge of Brexit for the UK can be eased by an economic partnership with the BVI to maintain the competitiveness of British firms in international trade; while for the BVI, cooperation with the UK in disaster management will be needed to temper the impact of more frequent and powerful hurricanes.

• This co-operation was evident following Hurricanes Irma and Maria when UK humanitarian relief and security were vital to stabilising the situation on the ground. The UK is also offering a loan guarantee on which the BVIG can borrow to rebuild public infrastructure and operate until its return to fiscal balance.

• It is critical that Territories like the BVI, which suffer disproportionately from the impact of climate change and biodiversity loss, be represented at international policy-making bodies when decisions are being made on issues critical to them.

1. The Governance of the OTs, including their adherence to human rights frameworks

BVI Government position on constitutional status

1.1 The V.I. 2007 Constitution made clear the rights and responsibilities of the BVI and the UK. The decision to impose public registers of beneficial ownership on the OTs by threat of Order in Council, which in modern times has only been used to ensure UK adherence to international human rights law, has created a sense of unease in the BVI.

1.2 The decision was made without consultation with or consent of the BVIG and it is clear that the relationship between the Territory and the UK is no longer fair or balanced. Indeed, this divergence of approach creates an infringement of certain human rights in the BVI Constitution, including those relating to the protection of private and family life and privacy of home and other property, essentially causing an inherent conflict between the Constitution and any Order in Council.

1.3 These events have demonstrated that a new and fundamentally different ‘constitutional construct’ is required; one better suited to the strategic goals and aspirations of the BVI. The BVIG is calling for a constitutional review to determine these desires and aspirations so that the Territory can move towards greater self-governance and to a deepening of the democratic institutions of government, as well as to enhance good governance, transparency and accountability. This will place the BVI on a more progressive constitutional footing.

BVIG Position on the amendment to the Sanctions & Anti-Money Laundering Act

1.4 The Entrustment Letter accompanying the 2007 BVI Constitution states, “the UK
Government will, whenever practicable, seek the fullest consultation with the Government of the [British] Virgin Islands, and will at all times have special regard to the wishes of the BVI.” Any Order in Council flies in the face of this principle; effectively disenfranchises the BVI people and their elected representatives and negates their right to selfdetermination. This constitutional overreach concerned not only the BVI but also other OTs, as well as the wider Caribbean with both the Caribbean Community [CARICOM] and the Organisation of Eastern Caribbean States [OECS] expressing disquiet.

1.5 The action was even more puzzling given that the BVI’s beneficial ownership system meets the requirements of the global regulator in this area, the Financial Action Task Force [FATF]. Should public registers become the standard, then the BVIG is clear that it will comply. It is the imposition of a public register in advance of any global standard that the BVIG objected to.

Governance structure in the BVI

1.6 The V.I. Constitution provides for a House of Assembly comprised of 13 elected members [i.e. 9 district and 4 territorial representatives] and one ex-officio member, the Attorney General. The Premier is the Leader of Government Business and Her Majesty the Queen is Head of State, represented by the Governor. The Cabinet comprised of the Premier, four other Ministers and one ex-officio member, the Attorney General, is chaired by the Governor. Ministers lead the 5 ministries’ day to day operations of the Government. The Governor is responsible for external affairs, defence, internal security, aspects of the public service and administration of the courts.

Human rights frameworks

1.7 Human rights in the BVI are enshrined in the 2007 Constitution and provide for the fundamental rights and freedoms of the individual; and are generally respected across the society. Greater access has been given to persons with disabilities and the frameworks for the protection of children have been strengthened. Civil society also plays a greater role in terms of identifying and reporting any abuses which occur.

1.8 The following UN human rights conventions and covenants apply to the BVI: The UN Convention on the Elimination of all Forms of Racial Discrimination, 1965 [CERD], the International Covenant on Economic, Social and Cultural Rights, 1966 [ICESCR], the International Covenant on Civil and Political Rights, 1966 [ICCPR], the UN Convention on the Elimination of All Forms of Discrimination Against Women, 1979 [CEDAW] and the UN Convention on the Rights of the Child, 1989 [CRC].

1.9 The BVI courts have held that the European Convention on Human Rights applies in the BVI through its constitutional relationship with the UK.

2 The benefits to the UK and the OTs of the relationship between them;

The UK’s and the BVI’s strong relationship provides a series of mutual benefits.

BVI benefits to UK

2.1 The BVI and OTs provide the UK with strategic outposts in the North Atlantic, South Atlantic, Caribbean, Pacific and Antarctica, strategically positioning the UK for security, trade and scientific purposes. The 2012 White Paper, ‘Security, Success and Sustainability’ points out: ‘the global spread of the UK’s Territories gives the UK access and insights in diverse regions of the world’. This will be even more important after Brexit.

2.2 The BVI’s rich marine and terrestrial biodiversity contributes to the overall biodiversity of the UK. The OTs’ progress in conserving their precious environments while developing their societies gives the UK an advantage in the environmental space where they have presented themselves as a world leader, particularly in reducing the pollution of the oceans.

2.3 The UK benefits from the BVI as a jurisdiction which significantly extends and amplifies its legal values and co-operation with law enforcement as well as expanding its economic footprint worldwide via the widespread use of BVI corporate structures for international business and trade.

2.4 The Territory is a Category 1 Shipping Registry and is part of the Red Ensign Group, enhancing the UK’s marine presence throughout the world.

UK benefits to BVI

2.5 The UK’s benefits to the BVI are also important and have helped the jurisdiction to thrive. These include defence and security; technical support in the areas of marine and air services; the stability which comes with being a British Overseas Territory which has supported the BVI’s economic development and access to the UK’s network of embassies and representative offices throughout the world. This diplomatic presence is utilised both for Government purposes and by private citizens needing help. The ability of British Virgin Islanders to hold a British passport also helps to enhance freedom of movement.

2.6 The most direct benefit was seen following Hurricane Irma when the deployment of RFA Mounts Bay and HMS Ocean provided assistance with equipment and personnel. Following the hurricanes and consequent destruction of the prison, the deployment of UK police officers to support the Royal Virgin Islands Police was essential in helping the Territory secure law and order. However, the sale of HMS Ocean means that British navy cover for the Caribbean is down to one small ship, a matter of concern for British Virgin Islanders.

Mutual benefits to the UK and BVI

2.7 As a partnership, the UK and OTs are in a position to capitalise on the opportunities presented by Brexit. The UK is actively seeking post-Brexit trade deals with the world’s largest economies including China, the United States and India, as well as with Commonwealth countries. The BVI can economically benefit from participation in new trade and investment agreements. Invitations to join UK trade missions abroad would help support this process.

2.8 While new trade agreements are being negotiated, the BVIG can play a role in maintaining the competitiveness of British firms by facilitating UK investment into emerging markets. The BVIG’s strong relationships in Asia and especially in China may be helpful here. Similarly, the BVI can facilitate international investment directly into the British economy to support critical sectors such as housing and infrastructure where inward investment is needed.

3 The financing of the OTs

The BVI has not received grant-in-aid since 1978, however the devastation wrought by Irma and Maria severely impacted its financial position. Levels of debt by borrowing commercially to cover the cost of the recovery and the operation of government must be significantly increased. Given this, the BVI’s economy should be considered over two time periods – Pre-Hurricane Irma and post-Hurricane Irma.

3.1 Pre-Irma

• The Territory was self-funded with a balanced economy, underpinned by its twin economic pillars of tourism and business and financial services. Tourism accounted for 1 in 4 jobs while international business and finance sector accounted for 1 in 10. With British Virgin Islander unemployment at very low levels [3% unemployed], the Territory hosted an international workforce with roughly three quarters employed on work permits.

• The BVI maintained a strong fiscal position with an estimated recurrent annual budget of US$300m and at September 2017 retained almost US$60m in reserves.

3.2 Post-Irma

• Irma and Maria devastated the tourism industry. Estimates indicate three full seasons to recover with many major resorts not re-opening until late 2019.

• The hurricanes destroyed homes; lifted roads; wiped out tourism properties from five star resorts to beach bars and scattered debris across the Territory’s lands and sea. With power lines down, affecting basic services from water and sewage to internet, the ability to rebuild was severely constrained.

• GDP is forecast to decline by 40% in 2018 as a consequence of the hurricanes and is expected to take a minimum of five years to return to pre-Irma levels.

3.3 Rebuilding the economy of the BVI

• Economic recovery is proceeding, led by the business and financial services sector which accounted for 56% of Government revenues pre-Irma. After the storm, firms were able to resume operations quickly through the transfer of people and work to other territories in the region which restored some Government revenues. Without the sector’s presence and support, the situation would have been far worse.

• The severity of the damage and the impact on GDP and the BVI’s earning potential means the government will have to borrow on the back of a UK loan guarantee to rebuild public infrastructure.

• This has led the BVIG to review its economic pillars and seek further diversification with a focus on sustainable development and a more robust SME sector.

4 Representation of the OTs in the UK and in the Commonwealth and other international forums

4.1 The BVIG, its departments and agencies engage widely internationally; and maintains two external offices in London and Hong Kong, led by full time Representatives.

UK and Commonwealth

4.2 The BVI and other Overseas Territories have consistently reaffirmed their position that they do not wish to have seats in the UK Parliament and that the annual Joint Ministerial Council held between the UK and OTs is the appropriate framework, albeit not perfect, by which the OTs can make direct political representation to the UK Government at Ministerial-level if deemed necessary. The UK Parliament’s All-Party Parliamentary Groups also provide an effective mechanism by which to update or raise awareness among UK Parliamentarians on any Territory issues.

4.3 The BVI is included in the Commonwealth under the UK and participates to the fullest extent permissible, particularly the Commonwealth Parliamentary Association [CPA].

Hertfordshire County Council

4.4 In the UK, the BVI has established a key partnership at local government level with Hertfordshire County Council. The partnership provides for exchange and sharing of best practices between Hertfordshire and the BVI in the public sector, private sectors and civil society.

Regional organisations

4.5 The BVI is an associate member of CARICOM, OECS, the Economic Commission for Latin America and the Caribbean [ECLAC], the Association of Caribbean States [ACS], the Pan-American Health Organisation [PAHO] and UNESCO. The BVI is also a full and active member of a range of organisations where engagement is essential to the continued positive development of the BVI economy.

European Union

4.6 The BVI has established a strong relationship with the EU. UK OTs have associate status under Part IV of the Treaty on the Functioning of the European Union as Overseas Countries and Territories [OCTs]. Cooperation between the EU and OCTs is set out in the 2013 Overseas Association Decision [OAD]. This is aimed at enhancing OCTs’ competitiveness; strengthening resilience and reducing vulnerability; and creating more reciprocal relations between the OCTs and the EU based on mutual interests and shared values.

4.7 The benefits from the BVI’s associate membership of the EU include: preferential terms for trade; expertise to strengthen the private sector; funding to support sustainable development; free movement rights for BVI citizens; programmes which support economic diversification and political dialogue on sectors such as financial services. These are valuable benefits which have opened many opportunities for BVI people. Brexit thus poses a particular threat.

International/ regulatory organisations: OECD, FATF, IOSCO, Egmont Group

4.8 The BVI’s engagement with various international fora is particularly important for the business and financial services sector. Being a respected and active participant in all relevant international bodies is critical to its ongoing success. These include the FATF and Financial Stability Board regional bodies, the global standard setter for the securities sector [IOSCO] and the Egmont Group of Financial Intelligence Units. The BVI also participates in the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes, and received a ‘largely compliant’ rating along with the UK. The BVI has membership of the Peer Review group, which assesses other members and relevant non-members of the Global Forum on their information exchange requirements and the Steering Committee which guides policy.

Bi-lateral relationships

4.9 The BVI maintains a significant number of bi-lateral relationships for example, with China which can be used to the benefit of the UK.

4.10 The Entrustment letter gave the BVI delegated authority to establish cooperation and closer links with China, Hong Kong and Macau. As a result, the BVI has MoUs of Cooperation with the Cities of Shenzhen, Tianjin and the Qianhai Cooperation Zone in China.

4.11 Early in 2018, the Premier travelled to Hong Kong, Bejing, Shanghai and Hangzhou to meet influential business and political stakeholders, including the Ministry of Foreign Affairs. A demonstration of the strength of the relationship with China can be seen in the establishment of the Bank of Asia in the BVI – a purposely designed digital global cross border bank.

5 Assets and liabilities [including but not limited to ecological richness and the effects of extreme weather, and natural resources such as minerals and fish]

5.1 The OTs are a part of the UK family whose value cannot be overstated. Some of the OTs host military bases or cover regions of significant current operational and long term strategic value. Those in the Caribbean, including the BVI, give the UK a strategic presence and voice in the Americas.

5.2 The business and financial services facilitated by the BVI are a clear asset. There are multiple economic opportunities for a broad spectrum of UK companies and financial sector specialists to engage with the BVI which can help facilitate UK business access to important markets in fast growing economies especially in Asia.

5.4 Data from respected economics consultancy, Capital Economics, estimated that the investment mediated by the BVI supports around 2.2 million jobs worldwide, with China [including Hong Kong] accounting for nearly two fifths of them.

5.5 The ecological richness of the BVI is a significant asset for both the UK and the BVI. A study by the IVN institute [University of Maryland] for Environmental Studies in 2014 concluded that the estimated total economic value of the tourism value of the ecosystems of the BVI based on the marine corals and coastal beaches alone was $195 million p.a. The management of biodiversity in the BVI as part of the relationship with the EU has been critical in the provision of funding for projects focusing on climate change, disaster preparedness and the conservation of its biodiversity. This funding will come to an end in 2020.

5.6 Climate change and its negative effects are a risk for the BVI as a vulnerable chain of islands in the Caribbean subject to more frequent and powerful storms and sea level rises. The BVI will look to alleviate that risk to as great a degree as possible with more resistant buildings and infrastructure.

5.7 The BVI currently receives no UK funds for climate change adaptation and is also not eligible for any non-EU international funding for climate change, biodiversity and disaster preparedness, despite the UK contributing to the Green Climate Fund and Global Environment Facility and providing direct financial support to small island developing states in the Caribbean in these areas. How the BVI will meet this unfunded liability in the advent of Brexit is a major concern.

September 2018

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